Exhibit 10.53
REGISTRATION RIGHTS AGREEMENT
by and between
DOCTORS HEALTH SYSTEM, INC.
and
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
Dated as of July 15, 1997
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of July 15, 1997, by and
between DOCTORS HEALTH SYSTEM, INC., a Maryland corporation (the "Company") and
THE BEACON GROUP III - FOCUS VALUE FUND, L.P., a Delaware limited partnership
("Beacon").
W I T N E S S E T H:
WHEREAS, simultaneously herewith, the Company and Beacon are entering
into a Preferred Stock Purchase Agreement (the "Purchase Agreement"), pursuant
to which the Company is issuing, and Beacon is purchasing, shares of Series D
Convertible Preferred Stock, $10.00 par value per share, of the Company ("Series
D Preferred"); and
WHEREAS, simultaneously herewith, the Company, Beacon and certain other
equity holders of the Company are entering into a Shareholders' and Voting
Agreement (the "Shareholders' Agreement"); and
WHEREAS, the execution and delivery of this Agreement is a condition to
the closing of the Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and obligations hereinafter set forth, the parties hereto hereby agree
as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have the meanings
ascribed to them below:
"Affiliate" means (i) with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) with respect to any
individual, shall also mean the spouse, sibling, child, step-child, grandchild,
niece, nephew or parent of such Person, or the spouse thereof.
"Common Stock" means any and all classes of common stock, $.01 par
value per share, of the Company and any equity securities issued or issuable
with respect to such common stock in connection with a reclassification,
recapitalization, merger, consolidation or other reorganization.
"Conversion Shares" means the shares of Class C Common Stock or other
equity securities issued or issuable upon conversion of the Series D Preferred.
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"Holder" or "Holders" means any party who is a signatory to this
Agreement and any party who shall hereafter acquire and hold Registrable
Securities.
"IPO" means the initial underwritten offering pursuant to which the
Common Stock becomes registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").
"Major Holder" means with respect to any registration the Holder that,
together with its Affiliates, includes the largest number of Registrable
Securities in such registration.
"Person" means any individual, corporation, limited liability company,
limited or general partnership, joint venture, association, joint-stock company,
trust, unincorporated organization or government or any agency or political
subdivisions thereof.
"Registrable Securities" means any (i) shares of Series D Preferred
owned by Beacon, whether acquired on the date hereof or hereafter acquired, (ii)
shares of Common Stock owned by Beacon, whether acquired on the date hereof or
hereafter acquired, (iii) Conversion Shares owned by Beacon, (iv) shares of
Series D Preferred or Common Stock acquired by any Person after the date hereof
pursuant to rights granted to Beacon under the Purchase Agreement or the
Shareholders' Agreement, (v) Conversion Shares acquired by any Person after the
date hereof pursuant to rights granted to Beacon under the Purchase Agreement or
the Shareholders' Agreement and (vi) shares of Common Stock issued or issuable,
directly or indirectly, with respect to the Common Stock referenced in clauses
(ii), (iii), (iv) or (v) above by way of stock dividend, stock split or
combination of shares. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities when (i) a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, or (ii) such securities shall
have been sold (other than in a privately negotiated sale) pursuant to Rule 144
(or any successor provision) under the Securities Act.
"Requisite Percentage of Outstanding Holders" means the Holders of
Registrable Securities who, assuming conversion of all of the then outstanding
Series D Preferred into Conversion Shares, would hold 5% or more of the total
Conversion Shares that would then be outstanding.
"Requisite Percentage of Participating Holders" means Holders of
Registrable Securities participating in the registration who, assuming
conversion of all then outstanding Series D Preferred into Conversion Shares,
would hold a majority of the total Conversion Shares that would then be held by
all Holders participating in the registration.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
2. Registration Rights.
2.1. Demand Registrations.
(a) Request for Registration. Subject to Section 2.1(d),
at any time and from time to time after the earlier of (i) the date six months
after the closing of an IPO and (ii) two years after the date hereof, one or
more Holders of Registrable Securities representing the Requisite Percentage of
Outstanding Holders shall have the right to require the Company to file a
registration statement under the Securities Act covering all or any part of
their respective Registrable Securities, by delivering a written request
therefor to the Company specifying the number of Registrable Securities to be
included in such registration by such Holder(s) and the intended method of
distribution thereof. All such requests pursuant to this Section 2.1(a) are
referred to herein as "Demand Registration Requests," and the registrations so
requested are referred to herein as "Demand Registrations" (with respect to any
Demand Registration, the Holder(s) making such demand for registration being
referred to as the "Initiating Holder"). As promptly as practicable, but no
later than 15 days after receipt of a Demand Registration Request, the Company
shall give written notice (the "Demand Exercise Notice") of such Demand
Registration Request to all Holders of record of Registrable Securities.
(b) Registration of Other Securities. The Company shall
include in a Demand Registration (i) the Registrable Securities of the
Initiating Holder and (ii) the Registrable Securities of any other Holder that
shall have made a written request to the Company for inclusion thereof in such
registration (which request shall specify the maximum number of Registrable
Securities intended to be disposed of by such Holder(s)) within 30 days after
the receipt of the Demand Exercise Notice.
(c) Registration. The Company shall, as expeditiously as
possible following a Demand Registration Request, use its best efforts to (i)
effect such registration under the Securities Act (including, without
limitation, by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested and if the Company is then eligible to use such a
registration) of the Registrable Securities that the Company has been so
requested to register, for distribution in accordance with such intended method
of distribution, and (ii) if requested by the Initiating Holder or Major Holder,
obtain acceleration of the effective date of the registration statement relating
to such registration.
(d) Limitations on Requested Registrations. The rights
of Holders of Registrable Securities to request Demand Registrations pursuant to
Section 2.1(a) are subject to the following limitations: (i) the Company shall
not be obligated to effect a Demand Registration within six months after the
effective date of any other registration of securities (other than pursuant to a
registration on Form S-8 or any successor or similar form that is then in
effect) and (ii) in no event shall the Company be required to
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effect, in the aggregate, without regard to the Holder of Registrable Securities
making such request, more than two Demand Registrations; provided that in the
event a Demand Registration is cancelled by the Requisite Percentage of
Outstanding Holders, such Demand Registration shall only be counted as a Demand
Registration for purposes of this Section 2.1(d)(ii) if the Requisite Percentage
of Outstanding Holders do not agree to pay all Expenses of such Demand
Registration notwithstanding their rights under Section 2.5.
(e) Cutbacks. If the managing underwriter of any
underwritten offering shall advise the Holders participating in a Demand
Registration that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable to the
Requisite Percentage of Participating Holders, then the Holders representing the
Requisite Percentage of Participating Holders shall have the right to notify the
Company in writing that they have determined that the registration statement be
abandoned or withdrawn, in which event the Company shall abandon or withdraw
such registration statement. If the managing underwriter of any underwritten
offering shall advise the Company in writing that, in its opinion, the number of
securities requested to be included in a Demand Registration exceeds the number
that can be sold in such offering within a price range acceptable to the
Requisite Percentage of Participating Holders, the Company will include in such
registration, to the extent of the number that the Company is so advised can be
sold in such offering, Registrable Securities requested to be included in such
registration, pro rata among the Holders requesting such registration in
accordance with the number of Conversion Shares held by and issuable upon
conversion of Registrable Securities to each such Holder so requested to be
registered.
(f) Selection of Underwriters. The managing underwriter
or underwriters of each underwritten offering of the Registrable Securities so
to be registered shall be proposed by the Requisite Percentage of Participating
Holders (and shall be reasonably acceptable to the Company).
(g) Postponement. The Company shall be entitled once to
postpone for a reasonable period of time (but not to exceed 180 days) the filing
of any registration statement required to be prepared and filed by it pursuant
to this Section 2.1 if a nationally recognized investment bank (which investment
bank shall be selected by and mutually agreeable to both an investment bank
selected by the Company and an investment bank selected by the Requisite
Percentage of Participating Holders) shall advise the Company in writing that,
in its opinion, the Company is unable to effect an underwritten offering due to
then currently prevailing market conditions or due to circumstances affecting
the financial condition, business or operations of the Company. Promptly (but in
no event more than 30 days) after receipt of such opinion, the Company shall
give the participating Holders written notice of its determination to postpone
the filing of any registration statement, and an approximation of the
anticipated delay. If the Company shall so postpone the filing of a registration
statement, the participating Holders representing the Requisite Percentage of
Participating Holders shall have the right to withdraw the request for
registration by
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giving written notice to the Company within 20 days after receipt of the notice
of postponement and, in the event of such withdrawal, such request shall not be
counted toward the number of Demand Registrations (including for purposes of
paragraph (d) of this Section 2.1).
2.2. Piggyback Registrations.
(a) Piggyback Registrations. If, at any time, the
Company proposes or is required to register any of its equity securities under
the Securities Act (other than pursuant to (i) registrations on such form or
similar form(s) solely for registration of securities in connection with an
employee benefit plan or dividend reinvestment plan or a merger, consolidation
or acquisition or (ii) a Demand Registration under Section 2.1) on a
registration statement on Form S-1, Form S-2 or Form S-3 (or an equivalent
general registration form then in effect), whether or not for its own account,
the Company shall give prompt written notice of its intention to do so to each
of the Holders of record of Registrable Securities. Upon the written request of
any Holder, made within 15 days following the receipt of any such written notice
(which request shall specify the maximum number of Registrable Securities
intended to be disposed of by such Holder and the intended method of
distribution thereof), the Company shall use its best efforts to cause all such
Registrable Securities, the Holders of which have so requested the registration
thereof, to be registered under the Securities Act (with the securities that the
Company at the time proposes to register) to permit the sale or other
disposition by the Holders (in accordance with the intended method of
distribution thereof) of the Registrable Securities to be so registered. There
is no limitation on the number of such piggyback registrations pursuant to the
preceding sentence that the Company is obligated to effect. No registration
effected under this Section 2.2(a) shall relieve the Company of its obligations
to effect Demand Registrations.
(b) Abandonment or Delay. If, at any time after giving
written notice of its intention to register any equity securities and prior to
the effective date of the registration statement filed in connection with such
registration, the Company shall determine for any reason not to register or to
delay registration of such equity securities, the Company may, at its election,
give written notice of such determination to all Holders of record of
Registrable Securities and (i) in the case of a determination not to register,
shall be relieved of its obligation to register any Registrable Securities in
connection with such abandoned registration, without prejudice, however, to the
rights of Holders under Section 2.1, and (ii) in the case of a determination to
delay such registration of its equity securities, shall be permitted to delay
the registration of such Registrable Securities for the same period as the delay
in registering such other equity securities.
(c) Holder's Right to Withdraw. Any Holder shall have
the right to withdraw its request for inclusion of its Registrable Securities in
any registration statement pursuant to this Section 2.2 by giving written notice
to the Company of its request to withdraw; provided, however, that (i) such
request must be made in writing prior to the earlier of the execution of the
underwriting agreement or the execution of
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the custody agreement with respect to such registration and (ii) such withdrawal
shall be irrevocable and, after making such withdrawal, a Holder shall no longer
have any right to include Registrable Securities in the registration as to which
such withdrawal was made.
(d) Cutbacks. If the managing underwriter of any
underwritten offering shall inform the Company by letter of its belief that the
number of Registrable Securities requested to be included in a registration
under this Section 2.2 would materially adversely affect such offering, then the
Company will include in such registration, first, the securities proposed by the
Company to be sold for its own account and, second, the Registrable Securities
and all other securities of the Company to be included in such registration to
the extent of the number and type, if any, that the Company is so advised can be
sold in (or during the time of) such offering.
2.3. S-3 Registrations. If at any time (i) one or more Holders of
Registrable Securities representing the Registrable Percentage of Outstanding
Holders request that the Company file a registration statement on Form S-3 or
any successor thereto for a public offering of all or any portion of the shares
of Registrable Securities held by such Holder or Holders, the reasonably
anticipated aggregate price to the public of which would exceed $1,000,000, and
(ii) the Company is a registrant entitled to use Form S-3 or any successor
thereto to register such shares, then the Company shall use its best efforts to
register under the Securities Act on Form S-3 or any successor thereto, for
public sale in accordance with the method of disposition specified in such
notice, the number of shares of Registrable Securities specified in such notice.
Whenever the Company is required by this Section 2.3 to use its best efforts to
effect the registration of Registrable Securities, each of the procedures and
requirements of Section 2.1 (including but not limited to the requirement that
the Company notify all Holders of Registrable Securities from whom notice has
not been received and provide them with the opportunity to participate in the
offering) shall apply to such registration. Notwithstanding anything to the
contrary contained herein, (i) no request may be made under this Section 2.3
within six months after the effective date of a registration statement filed by
the Company covering a firm commitment underwritten public offering in which the
holders of Registrable Securities shall have been entitled to join pursuant to
Sections 2.1 and 2.2 in which there shall have been effectively registered all
shares of Registrable Securities as to which registration shall have been
requested registrations pursuant to this Section 2.3 and (ii) the Company shall
not be required to effect more than four registrations pursuant to this Section
2.3.
2.4. Registration Procedures. If and whenever the Company is
required by the provisions of this Agreement to use its best efforts to effect
or cause the registration of any Registrable Securities under the Securities Act
as provided in this Agreement, the Company shall, as expeditiously as possible:
(a) prepare and file with the SEC a registration
statement on an appropriate registration form of the SEC for the disposition of
such Registrable Securities in accordance with the intended method of
disposition thereof, which form (i)
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shall be selected by the Company and (ii) shall, in the case of a shelf
registration, be available for the sale of the Registrable Securities by the
selling Holders thereof and such registration statement shall comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith, and
the Company shall use its best efforts to cause such registration statement to
become effective (provided, however, that before filing a registration statement
or prospectus or any amendments or supplements thereto, or comparable statements
under securities or blue sky laws of any jurisdiction, the Company will furnish
to one counsel for the Holders participating in the planned offering (selected
by the Major Holder) and the underwriters, if any, copies of all such documents
proposed to be filed (including all exhibits thereto), which documents will be
subject to the reasonable review and, in the case of a registration pursuant to
Section 2.1 or Section 2.3, reasonable comment of such counsel, and the Company
shall not file any registration statement or amendment thereto or any prospectus
or supplement thereto pursuant to Sections 2.1 or 2.3 to which the holders of a
majority of the Registrable Securities covered by such registration statement or
the underwriters, if any, shall reasonably object in writing);
(b) in connection with any Demand Registration, prepare
and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection therewith as may be necessary to
keep such registration statement effective for such period (which shall not be
required to exceed 180 days) as any seller of Registrable Securities pursuant to
such registration statement shall request and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement in accordance with
the intended methods of disposition by the seller or sellers thereof set forth
in such registration statement;
(c) furnish, without charge, to each seller of such
Registrable Securities and each underwriter, if any, of the securities covered
by such registration statement such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits), and the prospectus included in such registration statement (including
each preliminary prospectus) in conformity with the requirements of the
Securities Act, and other documents, as such seller and underwriter may
reasonably request in order to facilitate the public sale or other disposition
of the Registrable Securities owned by such seller (the Company hereby
consenting to the use in accordance with applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or preliminary prospectus or supplement thereto) by each
such seller of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such registration statement or prospectus);
(d) use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter,
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if any, shall reasonably request in writing, and do any and all other acts and
things that may be reasonably necessary or advisable to enable such sellers or
underwriter, if any, to consummate the disposition of the Registrable Securities
in such jurisdictions, except that in no event shall the Company be required to
qualify to do business as a foreign corporation in any jurisdiction where it
would not, but for the requirements of this paragraph (d), be required to be so
qualified, to subject itself to taxation in any such jurisdiction or to consent
to general service of process in any such jurisdiction;
(e) promptly notify each Holder selling Registrable
Securities covered by such registration statement and each managing underwriter,
if any: (i) when the registration statement, any pre-effective amendment, the
prospectus or any prospectus supplement related thereto or post-effective
amendment to the registration statement has been filed and, with respect to the
registration statement or any post-effective amendment, when the same has become
effective; (ii) of any request by the SEC or state securities authority for
amendments or supplements to the registration statement or the prospectus
related thereto or for additional information; (iii) of the issuance by the SEC
of any stop order suspending the effectiveness of the registration statement or
the initiation of any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the securities or blue sky laws of
any jurisdiction or the initiation of any proceeding for such purpose; (v) of
the existence of any fact of which the Company becomes aware that results in the
registration statement, the prospectus related thereto or any document
incorporated therein by reference containing an untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make any statement therein not misleading; and (vi) if at any time
the representations and warranties contemplated by Section 3 below cease to be
true and correct in all material respects; and, if the notification relates to
an event described in clause (v), the Company shall promptly prepare and furnish
to each such seller and each underwriter, if any, a reasonable number of copies
of a prospectus supplemented or amended so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein in the light of
the circumstances under which they were made not misleading;
(f) comply with all applicable rules and regulations of
the SEC, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(g) (i) cause all such Registrable Securities covered by
such registration statement to be listed on the principal securities exchange on
which similar
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securities issued by the Company are then listed (if any), if the listing of
such Registrable Securities is then permitted under the rules of such exchange,
or (ii) if no similar securities are then so listed, to either cause all such
Registrable Securities to be listed on a national securities exchange or to
secure designation of all such Registrable Securities as a National Association
of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") "national
market system security" within the meaning of Rule 11Aa2-1 of the SEC or,
failing that, secure NASDAQ authorization for such shares and, without limiting
the generality of the foregoing, take all actions that may be required by the
Company as the issuer of such Registrable Securities in order to facilitate the
managing underwriter's arranging for the registration of at least two market
makers as such with respect to such shares with the National Association of
Securities Dealers, Inc. (the "NASD");
(h) provide and cause to be maintained a transfer agent
and registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;
(i) enter into such customary agreements (including, if
applicable, an underwriting agreement) and take such other actions as the
Holders of a majority of the Registrable Securities or the Major Holder
participating in such offering shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(j) obtain an opinion from the Company's counsel and a
"cold comfort" letter from the Company's independent public accountants in
customary form and covering such matters as are customarily covered by such
opinions and "cold comfort" letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be reasonably satisfactory to
the underwriters, if any, and to the Major Holder participating in such
offering, and furnish to each Holder participating in the offering and to each
underwriter, if any, a copy of such opinion and letter addressed to such Holder
(in the case of the opinion) and underwriter (in the case of the opinion and the
"cold comfort" letter);
(k) deliver promptly to the Major Holder and counsel for
the selling Holders participating in the offering and each underwriter, if any,
copies of all correspondence between the Commission and the Company, its counsel
or auditors and any memoranda relating to discussions with the Commission or its
staff with respect to the registration statement, other than those portions of
any such memoranda that contain information subject to attorney-client privilege
with respect to the Company, and, upon receipt of such confidentiality
agreements as the Company may reasonably request, make reasonably available for
inspection by any seller of such Registrable Securities covered by such
registration statement, by any underwriter, if any, participating in any
disposition to be effected pursuant to such registration statement and by any
attorney, accountant or other agent retained by any such seller or any such
underwriter, all pertinent financial and other records, pertinent corporate
documents and properties of the Company, and cause all of the Company's
officers,
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directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(l) use its best efforts to promptly obtain the
withdrawal of any order suspending the effectiveness of the registration
statement;
(m) provide a CUSIP number for all Registrable
Securities, not later than the effective date of the registration statement;
(n) make reasonably available its employees and personnel
and otherwise provide reasonable assistance to the underwriters (taking into
account the needs of the Company's businesses and the requirements of the
marketing process) in the marketing of Registrable Securities in any
underwritten offering;
(o) promptly prior to the filing of any document that is
to be incorporated by reference into the registration statement or the
prospectus (after the initial filing of such registration statement) provide
copies of such document to counsel for the selling holders of Registrable
Securities and to each managing underwriter, if any, and make the Company's
representatives reasonably available for discussion of such document and make
such changes in such document concerning the selling holders prior to the filing
thereof as counsel for such selling holders or underwriters may reasonably
request;
(p) furnish to each Holder participating in the offering
and the managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);
(q) cooperate with the selling Holders of Registrable
Securities and the managing underwriter, if any, to facilitate the timely
preparation and delivery of certificates not bearing any restrictive legends
representing the Registrable Securities to be sold, and cause such Registrable
Securities to be issued in such denominations and registered in such names in
accordance with the underwriting agreement prior to any sale of Registrable
Securities to the underwriters or, if not an underwritten offering, in
accordance with the instructions of the selling holders of Registrable
Securities at least three business days prior to any sale of Registrable
Securities; and
(r) take all such other commercially reasonable actions
as are necessary or advisable in order to expedite or facilitate the disposition
of such Registrable Securities.
The Company may require as a condition precedent to the
Company's obligations under this Section 2.4 that each seller of Registrable
Securities as to which any registration is being effected furnish the Company
such information regarding such
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seller and the distribution of such securities as the Company may from time to
time reasonably request; provided that such information shall be used only in
connection with such registration.
Each Holder of Registrable Securities agrees that upon receipt
of any notice from the Company of the happening of any event of the kind
described in clause (v) of paragraph (e) of this Section 2.4, such Holder will
discontinue such Holder's disposition of Registrable Securities pursuant to the
registration statement covering such Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4 and, if so directed by the Company, will
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 that was in effect at the time of receipt
of such notice. In the event the Company shall give any such notice, the
applicable period mentioned in paragraph (b) of this Section 2.4 shall be
extended by the number of days during such period from and including the date of
the giving of such notice to and including the date when each seller of any
Registrable Securities covered by such registration statement shall have
received the copies of the supplemented or amended prospectus contemplated by
paragraph (e) of this Section 2.4.
If any such registration statement or comparable statement
under "blue sky" laws refers to any Holder by name or otherwise as the Holder of
any securities of the Company, then such Holder shall have the right to require
(i) the insertion therein of language, in form and substance satisfactory to
such Holder and the Company, to the effect that the holding by such Holder of
such securities is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (ii) in the event that such reference
to such Holder by name or otherwise is not in the judgment of the Company, as
advised by counsel, required by the Securities Act or any similar federal
statute or any state "blue sky" or securities law then in force, the deletion of
the reference to such Holder.
2.5. Registration Expenses.
(a) "Expenses" shall mean any and all fees and expenses
incident to the Company's performance of or compliance with this Article 2,
including, without limitation: (i) SEC, stock exchange or NASD registration,
listing and filing fees and all listing fees and fees with respect to the
inclusion of securities in NASDAQ, (ii) fees and expenses of compliance with
state securities or "blue sky" laws and in connection with the preparation of a
"blue sky" survey, including without limitation, reasonable fees and expenses of
blue sky counsel, (iii) printing and copying expenses, (iv) messenger and
delivery expenses, (v) expenses incurred in connection with any road show, (vi)
fees and disbursements of counsel for the Company, (vii) with respect to each
registration, the reasonable fees and disbursements of one counsel for the
selling Holder(s)
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(selected by the Major Holder), (viii) fees and disbursements of all independent
public accountants (including the expenses of any audit and/or "cold comfort"
letter) and fees and expenses of other persons, including special experts,
retained by the Company, (ix) fees and expenses payable to a Qualified
Independent Underwriter, (x) fees and expenses payable to the investment banks
referred to in Section 2.1(g) and (xi) any other fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities
(collectively, "Expenses").
(b) The Company shall pay all Expenses with respect to
any Demand Registration, whether or not it becomes effective or remains
effective for the period contemplated by Section 2.4(b), and with respect to any
registration effected under Sections 2.2 or 2.3.
(c) Notwithstanding the foregoing, (x) the provisions of
this Section 2.5 shall be deemed amended to the extent necessary to cause these
expense provisions to comply with "blue sky" laws of each state in which the
offering is made and (y) in connection with any registration hereunder, each
Holder of Registrable Securities being registered shall pay all underwriting
discounts and commissions and any transfer taxes, if any, attributable to the
sale of such Registrable Securities, pro rata with respect to payments of
discounts and commissions in accordance with the number of shares sold in the
offering by such Holder, and (z) the Company shall, in the case of all
registrations under this Article 2, be responsible for all its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties).
2.6. Certain Limitations on Registration Rights. In the case of
any registration under Section 2.1 pursuant to an underwritten offering, or in
the case of a registration under Sections 2.2 or 2.3 if the Company has
determined to enter into an underwriting agreement in connection therewith, all
securities to be included in such registration shall be subject to an
underwriting agreement and no Person may participate in such registration unless
such Person agrees to sell such Person's securities on the basis provided
therein and completes and executes all reasonable questionnaires and other
documents (including custody agreements and powers of attorney) that must be
executed in connection therewith, and provides such other information to the
Company or the underwriter as may be necessary to register such Person's
securities.
2.7. Limitations on Sale or Distribution of Other Securities.
(a) To the extent requested in writing by a managing
underwriter, if any, of any registration effected pursuant to Section 2.1, each
Holder of Registrable Securities agrees not to sell, transfer or otherwise
dispose of, including any sale pursuant to Rule 144 under the Securities Act,
any Common Stock, or any other equity security of the Company or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than as part of such underwritten public offering) during the
time period reasonably requested by the managing underwriter, not to exceed 180
days (and the Company hereby also so
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agrees (except that the Company may effect any sale or distribution of any such
securities pursuant to a registration on Form S-4 (if reasonably acceptable to
such managing underwriter) or Form S-8, or any successor or similar form that is
then in effect or upon the conversion, exchange or exercise of any then
outstanding Common Stock Equivalent) to use its reasonable best efforts to cause
each holder of any equity security or any security convertible into or
exchangeable or exercisable for any equity security of the Company purchased
from the Company at any time other than in a public offering so to agree). Each
managing underwriter shall be entitled to rely on the agreements of each Holder
of Registrable Securities set forth in this Section 2.7(a) and shall be a third
party beneficiary of the provisions of this Section 2.7(a).
(b) The Company hereby agrees that, if it shall
previously have received a request for registration pursuant to Section 2.1, 2.2
or 2.3, and if such previous registration shall not have been withdrawn or
abandoned, the Company shall not sell, transfer, or otherwise dispose of, any
Common Stock, or any other equity security of the Company or any security
convertible into or exchangeable or exercisable for any equity security of the
Company (other than as part of such underwritten public offering, a registration
on Form S-4 or Form S-8 or any successor or similar form that is then in effect
or upon the conversion, exchange or exercise of any then outstanding Common
Stock Equivalent), until a period of 180 days shall have elapsed from the
effective date of such previous registration; and the Company shall so provide
in any registration rights agreements hereafter entered into with respect to any
of its securities.
2.8. No Required Sale. Nothing in this Agreement shall be deemed
to create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.
2.9. Indemnification.
(a) In the event of any registration of any securities of
the Company under the Securities Act pursuant to this Article 2, the Company
will, and hereby does, indemnify and hold harmless, to the fullest extent
permitted by law, each Holder of Registrable Securities, its directors,
officers, affiliates, employees, stockholders, members and partners (and the
directors, officers, affiliates, employees, stockholders, members and partners
thereof), each other Person who participates as an underwriter or a Qualified
Independent Underwriter, if any, in the offering or sale of such securities,
each officer, director, employee, stockholder, member or partner of such
underwriter or Qualified Independent Underwriter, and each other Person, if any,
who controls such seller or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof ("Claims") and expenses (including reasonable fees of counsel
and any amounts paid in any settlement effected with the Company's consent,
which consent shall not be unreasonably withheld or delayed) to which each such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such Claims or expenses arise out of or are
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based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in any registration statement under which such securities were
registered under the Securities Act, together with the documents incorporated by
therein or 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, or (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus or any
amendment or supplement thereto, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company shall not be liable to
any such indemnified party in any such case to the extent such Claim or expense
arises out of or is based upon any untrue statement or alleged untrue statement
of a material fact or omission or alleged omission of a material fact made in
such registration statement or amendment thereof or supplement thereto or in any
such prospectus or any preliminary, final or summary prospectus in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of such indemnified party specifically for use therein. Such indemnity
and reimbursement of expenses shall remain in full force and effect regardless
of any investigation made by as on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.
(b) Each Holder of Registrable Securities that are
included in the securities as to which any registration under Section 2.1, 2.2
or 2.3 is being effected (and, if the Company requires as a condition to
including any Registrable Securities in any registration statement filed in
accordance with Section 2.1, 2.2 or 2.3, any underwriter and Qualified
Independent Underwriter, if any) shall, severally and not jointly, indemnify and
hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 2.9) to the extent permitted by law the Company,
its officers and directors, each Person controlling the Company within the
meaning of the Securities Act and all other prospective sellers and their
directors, officers, general and limited partners and respective controlling
Persons with respect to any untrue statement or alleged untrue statement of any
material fact in, or omission or alleged omission of any material fact from,
such registration statement, any preliminary, final or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company or its
representatives by or on behalf of such Holder or underwriter or Qualified
Independent Underwriter, if any, specifically for use therein and reimburse such
indemnified party for any legal or other expenses reasonably incurred in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, however, that the aggregate amount that any such Holder
shall be required to pay pursuant to this Section 2.9(b) and Sections 2.9(c) and
(e) shall in no case be greater than the amount of the net proceeds received by
such person upon the sale of the Registrable Securities pursuant to the
registration statement giving rise to such claim. Such indemnity and
reimbursement of expenses shall remain in full force and effect
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regardless of any investigation made by or on behalf of such indemnified party
and shall survive the transfer of such securities by such Holder.
(c) Indemnification similar to that specified in the
preceding paragraphs (a) and (b) of this Section 2.9 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any state securities and "blue sky" laws.
(d) Any person entitled to indemnification under this
Agreement shall notify promptly the indemnifying party in writing of the
commencement of any action or proceeding with respect to which a claim for
indemnification may be made pursuant to this Section 2.9, but the failure of any
indemnified party to provide such notice shall not relieve the indemnifying
party of its obligations under the preceding paragraphs of this Section 2.9,
except to the extent the indemnifying party is materially prejudiced thereby and
shall not relieve the indemnifying party from any liability that it may have to
any indemnified party otherwise than under this Article 2. In case any action
or proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to assume the
defense thereof jointly with any other indemnifying party similarly notified, to
the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party that it so chooses, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses subsequently incurred
by such indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided, however, that (i) if the
indemnifying party fails to take reasonable steps necessary to defend diligently
the action or proceeding within 20 days after receiving notice from such
indemnified party that the indemnified party believes it has failed to do so; or
(ii) if such indemnified party who is a defendant in any action or proceeding
that is also brought against the indemnifying party reasonably shall have
concluded that there may be one or more legal defenses available to such
indemnified party that are not available to the indemnifying party; or (iii) if
representation of both parties by the same counsel is otherwise inappropriate
under applicable standards of professional conduct, then, in any such case, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel for all indemnified
parties in each jurisdiction who shall be approved by the Major Holder of the
registration in respect of which such indemnification is sought), and the
indemnifying party shall be liable for any expenses therefor. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such
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settlement, compromise or judgment (A) includes an unconditional release of the
indemnified party from all liability arising out of such action or claim and (B)
does not include a statement as to or an admission of fault, culpability or a
failure to act, by or on behalf of any indemnified party.
(e) If for any reason the foregoing indemnity is
unavailable or is insufficient to hold harmless an indemnified party under
Sections 2.9(a), (b) or (c), then each indemnifying party shall contribute to
the amount paid or payable by such indemnified party as a result of any Claim in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party, on the one hand, and the indemnified party, on the other
hand, with respect to such offering of securities. The relative fault 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 fact relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. If, however, the allocation provided in the second preceding sentence
is not permitted by applicable law, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative faults but also
the relative benefits of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 2.9(e) were to be determined by pro rata allocation or by any other
method of allocation that does not take account of the equitable considerations
referred to in the preceding sentences of this Section 2.9(e). The amount paid
or payable in respect of any Claim shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such Claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Notwithstanding anything in this Section 2.9(e)
to the contrary, no indemnifying party (other than the Company) shall be
required pursuant to this Section 2.9(e) to contribute any amount in excess of
the net proceeds received by such indemnifying party from the sale of
Registrable Securities in the offering to which the losses, claims, damages or
liabilities of the indemnified parties relate, less the amount of any
indemnification payment made by such indemnifying party pursuant to Sections
2.9(b) and (c).
(f) The indemnity agreements contained herein shall be in
addition to any other rights to indemnification or contribution that any
indemnified party may have pursuant to law or contract and shall remain
operative and in full force and effect regardless of any investigation made or
omitted by or on behalf of any indemnified party and shall survive the transfer
of the Registrable Securities by any such party.
(g) The indemnification and contribution required by this
Section 2.9 shall be made by periodic payments of the amount thereof during the
course of the
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investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
3. Underwritten Offerings.
3.1. Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Holders pursuant to a
registration requested under Section 2.1 or 2.3, the Company shall enter into a
customary underwriting agreement with the underwriters. Such underwriting
agreement shall be satisfactory in form and substance to the Major Holder and
shall contain such representations and warranties by, and such other agreements
on the part of, the Company and such other terms as are generally included in
the standard underwriting agreement of such underwriters, including, without
limitation, indemnities and contribution agreements. Any Holder participating
in the offering shall be a party to such underwriting agreement and may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holder. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary in
agreements of that type.
3.2. Piggyback Underwritten Offerings. In the case of a
registration pursuant to Section 2.2 hereof, if the Company shall have
determined to enter into an underwriting agreement in connection therewith, all
of the Holders' Registrable Securities to be included in such registration shall
be subject to such underwriting agreement. Any Holder participating in such
registration may, at its option, require that any or all of the representations
and warranties by, and the other agreements on the part of, the Company to and
for the benefit of such underwriters shall also be made to and for the benefit
of such Holder and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such Holder. Such underwriting agreement shall
also contain such representations and warranties by the participating Holders as
are customary in agreements of that type.
4. General.
4.1. Adjustments Affecting Registrable Securities. The Company
agrees that it shall not effect or permit to occur any combination or
subdivision of shares that would adversely affect the ability of the Holder of
any Registrable Securities to include such Registrable Securities in any
registration contemplated by this Agreement or the marketability of such
Registrable Securities in any such registration. The Company agrees that it
will take all reasonable steps necessary to effect a subdivision of shares if in
the reasonable judgment of (a) the Holder of Registrable Securities that makes a
Demand Registration Request or (b) the managing underwriter for the offering in
respect of such Demand Registration Request, such subdivision would enhance the
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marketability of the Registrable Securities. Each Holder agrees to vote all of
its shares of capital stock in a manner, and to take all other actions
necessary, to permit the Company to carry out the intent of the preceding
sentence including, without limitation, voting in favor of an amendment to the
Company's Articles of Incorporation in order to increase the number of
authorized shares of capital stock of the Company.
4.2. Rule 144. If the Company shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act in
respect of the Common Stock or securities of the Company convertible into or
exchangeable or exercisable for Common Stock, the Company covenants that (i) so
long as it remains subject to the reporting provisions of the Exchange Act, it
will timely file the reports required to be filed by it under the Securities Act
or the Exchange Act (including, but not limited to, the reports under Sections
13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144
under the Securities Act), and (ii) will take such further action as any Holder
of Registrable Securities may reasonably request, 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 (A) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (B) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
4.3. Amendments and Waivers. This Agreement may be amended,
modified, supplemented or waived only upon the written agreement of the Company
and the holders of not less than a majority of the shares of Registrable
Securities (treating all shares of Series D Preferred as having been converted
at the conversion ratio then in effect).
4.4. Notices. Except as otherwise provided in this Agreement, all
notices, requests, consents and other communications hereunder to any party
shall be deemed to be sufficient if contained in a written instrument delivered
in person or by telecopy, nationally recognized overnight courier or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed to such party at the address set forth below or such other address as
may hereafter be designated in writing by such party to the other parties:
(i) if to the Company, to:
Doctors Health System, Inc.
00000 Xxxx Xxx Xxxxxx
Xxxxxx Xxxxx, XX 00000
Telecopy: (410)
Attention:
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(ii) if to Beacon, to:
The Beacon Group III - Focus Value Fund, L.P.
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
with a copy to:
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Shine, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been given when received.
4.5. No Inconsistent Agreements. Without the prior written consent
of Beacon, the Company will not, on or after the date of this Agreement, enter
into any agreement with respect to its securities that is inconsistent with the
rights granted in this Agreement or otherwise conflicts with the provisions
hereof, other than any lock-up agreement with the underwriters in connection
with any registered offering effected hereunder, pursuant to which the Company
shall agree not to register for sale, and the Company shall agree not to sell or
otherwise dispose of, Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock, for a specified period following
the registered offering.
4.6. Future Grants of Registration Rights. The Company shall not
grant any registration rights or similar rights with respect to its securities
without the consent of Beacon for so long as Beacon holds Registrable
Securities.
4.7. Miscellaneous.
(a) This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and the respective
successors, personal representatives and assigns of the parties hereto, whether
so expressed or not. If any Person shall acquire Registrable Securities from
any Holder, in any manner, whether by operation of law or otherwise, such
transferee shall promptly notify the Company and such Registrable Securities
acquired from such Holder shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities such Person
shall be entitled to receive the benefits of and be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provision of this
Agreement. If the Company shall so request, any such successor or assign shall
agree
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in writing to acquire and hold the Registrable Securities acquired from such
Holder subject to all of the terms hereof. If any Holder shall acquire
additional Registrable Securities, such Registrable Securities shall be subject
to all of the terms, and entitled to all the benefits, of this Agreement. No
Person other than a Holder shall be entitled to any benefits under this
Agreement, except as otherwise expressly provided herein.
(b) This Agreement (with the documents referred to herein
or delivered pursuant hereto) embodies the entire agreement and understanding
between the parties hereto and supersedes all prior agreements and
understandings relating to the subject matter hereof.
(c) This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of New York without giving
effect to the conflicts of law principles thereof.
(d) The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
section references are to this Agreement unless otherwise expressly provided.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(f) Any term or provision of this Agreement that is
invalid or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction.
(g) The parties hereto acknowledge that there would be no
adequate remedy at law if any party fails to perform any of its obligations
hereunder, and accordingly agree that each party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
injunctive relief, including specific performance, to enforce such obligations
without the posting of any bond, and, if any action should be brought in equity
to enforce any of the provisions of this Agreement, none of the parties hereto
shall raise the defense that there is an adequate remedy at law.
(h) Each party hereto shall do and perform or cause to be
done and performed all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments, and documents as
any other party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
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IN WITNESS WHEREOF, the undersigned have executed this Registration
Rights Agreement as of the date set forth above.
DOCTORS HEALTH SYSTEM, INC.
By: /s/ Stewart B. Gold
___________________
Name: Stewart B. Gold
Title: President
THE BEACON GROUP III -
FOCUS VALUE FUND, L.P.
By: Focus Value Investors, L.L.C.
By: Focus Value GP, Inc.
By: /s/ Xxxx X. Xxxxxxxxx
___________________
Name: Xxxx Xxxxxxxxx
Title: Managind Director
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