EXHIBIT B
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 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.
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.
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(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 shall 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 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.
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(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.
(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
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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 Jack Anderson and James H. Rempe 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 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 be 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.
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.
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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
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
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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.
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.
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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 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
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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 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 required in connection
with defense of such claim and litigation resulting therefrom.
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(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 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
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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 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:
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(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.
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
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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.
(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 (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
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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.
11555 Darnestown Road
Gaithersburg, Maryland 20878
Attention: James H. Rempe, Esq.,
General Counsel
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Telecopy: (212) 269-5420
Attention: W. Leslie Duffy, Esq.
(ii) if to Genesis, to:
Genesis Health Ventures, Inc.
148 West State Street
Kennett Square, Pennsylvania 19348
Attention: Ira Gubervick, Esq.,
General Counsel
with a copy to:
Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, Pennsylvania 19103
Attention: Stephen E. Luongo, Esq.
(h) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of 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
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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 Heath 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:____________________________
Name:
Title:
MANOR CARE, INC.
By:_____________________________
Name:
Title:
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