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Exhibit 10.18
Counsel Corporation
December 19, 1996
Page 1
LETTER AGREEMENT
December 19, 1996
Counsel Corporation
Two First Canadian Place
Suite 1300, P.O. Box 95
Toronto, Ontario
Canada X0X 0X0
RE: Registration Rights in connection with the purchase by Counsel
Corporation ("Counsel") of 2,112,490 shares of Common Stock of
Capstone Pharmacy Services, Inc. ("Capstone") on July 29, 1996
Gentlemen:
This letter sets forth the registration rights that Counsel received in
connection with the above-referenced Common Stock. As you know, Capstone's Board
of Directors agreed to grant to Counsel substantially the same registration
rights as granted to Integrated Health Services, Inc. ("IHS") in the Symphony
acquisition. The above-referenced shares (the "Capstone Stock") will have
registration rights as set forth below. Except as otherwise indicated herein,
capitalized terms used in this Letter Agreement are defined as set forth in the
Asset Purchase Agreement between IHS, Sellers and Buyer (each as defined
therein), dated as of June 19, 1996 (the "Purchase Agreement").
(a) Initial Registration. Unless all of the Capstone Stock has been
registered pursuant to the terms of Section (b) hereof, as soon as is
reasonably practicable but in any event by December 31, 1996, Capstone will
cause to be prepared and filed with the Securities and Exchange Commission
(the "Commission") (and will thereafter use its best efforts to have
declared effective as soon as possible) an underwritten registration
statement of all of the Capstone Stock on Form S-3 or its equivalent and
such other documents, including a prospectus, as may be necessary in the
opinion of both counsel for Capstone and counsel for the holders of the
Capstone Stock in order to comply with the provisions of the Securities Act
of 1933, as amended (the "Securities Act"), so as to permit an underwritten
public offering and sale by Counsel of all or a portion of the Capstone
Stock as elected by Counsel. Capstone shall give Counsel at least 30 days
notice prior to filing a registration statement. Capstone shall be entitled
to select the underwriter or underwriters for such registration statement.
In the event that Counsel elects, in its sole discretion, to delay or defer
the process, or to sell less than all shares of Capstone Stock owned by
Counsel, Counsel may
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December 19, 1996
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at any time after December 31, 1996 notify Capstone that it desires that
the registration process commence or recommence (as the case may be) as to
all or any of said shares, and thereupon Capstone shall commence or
recommence (as the case may be) such process promptly and shall file within
60 days of the Counsel notification (or prosecute the effectiveness of a
registration statement if one is on file for Counsel) the registration
statement and use its best efforts to cause it to become effective as soon
as possible. Counsel may require Capstone to, and Capstone shall, file up
to a total of two such underwritten registration statements during the two
year period following Closing under the Purchase Agreement.
(b) Piggyback Registration Rights. If the Capstone shall at any time
propose to file a registration statement under the Securities Act for any
sales of securities of the Capstone (i) on behalf of the holders of
securities sold by Capstone in a private placement in April 1996 (the
"April Holders") pursuant to a demand registration by such April Holders or
(ii) any other filing Capstone shall give to Counsel written notice of such
registration no later than thirty (30) days before its filing with the
Commission; provided, that registrations relating solely to securities to
be issued by Capstone in connection with any acquisition, employee stock
option or employee stock purchase or savings or similar plan on Form S-4 or
S-8 (or successor Forms) under the Securities Act shall not be subject to
this Section (b). If Counsel so requests within fifteen (15) days of the
sending of such notice, Capstone shall include all of the Capstone Stock in
any such registration. However, Capstone shall not be obligated to include
any portion (or all) of such Capstone Stock to the extent any underwriter
or underwriters of such securities being otherwise registered by Capstone
shall determine in good faith that the inclusion of such Capstone Stock (or
any portion thereof) would jeopardize the successful sale of such other
securities proposed to be sold by such underwriter or underwriters;
provided, however that if such offering includes securities being offered
for resale by other sellers of Capstone stock, then the Capstone Stock may
be eliminated from such offering only to the extent that the securities
being offered by such other sellers also are eliminated on a pari passu
basis (except as otherwise set forth in this section). Notwithstanding the
foregoing, in the case of a registration statement filed under item (ii) of
this paragraph (b), to the extent any underwriter or underwriters for such
registration statement shall determine that inclusion of all of the
securities proposed to be sold would jeopardize the
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December 19, 1996
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successful sale of such securities, the shares of Capstone Stock shall be
excluded from such registration statement prior to the exclusion of the
securities of the April Holders. Capstone represents and warrants that
there are no holders of shares of its common stock with registration rights
not previously included in a registration statement, other than the April
Holders, Counsel and IHS.
(c) Registration Expenses. Capstone shall bear all reasonable expenses
related to any registration referred to in paragraph (a). Such costs and
expenses shall include, without limitation, all underwriters' and brokers'
expenses exclusive of discounts and commissions applicable to the Capstone
Stock, the fees and expenses of counsel for Capstone and of its
accountants, all other costs, fees and expenses of Capstone incident to the
preparation, printing, registration and filing under the Securities Act of
the registration statement and all amendments and supplements thereto, the
fees and expenses of one counsel to the Sellers relating to such
registration, the cost of furnishing copies of each preliminary prospectus,
each final prospectus and each amendment or supplement thereto to
underwriters, dealers and Sellers.
(d) Registration Procedures, Etc. In connection with the registration
rights granted to the Sellers with respect to the Capstone Stock as
provided in paragraph (a), Capstone covenants and agrees to:
(1) use its best efforts to cause each registration under
paragraph (a) to be declared effective and to remain effective (and in
compliance with the Securities Act) by such action as may be necessary or
appropriate for a period of two (2) years (plus an amount of time equal tot
he number of days during which sales of Capstone Stock under such
registration statement shall have been prohibited in any jurisdiction in
which such securities are registered for sale by applicable law, court
order or similar compulsion) after the effective date of such registration
statement, or, if sooner, until an exemption from registration of the
Capstone Stock becomes available to Sellers, including, without limitation,
the filing of post-effective amendments and supplements to any registration
statement or prospectus necessary to keep the registration statement
current and the further qualification under any applicable Blue Sky or
other state securities laws to permit such sale or distribution all as
requested by holders of
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December 19, 1996
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Capstone Stock. Capstone will immediately notify holders of Capstone Stock
at any time when a prospectus relating to a registration statement under
paragraph (a) is required to be delivered under the Securities 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 any material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing. Notwithstanding anything to the
contrary contained herein, in the event that a registration is an
underwritten offering, Capstone shall be required to maintain the
effectiveness of the underwritten registration statement only for a
reasonable period of time.
(2) furnish, at least five business days before filing a
registration statement that registers such Capstone Stock, a prospectus
relating thereto or any amendments or supplements relating to such a
registration statement or prospectus, to one counsel selected by the
persons holding a majority of the Capstone Stock being so registered (the
"Stockholder Counsel"), copies of all such documents proposed to be filed
(it being understood that such five-business-day period need not apply to
successive drafts of the same document proposed to be filed so long as such
successive drafts are supplied to the Sellers in advance of the proposed
filing by a period of time that is customary and reasonable under the
circumstances);
(3) notify in writing (which notice may be sent via fax or
overnight courier) the Sellers promptly (i) of the receipt by Capstone of
any notification with respect to any comments by the Commission with
respect to such registration statement or prospectus or any amendment or
supplement thereto or any request by the Commission for the amending or
supplementing thereof or for additional information with respect thereto,
to the extent that such comments or requirements relate to information
regarding the persons selling Capstone Stock (ii) of the receipt by
Capstone of any notification with respect to the issuance by the Commission
of any stop order suspending the effectiveness of such registration
statement or prospectus or any amendment or supplement thereto or the
initiation or threatening of any proceeding for that purpose and (iii) of
the receipt by Capstone of any notification with respect to the suspension
of the
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qualification of such Capstone Stock for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purposes;
(4) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement, or the lifting
of any suspension of the qualification or exemption from qualification of
any of Capstone Stock for sale in any jurisdiction, at the earliest
possible time;
(5) use its best efforts to register or qualify such Capstone
Stock under such other securities or blue sky laws of such jurisdictions as
the Sellers selling Capstone Stock reasonably request and any and all other
acts and things which may be reasonably necessary or advisable to enable
such persons to consummate the disposition in such jurisdictions of
Capstone Stock; provided, however, that Capstone will not be required to
qualify generally to do business, subject itself to general taxation or
consent to general service of process in any jurisdiction where it would
not otherwise be required to do so but for this subparagraph (5);
(6) furnish to the persons selling Capstone Stock such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and
such other documents as such persons may reasonably request in order to
facilitate the public sale or other disposition of such Capstone Stock;
(7) use its best efforts to cause such Capstone Stock to be
registered with or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business and operations of
Capstone to enable the persons selling Capstone Stock to consummate the
disposition of such Capstone Stock;
(8) notify the persons selling Capstone Stock on a timely basis at
any time when a prospectus relating to such Capstone Stock is required to
be delivered under the Securities 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 light of the circumstances then
existing and, at the request of such persons, prepare and furnish to
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December 19, 1996
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such persons a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the offerees of such shares, 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
not misleading in light of the circumstances then existing;
(9) make available for inspection by the persons selling Capstone
Stock, any underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent retained
by such persons or underwriter (collectively, the "Inspectors"), all
pertinent financial and other records, pertinent corporate documents and
properties of Capstone (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause Capstone's officers, directors and employees and
any person possessing such information on behalf of Capstone to supply all
information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such registration
statement; provided that any of the Information which Capstone determines
in good faith to be confidential, and of which determination the Inspectors
are so notified, shall not be disclosed by the Inspectors unless (i) the
disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the release of
such Information is ordered pursuant to a subpoena or other order from a
court or government agency of competent jurisdiction or (iii) such
Information has been made generally available to the public; provided,
however, that each such person agrees that it will, upon learning that
disclosure of such Information is sought in a court of competent
jurisdiction, give notice to Capstone and allow Capstone, at its expense,
to undertake appropriate action to prevent disclosure of the Information
deemed confidential;
(10) use its best efforts to obtain from its independent certified
public accountants "cold comfort" letters addressed to Counsel and each
person selling Capstone Stock in customary form and at customary times and
covering matters of the type customarily covered by cold comfort letters;
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(11) use its best efforts to obtain from its counsel an opinion or
opinions addressed to Counsel in customary form covering matters of the
type customarily covered by such opinions;
(12) provide a transfer agent and registrar (which may be the same
entity and which may be Capstone) for such Capstone Stock;
(13) issue to any underwriter to which the Sellers selling
Capstone Stock may sell shares in such offering certificates evidencing
such Capstone Stock (following surrender of any existing certificate for
such securities);
(14) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission and make available to Capstone's
security holders, as soon as reasonably practicable, publicly available
earnings statements (which need not be audited) covering a period of twelve
(12) months beginning within three (3) months after the effective date of
the Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(15) use its best efforts to take all other steps necessary to
effect the registration of such Capstone Stock contemplated hereby.
(e) Indemnification Procedures, Etc.
(1) The information included or incorporated by reference in the
registration statements filed pursuant to paragraph (a) will not, at the
time any such registration statement becomes effective, contain any untrue
statement of a material fact, or omit to state any material fact required
to be stated therein as necessary in order to make the statements therein,
in light of the circumstances under which they were made, not misleading or
necessary to correct any statement in any earlier filing of such
registration statement or any amendments thereto. The registration
statements will comply in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder. Capstone shall
indemnify the holders of Capstone Stock to be sold pursuant to any
registration statement, their successors and assigns, and each person, if
any, who controls such holders within the meaning of ss.15 of the
Securities Act or ss.20(a) of the Securities
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Exchange Act of 1934, as amended (the "Exchange Act") against any and all
loss, claim, damage, expense or liability (including all expenses
reasonably incurred in investigating, preparing or defending against any
claim whatsoever) to which any of them may become subject under the
Securities Act, the Exchange Act or any other statute, common law or
otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in such registration
statement executed by Capstone or based upon Written information furnished
by Capstone filed in any jurisdiction in order to qualify Capstone Stock
under the securities laws thereof or filed with the Commission, any state
securities commission or agency, NYSE or any securities exchange; or the
omission or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements contained therein not
misleading, unless such statement or omission was made in reliance upon and
in conformity with written information furnished to Capstone by the holder
or its affiliate seeking indemnification expressly for use in such
registration statement, any amendment or supplement thereto or any
application, as the case may be. If any action is brought against the
holders or any controlling person of the holders in respect of which
indemnity may be sought against Capstone pursuant to this subparagraph
(e)(1), the holders or such controlling person shall promptly, and in any
event, within thirty (30) days (provided that the failure to give prompt
notice shall not relieve the indemnifying party of its indemnification
obligation but such obligation shall be reduced by any damages suffered by
such party resulting from a failure to give prompt notice) after the
receipt thereby of a summons or complaint, notify Capstone in writing of
the institution of such action and Capstone shall assume the defense of
such actions, including the employment and payment of reasonable fees and
expenses of counsel (reasonably satisfactory to the holders or such
controlling person). The holders or such controlling person shall have the
right to employ its or their own counsel in any such case, but the fees and
expenses of such counsel shall be at the expense of the holders or such
controlling person unless (A) the employment of such counsel shall have
been authorized in writing by Capstone in connection with the defense of
such action, or (B) Capstone shall not have promptly employed counsel to
have charge of the defense of such action, or (C) such indemnified party or
parties shall have reasonably concluded that there may be defenses
available to it or them which are different from or additional to those
available to Capstone (in which case, Capstone shall not have the right
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to direct the defense of such action on behalf of the indemnified party or
parties), in any of which events the reasonable fees and expenses of not
more than one additional principal firm of attorneys (and, if necessary,
applicable firms to serve as local counsel) for the holders and/or such
controlling person shall be borne, by Capstone. Except as expressly
provided in the previous sentence, in the event that Capstone shall have
assumed the defenses of any such action or claim, Capstone shall not
thereafter be liable to such holders or such controlling person for their
expenses in investigating, preparing or defending any such action or claim,
except for reimbursement of expenses incurred at Capstone's request (e.g.,
attending depositions etc.). Capstone agrees promptly to notify the holders
of the commencement or any litigation or proceedings against Capstone or
any of its officers, directors or controlling persons in connection with
the resale of Capstone Stock or in connection with such registration
statement.
(2) Each holder of Capstone Stock to be sold pursuant to a
registration statement, and his successors and assigns, shall severally,
and not jointly, indemnify Capstone, any underwriter, its or their officers
and directors and each person, if any, who controls Capstone or any
underwriter within the meaning of ss.15 of the Securities Act or ss.20(a)
of the Exchange Act against any and all loss, claim, damage, or expense or
liability (including all expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which they may
become subject under the Securities Act, the Exchange Act or any other
statute, common law or otherwise, arising from information containing any
untrue statement of a material fact furnished in writing by or on behalf of
such holder, or his successors or assigns for specific inclusion in such
registration statement. However, in no event shall the obligation of a
seller of Capstone Stock hereunder exceed the price received by such seller
for such shares.
(3) If the indemnification provided for in this paragraph (e) is
held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, claim, damage, expense,
liability or action referred to herein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to
the amounts paid or payable by such indemnified party as a result of such
loss, claim, damage, expense, liability or action in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the
one
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and of the indemnified party on the other in connection with the statement
or omissions which resulted in such loss, claim, damage, expense, liability
or action as well as any other relevant equitable considerations. The
relevant fault of the indemnifying party and of the indemnified party 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 by the indemnified party and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. However, in no event shall the
obligation of a seller of Capstone Stock hereunder exceed the price
received by such seller for such shares.
(f) Carve Back Agreement. In the event that the shares of Capstone
Stock that Counsel proposes to register in a registration under paragraph
(a) is carved back or reduced by an underwriter or by Capstone, Counsel
shall be entitled to a shelf registration on Form S-3 in accordance with
paragraph (a) (in a form similar to Section 2.5 of the Purchase Agreement
as if not amended by Amendment No. 1 to the Purchase Agreement) covering
the number of shares that were subject to the carve back.
Please recall that Counsel Corporation has agreed to not exercise its
registration rights in a manner which would adversely affect the
registration rights of IHS.
If you are in agreement with the foregoing, please indicate your acceptance
by executing this Letter Agreement and returning it to Capstone.
Very truly yours,
CAPSTONE PHARMACY SERVICES, INC.
By:__________________________________
Its:_________________________________
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December 19, 1996
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ACCEPTED BY:
Counsel Corporation
By:________________________________
Its:_______________________________
