<PAGE> 1
As filed with the Securities and Exchange Commission on August 7, 1996
REGISTRATION NO. 333-3643
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------------
CAPSTONE PHARMACY SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 62-1293855
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2930 WASHINGTON BOULEVARD
BALTIMORE, MARYLAND 21230-1197
(410) 646-7373
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
R. DIRK ALLISON, PRESIDENT COPY TO:
CAPSTONE PHARMACY SERVICES INC. PETER M. OLDHAM
2930 WASHINGTON BOULEVARD HARWELL HOWARD HYNE GABBERT & MANNER, P.C.
BALTIMORE, MARYLAND 21230-1197 1800 FIRST AMERICAN CENTER
(410) 646-7373 NASHVILLE, TENNESSEE 37219
(615) 256-0500
(Name, address, including zip code, and telephone number including area code,
of agent for service)
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
--------------------------
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 7, 1996
CAPSTONE PHARMACY SERVICES, INC.
6,478,367 Shares of Common Stock
650,000 Series B Warrants
This Prospectus relates to (i) the resale by the holders thereof (the
"Selling Stockholders") of up to 3,227,401 shares of Capstone Pharmacy
Services, Inc. (the "Company" or "Capstone") Common Stock, par value $.01 per
share (the "Common Stock") that have been previously issued by Capstone in
private placements; (ii) the resale by Selling Stockholders of 1,007,692 shares
issued by Capstone in an acquisition; (iii) the resale by Selling Stockholders
of 943,274 shares underlying certain warrants (the "Private Placement Warrants")
previously issued by Capstone in private placements; (iv) the issuance by
Capstone of warrants (the "Series B Warrants") entitling the holders thereof to
purchase an aggregate of 650,000 shares of Common Stock at $10.00 per share,
which warrants are issuable upon the exercise of currently outstanding (and
previously registered) warrants (the "Series A Warrants"); and (v) the
issuance of 650,000 and 650,000 shares of Common Stock upon the exercise of the
Series A Warrants and the Series B Warrants, respectively.
None of the proceeds from the sale of the shares by the Selling
Stockholders will be received by the Company. The Company could receive gross
proceeds of up to $4,606,188 from the exercise of the Private Placement
Warrants, up to $3,900,000 from the exercise of the Series A Warrants and up to
$6,500,000 from the exercise of the Series B Warrants. See "Use of Proceeds."
The Company has paid all costs and fees associated with the registration of the
securities under the Federal and state securities laws and the preparation and
delivery of this Prospectus.
The Company's Common Stock is quoted on the Nasdaq Stock Market under the
symbol "DOSE." On August 5, 1996, the reported closing price of the Company's
Common Stock on the Nasdaq Stock Market was $11.125 per share. The Series A
Warrants are currently quoted on the Nasdaq Stock Market under the symbol
"DOSEW". The Series B Warrants will not be quoted on the Nasdaq Stock Market.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 3
TABLE OF CONTENTS
AVAILABLE INFORMATION.......................................... 3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.............. 3
THE COMPANY.................................................... 4
USE OF PROCEEDS................................................ 5
SELLING STOCKHOLDERS........................................... 7
PLAN OF DISTRIBUTION........................................... 11
LEGAL MATTERS.................................................. 11
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER MADE
BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER
OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
2
<PAGE> 4
AVAILABLE INFORMATION
The Company's principal executive offices are located at 2930 Washington
Boulevard, Baltimore, Maryland 21230, phone number (410) 646-7373. The Company
is subject to the informational requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and, in accordance therewith, files
reports, proxy and information statements and other information with the
Securities and Exchange Commission (the "Commission"). Copies of such reports
and other information filed by the Company can be obtained, at prescribed
rates, from the Public Reference Section of the Commission at Room 1024, 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition,
such reports and other information can be inspected at the Public Reference
Section referred to above and at the Regional Offices of the Commission at
Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and 75 Park Place, 14th Floor, New York, New York 10007. Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission also maintains a web site on the worldwide web portion
of the Internet containing reports, proxy and information statements and other
information regarding issuers that file electronically at http://www.sec.gov.
The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933. This Prospectus does not contain
all of the information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information, reference is hereby made to the
Registration Statement.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Company's Annual Report on Form 10-K
for the ten months ended December 31, 1995, as amended by Form
10-K/A and 10-K/A2;
2. The Company's Registration Statement on Form 8-A
relating to the Company's Common Stock dated June 18, 1986, as
amended by a Form 8-A/A dated July 19, 1996;
3. The Company's Current Report on Form 8-K dated
December 31, 1995, as amended by Form 8-K/A;
4. The Company's Current Report on Form 8-K dated
February 29, 1996, as amended by Forms 8-K/A and 8-K/A2; and
5. The Company's Current Report on Form 8-K dated March 20, 1996.
6. The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.
7. The Company's Current Report on Form 8-K dated July 18, 1996.
8. The Company's Amendment to Current Report on Form 8-K/A and
8-K/A2 amending Form 8-K dated May 22, 1995.
All documents subsequently filed by the Company with the Commission
pursuant to Section 13(a), (c), 14 or 15(d) of the Exchange Act and prior to
the termination of this offering shall be deemed to be incorporated by
reference in this Prospectus. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein, or in any other subsequently filed document that
also is or is deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon the request of
such person, a copy of any or all of the documents which are incorporated by
reference in this Prospectus, but not delivered herewith, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into the information that this Prospectus incorporates). Written or
telephone requests should be directed to Dirk Allison, President, Capstone
Pharmacy Services, Inc., 2930 Washington Boulevard, Baltimore, Maryland 21230,
(410) 646-7373.
3
<PAGE> 5
THE COMPANY
Capstone is a leading provider of institutional pharmacy services to
long-term care facilities and correctional institutions throughout the United
States. On July 29, 1996, Capstone acquired the institutional pharmacy services
business of Symphony Pharmacy Services, Inc. ("Symphony"), a subsidiary of
Integrated Health Services, Inc. ("IHS"). The acquisition of Symphony (the
"Symphony Acquisition") increased the number of long-term care beds served by
Capstone from approximately 44,000 in seven states to approximately 84,000 in 13
states, making Capstone the second largest independent institutional pharmacy
company in the United States. Management believes the Symphony Acquisition is a
major strategic step in positioning Capstone as a leading provider of
institutional pharmacy services in numerous metropolitan markets nationwide.
The Symphony Acquisition significantly increased Capstone's client base and
geographic scope and establishes relationships with IHS and other large
operators of long-term care facilities not previously served by Capstone. In
addition, management believes that Capstone's expanded national presence will
enable it to compete more effectively for larger customers who operate multiple
facilities while achieving purchasing efficiencies and other economies of scale.
Capstone provides long-term care facilities with comprehensive institutional
pharmacy services that include the purchasing, repackaging and dispensing of
pharmaceuticals, infusion therapy and Medicare Part B services, and pharmacy
consulting services, all of which are supported by computerized record keeping
and third-party billing services. The Company serves its long-term care
clients primarily through regional pharmacies that are open 24 hours, seven
days a week. By establishing regional pharmacies that each have the capability
to serve in excess of 10,000 patients, management believes that the Company can
provide a broader range of services to its long-term care clients on a more
cost-effective basis than many of its competitors. In the correctional
business, where it currently is the largest non-captive provider of pharmacy
services in the United States, the Company provides pharmaceuticals under
capitated contracts to correctional institutions that have privatized their
inmate health care services. Management believes the Company's experience in
managing capitated correctional contracts, which involves the utilization of
closed formularies, generic substitution, rigorous drug utilization review and
proactive physician education, will provide a significant competitive advantage
as managed care becomes more prevalent in the long-term care industry.
In connection with an investment by Counsel Corporation ("Counsel") in
December 1994, the Company installed a new management team, refocused its
operating strategy on its core institutional pharmacy business and initiated an
aggressive acquisition strategy. As a result of these efforts, the Company's
net sales increased to $53.0 million on a pro forma basis for the quarter ended
March 31, 1996 from $11.0 million for the quarter ended March 31, 1995.
Capstone's profitability also improved during the same time period, with income
from continuing operations of $3.0 million on a pro forma basis for the quarter
ended March 31, 1996 compared to a loss from continuing operations of $2.5
million for the quarter ended March 31, 1995. Capstone's strategy is to enhance
its position as a leading provider of institutional pharmacy services by: (i)
acquiring institutional pharmacy companies in metropolitan markets; (ii)
achieving regional market density in order to enhance its operating leverage;
(iii) positioning itself as the provider of choice to managed care payors in the
markets in which it operates; and (iv) emphasizing internal growth through the
addition of new clients and the expansion of ancillary services. Since the
beginning of 1995, the Company has focused on expanding operations in major
metropolitan markets, concentrating initially on the urban corridor from
Baltimore to Boston and more recently acquiring operations in Chicago. As a
result of the Symphony acquisition, Capstone also operates in such metropolitan
markets such as Los Angeles, Dallas, New Orleans, Minneapolis-St. Paul and
Tampa-St. Petersburg. Since December 31, 1994, Capstone has increased its
long-term care bed count from approximately 16,200 to approximately 84,000 and
the number of inmates served in correctional institutions from approximately
65,000 to approximately 120,000. Growth in the Company's long-term care
business has been achieved through acquisitions in both existing and new markets
and through internal growth, and growth in Capstone's correctional business has
been achieved solely through the addition of new capitated contracts.
4
<PAGE> 6
USE OF PROCEEDS
4,243,553 of the shares of Common Stock offered hereby are currently owned
by the Selling Stockholders and are being registered for resale by such holders.
Accordingly, the Company will not receive any of the proceeds from any
transactions in these shares by the Selling Stockholders.
2,234,814 of the shares of Common Stock offered hereby can be obtained by
the Selling Stockholders upon exercise of the Series A Warrants, Series B
Warrants and Private Placement Warrants. The Company will receive proceeds to
the extent that such warrants are exercised before their expiration, as follows:
<TABLE>
<CAPTION>
Description Number of Warrants Exercise Price Expiration Date
----------- ------------------ -------------- ---------------
<S> <C> <C> <C>
Series A Warrants 650,000 $ 6.00/share August 16, 1996
Series B Warrants 650,000* $10.00/share August 16, 1997
Private Placement Warrants 501,819 $ 4.50/share May 22, 1998
Private Placement Warrants 401,455 $ 5.50/share May 22, 1998
Private Placement Warrants 40,000 $ 3.50/share October 31, 1999
</TABLE>
- --------------
* Assumes full exercise of Series A Warrants. One Series B Warrant will be
issued upon the exercise of each Series A Warrant.
As a result, the Company could receive gross proceeds of up to $3,900,000
from the exercise of the Series A Warrants, up to $6,500,000 from the exercise
of the Series B Warrants and up to $4,606,188 from the exercise of the Private
Placement Warrants. The Company intends to use these proceeds, if any, for
general corporate purposes including future acquisitions. No specific uses of
the proceeds have been identified by the Company because there is no certainty
that any of the Warrants will be exercised.
5
<PAGE> 7
RISK FACTORS
In evaluating the Company and its business, prospective investors
should carefully consider the following factors in addition to those discussed
elsewhere or incorporated by reference in this Prospectus. Information
contained or incorporated by reference in this Prospectus may contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue", or the negative thereof, or other variations thereon
or comparable terminology. The following matters constitute cautionary
statements identifying important factors with respect to any such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those reflected in any
such forward-looking statements.
NO ASSURANCE OF SUCCESSFUL INTEGRATION OF ACQUISITIONS. The Symphony
acquisition approximately doubles the number of beds served by the Company, the
number of Company employees and the Company's net sales. The Company has made
three significant acquisitions in addition to the Symphony Acquisition in 1996.
The integration of all of the acquisitions is critical to the Company's success.
Potential obstacles to successful integration include, but are not limited to:
cost containment; elimination of redundancies at the corporate and field level;
consolidation of financial and managerial reporting functions; coordination of
field managerial activities with corporate management; achievement of
purchasing efficiencies; expansion of the customer base of the combined entity;
roll-out of new products and services to acquired facilities; and addition and
integration of key personnel. There can be no assurance that Symphony or any
other acquisition will be integrated successfully into the Company's operations
or will not have a material adverse effect upon the Company's results of
operations, financial condition or prospects, especially in the fiscal quarters
immediately following the acquisitions. In addition, there can be no assurance
that the Symphony Acquisition or any other acquisition will achieve net sales
and earnings that justify the Company's investment therein or expenses related
thereto.
MANAGEMENT OF GROWTH; DEPENDENCE ON KEY PERSONNEL. In addition to
growth resulting from the acquisition of Symphony, the Company has experienced
growth that has placed, and is likely to continue to place, significant
pressure on its management resources. The Company's successful implementation
of its growth strategy depends upon its ability to attract and retain qualified
corporate, financial, clinical, operating and regional management personnel.
The loss of the services of one or more of the Company's key executives, or of
one or more of Symphony's key executives, could have a material adverse effect
on the Company. The Company does not have employment agreements with certain
of its key executives. There can be no assurance that the Company will be able
to attract and retain sufficient numbers of qualified personnel.
DEPENDENCE ON ACQUISITIONS FOR GROWTH. A significant component of the
Company's historical growth has come through acquisitions of institutional
pharmacy companies, and the success of the Company's growth strategy is
dependent on additional acquisitions. No assurance can be given that the
Company will be able to identify suitable acquisition candidates or to
consummate acquisitions on terms acceptable to the Company. The Company will
compete for acquisition candidates with buyers who may have greater financial
and other resources than the Company and may be able to pay higher acquisition
prices than the Company. To the extent that the Company is unable to acquire
institutional pharmacy companies, or to integrate such acquisitions
successfully, its ability to expand its business would be reduced
significantly.
GROWTH STRATEGY; NEED FOR ADDITIONAL FINANCING. In order to implement
its growth strategy, the Company will require substantial capital resources and
will need to incur, from time to time, additional bank indebtedness. The
Company also may need to issue, in public or private transactions, equity or
debt securities, the terms of which will depend on market and other conditions.
There can be no assurance that any such additional financing will be available
on terms acceptable to the Company if at all. As a result, the Company may not
be able to implement fully its growth strategy.
NASDAQ STOCK MARKET NET TANGIBLE ASSET CRITERIA. In order for the
NASDAQ Stock Market to continue to quote prices for the Company's Common Stock,
the Company must maintain a certain minimum level of net tangible assets. The
calculation of net tangible assets excludes the value of goodwill, which
typically represents a substantial part of the assets acquired by the Company,
insofar as most institutional pharmacy companies maintain relatively low levels
of fixed assets. Should the Company continue to acquire substantial goodwill
and/or increase its liabilities without increasing its stockholders' equity, it
may, from time to time, fail to comply with Nasdaq's net tangible asset
criteria. Such failure, if not remedied, could result in the Company's Common
Stock no longer being quoted on the Nasdaq Stock Market. Such a result could
have a material adverse effect on the liquidity and price of the Company's
Common Stock.
LIMITED HISTORY OF PROFITABILITY. The Company has incurred net losses in
its last three fiscal years. For the years ended February 28, 1995 and
1994, losses from continuing operations were approximately $10.8 million and
$521,000, respectively, and for the ten months ended December 31, 1995, the
Company had a loss from continuing operations of approximately $645,000. While
the Company has been profitable for the past four consecutive quarters, there
can be no assurance that it will continue to be profitable in the future.
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS. The Company derives,
directly or indirectly, a majority of its net sales from government-sponsored
reimbursement programs. The Company's net sales and profitability are, and will
continue to be, affected by the efforts of all payors to contain or reduce
the costs of health care by lowering reimbursement rates, narrowing the scope
of covered services, increasing case management review of service, and
negotiating reduced contract pricing. Any changes in reimbursement levels under
Medicare, Medicaid, or private pay programs, including managed care contracts,
could have a significant adverse effect on the Company's net sales and
profitability. Changes in the mix of patients among Medicare, Medicaid and
different types of private pay sources, may adversely affect the Company's net
sales and profitability.
HEALTH CARE REFORM. The health care industry is subject to changing
political, economic and regulatory influences that may affect the institutional
pharmacy industry. In recent years, several comprehensive national health care
reform proposals were introduced in the United States Congress. While none of
the proposals were adopted, health care reform may again be addressed by the
United States Congress. Several states also are considering health care
reforms through Medicaid managed care demonstration projects. Although these
projects generally exempt institutional pharmacy services and long-term care
facilities, no assurance can be given that these projects will not change the
Medicaid reimbursement system in certain states for long-term care, including
pharmacy services, from fee-for-service to negotiated or capitated rates. The
Company cannot predict which, if any, federal or state modifications or reform
proposals will be adopted, when they may be adopted or what their impact on the
Company may be if adopted. There can be no assurance that the adoption of
certain modifications or proposals will not have a material adverse effect on
the Company's results of operations, financial condition or future prospects.
ROLE OF MANAGED CARE. As managed care assumes an increasingly
significant role in the health care industry, Capstone's future success will,
in part, be dependent on obtaining and retaining managed care contracts.
Competition for such contracts is intense and, in most cases, will require
Capstone to compete based on breadth of services offered, pricing, ability to
track and report patient outcomes and cost data and provision of value-added
pharmacy consulting services, among other factors. There can be no assurance
that the Company will retain or continue to obtain such managed care contracts
or that the managed care contracts it obtains will be on terms as favorable to
the Company as those of its current contracts. In addition, reimbursement
rates under managed care contracts typically are significantly lower than those
paid by other private third-party payors.
COMPETITION. The long-term care pharmacy markets in which Capstone
operates are highly fragmented, and the majority of competition in such markets
comes from small to mid-size local operators whose primary advantage is market
familiarity. Capstone's competition in the correctional pharmacy market comes
primarily from other large providers. Management believes that the primary
competitive factor in its industry is breadth and quality of service.
Additional competitive factors include reputation, ease of doing business with
the specific providers, ability to develop and to maintain relationships with
referral sources and competitive pricing. Some of the Company's present and
potential competitors are significantly larger than Capstone and have, or may
obtain, greater financial and marketing resources than Capstone.
GOVERNMENT REGULATION. Capstone is subject to extensive federal,
state and local regulation. Federal laws governing the Company's activities
include regulations covering the repackaging, storing and dispensing of drugs,
Medicare reimbursement and certification, and certain financial relationships
with physicians and other health care providers. Capstone is subject to state
laws governing Medicaid, professional training, pharmacy licensure, payment of
remuneration in exchange for patient referrals and the dispensing and storage
of pharmaceuticals. The pharmacies operated by the Company must comply with
all applicable laws, regulations and licensing standards. Many of Capstone's
employees must maintain certain licenses in order to provide services. The
long-term care facilities which contract for the Company's pharmacy services
are also subject to federal, state and local regulations and are required to be
licensed in the states in which they are located. The failure by these
institutions to comply with such regulations or to obtain or renew any required
licenses could result in the loss of the Company's ability to provide pharmacy
services to their residents. There can be no assurance that federal, state or
local governments will not change existing standards or impose additional
standards. Any failure to comply with existing or future standards could have
a material adverse effect upon Capstone's results of operations, financial
condition or prospects.
INFLUENCE OF PRINCIPAL STOCKHOLDER. The Company's principal
stockholder, Counsel, and its affiliates beneficially own approximately 39.6%
of the outstanding shares of the Common Stock of the Company. As a condition
of Counsel's initial investment in Capstone, the Company agreed contractually
to use its good faith efforts to have elected as directors up to four Counsel
nominees, subject to certain conditions. As a result of its equity ownership
in the Company and its nominees on the Company's Board of Directors, Counsel can
significantly influence the management and policies of the Company, including
the election of the Company's directors and the outcome of matters submitted to
stockholders of the Company for approval.
LIABILITY AND ADEQUACY OF INSURANCE. The provision of health care
services entails an inherent risk of liability. Capstone currently maintains
product and professional liability insurance intended to cover such claims in
amounts which it believes are consistent with industry standards. There can be
no assurance that claims in excess of the insurance coverage or claims not
covered by insurance will not arise. A successful claim in excess of its
insurance coverage could have a material adverse effect upon the Company's
results of operations, financial condition and future prospects. Claims,
regardless of their merit or eventual outcome, may also have a material adverse
effect upon Capstone's ability to attract customers, to maintain its insurance
or to expand its business. There can be no assurance that Capstone will be
able to obtain liability insurance coverage in the future on acceptable terms.
6
<PAGE> 8
SELLING STOCKHOLDERS
The Selling Stockholders acquired or will acquire 4,170,675 shares of
Common Stock, including shares underlying the Private Placement Warrants, in
private placements that have closed in or since October 1994, and 1,007,692
shares in connection with an acquisition made by the Company in January 1996.
Registration of these shares of Common Stock will enable the Selling
Stockholders to sell such shares from time to time on the Nasdaq Stock Market
or in other transactions. The table below sets forth certain information
regarding the beneficial ownership of the Common Stock by the Selling
Shareholders as of July 2, 1996 and assumes the exercise of all Private
Placement Warrants.
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership Prior to Shares Ownership After the
Offering Offered Herein Offering
----------------------- -------------- ------------------------
Stockholder Number Percent(1) Amount Percent(1)
----------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Edward Sonshine(2) 74,500(3)(4) * 57,000 17,500 *
Joseph F. Furlong, III(5) 74,500(3)(4) * 57,000 7,500 *
Robert S. Colman 38,000(6) * 38,000 -0- -0-
Paul Godfrey(2) 57,171(7) * 57,171 -0- -0-
Howard Wortzman(8) 57,475(9) * 57,475 -0- -0-
Norman Hill Florida, Inc. 53,291(10) * 53,291 -0- -0-
Nicholas E. Sinacori 52,060(11) * 52,060 -0- -0-
R. Dirk Allison(12) 97,746(13) * 57,646 40,000 *
Don H. Thompson 15,618(14) * 15,618 -0- -0-
Carl A. Pannuti(12) 29,363(15) * 26,030 -0- -0-
A. Joe McLellan(12) 13,539(16) * 5,206 -0- -0-
Curtis B. Johnson(8) 52,060(17) * 52,060 -0- -0-
PF & R Holdings Inc. 342,000(18) 2.1% 342,000 -0- -0-
Morris A. Perlis(2) 387,500(19) 2.4% 95,000 292,500 1.8%
Allan C. Silber(2) 387,500(19) 2.4% 95,000 292,500 1.8%
J.E. Duffy(20) 13,015(21) * 13,015 -0- -0-
John Haronian(5) 142,500(4)(22) * 95,000 47,500 *
John E. Zuccotti(5) 24,500(23) * 9,500 15,000 *
Fallbrook Holdings Limited 100,000 * 100,000 -0- -0-
Shermfin Corp 650,000 4.1% 650,000 -0- -0-
CreditAnstalt American
Corporation(24) 130,000(25) * 115,000 -0- -0-
Cary Lester McWhinnie 26,000 * 26,000 -0- -0-
</TABLE>
7
<PAGE> 9
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership Prior to Shares Ownership After the
Offering Offered Herein Offering
----------------------- -------------- ------------------------
Shareholder Number Percent(1) Amount Percent(1)
----------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Patrick S. Brigham 202,310 1.3% 202,310 -0- -0-
Abraham Wieder 689,231 4.4% 689,231 -0- -0-
Raphael Lieberman 318,461 2.0% 318,461 -0- -0-
Cote 100 457,143 2.9% 457,143 -0- -0-
ASB Capital Management 410,000 2.6% 410,000 -0- -0-
Private Trust Bank Corp. 91,310 * 91,310 -0- -0-
Experta Trustee Co. Ltd. 114,000 * 114,000 -0- -0-
Cantrade Ormond Burrus
Banque Privee S.A. 23,000 * 23,000 -0- -0-
Jack Machbitz 35,000 * 35,000 -0- -0-
The Jennifer Altman
Foundation 26,600(26) * 26,600 -0- -0-
Albert L. Zesiger 71,060(27) * 71,060 -0- -0-
Alza Corporation
Retirement Plan 35,150(28) * 35,150 -0- -0-
Asphalt Green, Inc. 17,860(29) * 17,860 -0- -0-
Brearley School General
Investment Fund 26,600(30) * 26,600 -0- -0-
Barrie Ramsay Zesiger 44,460(31) * 44,460 -0- -0-
Chapin School -
Endowment Fund 35,150(28) * 35,150 -0- -0-
Helen Hunt 17,860(29) * 17,860 -0- -0-
Psychology Associates 3,420(32) * 3,420 -0- -0-
Meehan Investment
Partnership I, L.P. 17,860(29) * 17,860 -0- -0-
City of Milford Employee
Pension Fund 88,350(33) * 88,350 -0- -0-
NFIB Employee Pension 55,100(34) * 55,100 -0- -0-
Norwalk Employee
Pension Fund 71,060(35) * 71,060 -0- -0-
Planned Parenthood of
New York City 14,060(36) * 14,060 -0- -0-
</TABLE>
8
<PAGE> 10
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership Prior to Shares Ownership After the
Offering Offered Herein Offering
----------------------- -------------- ------------------------
Shareholder Number Percent(1) Amount Percent(1)
----------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Mary Van Schuyler
Raiser 17,860(29) * 17,860 -0- -0-
Raiser Marital Trust 71,060(35) * 71,060 -0- -0-
Robert J. Suslow 26,600(30) * 26,600 -0- -0-
Tab Products Company
Pension Plan 35,150(28) * 35,150 -0- -0-
Warren Investment
Group, Ltd. 17,860(29) * 17,860 -0- -0-
Warren Otologic Group
Profit Sharing Trust 17,860(29) * 17,860 -0- -0-
Harold & Grace Willens
JTWROS 17,860(29) * 17,860 -0- -0-
Robert Goldstein 40,000(37) * 40,000 -0- -0-
</TABLE>
- ---------------------
* Less than 1%.
(1) The percentages shown are based on 15,845,025 shares of Common Stock
outstanding on July 2, 1996, plus, as to each individual, the number of
shares of Common Stock deemed to be owned by such holder pursuant to Rule
13d-3 under the Securities Exchange Act of 1934 (the "Exchange Act"),
which includes shares subject to stock options and warrants held by such
holder which are exercisable within sixty (60) days.
(2) Messrs. Silber, Sonshine and Perlis, each of whom is a director of
Capstone, and Mr. Godfrey are directors of Counsel, a publicly-traded,
Ontario, Canada corporation primarily engaged in the health care
industry. Counsel owns 6,244,325 shares of Capstone Common Stock, which
includes shares issuable upon the exercise of warrants to purchase
1,298,181 shares at $4.50 per share and 1,038,545 at $5.50 per share.
Mr. Silber beneficially owns or controls approximately 25% of the Common
Stock of Counsel. All of the directors listed in this footnote (2)
disclaim beneficial ownership of shares of Common Stock in their capacity
as directors of Counsel, and Mr. Silber disclaims beneficial ownership of
shares of Common Stock in his capacity as a significant stockholder of
Counsel.
(3) Includes 15,000 and 12,000 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(4) Includes 15,000 and 2,500 shares purchasable upon exercise of options at
$4.44 and $7.50 per share, respectively.
(5) Stockholder is a director of Capstone.
(6) Includes 10,000 and 8,000 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(7) Includes 15,045 and 12,036 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(8) Stockholder is an Employee of Counsel or an affiliate of Counsel.
(9) Includes 15,125 and 12,100 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(10) Includes 14,024 and 11,219 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(11) Includes 13,700 and 10,960 shares purchasable upon exercise of warrants
of $4.50 and $5.50 per share, respectively.
(12) Stockholder is an officer of Capstone.
(13) Includes 15,170 and 12,136 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively and 15,000 and 25,000 shares
purchasable upon exercise of options at $4.44 and $8.50 per share,
respectively.
(14) Includes 4,110 and 3,288 shares purchase upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(15) Includes 6,850 and 5,480 shares purchasable upon exercise of warrants at
$4.50 and $5.50, respectively and 3,333 shares purchasable upon exercise
of options at $8.50 per share.
(16) Includes 1,370 and 1,096 shares purchasable upon exercise of warrants at
$4.50 and $5.50, respectively and 8,333 shares purchasable upon exercise
of options at $8.50 per share.
(17) Includes 13,700 and 10,960 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(18) Includes 90,000 and 72,000 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(19) Includes 25,000 and 20,000 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively and 15,000, 2,500, 250,000 and
25,000 shares purchasable upon exercise of options at $4.44, $7.50, $4.31
and $8.50 per share, respectively.
(20) Stockholder is a consultant to Capstone.
(21) Includes 3,425 and 2,740 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
9
<PAGE> 11
(22) Includes 15,000 and 15,000 shares purchasable upon exercise of options at
$2.85 and $3.50 per share, respectively and 25,000 and 20,000 shares
purchasable upon exercise of warrants at $4.50 and $5.50 per share,
respectively.
(23) Includes 15,000 shares purchasable upon exercise of options at $4.44 per
share and 2,500 and 2,000 shares purchasable upon exercise of warrants
at $4.50 and $5.50 per share, respectively.
(24) Stockholder is an affiliate of Capstone's institutional lender.
(25) Includes 15,000 shares purchasable upon exercise of warrants at $7.31 per
share.
(26) Includes 7,000 and 5,600 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(27) Includes 18,700 and 14,960 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(28) Includes 9,250 and 7,400 shares purchasable upon exercise of warrants at
$4.50 an $5.50 per share, respectively.
(29) Includes 4,700 and 3,760 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(30) Includes 7,000 and 5,600 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(31) Includes 11,700 and 9,360 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(32) Includes 900 and 720 shares purchasable upon exercise of warrants at $4.50
and $5.50 per share, respectively.
(33) Includes 23,250 and 18,600 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(34) Includes 14,500 and 11,600 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(35) Includes 18,700 and 14,960 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(36) Includes 3,700 and 2,960 shares purchasable upon exercise of warrants at
$4.50 and $5.50 per share, respectively.
(37) Includes 40,000 shares purchasable upon exercise of warrants at $3.50 per
share.
10
<PAGE> 12
PLAN OF DISTRIBUTION
The Series B Warrants and the 1,300,000 shares of Common Stock issuable
upon the exercise of the Series A Warrants and the Series B Warrants will be
issued by the Company in direct transactions with the holders of the rights to
acquire such securities and such Common Stock is expected to be available for
public trading on the Nasdaq Stock Market upon issuance. The Company will pay
no commissions or discounts in connection with such transactions.
The Selling Stockholders have advised the Company that they may elect to
offer for sale and to sell the shares of Common Stock listed herein from time
to time through brokers on the Nasdaq Stock Market, in private transactions,
through the writing of options on the shares, or otherwise (including pursuant
to Rule 144 and in transactions with the Company as consideration for the
exercise price of certain warrants), at market prices prevailing at the time of
sale or at prices and terms then obtainable, in block transactions, negotiated
transactions, or otherwise. Accordingly, sales prices and proceeds to the
Selling Stockholders will depend upon market fluctuations and the manner of
sale.
If the shares are sold through brokers, the Selling Stockholders will pay
brokerage commissions and other charges, including any transfer taxes (which
compensation as to a particular broker dealer might be in excess of customary
commissions). No Selling Stockholder has an agreement with any particular
broker with respect to the price at which the Common Stock will be sold or with
respect to any commissions to be charged. The Selling Stockholders will also
pay the fees and expenses of any counsel retained by them in connection with
this Offering. Except for the payment of such legal fees and expenses,
brokerage commissions and charges, the Company will bear all expenses in
connection with registering the shares of Common Stock offered hereby.
DESCRIPTION OF SECURITIES BEING REGISTERED
SERIES B WARRANTS
The Series B Warrants will be issued pursuant to a Warrant Agreement (the
"Warrant Agreement") between the Company and First Union National Bank
(Charlotte, North Carolina), as Warrant Agent (the "Warrant Agent"). The
following discussion of certain terms and provisions of the Series B Warrants
is qualified in its entirety by reference to the detailed provisions of the
Series B Warrants and of the Warrant Agreements, the forms of which have been
filed as exhibits to the Registration Statement of which this Prospectus is a
part.
Each Series B Warrant will enable the holder to purchase one share of
Common Stock at a price equal to $10.00 per share (the "Exercise Price") at any
time commencing upon issuance until August 16, 1997, unless earlier redeemed by
the Company as described below.
To exercise a Series B Warrant, the holder must send the certificate
evidencing the Series B Warrant (the "Warrant Certificate") to the Warrant
Agent, together with an election to exercise, setting forth the number of
shares to be purchased and payment by certified check or money order for the
total Exercise Price of the shares purchased. The Warrant Agent will then
return a certificate evidencing the number of shares of Common Stock issued
upon exercise of the Series B Warrant, together with a new Warrant
Certificate if less than all the shares covered by the Warrant Certificate are
being purchased.
The Company may redeem all of the Series B Warrants at a redemption
price of $0.25 per warrant at any time after issuance thereof until the
expiration date provided that (i) the Company gives notice to the holders, and
(ii) the closing bid quotation of the Company's Common Stock (as reported on
the Nasdaq National Market) has been at least 150% of the then effective
Exercise Price on all twenty of the trading days ending on the third day prior
to the day on which notice is given.
The holders of the Series B Warrants are protected against dilution of
their interests by adjustment of the number of shares of Common Stock
underlying the Series B Warrants and of the Exercise Price upon the occurrence
of certain events, including stock dividends, stock splits, mergers and
reclassifications. The Warrant Agreement cannot be amended or supplemented in
a manner adverse to the holders of the Series B Warrants without such holders'
consent.
The holders of Series B Warrants, as such, have no right to vote on
matters submitted to the shareholders of the Company or to receive dividends
and are not entitled to share in the assets of the Company in the event of
liquidation, dissolution or the winding up of the Company's affairs. However,
upon exercise of the Series B Warrants and issuance of shares of Common Stock
to the holder, such shares of Common Stock shall have rights identical to all
other shares of Common Stock.
OTHER SECURITIES
The Company also has outstanding as of July 2, 1996, 650,000 Series A
Warrants that expire August 16, 1996 and 15,836,565 shares of Common
Stock. Certain privately placed warrants to purchase Common Stock at exercise
prices of $3.50, $4.50 and $5.50 per share are outstanding but have not been
registered and are not freely tradeable by the holders thereof.
LEGAL MATTERS
Certain legal matters with respect to the legality of the shares of Common
Stock and Series B Warrants offered hereby will be passed upon for the Company
by Harwell Howard Hyne Gabbert & Manner. P.C., Nashville, Tennessee.
11
<PAGE> 13
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Registration Fee ............... $26,086
Listing Fee .................... 17,500
*Blue Sky fees and expenses ..... 500
*Accounting fees and expenses ... 7,500
*Legal fees and expenses ........ 25,000
*Transfer Agent Fees ............ 500
*Miscellaneous .................. 1,500
Total ........................... 78,586
</TABLE>
- ----------
*Estimated
INDEMNIFICATION
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article Eleventh of the Certificate of Incorporation of the Registrant
sets forth the extent to which officers or directors of the Registrant may be
insured or indemnified against any liabilities which they may incur. The
general effect of such provision is that any person made a party to any action,
suit or proceeding by reason of the fact that he or she is or was a director or
officer of the Registrant will be indemnified by the Registrant against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her in connection with
such action, suit or proceeding, to the fullest extent permitted under the laws
of the State of Delaware. In addition, such provision provides that, in the
Registrant's sole discretion, the Registrant may indemnify employees or agents
against such expenses, judgments, fines and amounts paid in settlement.
SECTION 145 of the Delaware General Corporation Law ("DGCL") applies to
the Registrant and the relevant portion of the DGCL provides as follows:
145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.
(a) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person
did not act in good faith and in a manner which he reasonably believed to
be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the
II-1
<PAGE> 14
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which such
person shall have been adjudged to be liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem
proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he has met the applicable standard of conduct
set forth in subsections (a) and (b) of this section. Such determination
shall be made (1) by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit
or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation
in advance of the final disposition of such action, suit or proceeding
upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he
is not entitled to be indemnified by the corporation as authorized in
this section. Such expenses (including attorneys' fees) incurred by
other employees and agents may be so paid upon such terms and conditions,
if any, as the board of directors deems appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any
such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.
(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position
under this section with respect to the resulting or surviving corporation
as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee
benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer,
II-2
<PAGE> 15
employee or agent of the corporation which imposes duties on, or involves
services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the heirs, executors and administrators of such a person.
The Registrant maintains insurance for the benefit of the Registrant's
directors and officers and officers and directors of the Registrant's
subsidiaries insuring such persons against certain liabilities, including
liabilities arising under the securities laws.
II-3
<PAGE> 16
ITEM 16. EXHIBITS
The exhibits filed as a part of this registration statement are listed in
the Exhibit Index immediately following the signature page.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Report of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant, incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Baltimore,
State of Maryland, on the 7th day of August, 1996.
CAPSTONE PHARMACY SERVICES, INC.
By: *
-------------------------------------
R. Dirk Allison
President and Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed on the dates indicated by the
following persons in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
*
- --------------------------- President, Chief Executive Office
R. Dirk Allison and Director (Chief Executive August 7, 1996
Officer)
/s/ Donald W. Hughes
- --------------------------- Vice President, Chief Financial
Donald W. Hughes Officer and Secretary (Chief
Accounting Officer) August 7, 1996
* Chairman August 7, 1996
- ---------------------------
Allan C. Silber
* Vice Chairman August 7, 1996
- ---------------------------
Morris A. Perlis
* Director August 7, 1996
- ---------------------------
Joseph Furlong, III
* Director August 7, 1996
- ---------------------------
John Haronian
* Director August 7, 1996
- ---------------------------
Albert Reichmann
* Director August 7, 1996
- ---------------------------
J. Brendan Ryan
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director August 7, 1996
- -------------------------------
Edward Sonshine
* Director August 7, 1996
- -------------------------------
Dr. Gail Wilensky
* Director August 7, 1996
- -------------------------------
John E. Zuccotti
</TABLE>
* By: /s/ Donald W. Hughes
------------------------
Donald W. Hughes
Attorney-in-Fact
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
<S> <C>
4.1* Form of Series B Warrant Certificate
4.2 Form of Series B Warrant Agreement
5* Opinion of Harwell Howard Hyne Gabbert & Manner, P.C.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Roth and Company
23.3 Consent of Blackman Kallick Bartelstein, LLP
23.4 Consent of Harwell Howard Hyne Gabbert & Manner, P.C. (See Exhibit 5)*
24* Power of Attorney
</TABLE>
---------
* Previously Filed.
<PAGE> 1
Exhibit 4.2
WARRANT AGREEMENT
BETWEEN
CAPSTONE PHARMACY SERVICES, INC.
AND
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
Dated as of August 7, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DISTRIBUTION OF WARRANT CERTIFICATES..........................................................................2
Section 1.1 Appointment of Warrant Agent......................................................................2
Section 1.2 Form of Warrant Certificates......................................................................2
Section 1.3 Execution of Warrant Certificates.................................................................2
Section 1.4 Issuance and Distribution of Warrant .............................................................3
ARTICLE II WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS................................................................3
Section 2.1 Exercise Price....................................................................................3
Section 2.2 Registration of Common Stock and Exercisability of Warrants.......................................4
Section 2.3 Procedure for Exercise of Warrants................................................................5
Section 2.4 Issuance of Common Stock..........................................................................6
Section 2.5 Certificate for Unexercised Warrants..............................................................6
Section 2.6 Reservation of Shares.............................................................................6
Section 2.7 Disposition of Proceeds...........................................................................7
ARTICLE III REDEMPTION OF WARRANTS........................................................................................7
Section 3.1 Redemption Price and Redemption Trigger Price.....................................................7
Section 3.2 Payment of Redemption Price.......................................................................8
Section 3.3 Redemption in Part................................................................................8
ARTICLE IV ADJUSTMENTS AND NOTICE PROVISIONS..............................................................................8
Section 4.1 Adjustment of Exercise Price......................................................................8
Section 4.2 No Adjustment to Exercise Price..................................................................12
Section 4.3 Adjustment to Number of Shares...................................................................12
Section 4.4 Reorganizations..................................................................................13
Section 4.5 Adjustment of Redemption Trigger Price...........................................................14
Section 4.6 Verification of Computations.....................................................................14
Section 4.7 Exercise Price Not Less Than Par Value...........................................................14
Section 4.8 Notice of Certain Actions........................................................................14
Section 4.9 Notice of Redemption.............................................................................16
Section 4.10 Notice of Adjustments...........................................................................17
Section 4.11 Warrant Certificate Amendments..................................................................17
Section 4.12 Fractional Shares...............................................................................17
ARTICLE V OTHER PROVISIONS RELATING TO RIGHTS OF
REGISTERED HOLDERS OF WARRANT CERTIFICATES...................................................................18
Section 5.1 Rights of Warrant Holder........................................................................18
Section 5.2 Lost, Stolen, Mutilated or Destroyed Warrant Certificates........................................18
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI SPLIT UP, COMBINATION, EXCHANGE, TRANSFER
AND CANCELLATION OF WARRANT CERTIFICATES.....................................................................19
Section 6.1 Split Up, Combination, Exchange and Transfer of
Warrant Certificates.............................................................................19
Section 6.2 Cancellation of Warrant Certificates.............................................................20
ARTICLE VII PROVISIONS CONCERNING THE WARRANT AGENT
AND OTHER MATTERS............................................................................................21
Section 7.1 Payment of Taxes and Charges.....................................................................21
Section 7.2 Resignation or Removal of Warrant Agent..........................................................21
Section 7.3 Notice of Appointment............................................................................22
Section 7.4 Merger of Warrant Agent..........................................................................23
Section 7.5 Company Responsibilities.........................................................................23
Section 7.6 Duties, Liability and Indemnification of Warrant Agent...........................................24
Section 7.7 Changes to Agreement.............................................................................29
Section 7.8 Assignment.......................................................................................29
Section 7.9 Successor to the Company.........................................................................30
Section 7.10 Notices.........................................................................................30
Section 7.11 Defects in Notice...............................................................................31
Section 7.12 Governing Law...................................................................................31
Section 7.13 Standing........................................................................................31
Section 7.14 Headings........................................................................................32
Section 7.15 Counterparts....................................................................................32
Section 7.16 Availability of the Agreement...................................................................32
</TABLE>
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<PAGE> 4
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Agreement") is made as of August
7, 1996, by and between CAPSTONE PHARMACY SERVICES, INC., a Delaware corporation
(the "Company"), and FIRST UNION NATIONAL BANK OF NORTH CAROLINA (the "Warrant
Agent").
R E C I T A L S:
A. The Company proposes to make a public offering (the
"Offering") of up to 650,000 Series B Warrants (the "Warrants"), each of which
will entitle the holder thereof to purchase one share of the Company's common
stock, par value $.01 per share (the "Common Stock").
B. The Company proposes to issue certificates evidencing the
Warrants (such Warrant certificates issued pursuant to this Agreement being
hereafter called the "Warrant Certificates").
C. The Company desires the Warrant Agent, and the Warrant
Agent agrees, to act on behalf of the Company in connection with the issuance,
transfer, exchange, replacement, redemption and surrender of the Warrant
Certificates.
D. The Company and the Warrant Agent desire to set forth in
this Agreement, among other things, the form and provisions of the Warrant
Certificates and the terms and conditions under which they may be issued,
transferred, exchanged, replaced, redeemed and surrendered in connection with
the exercise and redemption of the Warrants.
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements herein contained, the parties hereto agree as follows:
<PAGE> 5
ARTICLE I
DISTRIBUTION OF WARRANT CERTIFICATES
Section 1.1 Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act on behalf of the Company in accordance with
the instructions hereinafter in this Agreement set forth, and the Warrant Agent
hereby accepts such appointment.
Section 1.2 Form of Warrant Certificates. The Warrant
Certificates shall be issued in registered form only and, together with the
purchase and assignment forms to be printed on the reverse thereof, shall be
substantially in the form of Exhibit A attached hereto and, in addition, may
have such letters, numbers or other marks of identification or designation and
such legends, summaries, or endorsements stamped, printed, lithographed or
engraved thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as, in any particular case, may be
required, in the opinion of counsel for the Company, to comply with any law or
with any rule or regulation of any regulatory authority or agency, or to conform
to customary usage.
Section 1.3 Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by its Chairman or
President or any Vice President and by its Secretary or Assistant Secretary,
either manually or by facsimile signature printed thereon. The Warrant
Certificates shall be manually countersigned and dated the date of
countersignature by the Warrant Agent and shall not be valid for any purpose
unless so countersigned and dated. In case any authorized officer of the Company
who shall have signed any of the Warrant Certificates shall cease to be such
officer of the Company either before or after delivery thereof by the Company to
the Warrant Agent, the signature of such person on such Warrant Certificates,
nevertheless, shall be valid and such Warrant Certificates may be countersigned
by the Warrant Agent and issued and
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<PAGE> 6
delivered to those person entitled to receive the Warrants represented thereby
with the same force and effect as though the person who signed such Warrant
Certificates had not ceased to be such officer of the Company.
Section 1.4 Issuance and Distribution of Warrant Certificates.
The Company shall deliver to the Warrant Agent an adequate supply of Warrant
Certificates executed on behalf of the Company as described in Section 1.3
hereof. Upon receipt of an order from the Company, the Warrant Agent shall
within three (3) business days complete and countersign Warrant Certificates
registered in such names and representing such number of Warrants as shall be
specified in such order, and shall deliver such Warrant Certificates by first
class mail as directed in such order.
ARTICLE II
WARRANT EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 2.1 Exercise Price. Each Warrant Certificate shall,
when signed by the Chairman or President or any Vice President and by the
Secretary or Assistant Secretary of the Company and countersigned by the Warrant
Agent, entitle the registered holder thereof, subject to the provisions of
Article III hereof, to purchase from the Company one share of Common Stock for
each Warrant evidenced thereby, at the purchase price of $10.00 per share (the
"Initial Exercise Price"), or such adjusted number of shares at such adjusted
purchase price as may be established from time to time pursuant to the
provisions of Article IV hereof, payable in full at the time of exercise of the
Warrant. Except as the context otherwise requires, the term "Exercise Price" as
used in this Agreement shall mean the purchase price of one share of Common
Stock, reflecting all appropriate adjustments made in accordance with the
provisions of Article IV hereof.
Section 2.2 Registration of Common Stock and Exercisability of
Warrants. Each Warrant may be exercised at any time after the shares of Common
Stock issuable upon exercise of such
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<PAGE> 7
Warrants have been effectively registered under the Securities Act of 1933, as
amended (the "Securities Act"), and such other action as may be required by
Federal or state law relating to the issuance or distribution of securities
shall have been taken, but not after 5:00 P.M., Eastern Time, on the earlier of
August 16, 1997, or the Redemption Date (as defined in Section 4.9). The term
"Exercise Deadline" as used in this Agreement shall mean the latest time and
date at which the Warrants may be exercised. The Company shall use reasonable
good faith efforts to secure the effective registration of the aforementioned
shares of Common Stock under the Securities Act and to register or qualify such
shares under applicable state laws; the Company further agrees, from and after
the time such registration has become effective, to use reasonable good faith
efforts to maintain such registration or qualification in effect and to keep
available for delivery upon the exercise of Warrants a prospectus that meets the
requirements of Section 10 of the Securities Act, until the earlier of the date
by which all Warrants are exercised or the Exercise Deadline; provided, however,
that the Company shall have no obligation to register such Common Stock or
maintain the effectiveness of such registration or qualification or to keep
available a prospectus, as aforesaid, in the event that, by amendment to the
Securities Act or otherwise, such registration or qualification or the delivery
of such prospectus is not required at the time said Common Stock is to be
issued; and provided further that in the event, by amendment to the Securities
Act or otherwise, some other or different requirement shall be imposed by act of
Congress of the United States that shall relate to the issuance of Common Stock
upon exercise of the Warrants, the Company shall use reasonable good faith
efforts to comply with such requirements so long as the same shall not be more
burdensome to the Company than the registration statement under the Securities
Act. Promptly after a registration statement under the Securities Act covering
the aforementioned Common Stock has become effective, or such other action as
contemplated hereby and as may be required has been
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<PAGE> 8
taken, as the case may be, the Company shall cause notice thereof or a copy of
the prospectus covering the aforementioned Common Stock to be mailed to the
Warrant Agent and to each registered holder of a Warrant Certificate.
Thereafter, the Company shall give prompt written notice to the Warrant Agent of
any change in the registration status of the Common Stock.
Section 2.3 Procedure for Exercise of Warrants. During the
period specified in and subject to the provisions of Section 2.2 hereof,
Warrants may be exercised by surrendering the Warrant Certificates representing
such Warrants to the Warrant Agent at the principal office of its stock transfer
department in Charlotte, North Carolina ("Principal Office"), which is presently
at 230 South Tryon Street, Charlotte, North Carolina 28288, with the election to
purchase form set forth on the Warrant Certificate duly completed and executed,
with signatures guaranteed by a member firm of a national securities exchanges,
a commercial bank (not a savings bank or a savings and loan association) or
trust company located in the United States or a member of the National
Association of Securities Dealers, Inc. ("Signatures Guaranteed"), accompanied
by payment in full to the Warrant Agent for the account of the Company of the
Exercise Price in effect at the time of such exercise, together with such taxes
as are specified in Section 7.1 hereof, for each share of Common Stock with
respect to which such Warrants are being exercised. Such Exercise Price and
taxes shall be paid in full by certified check or money order, payable in United
States currency to the order of the Warrant Agent. The date on which Warrants
are exercised in accordance with this Section 2.3 is sometimes referred herein
as the "Date of Exercise" of such Warrants.
Section 2.4 Issuance of Common Stock. As soon as practicable
after the Date of Exercise of any Warrants, the Company shall issue or cause its
stock transfer agent to issue a certificate or certificates for the number of
full shares of Common Stock to which such holder is entitled, registered in
accordance with the instructions set forth in the election to purchase. All
shares of
5
<PAGE> 9
Common Stock issued upon the exercise of any Warrants shall be validly
authorized and issued, fully paid and nonassessable, and free from all taxes,
liens and charges created by the Company in respect of the issue thereof. Each
person in whose name any such certificate for shares of Common Stock is issued
shall for all purposes be deemed to have become the holder of record of the
Common Stock represented thereby on the Date of Exercise of the Warrants
resulting in the issuance of such shares, irrespective of the date of issuance
or delivery of such certificate for shares of Common Stock.
Section 2.5 Certificate for Unexercised Warrants. In the event
that less than all of the Warrants represented by a Warrant Certificate are
exercised, the Warrant Agent shall execute and mail, by first-class mail, within
thirty (30) days of the Date of Exercise, to the registered holder of such
Warrant Certificate, or such other person as shall be designated in the election
to purchase, a new Warrant Certificate representing the number of full Warrants
not exercised. In no event shall a fraction of a Warrant be exercised, and the
Warrant Agent shall distribute no Warrant Certificate representing fractions of
Warrants under this or any other section of this Agreement.
Section 2.6 Reservation of Shares. The Company shall at all
times reserve and keep available for issuance upon the exercise of Warrants a
number of its authorized but unissued shares or treasury shares, or both, of
Common Stock that will be sufficient to permit the exercise in full of all
outstanding Warrants.
Section 2.7 Disposition of Proceeds. The Warrant Agent shall
account promptly to the Company with respect to Warrants exercised and
concurrently deliver to the Company all funds applied to the purchase of shares
of Common Stock upon exercise of such Warrants.
6
<PAGE> 10
ARTICLE III
REDEMPTION OF WARRANTS
Section 3.1 Redemption Price and Redemption Trigger Price. The
Company may, at its option, redeem all or any portion of the outstanding
Warrants at a redemption price of $.25 (twenty-five cents) per Warrant (such
price is hereinafter referred to as the "Redemption Price"), provided that the
closing bid price per share of Common Stock has been at least 150% of the then
Exercise Price (such price, as the same may from time to time be adjusted, is
hereinafter referred to as the "Redemption Trigger Price") on all twenty (20) of
the trading days ending on the third day prior to the day on which notice of
such redemption shall have been given to the Warrant Agent by the Company
pursuant to Section 4.9. For purposes of this Section 3.1, the closing bid price
for each day shall be the last reported sale price regular way or, in case no
such reported shall takes place on such date, the last reported bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is admitted to trading or listed if that is the principal
market for the Common Stock or if not listed or admitted to trading on any
national securities exchange or if such national securities exchanges is not the
principal market for the Common Stock, the closing bid price as reported by the
NASDAQ System or its successor, if any. If the price of the Common Stock is not
so reported, then the closing bid price shall mean the last known price paid per
share by a purchaser of such stock in an arm's-length transaction. All
calculations under this Section 3.1 shall be made to the nearest cent.
Section 3.2 Payment of Redemption Price. On or prior to the
opening of business on the Redemption Date (as defined in Section 4.9), the
Company will deposit with the Warrant Agent funds in form satisfactory to the
Warrant Agent sufficient to purchase all the Warrants which are to be redeemed.
Payment of the Redemption Price will be made by the Warrant Agent upon
7
<PAGE> 11
presentation and surrender of the Warrant Certificates representing such
Warrants to the Warrant Agent at its Principal Office.
Section 3.3 Redemption in Part. In the event the Company shall
determine to redeem less than all the Warrants, the Warrants chosen for
redemption shall be selected by the Warrant Agent in such manner as the Warrant
Agent shall deem fair and equitable.
ARTICLE IV
ADJUSTMENTS AND NOTICE PROVISIONS
Section 4.1 Adjustment of Exercise Price. Subject to the
provisions of this Article IV, the Exercise Price in effect from time to time
shall be subject to adjustment, as follows:
a. In case the Company shall (i) declare a dividend
or make a distribution on the outstanding shares of its Common
Stock in shares of its Common Stock, (ii) subdivide or
reclassify the outstanding shares of its Common Stock into a
greater number of shares, or (iii) combine or reclassify the
outstanding shares of its Common Stock into a smaller number
of shares, the Exercise Price in effect immediately after the
record date for such dividend or distribution or the effective
date of such subdivision, combination or reclassification
shall be adjusted so that it shall equal the price determined
by multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the
number of shares of Common Stock outstanding immediately
before such dividend, distribution, subdivision, combination
or reclassification, and of which the denominator shall be the
number of shares of Common Stock outstanding immediately after
such dividend, distribution, subdivision, combination or
reclassification. Any shares of Common Stock of the Company
issuable in payment
8
<PAGE> 12
of a dividend shall be deemed to have been issued immediately
prior to the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock
of the Company under Subsections 4.1(b) and 4.1 (c) below.
Such adjustment shall be made successively whenever any event
specified above shall occur.
b. In case the Company shall fix a record date for
the issuance of rights or warrants to all holders of its
Common Stock entitling them (for a period expiring within
forty-five (45) days after such record date) to subscribe for
or purchase shares of its Common Stock at a price per share
less than the Current Market Price (as such term is defined in
Subsection 4.1(d) below) of a share of Common Stock of the
Company on such record date, the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the
price determined by multiplying the Exercise Price in effect
immediately prior thereto by a fraction, of which the
numerator shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of
Common Stock that the aggregate offering price of the total
number of shares of such Common Stock so offered would
purchase at the Current Market Price per share, and of which
the denominator shall be the number of shares of Common Stock
outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchase.
Such adjustment shall be made successively whenever such a
record date is fixed. To the extent that any such rights or
warrants are not so issued or expire unexercised, the Exercise
Price then in effect shall be readjusted to that which would
then be in effect if such unissued or unexercised rights or
warrants had not been issuable.
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<PAGE> 13
c. In case the Company shall fix a record date for
the making of a distribution to all holders of shares of its
Common Stock of (i) shares of any class other than its Common
Stock or (ii) evidences of its indebtedness or (iii) assets
(excluding cash dividends or distributions, and dividends or
distributions referred to in Subsection 4.1(a.) above) or (iv)
rights or warrants to acquire securities of the Company
(excluding those rights or warrants referred to in Section
4.1(b) above), then in each such case the Exercise Price in
effect immediately thereafter shall be determined by
multiplying the Exercise Price in effect immediately prior
thereto by a fraction, of which the numerator shall be the
total number of shares of Common Stock outstanding on such
record date multiplied by the Current Market Price (as such
term is defined in Subsection 4.1 (d) below) per share on such
record date, less the aggregate fair market value as
determined in good faith by the Board of Directors of the
Company of said shares or evidences of indebtedness or assets
or rights or warrants so distributed, and of which the
denominator shall be the total number of shares of Common
Stock outstanding on such record date multiplied by such
Current Market Price per share. Such adjustment shall be made
successively whenever such a record date is fixed. In the
event that such distribution is not so made, the Exercise
Price then in effect shall be readjusted to the Exercise Price
which would then be in effect if such record date had not been
fixed.
d. For the purpose of any computation under
Subsections 4.1(b) and 4.1(c) above, the "Current Market
Price" per share at any date (the "Computation Date") shall be
deemed to be the average of the daily closing prices of the
Common Stock for sixty (60) consecutive trading days ending
twenty (20) trading days before
10
<PAGE> 14
such date; provided, however, that if there shall have
occurred any event described in Subsections 4.1(a), 4.1(b) or
4.1(c) that shall have become effective with respect to market
transactions at any time (the "Market-Effect Date") on or
after the beginning of such 60-day period and prior to the
Computation Date, the closing price for each trading day
preceding the Market-Effect Date shall be adjusted, for
purposes of calculating such average, by multiplying such
closing price by a fraction, the numerator of which is the
Exercise Price as in effect immediately prior to the
Computation Date and the denominator of which is the Exercise
Price as in effect immediately prior to the Market-Effect
Date, it being understood that the purpose of this provision
is to ensure that the effect of such event on the market price
of the Common Stock shall, as nearly as possible, be
eliminated in order that the distortion in the calculation of
the Current Market price may be minimized. The closing price
for each day shall be the last reported sale price regular way
or, in case no such reported sale takes place on such date,
the average of the last reported bid and asked prices regular
way, in either case on the principal national securities
exchange on which the Common Stock is admitted to trading or
listed if that is the principal market for the Common Stock or
if not listed or admitted to trading on any national
securities exchange or if such national securities exchange is
not the principal market for the Common Stock, the closing bid
price as reported by the NASDAQ System or its successor, if
any. If the price of the Common Stock is not so reported, then
the closing price shall mean the last known price paid per
share by a purchaser of such stock in an arm's-length
transaction.
e. All calculations made under this Section 4.1 shall be made
to the nearest cent.
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<PAGE> 15
Section 4.2 No Adjustment to Exercise Price. No adjustment in
the Exercise Price in accordance with the provisions of paragraphs (a), (b) or
(c) of Section 4.1 hereof need be made if such adjustment would amount to a
change in such Exercise price of less than $.05; provided, however, that the
amount by which any adjustment is not made by reason of the provisions of this
Section 4.2 shall be carried forward and taken into account at the time of any
subsequent adjustment in the Exercise Price.
Section 4.3 Adjustment to Number of Shares. Upon each
adjustment of the Exercise Price pursuant to paragraphs (a), (b) or (c) of
Section 4.1, each Warrant shall thereupon evidence the right to purchase that
number of shares of Common Stock (calculated to the nearest hundredth of a
share) obtained by multiplying the number of shares of Common Stock purchasable
immediately prior to such adjustment upon exercise of the Warrant by the
Exercise Price in effect immediately prior to such adjustment and dividing the
product so obtained by the Exercise Price in effect immediately after such
adjustment.
Section 4.4 Reorganizations. In case of any capital
reorganizations, other than in the cases referred to in Section 4.1 hereof, or
the consolidation or merger of the Company with or into another corporation
(other than a merger or consolidation in which the Company is the continuing
corporation and which does not result in any reclassification of the outstanding
shares of Common Stock or the conversion of such outstanding shares of Common
Stock into shares of other stock or the securities or property), (collectively
such actions being hereinafter referred to as "Reorganizations"), there shall
thereafter be deliverable upon exercise of any Warrant (in lieu of the number of
shares of Common Stock theretofore deliverable) the number of shares of stock or
other securities or property to which a holder of the number of shares of Common
Stock which would otherwise have been deliverable upon the exercise of such
Warrant would have been entitled upon
12
<PAGE> 16
such Reorganization if such Warrant had been exercised in full immediately prior
to such Reorganization. In case of any Reorganization, appropriate adjustment,
as determined in good faith by the Board of Directors of the Company, shall be
made in the application of the provisions herein set forth with respect to the
rights and interest of Warrant holders so that the provisions set forth herein
shall thereafter be applicable, as nearly as possible, in relation to any shares
or other property thereafter deliverable upon exercise of Warrants. Any such
adjustment shall be made by and set forth in a supplemental agreement between
the Company, or successor thereto, and the Warrant Agent and shall for all
purposes hereof conclusively be deemed to be an appropriate adjustment. The
Company shall not effect any such Reorganization, unless upon or prior to the
consummation thereof the successor corporation, or if the Company shall be the
surviving corporation in any such Reorganization and is not the issuer of the
shares of stock or other securities or property to be delivered to holders of
shares of the Common Stock outstanding at the effective time thereof, then such
issuer, shall assume by written instrument the obligation to deliver to the
registered holder of any Warrant Certificate such shares of stock, securities,
cash or other property as such holder shall be entitled to purchase in
accordance with the foregoing provisions. In the event of sale or conveyance or
other transfer of all or substantially all of assets of the Company as part of a
plan for liquidation of the Company, all rights to exercise any Warrant shall
terminate thirty (30) days after the Company gives written notice to each
registered holder of a Warrant Certificate that such sale or conveyance or other
transfer has been consummated.
Section 4.5 Adjustment of Redemption Trigger Price. Upon each
adjustment of the Exercise Price of the Warrants, the Redemption Trigger Price
shall be adjusted to be a price equal to the product of (i) the Redemption
Trigger Price, in effect immediately prior to the adjustment of the Exercise
Price multiplied by (ii) a fraction, the numerator of which is the Exercise
Price in effect
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<PAGE> 17
immediately after the adjustment of the Exercise Price and the denominator of
which is the Exercise Price immediately prior to such adjustment. All
calculations under this Section 4.5 shall be made to the nearest cent.
Section 4.6 Verification of Computations. The Company shall
select a firm of independent public accountants, which selection may be changed
from time to time, to verify the computations made in accordance with this
Article IV. The certificate, report or other written statement of any such firm
shall be conclusive evidence of the correctness of any computation made under
this Article IV and Section 3.1.
Section 4.7 Exercise Price Not Less Than Par Value. In no
event shall the Exercise Price be adjusted below the par value per share of the
Common Stock.
Section 4.8 Notice of Certain Actions. In the event the
Company shall:
a. Declare any dividend payable in stock to the
holders of its Common Stock or make any other distribution in
property other than cash to the holders of its Common Stock;
or
b. offer to the holders of its Common Stock rights to
subscribe for or purchase any shares of any class of stock or
any other rights or options; or
c. effect any reclassification of its Common Stock
(other than a reclassification involving merely the
subdivision or combination of outstanding shares of Common
Stock), any capital reorganization, any consolidation or
merger (other than a merger in which no distribution of
securities or other property is made to holders of Common
Stock), or any sale, transfer of all or substantially all of
the assets of the Company, or the liquidation, dissolution or
winding up of the Company; or
14
<PAGE> 18
d. issue any shares of Common Stock in exchange for
shares of preferred stock of the Company, other than upon
conversion of such shares of preferred stock; then, in each
such case, the Company shall cause notice of such proposed
action to be mailed to the Warrant Agent. Such notice shall
specify the date on which the books of the Company shall
close, or a record to be taken, for determining holders of
Common Stock entitled to receive such stock dividend or other
distribution of such rights or options, or the date on which
such reclassification, reorganization, consolidation, merger,
sale, transfer, other disposition, liquidation, dissolution,
winding up or exchange shall take place or commence, as the
case may be, and the date as of which it is expected that
holders of record of Common Stock shall be entitled to receive
securities or other property deliverable upon such action, if
any such date has been fixed. The Company shall cause copies
of such notice to be mailed to each registered holder of a
Warrant Certificate. Such notice shall be mailed in the case
of any action covered by Subsection 4.8(a) or 4.8(b) above, at
least ten (10) days prior to the record date for determining
holders of the Common Stock for purposes of receiving such
payment or offer, and in the case of any action covered by
Subsection 4.8(c) or 4.8(d) above, at least ten (10) days
prior to the earlier of the date upon which such action is to
take place or any record date to determine holders of Common
Stock entitled to receive such securities or other property.
Section 4.9 Notice of Redemption. Notice of redemption shall
be given the Warrant Agent by the Company not less than sixty (60) days prior to
the date established for such redemption (the "Redemption Date") and mailed by
the Warrant Agent to all registered holders of Warrant
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<PAGE> 19
Certificates to be redeemed by the Warrant Agent promptly after the Company
shall have given such notice to the Warrant Agent. Each such notice of
redemption will specify the Redemption Date and the Redemption Price. The notice
will state that payment of the Redemption Price will be made by the Warrant
Agent upon presentation and surrender of the Warrant Certificates representing
such Warrants to the Warrant Agent at its Principal Office on or after the
Redemption Date, and will also state that the right to exercise the Warrants
will terminate at 5:00 P.M., Eastern Time, on the business day immediately
preceding the Redemption Date. The Company will also make prompt pubic
announcement of such redemption by news release and by notice to any national
securities exchange on which the Warrants are listed for trading. The notice to
the Warrant Agent shall include the verifications provided for in Section 4.6.
Section 4.10 Notice of Adjustments. Whenever any adjustment is
made pursuant to this Article IV, the Company shall cause notice of such
adjustment to be mailed to the Warrant Agent within fifteen (15) days
thereafter, such notice to include in reasonable detail (i) the events
precipitating the adjustment, (ii) the computation of any adjustments, (iii) the
Exercise Price, (iv) the number of shares or the securities or other property
purchasable upon exercise of each Warrant, (v) the Redemption Trigger Price
after giving effect to such adjustment, and (vi) the verifications provided for
in Section 4.6. The Warrant Agent shall within fifteen (15) days after receipt
of such notice from the Company cause a similar notice to be mailed to each
registered holder of a Warrant Certificate.
Section 4.11 Warrant Certificate Amendments. Irrespective of
any adjustments pursuant to this Article IV, Warrant Certificates theretofore or
thereafter issued need not be amended or replaced, but certificates thereafter
issued shall bear an appropriate legend or other notice of any adjustments.
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<PAGE> 20
Section 4.12 Fractional Shares. The Company shall not be
required upon the exercise of any Warrant to issue fractional shares of Common
Stock that may result from adjustments in accordance with this Article IV to the
Exercise Price or number of shares of Common Stock purchasable under each
Warrant. If more than one Warrant is exercised at one time by the same
registered holder, the number of full shares of Common Stock that shall be
deliverable shall be computed based on the number of shares deliverable in
exchange for the aggregate number of Warrants exercised. With respect to any
final fraction of a share called for upon the exercise of any Warrant or
Warrants, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such final fraction multiplied by the difference
between the Exercise Price and the market value of a share of Common Stock, as
determined by the Warrant Agent on the basis of the market price per share of
Common Stock on the business day next preceding the date of such exercise. The
registered holder of each Warrant Certificate, by his acceptance of the Warrant
Certificate, shall expressly waive any right to receive any fractional share of
Common Stock upon exercise of the Warrants. For the purposes of this Section
4.12, the market price per share of Common Stock at any date shall mean the last
reported sale price regular way or, in case no such reported bid and asked
prices regular way, in either case on the principal national securities exchange
on which the Common Stock is admitted to trading or listed if that is the
principal market for the Common Stock or if not listed or admitted to trading on
any national securities exchange or if such national securities exchange is not
the principal market for the Common Stock, the closing bid price as reported by
the NASDAQ System or its successor, if any. If the price of the Common Stock is
not so reported, then such market price shall mean the last known price paid per
share by a purchaser of such stock in an arm's-length transaction. All
calculations under this Section 4.12 shall be made to the nearest 1/100th of a
share.
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ARTICLE V
OTHER PROVISIONS RELATING TO RIGHTS OF
REGISTERED HOLDERS OF WARRANT CERTIFICATES
Section 5.1 Rights of Warrant Holder. No warrant Certificate
shall entitle the registered holder thereof to any of the rights of a
stockholder of the Company, including without limitation the right to vote, to
receive dividends and other distributions, to receive any notice thereof, or to
attend meetings of stockholders or any other proceedings of the Company.
Section 5.2 Lost, Stolen, Mutilated or Destroyed Warrant
Certificates. If any Warrant Certificate shall be mutilated, lost, stolen or
destroyed, the Company in its discretion may direct the Warrant Agent to execute
and deliver in exchange and substitution for and upon cancellation of a
mutilated Warrant Certificate, or in lieu of or in substitution for a lost,
stolen or destroyed Warrant Certificate, a new Warrant Certificate for the
number of Warrants represented by the Warrant Certificate so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Warrant certificate, and of the ownership thereof, and
indemnity, if requested, all satisfactory to the Company and the Warrant Agent.
Applicants for such substitute Warrant Certificates shall also comply with such
other reasonable regulations and pay such other reasonable charges incidental
thereto as the Company or Warrant Agent may prescribe. Any such new Warrant
Certificate shall constitute an original contractual obligation of the Company,
whether or not the allegedly lost, stolen, mutilated or destroyed Warrant
Certificate shall be at any time enforceable by anyone.
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ARTICLE VI
SPLIT UP, COMBINATION, EXCHANGE, TRANSFER
AND CANCELLATION OF WARRANT CERTIFICATES
Section 6.1 Split Up, Combination, Exchange and Transfer of
Warrant Certificates. Prior to the Exercise Deadline, Warrant Certificates,
subject to the provisions of Section 6.2, may be split up, combined or exchanged
for other Warrant Certificates representing a like aggregate number of Warrants
or may be transferred in whole or in part. Any holder desiring to split up,
combine or exchange a Warrant Certificate or Warrant Certificates shall make
such request in writing delivered to the Warrant Agent at its Principal Office
and shall surrender the Warrant Certificate or Warrant Certificates so to be
split up, combined or exchanged at said office. Subject to any applicable laws,
rules or regulations restricting transferability, any restriction or
transferability that may appear on a Warrant Certificate in accordance with the
terms hereof, or any "stop-transfer" instructions the Company may give to the
Warrant Agent to implement any such restrictions (which instructions the Company
is expressly authorized to give), transfer of outstanding Warrant Certificates
may be effected by the Warrant Agent from time to time upon the books of the
Company to be maintained by the Warrant Agent for that purpose, upon a surrender
of the Warrant Certificate to the Warrant Agent at its Principal Office, with
the assignment form set forth in the Warrant Certificate duly executed and with
Signatures Guaranteed. Upon any such surrender for split up, combination,
exchange or transfer, the Warrant Agent shall execute and deliver to the person
entitled thereto a Warrant Certificate or Warrant Certificates, as the case may
be, as so requested. The Warrant Agent shall not be required to effect any split
up, combination, exchange or transfer which will result in the issuance of a
Warrant Certificate evidencing a fraction of a Warrant. The Warrant Agent shall
not be required to (i) issue, register the transfer of or exchange any Warrant
during a period
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beginning at the opening of business 15 days before the day of the mailing of a
notice of redemption of Warrants selected for redemption under Section 3.1 and
ending at the close of business on the day of such mailing, or (ii) register the
transfer of or exchange any Warrant so selected for redemption in whole or in
part, except, in the case of any Warrant to be redeemed in part, the portion
thereof not to be redeemed. The Warrant Agent may require the holder to pay a
sum sufficient to cover any tax or governmental charge that may be imposed in
connection with any split up, combination, exchange or transfer of Warrant
Certificates prior to the issuance of any new Warrant Certificate.
Section 6.2 Cancellation of Warrant Certificates. Any Warrant
Certificate surrendered upon the exercise of Warrants or for split up,
combination, exchange or transfer, or purchased or otherwise acquired by the
Company, shall be canceled and shall not be reissued by the Company; and, except
as provided in Section 2.5 in case of the exercise of less than all of the
Warrants evidenced by a Warrant Certificate or in Section 6.1 in case of a split
up, combination, exchange or transfer, no Warrant Certificate shall be issued
hereunder in lieu of such canceled Warrant Certificate. Any Warrant Certificate
so canceled shall be destroyed by the Warrant Agent unless otherwise directed by
the Company.
ARTICLE VII
PROVISIONS CONCERNING THE WARRANT AGENT AND OTHER MATTERS
Section 7.1 Payment of Taxes and Charges. The Company will
from time to time promptly pay to the Warrant Agent, or make provisions
satisfactory to the Warrant Agent for the payment of, all taxes and charges that
may be imposed by the United States or any state upon the Company or the Warrant
Agent in connection with the issuance or delivery of shares of Common Stock upon
the exercise of any Warrants, but any transfer taxes in connection with the
issuance of Warrant Certificates or certificates for shares of Common Stock in
any name other than that of the
20
<PAGE> 24
registered holder of the Warrant Certificate surrendered shall be paid by such
registered holder; and, in such case, the Company shall not be required to issue
or deliver any Warrant Certificate or certificates for shares of Common Stock
until such taxes shall have been paid or it has been established to the
Company's satisfaction that no tax is due.
Section 7.2 Resignation or Removal of Warrant Agent. The
Warrant Agent may resign its duties and be discharged from all further duties
hereunder after giving thirty (30) days' notice in writing to the Company,
except that such shorter notice may be given as the Company shall, in writing,
accept as sufficient. Upon comparable notice to the Warrant Agent, the Company
may remove the Warrant Agent; provided, however, that in such event the Company
shall appoint a new Warrant Agent, as hereinafter provided, and the removal of
the Warrant Agent shall not be effective until a new Warrant Agent has been
appointed and has accepted such appointment. If the office of Warrant Agent
becomes vacant by resignation or incapacity to act or otherwise, the Company
shall appoint in writing a new Warrant Agent. If the Company shall fail to make
such appointment within a period of thirty (30) days after it has been notified
in writing of such resignation or incapacity by the resigning or incapacitated
Warrant Agent or by the registered holder of any Warrant Certificate, then the
registered holder of any Warrant Certificate may apply to any court of competent
jurisdiction for the appointment of a new Warrant Agent. Any new Warrant Agent,
whether appointed by the Company or by such a court, shall be a bank that is a
member of the Federal Reserve System. Any new Warrant Agent appointed hereunder
shall execute, acknowledge and deliver to the former Warrant Agent last in
office, and to the Company, an instrument accepting such appointment under
substantially the same terms and conditions as are contained herein, and
thereupon such new Warrant Agent without any further act or deed shall become
vested with the rights, powers, duties and responsibilities of the Warrant
Agent. If for any reason it becomes
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necessary or expedient to have the former Warrant Agent execute and deliver any
further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the former Warrant Agent. During any period following the resignation,
termination or incapacity of the Warrant Agent, and prior to the appointment of
a successor Warrant Agent, the Company shall act as the Warrant Agent.
Section 7.3 Notice of Appointment. Not later than the
effective date of the appointment of a new Warrant Agent the Company shall cause
notice thereof to be mailed to the former Warrant Agent and the transfer agent
for the Common Stock, and shall forthwith cause a copy of such notice to be
mailed to each registered holder of a Warrant Certificate. Failure to mail such
notice, or any defect contained therein shall not affect the legality or
validity of the appointment of the successor Warrant Agent.
Section 7.4 Merger of Warrant Agent. Any company into which
the Warrant Agent may be merged or with which it may be consolidated or any
company resulting from any merger or consolidation to which the Warrant Agent
shall be a party, shall be the successor Warrant Agent under this Agreement
without further act, provided that such company would be eligible for
appointment as a successor Warrant Agent under the provisions of Section 7.2
hereof. Any such successor Warrant Agent may adopt the prior countersignature of
any predecessor Warrant Agent and distribute Warrant Certificates countersigned
but not distributed by such predecessor Warrant Agent, or may countersign the
Warrant Certificates in its own name.
Section 7.5 Company Responsibilities. The Company agrees that
it shall (i) pay the Warrant Agent reasonable remuneration for its services as
Warrant Agent hereunder and will reimburse the Warrant Agent upon demand for all
expenses, advances, and expenditures that the Warrant Agent may reasonably incur
in the execution of its duties hereunder (including fees and
22
<PAGE> 26
expenses of its counsel); (ii) provide the Warrant Agent, upon request, with
sufficient funds to pay any cash due pursuant to Section 4.12 upon exercise of
Warrants; and (iii) perform, execute, acknowledge and deliver or cause to be
performed, executed, acknowledged and delivered all further and other acts,
instruments and assurances as may be reasonably be required by the Warrant Agent
for the carrying out or performing by the Warrant Agent of the provisions of
this Agreement. The Company shall have the sole and exclusive responsibility and
liability to determine the applicability and effect of, and to maintain
compliance with, all federal and state securities laws, rules and regulations
relating or pertaining to the Warrants, the Common Stock and the Company
generally.
Section 7.6 Duties, Liability and Indemnification of Warrant
Agent. The Warrant Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, all of which the Company, by
its acceptance hereof, and the holders of Warrant Certificates, by their
acceptance thereof, shall be bound:
(a) The Warrant Agent shall have no implied duties or
obligations and shall not be charged with knowledge or notice
of any fact or circumstance not specifically set forth herein
or given pursuant hereto.
(b) The Warrant Agent may rely upon any instrument,
not only as to its due execution, validity and effectiveness,
but also as to the truth and accuracy of any information
contained therein, which the Warrant Agent shall in good faith
and reasonably believe to be genuine, to have been signed or
presented by the person or parties purporting to sign the same
and to conform to the provisions of this Agreement.
(c) The Warrant Agent shall have no liability or
obligation with respect to its duties hereunder except for the
Warrant Agent's willful misconduct or negligence. In no event
shall the Warrant Agent be liable for incidental, indirect,
special, consequential, or
23
<PAGE> 27
punitive damages. The Warrant Agent shall not be obligated to
take any legal action or commence any proceeding in connection
with this Agreement or the Warrant Certificates, or to appear
in, prosecute or defend any such legal action or proceeding.
(d) The Warrant Agent may consult legal counsel
selected by it (which may be counsel of the Company) in the
event of any dispute or question as to the construction of any
of the provisions hereof or of any other agreement or of its
duties hereunder, and shall incur no liability or
responsibility to the Company or any holder of Warrant
Certificates acting in good faith and in accordance with the
opinion or instruction of such counsel, provided the Warrant
Agent shall have exercised reasonable care in the selection by
it of such counsel. The Company shall promptly pay, upon
demand, the reasonable fees and expenses of any such counsel.
(e) From and at all times after the date of the
Agreement, the Company shall, to the fullest extent permitted
by law, to the extent provided herein, indemnify and hold
harmless the Warrant Agent and each director, officer,
employee, attorney, agent, and affiliate of the Warrant Agent
(collectively, the "Indemnified Parties") against any and all
actions, claims (whether or not valid), losses, damages,
liabilities, costs and expenses of any kind or nature
whatsoever (including, without limitation, reasonable
attorneys' fees, costs and expenses) incurred by or asserted
against any of the Indemnified Parties from and after the date
hereof, whether direct, indirect or consequential, as a result
of or arising from or in any way relating to any claim,
demand, suit, action, or proceeding (including any inquiry or
investigation) by any person, including, without limitation,
the Company, whether threatened or initiated, asserting a
claim or any legal or equitable remedy against any person
under any statute or regulation or under any common law or
equitable cause or otherwise, arising from
24
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or in connection with the negotiation, preparation, execution,
performance or failure of performance of this Agreement or any
transactions contemplated herein, whether or not any such
Indemnified Party is a party to any such action, proceeding,
suit or the target of any such inquiry or investigation;
provided, however, that no Indemnified Party shall have the
right to be indemnified hereunder for any liability finally
determined by a court of competent jurisdiction, subject to no
further appeal, to have resulted from the negligence or
willful misconduct of such Indemnified Party. If any such
action or claim shall be brought or asserted against any
Indemnified Party, such Indemnified Party shall promptly
notify the Company in writing, and the Company shall assume
the defense thereof, including the employment of counsel and
the payment of all expenses. Such Indemnified Party shall, in
its sole discretion, have the right to employ separate counsel
(who may be selected by such Indemnified Party in its sole
discretion) in any such action and to participate in the
defense thereof, and the fees and expenses of such counsel
shall be paid by such Indemnified Party, except that the
Company shall be required to pay such fee and expense if (a)
the Company agrees to pay such fees and expenses, (b) the
Company shall fail to assume the defense of such action or
proceeding or shall fail, in the reasonable discretion of such
Indemnified Party to employ counsel satisfactory to the
Indemnified Party in any such action or proceeding, or (c) the
named parties to any such action or proceeding (including the
impleaded parties) include both Indemnified Party and the
Company, and Indemnified Party shall have been reasonably
advised by counsel that there may be one or more legal
defenses available to it which are different from or
additional to those available to the Company. All such fees
and expenses payable by the Company pursuant to the foregoing
sentence shall be paid from time to time as incurred, both in
advance of and after the final disposition of such action or
claim.
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All of the foregoing losses, damages, costs, and expenses of
the Indemnified Parties shall be payable by the Company, upon
demand by such Indemnified Party. The obligations of the
Company under this Section shall survive and termination of
this Warrant Agreement and the resignation or removal of the
Warrant Agent.
(f) Whenever in the performance of its duties under
this Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by
the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed on
behalf of the Company by the Chairman, the President, a Vice
President, the Secretary or the Treasurer of the Company and
delivered to the Warrant Agent; and such certificate shall be
full authorization to the Warrant Agent for any action taken
reasonably and in good faith by it under the provisions of
this Agreement in reliance upon such certificate.
(g) The Warrant Agent shall not be liable for, or by
reason of, any of the statements of fact or recitals contained
in this Agreement or in the Warrant Certificates (except as to
the fact that it has countersigned the Warrant Certificates)
or be required to verify the same, and all such statements and
recitals are and shall be deemed to have been made by the
Company only.
(h) The Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution
hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its
countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained
in this Agreement or in any Warrant
26
<PAGE> 30
Certificate; nor shall it be responsible for any adjustment
required under the provisions of Article IV hereof or
responsible for the manner, method or amount of any such
adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the
exercise of Warrants evidenced by Warrant Certificates after
receipt of the notice described in Section 4.10 hereof); nor
shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or
reservation of any shares of Common Stock or as to whether any
shares of Common Stock or other securities shall, when so
issued, be validly authorized and issued, fully paid and
nonassessable.
(i) The Warrant Agent and any stockholder, director,
officer, or employee of the Warrant Agent may buy, sell or
deal in any of the Warrants or other securities of the Company
or become pecuniarily interested in any transaction in which
the Company may be interested, or contract with or lend money
to the Company or otherwise act as fully and freely as though
it were not Warrant Agent under this Agreement to the extent
lawfully permitted to so act. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the
Company or for any legal entity.
(j) The Warrant Agent may execute and exercise any of
the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or
agents (which shall not include its employees), and the
Warrant Agent shall not be answerable or accountable for any
act, omission, default, neglect, or misconduct of any such
attorneys or agents or for any loss to the Company or to the
holders of the Warrants resulting from any such act, omission,
default, neglect, or misconduct, provided reasonable care was
exercised in the selection and continued employment thereof.
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(k) No provision of this Agreement shall require the
Warrant Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder or in the exercise of its rights if there
shall be reasonable grounds for believing that repayment of
such funds or adequate indemnification against such risk or
liability is not reasonably assured to it.
(l) If, with respect to any Warrant Certificate
surrendered to the Warrant Agent for exercise or transfer, the
form of election to purchase or transfer, as the case may be,
has not been completed, the Warrant Agent shall not take any
further action with respect to such requested exercise or
transfer without first consulting with the Company.
(m) The Warrant Agent shall not be required to take
notice of, or be deemed to have notice of, any fact, event or
determination under this Agreement unless and until the
Warrant Agent shall be specifically notified in writing by the
Company of such fact, event or determination.
Section 7.7 Changes to Agreement. The Warrant Agent may,
without the consent or concurrence of any registered holder of a Warrant
Certificate, by supplemental agreement or otherwise, join with the Company in
making changes or corrections in this Agreement that they shall have been
advised by counsel (i) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained, (ii) add to the covenants and agreements of the Company
or the Warrant Agent in the Agreement such further covenants and agreements
thereafter to be observed or (iii) result in the surrender of any right or power
reserved to or conferred upon the Company or the Warrant Agent in this
Agreement, but which changes or corrections do not or will not adversely affect,
alter or change the rights, privileges or immunities of the registered holders
of Warrant Certificates.
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Section 7.8 Assignment. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns.
Section 7.9 Successor to the Company. The Company will not
merge or consolidate with or into any other corporation or sell or otherwise
transfer its property, assets and business substantially as an entirety to a
successor corporation, unless the corporation resulting from such merger,
consolidation, sale or transfer (if not the Company) shall expressly assume, by
supplemental agreement satisfactory in form and substance to the Warrant Agent
and delivered to the Warrant Agent, the performance of this Agreement to be
performed by the Company.
Section 7.10 Notices. Any notice or demand required by this
Agreement to be given or made by the Warrant Agent or by the registered holder
of any Warrant certificate to or on the Company shall be sufficiently given or
made if sent by first-class or registered mail, postage prepaid, addressed
(until another address is filed in writing by the Company with the Warrant
Agent) as follows:
Capstone Pharmacy Services, Inc.
2930 Washington Boulevard
Baltimore, Maryland 21230
Attention: Secretary
Any notice or demand required by this Agreement to be given or made by the
registered holder of any Warrant Certificate or by the Company to or on the
Warrant Agent shall be sufficiently given or made if sent first-class or
registered mail, postage prepaid, addressed (until another address is filed in
writing with the Company by the Warrant Agent), as follows:
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<PAGE> 33
First Union National Bank of North Carolina
230 South Tryon Street
Charlotte, North Carolina 28288
Attention: Stock Transfer Department
Any notice or demand required by this Agreement to be given or made by the
Company or the Warrant Agent to or on the registered holder of any Warrant
Certificate shall be sufficiently given or made, whether or not such holder
receives the notice, if sent by first-class or registered mail, postage prepaid,
addressed to such registered holder at his last address shown on the books of
the Company maintained by the Warrant Agent.
Section 7.11 Defects in Notice. Failure to file any
certificate or notice or to mail any notice, or any defect in any certificate or
notice pursuant to this Agreement shall not affect in any way the rights of any
registered holder of a Warrant Certificate or the legality or validity or any
adjustment made pursuant to Section 4.1 hereof, or any transaction giving rise
to any such adjustment, or the legality or validity of any action taken or to be
taken by the Company.
Section 7.12 Governing Law. The validity, interpretation and
performance of this Agreement, of each Warrant Certificate issued hereunder and
of the respective terms and provisions thereof shall be governed by the laws of
the State of Maryland, except that the rights and duties of the Warrant Agent
shall be governed by the laws of the state of North Carolina.
Section 7.13 Standing. Nothing in this Agreement expressed and
nothing that may be implied from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company, the Warrant Agent, and the registered holders of the Warrant
Certificates any right, remedy or claim under or by reason of this Agreement or
of any covenant, condition, stipulation, promise or agreement contained herein;
and all covenants, conditions, stipulations, promises and agreements contained
in this Agreement shall be for the sole
30
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and exclusive benefit of the Company and the Warrant Agent and their successors,
and the registered holders of the Warrant Certificates.
Section 7.14 Headings. The descriptive headings of the
articles and sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
Section 7.15 Counterparts. This Agreement may be executed in
any number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
Section 7.16 Availability of the Agreement. The Warrant Agent
shall keep copies of this Agreement available for inspection by holders of
Warrants during normal business hours at its Stock Transfer Department. Copies
of this Agreement may be obtained upon written request addressed to:
Capstone Pharmacy Services, Inc.
2930 Washington Boulevard
Baltimore, Maryland 21230
Attention: Secretary
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<PAGE> 35
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the day and year first above written.
CAPSTONE PHARMACY SERVICES, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By:___________________________________________
Name:_________________________________________
Title:________________________________________
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<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated March 11, 1996,
included in Capstone Pharmacy Services, Inc.'s Form 10-K for the ten months
ended December 31, 1995 and for the years ended February 28, 1995 and 1994,
and to all references to our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Baltimore, Maryland
August 7, 1996
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report on the audited financial
statements of Geri Care Inc. and Affiliate for the nine months ended September
30, 1995, dated December 18, 1995, included in Capstone Pharmacy Services,
Inc.'s Form 8K/A dated December 31, 1995 and to all references to our Firm
included in this registration statement.
/s/ Roth & Company
Brooklyn, New York
August 7, 1996
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report in Capstone Pharmacy
Services, Inc.'s Form 8-K dated February 29, 1996 for the years ended December
31, 1995, 1994 and 1993 dated March 20, 1996 and to all references to our firm
included in this registration statement.
/s/ Blackman Kallick Bartelstein, LLP
Chicago, Illinois
August 7, 1996
