<PAGE> 1
As filed with the Securities and Exchange Commission on July 10, 1996
REGISTRATION NO. 333-3643
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
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.
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
======================================================================================================
Title of Each Class Amount Proposed Maximum Proposed Maximum Amount of
of Securities to be Offering Price Aggregate Offering Registration
to be Registered Registered per Security Price Fee
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value $.01 per share 75,000 $12.69(1) $951,750(1) $ 329
6,418,467 (2) (2) $23,516(2)
Series B Redeemable 650,000 (2) (2) $ 2,241(2)
Warrants
======================================================================================================
</TABLE>
(1) Estimated solely for computing registration fee pursuant to Rule 457(c).
The calculation is based on the average of the high and low prices of the
Company's common stock reported on July 3, 1996.
(2) Fee paid with original filing of the 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 JULY __, 1996
CAPSTONE PHARMACY SERVICES, INC.
6,493,467 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 3,242,501 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 July 3, 1996, the reported closing price of the Company's
Common Stock on the Nasdaq Stock Market was $12.69 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........................................... 6
PLAN OF DISTRIBUTION........................................... 10
LEGAL MATTERS.................................................. 10
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.
INFORMATION 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;
2. The Company's Registration Statement on Form 8-A
relating to the Company's Common Stock dated June 18, 1986;
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 Form 8-K/A; 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.
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 June 20, 1996, Capstone entered into an agreement to acquire
Symphony Pharmacy Services, Inc. ("Symphony"), a subsidiary of Integrated
Health Services, Inc. ("IHS"). The acquisition of Symphony will increase 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. Symphony will increase
significantly the number and geographic scope of Capstone's clients and will
establish relationships with IHS and other large operators of long-term care
facilities not previously serviced by Capstone. In addition, management
believes that Capstone's expanded national presence will enable it to compete
more effectively for larger customers with multiple facilities while achieving
purchasing efficiencies and other economies of scale.
Capstone provides its long-term care clients 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 services its
long-term care clients primarily through regional pharmacies that are open 24
hours, seven days a week. By focusing on the establishment of 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 at correctional institutions
that have privatized their inmate health care services. Management believes
the Company's experience in managing capitated correctional contracts, which
involve the utilization of closed formularies, generic substitution, rigorous
drug utilization review and proactive physician education, should provide the
Company with 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 $191.8 million on a pro forma basis for the 12-month
period ended December 31, 1995 from $43.6 million for the fiscal year ended
February 28, 1995, and 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 improved during the same time period, with income from
continuing operations of $3.6 million on a pro forma basis for the 12 months
ended December 31, 1995 compared to an actual loss from continuing operations
of ($10.8 million) for the year ended February 28, 1995, and income from
continuing operations of $3.2 million on a pro forma basis for the quarter
ended March 31, 1996 compared to an actual loss from continuing operations of
($2.5 million) for the quarter ended March 31, 1995.
Capstone's objective is to enhance its position as a leading provider of
high-quality, cost-effective institutional pharmacy services. The Company
seeks to achieve this objective by: (i) acquiring institutional pharmacy
companies in metropolitan markets; (ii) achieving regional market density in
order to enhance its operating leverage; (iii) positioning the Company 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 in
existing markets 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. Upon consummating the
Symphony acquisition, Capstone will enter additional metropolitan markets such
as Los Angeles, Dallas, Minneapolis-St. Paul and Tampa-St. Petersburg. Since
December 31, 1994, Capstone has increased its long-term care bed count from
approximately 13,500 to approximately 84,000 (including the beds served by
Symphony) and the number of inmates served in correctional institutions from
approximately 70,000 to approximately 115,000. Growth in the Company's
long-term care business has been achieved through a combination of internal
growth in existing markets and acquisitions in both existing and new markets,
while growth in Capstone's correctional business has been achieved solely
through the addition of new capitated contracts.
4
<PAGE> 6
USE OF PROCEEDS
4,250,193 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.
2,243,274 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 July 31, 1996
Series B Warrants 650,000* $10.00/share July 31, 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
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. 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.
NO ASSURANCE OF SUCCESSFUL INTEGRATION OF ACQUISITIONS. The Symphony
acquisition will substantially increase the number of beds served by the
Company, the number of Company employees and the Company's net sales. 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. The success of the Company's integration of Symphony or any
other acquisition may depend on the retention of such acquisition's existing
management. Although the Company intends to retain substantially all of
Symphony's employees, there can be no assurances that such individuals will
remain with the Company, and their loss could have a material adverse effect on
the Company.
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, a significant strain on
its management resources. The Company's successful implementation of its
growth strategy depends upon its ability to attract and retain qualified
management, clinical and technical operating 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.
There can be no assurances 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 Company's growth strategy includes making
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.
Future acquisitions may also be dependent on the Company's ability to obtain
additional financing, and there can be no assurance that the Company will be
able to obtain such financing on suitable terms.
NASDAQ NET NATIONAL MARKET TANGIBLE ASSET QUOTATION CRITERIA. In order
for its Common Stock to remain quoted on the Nasdaq National Market, the
Company must maintain a certain minimum level of net tangible assets. The
calculation of net tangible assets does not include the value of goodwill,
which typically represents, a substantial part of the institutional pharmacy
company assets acquired by the Company. Should the Company continue to acquire
substantial goodwill and/or increase its liabilities without increasing its
tangible assets, it may from time to time fail to comply with Nasdaq's net
tangible asset criteria. If such failure is not remedied, it could result in
the Company's Common Stock no longer being quoted on the Nasdaq National
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
two of the last three fiscal years. For the years ended February 28, 1994 and
1995, net losses were approximately $862,000 and $11,420,000, respectively,
while for the ten months ended December 31, 1995, the Company had net income of
approximately $222,000. While the Company has been profitable for the past
three consecutive quarters, there can be no assurance that it will continue to
be profitable in the future.
DEPENDENCE ON REIMBURSEMENT BY THIRD-PARTY PAYORS. For the ten months
ended December 31, 1995, less than 2% and approximately 13% of the Company's net
sales were derived directly from Medicare and Medicaid, respectively, and
approximately 40% were derived from long-term care facilities which were in turn
reimbursed directly by Medicare, Medicaid and other third-party payors. The
Company's net sales and profitability are, and will continue to be, affected by
the efforts of all payors to contain or to reduce the costs of health care by
lowering reimbursement rates, narrowing the scope of covered services,
increasing case management review of services, 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 are also 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. It
cannot be predicted 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. 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 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, competitive prices, and the range of services offered. 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 and frequently
changing federal, state and local regulation. Federal laws governing Capstone'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 Capstone
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
operation, financial condition or prospects.
INFLUENCE OF PRINCIPAL STOCKHOLDER. As of the date of this Prospectus, the
Company's principal stockholder, Counsel Corporation ("Counsel"), its
affiliates and officers and directors of the Company will beneficially own
approximately 37.5% 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 positions on the
Company's Board, 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.
SHARES ELIGIBLE FOR FUTURE SALE. Upon effectiveness of the Registration
Statement of which this Prospectus is a part, the Company will have 15,845,025
shares of Common Stock outstanding, of which 10,902,426 will be freely tradeable
without restriction. All of the remaining shares of Common Stock are
"restricted securities" as that term is defined in Rule 144 promulgated under
the Securities Act. Additional shares of Common Stock, including shares
issuable upon exercise of options and warrants, will also become eligible for
sale in the public market from time to time. As of the date of this Prospectus
there were options and warrants outstanding to purchase 1,721,040 and 4,030,000
shares of common stock, respectively. Sales of substantial amounts of the
Company's Common Stock in the public market pursuant to Rule 144 or otherwise,
or the potential of such sales, could adversely affect the prevailing market
price for the Common Stock and impair the Company's ability to raise additional
capital through the sale of equity securities.
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 in keeping 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,
if at all.
6
<PAGE> 8
SELLING STOCKHOLDERS
The Selling Stockholders acquired or will acquire 4,185,775 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 May 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) * 57,746 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) * 130,000 -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 Corporation ("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 July 31, 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 $1.00 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 1, 1996, 650,000 Series A
Warrants that expire July 31, 1996 and 15,845,025 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 ... 2,500
*Legal fees and expenses ........ 15,000
*Transfer Agent Fees ............ 500
*Miscellaneous .................. 500
Total ............................ 62,586
</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 9th day of July, 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 July 9, 1996
Officer)
/s/ Donald W. Hughes
- --------------------------- Vice President, Chief Financial
Donald W. Hughes Officer and Secretary (Chief
Accounting Officer) July 9, 1996
* Chairman July 9, 1996
- ---------------------------
Allan C. Silber
* Vice Chairman July 9, 1996
- ---------------------------
Morris A. Perlis
* Director July 9, 1996
- ---------------------------
Joseph Furlong, III
* Director July 9, 1996
- ---------------------------
John Haronian
* Director July 9, 1996
- ---------------------------
Albert Reichmann
* Director July 9, 1996
- ---------------------------
J. Brendan Ryan
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director July 9, 1996
- -------------------------------
Edward Sonshine
* Director July 9, 1996
- -------------------------------
Dr. Gail Wilensky
* Director July 9, 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 Form of Series B Warrant Certificate
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
No.
Certificate for _____________ Warrants
NOT EXERCISABLE AFTER 5:00 P.M.,
EASTERN STANDARD TIME, ON JUNE 30, 1997
CAPSTONE PHARMACY SYSTEMS, INC.
SERIES B WARRANT CERTIFICATE
THIS CERTIFIES that
or registered assigns thereof is the registered holder (the "Registered
Holder") of the number of Warrants set forth above, each of which represents
the right to purchase one fully paid and nonassessable share of common stock,
par value $.01 per share (the "Common Stock"), of CAPSTONE PHARMACY SYSTEMS,
INC., a Delaware corporation (the "Company"), at an exercise price of $10.00,
at any time after the shares of Common Stock issuable upon exercise of the
Warrants evidenced hereby have been registered under the Securities Act of
1933, as amended, or 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 the Expiration Date hereinafter referred to, by
surrendering this Warrant Certificate, with the form of election to purchase
set forth hereon duly executed with signatures guaranteed by a member firm of a
national securities exchange, a commercial bank (not a savings bank or a
savings and loan association) or a trust company located in the United States,
or a member of the National Association of Securities Dealers, Inc., at the
office maintained for that purpose by First Union National Bank, or its
successor as warrant agent, in Charlotte, North Carolina (any such warrant
agent being herein
<PAGE> 2
called the "Warrant Agent"), and by paying in full the Exercise Price, plus
transfer taxes, if any. Payment of the Exercise Price shall be made in United
States currency by certified check or money order payable to the order of the
Warrant Agent and upon compliance with and subject to the conditions set forth
herein.
The Warrants, or any portion thereof, are subject to redemption by the
Company at a redemption price of $1.00 per Warrant (the "Redemption Price"),
provided that the closing bid price per share of Common Stock (as determined
pursuant to the Warrant Agreement) has been at least 150% on the then Exercise
Price (the "Redemption Trigger Price") on all twenty of the trading days ending
on the third day prior to the day on which notice of such redemption (the
"Redemption Notice") is given by the Company to the Warrant Agent.
No Warrant may be exercised after 5:00 P.M., Eastern Standard Time, on
the expiration date (the ''Expiration Date") which will be the earlier of June
30, 1997 or the redemption date specified in a Redemption Notice. All Warrants
evidenced hereby shall thereafter become void.
Prior to the Expiration Date, subject to any applicable laws, rules or
regulations restricting transferability and to any restriction on
transferability that may appear on this Warrant Certificate in accordance with
the terms of the Warrant Agreement, the Registered Holder shall be entitled to
transfer this Warrant Certificate in whole or in part upon surrender of this
Warrant Certificate at the office of the Warrant Agent maintained for that
purpose in Charlotte, North Carolina, with the form of assignment set forth
hereon duly executed, with signatures guaranteed by a member firm of a national
securities exchange, a commercial bank (not a savings bank or a savings and
loan association) or a trust company located in the United States, or a member
of the National
2
<PAGE> 3
Association of Securities Dealers. Inc. Upon any such transfer, a new Warrant
Certificate or Warrant Certificates representing the same aggregate number of
Warrants will be issued in accordance with instructions in the form of
assignment.
Prior to the Expiration Date, the Registered Holder shall be entitled
to exchange this Warrant Certificate, with or without other Warrant
Certificates, for another Warrant Certificate or Warrant Certificates for the
same aggregate number of Warrants, upon surrender of this Warrant Certificate
at the Stock Transfer Department of the Warrant Agent in Charlotte, North
Carolina.
To prevent dilution of the rights granted under this Warrant, the
initial Exercise Price shall be subject to adjustment from time to time as
provided herein (such price or such price as last adjusted pursuant to the
terms hereof, as the case maybe, is herein called the "Exercise Price"), and
the number of shares obtainable upon Exercise of this warrant shall be subject
to adjustment from time to time as provided herein. If the Company at any time
after the date hereof shall, stock dividend, subdivision, stock split or
combination or other Reclassification of securities (any such action herein
referred to as ("Reclassification"), change any of the securities to which
purchase rights under this warrants exist into the same or a different number
of securities of any class or series, this Warrant shall entitle the registered
holder to acquire such number of securities as would have been issuable as a
result of such change with respect to the securities which were subject to the
purchase rights under this Warrant immediately prior to such Reclassification
and the Exercise Price shall be appropriately adjusted. Following any
adjustment as provided herein, the Company will give written notice of the new
Exercise Price and the number of securities to
3
<PAGE> 4
the Registered Holder.
No fractional shares will be issued upon the exercise of Warrants. As
to any final fraction of a share which the Registered Holder of one or more
Warrant Certificates, the rights under which are exercised in the same
transaction, would otherwise be entitled to purchase upon such exercise, the
Company shall pay the cash value thereof determined as provided in the Warrant
Agreement.
This Warrant Certificate shall not entitle the Registered Holder to
any of the rights of a stockholder of the Company, including, without
limitation, the right to vote, to receive dividends and other distributions, or
to attend or receive any notice of meetings of stockholders or any other
proceedings of the Company.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed.
CAPSTONE PHARMACY SYSTEMS, INC.
By:
--------------------------------
Title:
-----------------------------
4
<PAGE> 5
[FORM OF]
ELECTION To PURCHASE
The undersigned hereby irrevocably elects to exercise
______________________ of the Warrants represented by this Warrant Certificate
and to purchase the shares of Common Stock issuable upon the exercise of said
Warrants, and requests that certificates for such shares be issued and
delivered as follows:
ISSUE TO:
-------------------------------------------------------------------
(NAME)
- ----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- ----------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
-----------------------------------------------------------------
(NAME)
at
-------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
5
<PAGE> 6
If the number of Warrants hereby exercised is less than all the
Warrants represented by this Warrant Certificate, the undersigned requests that
a new Warrant Certificate representing the number of full Warrants not
exercised be issued and delivered as set forth below.
In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$_____________________ by certified check or money order payable in United
States currency to the order of the Warrant Agent.
ISSUE TO:
-------------------------------------------------------------------
(NAME)
- ----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- ----------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
-----------------------------------------------------------------
(NAME)
at
-------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Dated: , 19.
-------------------
-------------------------
Signature
6
<PAGE> 7
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
Signature Guaranteed:
PLEASE INSERT SOCIAL SECURITY OR TAX
I.D. NO. OF STOCKHOLDER
7
<PAGE> 8
[FORM OF] ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
represented by the within Warrant Certificate, with respect to the number of
Warrants set forth below:
Name of Assignee Address No. of Warrants
- ---------------- ------- ---------------
and does hereby irrevocably constitute and appoint __________________________.
Attorney to make such transfer on the books of ________________________________
maintained for that purpose, with full power of substitution in the premises.
Dated: , 19
-------------------- ----
-------------------------------------------
Signature
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
Signature Guaranteed:
8
<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
July 8, 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
July 8, 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 dated March 20, 1996 on
the financial statements of IMD Corporation, included in Capstone Pharmacy
Services, Inc.'s Form 8-K/A for the years ended December 31, 1995, 1994 and
1993 and to all references to our firm included in this registration statement.
/s/ Blackman Kallick Bartelstein, LLP
Chicago, Illinois
July 9, 1996
