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Filed Pursuant to Rule 424(b)(2)
Registration No. 33-60959
PROSPECTUS
CORAM HEALTHCARE CORPORATION
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2,686,656 SHARES OF COMMON STOCK
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Pursuant to this Prospectus, certain persons (collectively the "Selling
Stockholders") who hold 2,686,656
shares of Common Stock, $.001 par value per share (the "Common Stock") of Coram
Healthcare Corporation (together with its subsidiaries, the "Company") may
resell or further distribute such securities on a deferred basis. The Common
Stock owned by the Selling Stockholders is collectively referred to herein as
the "Offered Securities." The Selling Stockholders acquired the Offered
Securities (i) pursuant to the Stipulation of Settlement (the "T2 Settlement
Agreement") by and between Thomas E. Haire, Joseph C. Allegra, David Hersh, J.
Lee Ledbetter and T2 Medical, Inc. ("T2") a wholly-owned subsidiary of the
Company, on the one hand, and the Representative Plaintiffs (as defined in the
T2 Settlement Agreement) on the other hand; (ii) in connection with earn-out
agreements (the "Earn-Out Agreements") by and among certain Selling Stockholders
and Curaflex Health Services, Inc., a wholly-owned subsidiary of the Company
("Curaflex"), or Medisys, Inc., a wholly-owned subsidiary of the Company
("Medisys") and the Company; (iii) pursuant to an agreement by and among the
Company, Curaflex and TBOB Enterprises, Inc. dated as of February 23, 1996 (the
"TBOB 1996 Agreement"); (iv) in satisfaction of certain obligations of Curaflex
arising under an Asset Purchase Agreement dated as of September 30, 1993 by and
among Curaflex, Excellence, Inc., a Florida corporation, Excellence, Inc. of
North Carolina, a North Carolina corporation, Donald R. Gillespie and Rita K.
Gillespie; (v) pursuant to a Release and Registration Agreement dated as of
April 21, 1995 by and among the Company, HealthInfusion, Inc., a wholly-owned
subsidiary of the Company ("HealthInfusion"), Lawrence H. Garatoni, Steven H.
Manning, Charles M. Loeser and Anthony Wright; and (vi) pursuant to an Agreement
among the Company, Curaflex and Nebraska Prescription Services Limited
Partnership (the "Nebraska Prescription Services Agreement"). The Selling
Stockholders may sell the Offered Securities from time to time in transactions
on the New York Stock Exchange (the "NYSE"), in privately negotiated
transactions, through the writing of options on the Common Stock, or by a
combination of those methods, at fixed prices that may be changed, at market
prices at the time of sale, at prices related to market prices or at negotiated
prices. The Selling Stockholders may effect those transactions by selling the
Offered Securities to or through broker-dealers, who may receive compensation in
the form of discounts or commissions from the Selling Stockholders or from the
purchasers of the Offered Securities for whom the broker-dealers may act as
agent or to whom they may sell as principal, or both. See "Selling Stockholders"
and "Plan of Distribution."
If all of the T2 Warrants are exercised at their current maximum exercise
price, the Company will receive aggregate proceeds of approximately $55,585,000,
after deducting estimated offering expenses payable by the Company. The Company
will not receive any proceeds from the sale of the Offered Securities. See "Use
of Proceeds" and "Plan of Distribution."
The Company's Common Stock is presently traded on the NYSE under the symbol
"CRH." On May 31, 1996 the closing bid price of the Common Stock was $4.875.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 4.
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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.
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THE COMPANY HAS UNDERTAKEN TO KEEP A REGISTRATION STATEMENT OF WHICH THIS
PROSPECTUS CONSTITUTES A PART EFFECTIVE UNTIL THE EARLIER TO OCCUR OF JULY 11,
1999 OR THE EARLIER DISPOSITION OF THE SECURITIES OFFERED HEREBY. AFTER SUCH
PERIOD, IF THE COMPANY CHOOSES NOT TO MAINTAIN THE EFFECTIVENESS OF THE
REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS CONSTITUTES A PART, THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF AND OFFERED HEREBY MAY NOT BE SOLD,
PLEDGED, TRANSFERRED OR ASSIGNED, EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
THE PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT THEREUNDER.
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NO PERSON IS AUTHORIZED IN CONNECTION WITH ANY OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS, AND ANY INFORMATION OR REPRESENTATION NOT
CONTAINED OR INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, BY ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS AT ANY TIME NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
THE DATE OF THIS PROSPECTUS IS JULY 1, 1996.
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AVAILABLE INFORMATION
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 statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the following
regional offices: Seven World Trade Center, Room 1300, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Room 1500, Chicago,
Illinois 60661-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates.
The Company has filed with the Commission a registration statement (herein,
together with all amendments thereto, called the "Registration Statement") of
which this Prospectus constitutes a part, under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the securities offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and in the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and
reference is made to the Registration Statement and the exhibits thereto for
further information regarding the Company and the securities offered hereby.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each such statement is qualified in
its entirety by reference to the copy of the applicable documents filed with the
Commission. The Registration Statement and the exhibits thereto may be inspected
without charge and copies thereof may be obtained upon payment of the prescribed
fees at the public reference facilities of the Commission at its principal
office in Washington, D.C.
The Company's Common Stock is listed on the NYSE. All reports, proxy
statements and other information filed by the Company with the NYSE may be
inspected at the offices of the NYSE at 20 Broad Street, New York, New York
10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following reports pursuant to Item 12(a)(1) and (2) of the Instructions
to Form S-3 filed with the Commission by the Company are incorporated by
reference into this Registration Statement:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1995;
2. Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1996;
3. Amendment No. 1 to Quarterly Report on Form 10-Q/A for the fiscal
quarter ended March 31, 1996, as filed with the Commission on June 6, 1996;
4. Amendment No. 1 to Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1995, as filed with the Commission on June 6, 1996;
5. Amendment No. 3 to Annual Report on Form 10-K/A for the fiscal year
ended December 31, 1994, as filed with the Commission on April 8, 1996;
6. Amendment No. 1 to Quarterly Report on Form 10-Q/A for the fiscal
quarter ended September 30, 1995, as filed with the Commission on April 8,
1996;
7. Amendment No. 1 to Quarterly Report on Form 10-Q/A for the fiscal
quarter ended June 30, 1995, as filed with the Commission on April 8, 1996;
8. Amendment No. 1 to Quarterly Report on Form 10-Q/A for the fiscal
quarter ended March 31, 1995, as filed with the Commission on April 8,
1996;
9. Amendment No. 1 to Current Report on Form 8-K/A dated October 23,
1995, as filed with the Commission on April 8, 1996;
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10. Amendment No. 2 to Current Report on Form 8-K/A dated April 17,
1995, as filed with the Commission on April 8, 1996;
11. The Company's Proxy Statement filed with the Commission on April
29, 1996, pursuant to Section 14(a) of the Exchange Act; and
12. Amendment No. 2 to Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1995, as filed with the Commission on June 27,
1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of the Prospectus and prior to
the filing of a post-effective amendment which indicates that all securities
offered hereby have been sold or which deregisters all securities hereby then
remaining unsold, shall be deemed to be incorporated by reference to this
Prospectus and to be a part hereof from the date of filing of such documents.
Any statement contained herein or 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 which 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.
Copies of all documents which are incorporated herein by reference
(excluding exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents) will be provided without charge by
the Company to each person to whom this Prospectus is delivered, upon the
written request of such person directed to Coram Healthcare Corporation,
Attention: Corporate Communications, 1125 Seventeenth Street, Suite 1500,
Denver, Colorado 80202, telephone (303) 292-4973.
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THE COMPANY
Coram Healthcare Corporation, a Delaware corporation ("Coram" or the
"Company"), is a leading provider of alternate site (outside the hospital)
infusion therapy and related services in the United States. Infusion therapy
involves the intravenous administration of anti-infective, biotherapy,
chemotherapy, pain management, nutrition, and other therapies. Other services
offered by the Company include the provision of lithotripsy and other
non-intravenous products and services.
The Company was formed on July 8, 1994 pursuant to a merger (the "Four-Way
Merger") by and among T2, Curaflex, Medisys and HealthInfusion, each of which
was a publicly-held national or regional provider of home infusion therapy and
related services. The Four-Way Merger enabled the Company to become a national
provider of home infusion and other alternate site health care services. On
September 12, 1994, the Company further broadened its geographic coverage by
acquiring H.M.S.S., Inc., a leading regional provider of home infusion therapies
based in Houston, Texas. Effective April 1, 1995, the Company acquired
substantially all the assets used in the alternate site infusion business (the
"Caremark Business") of Caremark Inc., a California corporation, thereby
becoming the largest provider of alternate site infusion therapy service in the
United States based on breadth of service and total revenues (such acquisition,
including certain financings related thereto, are collectively referred to
herein as the "Caremark Transaction"). The Company has substantially completed a
branch corporate office consolidation of its six predecessor companies.
The Company's principal executive offices are located at 1125 Seventeenth
Street, Suite 1500, Denver, Colorado 80202, and its telephone number is (303)
292-4973.
CERTAIN FINANCIAL INFORMATION
The Company believes that the separate financial statements of the Caremark
Business for periods prior to its acquisition by the Company are not currently
material to an investor's ability to understand the consolidated financial
statements of the Company, and they are therefore not included in this
Registration Statement. The Caremark Business was acquired effective as of April
1, 1995, and nine months of its operating results are included in the Company's
consolidated financial statements included in its 1995 Annual Report on Form
10-K. The Company's operating results have declined materially since the
acquisition of the Caremark Business; consolidated revenues, including the
Caremark Business, are currently running at a rate of only slightly more than
half of the pro forma combined revenues at the time of the acquisition, and the
portion of its business now represented by the Caremark Business is
substantially smaller than indicated by the historical financial statements of
the Caremark Business. Further, the consolidation of the operations of the
Caremark Business with the operations the Company has been substantially
completed, and the Company believes that the discussion of its
quarter-to-quarter operating results in the annual report and quarterly reports
provide more relevant information.
A pro forma presentation for the acquisition of Caremark as if it had
occurred on January 1, 1995 has not been presented as the effect is not material
to pre-tax loss, excluding non-recurring charges directly attributable to the
transaction.
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RISK FACTORS
In addition to the other information contained in this Prospectus and the
information incorporated herein by reference, prospective investors should
carefully consider, among others, the following risk factors prior to investing.
In addition, the information incorporated herein by reference contains
forward-looking statements within the meaning of the Securities Act and the
Exchange Act. The Company's actual results could differ materially from those
projected in any forward-looking statements as a result of the factors described
below and elsewhere in the information incorporated herein by reference.
RECENT OPERATING LOSSES; FUTURE OPERATING RESULTS UNCERTAIN
The Company recorded operating losses of $283.9 million and $4.9 million
and net losses of $334.1 million and $17.9 million for the year ended December
31, 1995 and the quarter ended March 31, 1996, respectively, and it has
experienced consecutive quarterly losses in each quarter since the quarter ended
March 31, 1995. The Company has only been operating as a combined entity since
July 8, 1994, and has incurred cumulative net losses of approximately $474.2
million (including $404.3 million of non-recurring and special charges) from
such date through March 31, 1996. Numerous factors have affected the Company's
performance and financial condition, including, among others, (i) the
underperformance of the Caremark Business from what the Company expected at the
time such business was acquired, combined with the substantial indebtedness that
the Company incurred to acquire the Caremark Business, which the Company
expected to service in substantial part through the operating income and cash
flow of the Caremark Business; (ii) implementation of a policy of terminating
physician arrangements and certain businesses which it inherited from its
predecessors which were potentially in conflict with new federal and state law,
resulting in the loss of a number of historic referral sources; (iii) pricing
pressure in the Company's core infusion business as a result of a continuing
shift in payor mix from traditional indemnity insurers to managed care and
government payors and intense competition among infusion providers; (iv) a
disruption in certain relationships as a result of the Company's headcount
reductions and consolidation; and (v) increased competition from hospitals and
physicians offering services similar to those offered by the Company. There can
be no assurance that these factors will not continue to have an adverse effect
on the Company's business, financial condition and results of operations in the
future. In addition, there can be no assurance that the Company can increase
revenues or become profitable or achieve positive cash flow from operations in
future periods. The future operating results of the Company will depend on many
factors, including stabilization of operating revenues and pricing pressures,
the ability of the Company to implement its strategy, the level of competition
in the home health care industry, the ability to integrate the Company's
purchased businesses into its current organization, general economic conditions,
the ability to attract and retain qualified personnel at competitive rates and
government regulation and reimbursement policies.
A central component of the Company's business strategy is to focus on
revenue generation. The Company intends to increase revenue in part by
redirecting its marketing efforts towards improving its physician relationships.
The Company has experienced and expects to continue to experience difficulties
with its strategy of improving revenues, as a result of several factors. These
factors include a negative perception of the Caremark Business among certain
physicians as a result of Caremark's guilty plea to federal charges and concerns
among payors and providers as to whether the Company could continue as a going
concern. The Company believes the guilty plea by Caremark to criminal felony
charges in June 1995 has negatively impacted revenue referral sources and
employee morale throughout the Company generally. In addition, Caremark recently
announced a substantial settlement with private payors with whom Caremark did
business before selling the Caremark Business to the Company. The Company
believes the guilty plea and the causes underlying the settlement with private
payors have had an adverse effect on the Company's revenues because of a
reluctance of referral sources to continue to refer patients to the business
formerly owned by Caremark, although it is unable to quantify such effect at
this time. There can be no assurance that these factors will not continue to
have an adverse effect on the Company's business, financial condition and
results of operations in the future.
A further factor causing difficulty with the Company's strategy of
improving revenues is concern among payors and providers as to whether the
Company would continue as a going concern. The Company has experienced inquiries
on this matter directly from payors and providers, and believes that these
concerns have
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negatively impacted referrals and the ability to secure contracts. The Company
believes that the concerns stem from the Company's adverse operating results
during 1995, public disclosures by the Company related thereto and questions
raised by competitors of the Company and the news media. There can be no
assurance that the Company will be successful in mitigating these concerns or
that they will not continue to have an adverse effect on the Company's business,
financial condition and results of operations in the future.
Implementation of the Company's business strategy could also be affected by
a number of factors beyond the Company's control, such as loss of personnel, the
response of competitors and regulatory developments. Pronounced changes are
expected to occur in the markets which the Company serves, which may require
adjustments to the Company's strategy. Execution of this strategy has placed and
will continue to place significant demands on the Company's financial and
management resources and there can be no assurance that the Company will be
successful in implementing its strategy, or in responding to ongoing changes in
its markets which may require adjustments to its strategy. If the Company fails
to successfully implement its strategy or respond to ongoing changes in its
markets, its business, financial condition and results of operations will be
materially adversely affected.
In 1995, the Company's lithotripsy business had net revenue, and pre-tax
income and cash flow from operating activities net of minority interest of
approximately $53 million, $19 million and $25 million, respectively, while the
Company had combined net revenue, a pre-tax loss and negative cash flow from
operations of $602.6 million, $334.2 million and $16.8 million, respectively.
The Company is currently evaluating strategic alternatives concerning its
lithotripsy business, which may include a sale of such business, and has engaged
an investment bank for that purpose. No agreement or understanding currently
exists to divest the lithotripsy business, however. While the sale of the
lithotripsy business could have a material adverse effect on the Company's
revenue, operating results and cash flows, the required application of proceeds
to the Company's Senior Credit Facility with Chemical Bank as Agent (the "Senior
Credit Facility") could significantly reduce the Company's indebtedness under
the Senior Credit Facility and related interest expense, although no assurance
can be given as to the aggregate amount of such reductions.
SUBSTANTIAL LEVERAGE
The Company incurred a significant amount of long-term debt in connection
with the Caremark Transaction. As of March 31, 1996, the Company's consolidated
long-term indebtedness was $512.0 million and its consolidated stockholders'
equity was $3.6 million. The degree to which the Company is leveraged could
impair the Company's ability to finance, through its own cash flow or from
additional financing, its future operations or pursue its business strategy and
make the Company more vulnerable to economic downturns, competitive and payor
pricing pressures and adverse changes in government regulation. At March 31,
1996, $390.0 million of the Company's borrowings were under arrangements with
variable interest rates. Interest under the Senior Credit Facility, under which
there was $224.7 million outstanding, is payable currently; interest of $15.3
million on a $150 million subordinated bridge note (the "Bridge Note"), as of
March 31, 1996, is deferred to March 31, 1997. Any significant increase in the
interest rates on those borrowings would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"-- Liquidity; Need for Additional Financing."
LIQUIDITY; NEED FOR ADDITIONAL FINANCING
On October 13, 1995, the Company and its lenders under the Senior Credit
Facility and the holder of the Bridge Note agreed to a restructuring of the
major terms of both agreements, which postponed the first principal payment due
on the Senior Credit Facility from September 30, 1995 to March 31, 1996,
redefined covenants to be consistent with the Company's new business strategy
and provided a new $25 million credit line. The principal covenants relate to
maintenance of minimum revenues, minimum cash receipts, maximum cash
disbursements and minimum earnings before interest, taxes, depreciation and
amortization. In addition, the covenants, among other things, restrict the
ability of the Company and its subsidiaries to dispose of assets, incur debt,
pay dividends, create liens, make capital expenditures and make certain
investments or acquisitions and otherwise restrict corporate activities and
require that any excess cash balances, as defined, be applied to prepayment of
the debt. Proceeds from the sale of any of the Company's non-core businesses
must be applied directly to reducing principal indebtedness under the Senior
Credit Facility. The ability of the Company to
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comply with such provisions may be affected by events beyond its control. The
breach of any of these covenants could result in a default under the terms of
such indebtedness. If the Company were to default under any of its indebtedness
agreements, the lenders to the Company could, at their option, declare all
borrowings immediately due and payable if any default were not cured prior to
any such action by the lenders. Moreover, there can be no assurance that the
Company's cash flow from operations and current borrowings will be sufficient to
meet its short or long-term needs, and additional sources of funds may be
required in future periods. The new line expires and matures on December 31,
1996 and the entire Senior Credit Facility has a new maturity date of March 31,
1997. There can be no assurance that the Company's cash flow from operations
will be sufficient to satisfy its obligations upon the maturity of the new line
of credit, the Senior Credit Facility or the Bridge Note. In order to satisfy
such obligations, the Company may engage in a public or private offering of
securities or a sale or merger of the Company. Any such transaction could result
in a substantial dilution in the ownership interest of the existing stockholders
and may have an adverse impact on the market price of the Company's Common
Stock. There can be no assurance that the Company will undertake such a
transaction, the timing thereof or that the Company will be able to obtain any
additional funds or complete such a transaction on terms acceptable to the
Company, if at all.
DEPENDENCE ON KEY PERSONNEL; CHANGES IN MANAGEMENT
The Company is substantially dependent upon the services of its executive
officers, which include Donald J. Amaral, Chief Executive Officer and President,
and Richard M. Smith, Chief Financial Officer, and the loss of services of
either of these executives could have a material adverse affect on the Company.
Effective October 16, 1995, Mr. Amaral was named President and Chief Executive
Officer of the Company, succeeding James M. Sweeney, who remains the Company's
Chairman. Mr. Smith was named Chief Financial Officer on August 30, 1995. The
Company has experienced substantial turnover in its senior management group over
the past twelve months and several of the Company's executive officers have been
in their current positions for only a limited period of time. The Company's
future growth and success depends, in large part, upon its ability to obtain,
retain and expand its staff of professional personnel. There can be no assurance
that the Company will be successful in its efforts to attract and retain such
personnel.
CERTAIN LITIGATION
The Company is a party to several lawsuits that could, if their outcomes
were unfavorable, have a material adverse effect on the Company's business,
financial condition and results of operations. These lawsuits include (i) 20
civil suits (which were consolidated into one suit) filed by individuals
claiming to have purchased and sold Common Stock during a specified period in
1995, asserting claims under Section 10(b) and 20(a) of the Exchange Act and
Rule 10b-5 of the Commission; (ii) a shareholders' derivative action asserting
substantially similar factual allegations; (iii) a lawsuit filed by the Company
against Caremark Inc. and Caremark International, Inc. (collectively
"Caremark"), and a lawsuit and a cross-complaint filed by Caremark against the
Company, relating to the acquisition of the Caremark Business; and (iv) actions
by plaintiffs in the shareholder litigation which was initiated against T(2) in
1992, related to the T(2) Settlement Agreement. The Company intends to
vigorously defend itself in these matters. Nevertheless, due to the
uncertainties inherent in the early stages of litigation, the ultimate
disposition of the litigation cannot be presently determined. In addition, even
if the ultimate outcome of the claims pending against the Company and the
Company's claims against Caremark are resolved in favor of the Company, such
litigation could entail considerable cost and the diversion of efforts of
management, either of which could have a material adverse effect upon the
Company's business, financial condition and results of operations.
DEPENDENCE ON RELATIONSHIPS WITH THIRD PARTIES
The profitability of the Company's business depends in part on its ability
to establish and maintain close working relationships with managed care
organizations, private and governmental third-party payors, hospitals,
physicians, physician groups, home health agencies, long-term care facilities
and other institutional health providers and insurance companies and large
self-insured employers. A central feature of the Company's business strategy is
to improve its relationships with such third parties in general, and with
physicians in particular. There can be no assurance that the Company will be
successful in improving and maintaining such relationships or that the Company's
existing relationships will be successfully maintained or that additional
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relationships will be successfully developed and maintained in existing or
future markets. The loss of such existing relationships or the failure to
continue to develop such relationships in the future could have a material
adverse effect on the Company's business, financial condition or results of
operations.
GOVERNMENTAL REGULATION
The Company is subject to extensive federal and state laws regulating,
among other things, the provision of pharmacy, home care nursing services,
health planning, health and safety, environmental compliance and toxic waste
disposal. The Company is also subject to fraud and abuse and self referral laws
and "anti-kickback" statutes which affect the Company's business relationships
with physicians and other health care providers and referral sources and its
reimbursement from government payors. The Company may be required to obtain
certification to participate in governmental payment programs, such as Medicare
and Medicaid. Some states have established certificate of need programs
regulating the establishment or expansion of health care facilities, including
certain of the Company's facilities.
Violations of the federal anti-kickback statute are punishable by criminal
or civil penalties, including imprisonment, fines and exclusion of the provider
from future participation in the Medicare and Medicaid programs. Civil
suspension for anti-kickback violations can also be imposed through an
administrative process, without the imposition of civil monetary penalties. The
failure to obtain, renew or maintain any of the required regulatory approvals or
licenses could adversely affect the Company's business and could prevent the
location involved from offering products and services to patients. The Company's
business, financial condition and results of operations could be materially
adversely affected as a result of any such change or sanctions. The health care
services industry will continue to be subject to intense regulation at the
federal and state levels, the scope and effect of which cannot be predicted. No
assurance can be given that the activities of the Company will not be reviewed
and challenged or that government sponsored health care reform, if enacted, will
not have a material adverse effect on the Company.
In September 1994, T(2) entered into a settlement agreement with the Office
of the Inspector General (the "OIG") of the Department of Health and Human
Services (the "T(2) OIG Settlement Agreement") settling charges brought on by an
investigation by the OIG into certain operations of T(2). T(2), in expressly
denying liability, agreed to a civil order which enjoins it from violating
federal anti-kickback and false claims laws related to Medicare/Medicaid
reimbursement. The T(2) OIG Settlement Agreement imposes certain restrictions
upon the types of relationships that T(2) may have with referring physicians and
imposes a five year reporting obligation upon T(2). The Company has implemented
an internal review program to ensure compliance with the T(2) OIG Settlement
Agreement. The internal regulatory compliance review program is intended to deal
with compliance issues under the T(2) OIG Settlement Agreement and with other
legal, regulatory and ethical compliance issues. However, no assurance can be
made that in the future the Company's business arrangements, past or present,
will not be the subject of an investigation or prosecution by a federal or state
governmental authority. Such investigation could result in any, or any
combination, of the penalties discussed above depending upon the agency involved
in such investigation and prosecution, which could have a material adverse
effect on the Company's business, financial condition and results of operations.
DEPENDENCE ON PAYORS AND REIMBURSEMENT RELATED RISKS
The profitability of the Company depends in large part on reimbursement
provided by third party payors. Since alternate site care is generally less
costly to third party payors than hospital-based care, alternate site providers
have historically benefitted from cost containment initiatives aimed at reducing
the costs of hospitalization. However, competition for patients, efforts by
traditional third party payors to contain or reduce health care costs and the
increasing influence of managed care payors such as health maintenance
organizations in recent years have resulted in reduced rates of reimbursement
for services provided by alternate site providers such as the Company. Since
1993, the alternate site infusion industry, including the Company, experienced
severe reductions in the pricing of its products and services as a result of
these trends.
The ability of the Company to collect from third party payors depends on
the timely and accurate filing of claims. In 1995, the Company experienced
significant delays in billing as well as difficulties in receiving timely
reimbursements. The delays were caused in part by the inability to efficiently
complete, obtain or process certain claim documentation and in part by lack of
familiarity with the billing systems of its predecessor
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entities and the Caremark Business. The passage of time makes incomplete
documentation required for billing and payment difficult or impossible to obtain
or replace, and can delay claim submission past deadlines imposed by certain
payors. Any further disruptions in those procedures could adversely affect the
ability of the Company to collect its accounts receivable, and that would have
an adverse effect on the Company's business, financial condition and results of
operations.
Additionally, managed care payors and even traditional indemnity insurers
increasingly are demanding fee structures and other arrangements providing for
the assumption by health care providers of all or a portion of the financial
risk of providing care (e.g., capitation). Capitation arrangements currently do
not comprise a material component of the Company's revenues. While the Company
believes that short-term pricing pressures are stabilizing, no assurance can be
given that pricing pressures will not continue or that the Company's business,
financial condition and results of operations will not be adversely affected by
such trends. A rapid increase in the percentage of revenue derived from managed
care payors without a corresponding decrease in the Company's operating costs
could have an adverse impact on the Company's gross margins.
In addition to infusion therapy and related services, the Company also
provides lithotripsy services. Lithotripsy is a non-invasive technique that uses
shock waves to disintegrate kidney stones. The Company's lithotripsy operations
have historically contributed a substantial amount of operating income to the
Company. The Company has recently experienced modest downward pricing pressures
in its lithotripsy operations and in 1995, lithotripsy revenues per procedure
declined by approximately 5.5%. These operations may continue to experience
pricing pressures in the future. A material change in the operating performance
of the lithotripsy business could have a material adverse effect on the
consolidated operating results of the Company. In 1993, the Health Care
Financing Administration ("HCFA") released a proposed rule reducing the rate at
which ambulatory surgery centers and certain hospitals would be reimbursed for
the technical component of a lithotripsy procedure. Although the HCFA has not
taken any further action, the adoption of this proposed rule could have a
material adverse effect on the Company's lithotripsy revenues. See "-- Recent
Operating Losses; Future Operating Results Uncertain.
CONCENTRATION OF LARGE PAYORS
Managed care organizations have grown substantially in terms of the
percentage of the population that is covered by such organizations and in terms
of their control over an increasing portion of the health care economy. Managed
care plans have continued to consolidate to enhance their ability to influence
the delivery of health care services. The Company has a number of contractual
arrangements with managed care organizations and other parties. None of these
arrangements individually accounted for more than 5% of the Company's net
revenues in the year ended December 31, 1995; however, ten managed care
customers accounted for approximately 12% of the Company's infusion therapy
revenue, and the loss of such customers could have a material adverse effect on
the Company's business, financial condition and results of operations.
INTENSELY COMPETITIVE INDUSTRY
The alternate site health care market is highly competitive and is
experiencing both horizontal and vertical consolidation. Some of the Company's
current and potential competitors include (i) integrated providers of alternate
site health care services; (ii) large national hospital chains; (iii) local
providers of multiple products and services for the alternate site health care
market; and (iv) physicians, including physicians with whom the Company
previously had business arrangements. The Company has experienced increased
competition from hospitals and physicians who have sought to increase the scope
of services through their offices, including services similar to those offered
by the Company. Integrated alternate site health care companies and certain of
the Company's other competitors have superior financial, marketing and
managerial resources, size, purchasing power and numerous strategic
relationships with providers, referral sources such as physicians and
traditional indemnity and managed care payors. Moreover, there are relatively
few barriers to entry in the local markets which the Company serves. Local or
regional companies are currently competing in many of the home health care
markets served by the Company and others may do so in the future. The Company
expects its competitors to continue to improve their service offerings and price
competitiveness. The Company also expects its competitors to develop new
strategic relationships with providers, referral sources and payors, which could
result in a rapid and dramatic increase in competition. New services
introductions and
9
<PAGE> 10
enhancements, acquisitions and continued industry consolidation and the
development of strategic relationships by the Company's competitors could cause
a significant decline in sales or loss of market acceptance of the Company's
services or intense price competition, or make the Company's services
noncompetitive. The Company expects to continue to encounter increased
competition in the future that could limit its ability to maintain or increase
its market share. There can be no assurance that the Company will be able to
compete successfully against current or future competitors or that competitive
pressures will not have a material adverse effect on the Company's business,
financial condition and results of operations.
HEALTH CARE REFORM LEGISLATION
In recent years, an increasing number of legislative initiatives have been
introduced or proposed in Congress and in state legislatures that would effect
major changes in the health care system, either nationally or at the state
level. Among the proposals under consideration are various insurance market
reforms, forms of price control, expanded fraud and abuse and anti-referral
legislation and further reductions in Medicare and Medicaid reimbursement. The
Company cannot predict whether any of the above proposals or any other proposals
will be adopted, and if adopted, no assurance can be given that the
implementation of such reforms will not have a material adverse effect on the
business of the Company.
POTENTIAL PROFESSIONAL LIABILITY
The services of the Company involve an inherent risk of professional
liability and, with respect to such services, while the Company has not had any
material claims for professional liability asserted against it, no assurance can
be given that such claims will not be asserted in the future. While the Company
maintains insurance consistent with industry practice, there can be no assurance
that the amount of insurance currently maintained by it will satisfy all claims
made against it or that the Company will be able to obtain insurance in the
future at satisfactory rates or in adequate amounts. The Company cannot predict
the effect that any such claims, regardless of their ultimate outcome, might
have on its business or reputation or on its ability to attract and retain
patients.
CHANGES IN TECHNOLOGY
The alternate site infusion business of the Company is dependent on
physicians continuing to prescribe the administration of drugs and nutrients
through intravenous and other infusion methods. Intravenous administration is
often the most appropriate method for treating critically ill patients and is
often the only way to administer proteins and biotechnology drugs. Nonetheless,
technological advances in drug delivery systems, the development of therapies
that can be administered orally and the development of new medical treatments
that cure certain complex diseases or reduce the need for infusion therapy could
adversely impact the business of the Company.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Common Stock is likely to be highly volatile and
may be significantly affected by factors such as actual or anticipated
fluctuations in the Company's operating results, new products or new contracts
by the Company or its competitors, conditions and trends in the healthcare
industry, adoption of new accounting standards affecting the healthcare
industry, changes in financial estimates by securities analysts, general market
conditions and other factors. In addition, the stock market has from time to
time experienced significant price and volume fluctuations that have
particularly affected the market prices for the common stocks of healthcare
companies. These broad market fluctuations may adversely affect the market price
of the Common Stock. In the past, following periods of volatility in the market
price of a particular company's securities, securities class action litigation
has often been brought against the company. There can be no assurance that such
litigation will not occur in the future with respect to the Company; such
litigation could result in substantial costs and a diversion of management's
attention and resources, which could have a material adverse effect upon the
Company's business, financial condition and results of operations.
10
<PAGE> 11
USE OF PROCEEDS
The proceeds to be received by the Company from the issuance of Common
Stock upon exercise of all of the T(2) Warrants will be an aggregate of
approximately $55,655,000, after deducting estimated offering expenses of
approximately $100,000. The amount of such proceeds will vary significantly
depending on the number of T(2) Warrants, if any, which are exercised. The net
proceeds are expected to be used by the Company for general corporate purposes.
The net proceeds from the sale of the Offered Securities will be received
directly by each Selling Stockholder.
DETERMINATION OF OFFERING PRICE
The exercise price of the T(2) Warrants was established by negotiations
among the Company and the Representative Plaintiffs and Defendants (each as
defined in the T(2) Settlement Agreement). This Prospectus may be used from time
to time by the Selling Stockholders who offer the Offered Securities registered
hereby for sale, and the offering price of such Offered Securities will be
determined by the Selling Stockholders and may be based on market prices
prevailing at the time of sale, at prices relating to such prevailing market
prices, or at negotiated prices.
SELLING STOCKHOLDERS
The following table sets forth certain information with respect to the
Common Stock beneficially owned by each Selling Stockholder as of June 4, 1996
and as adjusted to give effect to the sale of such securities. The securities
offered in this Prospectus by the Selling Stockholders are the Offered
Securities. The Offered Securities are being registered to permit public
secondary trading of such securities, and the Selling Stockholders may offer
such securities for resale from time to time. See "Plan of Distribution."
The following Selling Stockholders acquired the Common Stock they are
offering hereby pursuant to the T(2) Settlement Agreement: Kaufman Malchman
Kirby & Squire, as Escrow Agent for the T(2) Medical Shareholder Litigation
Settlement Fund; Kaufman Malchman Kirby & Squire, as Escrow Agent for the T(2)
Medical Shareholder Litigation Attorney Fund; Appel, Chitwood & Harley; Barrack
Rodos & Bacine; Berger & Montague, P.C.; Berman, DeValerio & Pease; Bernard M.
Gross, P.C.; Bernstein, Liebhard & Lifshitz; R. Bruce McNew, Attorney at Law;
Charles J. Piven; Christopher Lovell, P.C.; Jacobson & Triggs; Page & Bacek;
Cohen Milstein Hausfeld & Toll; Curtis V. Trinko; Doffermyre, Shields, Canfield
& Knowles; Finkelstein & Associates; Garwin, Bronzaft, Gerstein & Fisher, LLP;
Gerald Cohen; Gilman & Pastor; Goodkind, Labaton, Rudoff & Sucharow; Zwerling
Schachter Zwerling & Koppell, LLP; Horwitz, Toback & Hyman; Kaplan Kilsheimer &
Fox; Kenneth A. Elan; James V. Bashian; Mager, Liebenberg & White; Lawrence G.
Soicher; Levin, Fishbein, Sedran & Berman; Lipshutz, Greenblatt & King; Stephen
Lowey; Richard B. Dannenberg; Richard Bemporad; Neil L. Selinger; Lowey
Dannenberg Bemporad & Selinger, P.C.; Milberg Weiss Bershad Hynes & Lerach;
Mogin & Kendrick; Much Shelist Freed Denenberg & Ament, P.C.; Pomerantz Haudek
Block & Grossman; Rabin & Garland; Richard Appleby; Ritchie & Rediker, LLC;
Robert C. Schubert; Rudnick & Wolfe; Rudolph, Salmon, Goldstein, Rochestie &
Dorian, P.C.; Savett, Frutkin, Podell & Ryan, P.C.; Schiffrin & Craig, Ltd.;
Schoengold & Sporn, P.C.; Specter Law Offices, P.C.; Spector & Roseman; Wechsler
Skirnick Harwood Halebian & Feffer, LLP; Wolf Hadenstein Adler Freeman & Herz,
LLP; Wolf Popper Ross Wolf & Jones, LLP; Alfred G. Yates, Jr. & Associates;
Zlotnick & Thomas; Freeman & Hawkins; Susman, Buehler & Watkins; Abbey & Ellis;
Carr Tabb & Pope; Bernstein Litowitz Berger & Grossman; and Kaufman, Malchman
Kirby & Squire, LLP.
Bryan L. Hammons, Andrew Cummings, Phillip Russell, Michael Inman, John
Clark and TBOB Enterprises, Inc. acquired the shares of Common Stock they are
offering hereby in connection with Earn-Out Agreements entered into by Medisys.
TBOB Enterprises, Inc. acquired an additional 15,496 shares of Common Stock they
are offering hereby pursuant to the TBOB 1996 Agreement. Donald R. Gillespie and
Rita K. Gillespie acquired the Common Stock they are offering hereby in
satisfaction of certain obligations of Curaflex arising under an Asset Purchase
Agreement dated as of September 30, 1993 by and among Mr. and Mrs. Gillespie,
Curaflex, Excellence, Inc., a Florida corporation and Excellence, Inc. of North
Carolina, a
11
<PAGE> 12
North Carolina corporation. Lawrence H. Garatoni, Steven H. Manning, Charles M.
Loeser and Anthony Wright acquired the Common Stock they are offering hereby
pursuant to a Release and Registration Agreement dated as of April 21, 1995 by
and among such individuals, the Company and HealthInfusion. Nebraska
Prescription Services Limited Partnership acquired the Common Stock they are
offering hereby pursuant to the Nebraska Prescription Services Agreement.
None of the Selling Stockholders has had a material relationship with the
Company within the past three years other than as a result of ownership of the
securities of the Company. The Offered Securities may be offered from time to
time by the Selling Stockholders named below or their nominees, and this
Prospectus may be required to be delivered by persons who may be deemed to be
underwriters in connection with the offer or sale of such securities. See "Plan
of Distribution."
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) COMMON OFFERING(1)(2)
NAME OF ------------------- STOCK ----------------
SELLING STOCKHOLDERS AMOUNT PERCENT OFFERED(3) AMOUNT PERCENT
- -------------------------------------------------- --------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Kaufman Malchman Kirby & Squire, as Escrow
Agent for the T2 Medical Shareholder
Litigation Settlement Fund...................... 1,814,400 * 1,814,400 0 *
Kaufman Malchman Kirby & Squire, As
Escrow Agent for the T2 Medical Shareholder
Litigation Attorney Fund........................ 5,046 * 5,046 0 *
Appel, Chitwood & Harley.......................... 3,023 * 3,023 0 *
Barrack Rodos & Bacine............................ 5,039 * 5,039 0 *
Berger & Montague, P.C............................ 7,307 * 7,307 0 *
Berman, DeValerio & Pease......................... 2,771 * 2,771 0 *
Bernard M. Gross, P.C............................. 2,771 * 2,771 0 *
Bernstein, Liebhard & Lifshitz.................... 5,191 * 5,191 0 *
R. Bruce McNew, Attorney at Law................... 8,820 * 8,820 0 *
Charles J. Piven.................................. 604 * 604 0 *
Christopher Lovell, P.C........................... 4,023 * 4,023 0 *
Jacobson & Triggs................................. 3,572 * 3,572 0 *
Page & Bacek...................................... 468 * 468 0 *
Cohen Milstein Hausfeld & Toll.................... 7,307 * 7,307 0 *
Curtis V. Trinko.................................. 2,015 * 2,015 0 *
Doffermyre, Shields, Canfield & Knowles........... 75 * 75 0 *
Finkelstein & Associates.......................... 2,267 * 2,267 0 *
Garwin, Bronzaft, Gerstein & Fisher............... 2,519 * 2,519 0 *
Gerald Cohen...................................... 604 * 604 0 *
Gilman & Pastor................................... 5,039 * 5,039 0 *
Goodkind, Labaton, Rudoff & Sucharow.............. 6,047 * 6,047 0 *
Zwerling Schachter Zwerling & Koppell, LLP........ 6,803 * 6,803 0 *
Horwitz, Toback & Hyman........................... 2,519 * 2,519 0 *
Kaplan Kilsheimer & Fox........................... 4,031 * 4,031 0 *
Kenneth A. Elan................................... 604 * 604 0 *
James V. Bashian.................................. 3,023 * 3,023 0 *
Mager, Liebenberg & White......................... 4,535 * 4,535 0 *
Lawrence G. Soicher............................... 2,519 * 2,519 0 *
Levin, Fishbein, Sedran & Berman.................. 1,209 * 1,209 0 *
Lipshutz, Greenblatt & King....................... 503 * 503 0 *
Stephen Lowey..................................... 4,640 * 4,640 0 *
Richard B. Dannenberg............................. 4,640 * 4,640 0 *
Richard Bemporad.................................. 2,320 * 2,320 0 *
Neil L. Selinger.................................. 2,320 * 2,320 0 *
Lowey Dannenberg Bemporad & Selinger, P.C......... 2,459 * 2,459 0 *
Milberg Weiss Bershad Hynes & Lerach.............. 12,599 * 12,599 0 *
Mogin & Kendrick.................................. 1,007 * 1,007 0 *
Much Shelist Freed Denenberg & Ament, P.C......... 3,023 * 3,023 0 *
Pomerantz Haudek Block & Grossman................. 4,031 * 4,031 0 *
Rabin & Garland................................... 3,023 * 3,023 0 *
Richard Appleby................................... 3,528 * 3,528 0 *
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING(1)(2) COMMON OFFERING(1)(2)
NAME OF ------------------- STOCK ----------------
SELLING STOCKHOLDERS AMOUNT PERCENT OFFERED(3) AMOUNT PERCENT
- -------------------------------------------------- --------- ------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Ritchie & Rediker, LLC............................ 1,259 * 1,259 0 *
Robert C. Schubert................................ 2,015 * 2,015 0 *
Rudnick & Wolfe................................... 1,007 * 1,007 0 *
Rudolph, Salmon, Goldstein Rochestie &
Dorian, P.C..................................... 503 * 503 0 *
Savett, Frutkin, Podell & Ryan, P.C............... 1,511 * 1,511 0 *
Schiffrin & Craig, Ltd............................ 3,275 * 3,275 0 *
Schoengold & Sporn, P.C........................... 2,519 * 2,519 0 *
Specter Law Offices, P.C.......................... 503 * 503 0 *
Spector & Roseman................................. 2,015 * 2,015 0 *
Wechsler Skirnick Harwood Halebian & Feffer,
LLP............................................. 2,519 * 2,519 0 *
Wolf Haldenstein Adler Freeman & Herz, LLP........ 5,039 * 5,039 0 *
Wolf Popper Ross Wolf & Jones, LLP................ 10,584 * 10,584 0 *
Alfred G. Yates, Jr. & Associates................. 604 * 604 0 *
Zlotnick & Thomas................................. 251 * 251 0 *
Freeman & Hawkins................................. 4,913 * 4,913 0 *
Susman, Buehler & Watkins......................... 4,914 * 4,914 0 *
Abbey & Ellis..................................... 9,575 * 9,575 0 *
Carr Tabb & Pope.................................. 149,330 * 149,330 0 *
Bernstein Litowitz Berger & Grossman.............. 186,942 * 186,942 0 *
Kaufman, Malchman, Kirby & Squire, LLP............ 172,478 * 172,478 0 *
Bryan L. Hammons.................................. 3,410 * 3,410 0 *
Andrew Cummings................................... 3,410 * 3,410 0 *
Philip Russell.................................... 3,410 * 3,410 0 *
Michael Inman..................................... 2,046 * 2,046 0 *
John Clark........................................ 4,774 * 4,774 0 *
TBOB Enterprises, Inc............................. 34,615 * 34,615 0 *
Donald R. and Rita K. Gillespie................... 23,289 * 23,289 0 *
Lawrence H. Garatoni.............................. 26,541 * 26,541 0 *
Steven H. Manning................................. 2,275 * 2,275 0 *
Anthony Wright.................................... 758 * 758 0 *
Charles M. Loeser................................. 758 * 758 0 *
Nebraska Prescription Services Limited
Partnership..................................... 61,370 * 61,370 0 *
- - -
--------- ---------
All Selling Stockholders as a Group............... 2,686,656 * 2,686,656 0 *
========= = ========= = =
</TABLE>
- ---------------
(1) Shares of Common Stock subject to options or warrants which are currently
exercisable or exercisable within 60 days are deemed outstanding for
purposes of computing the percentage of the person holding such options or
warrants but are not deemed to be outstanding for computing the percentage
of any other person.
(2) No percent of class is shown for holders of less than 1%. Percentage
computations are based on 40,837,617 shares of Common Stock outstanding as
of June 4, 1996.
(3) Assumes sale of all Common Stock offered hereby.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Stockholders that the Offered
Securities may be sold from time to time in transactions on the NYSE in
privately negotiated transactions, through the writing of options on the Common
Stock, or by a combination of these methods, at fixed prices that may be
changed, at market prices at the time of sale, at prices related to market
prices or at negotiated prices. The Selling Stockholders will act independently
of the Company in making decisions with respect to the timing, manner and size
of each sale. The Selling Stockholders may effect these transactions by selling
the Offered Securities to or through broker-dealers and/or purchasers of the
Offered Securities for whom they may act as agent.
13
<PAGE> 14
Each Selling Stockholder has represented that it was acquiring the Offered
Securities without any present intention of effecting a distribution of such
securities except in the manner contemplated in the respective agreements under
which such securities were issued and in compliance with applicable securities
laws. In recognition of the fact that investors, even though having acquired the
Offered Securities without a view to distribution, may wish to be legally
permitted to sell such securities when they deem appropriate, the Company has
filed with the Commission under the Securities Act, a Registration Statement of
which this Prospectus forms a part, with respect to the resale of the Offered
Securities from time to time as described herein and has agreed to prepare and
file such amendments and supplements to the Registration Statement as may be
necessary to keep the Registration Statement effective for a period not to
exceed nine months from the effective date of such Registration Statement.
The Selling Stockholders and broker-dealers who act in connection with the
sale of the Offered Securities may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commissions received by such
broker-dealers and profits on the resale of the Offered Securities as a
principal may be deemed to be underwriting discounts and commissions under the
Securities Act.
DESCRIPTION OF SECURITIES
GENERAL
The authorized capital stock of the Company consists of an aggregate of
75,000,000 shares of Common Stock, par value $.001 per share, and 10,000,000
shares of Preferred Stock, par value $.001 per share ("the Preferred Stock"). As
of June 4, 1996, 40,837,617 shares of Common Stock and no shares of Preferred
Stock were outstanding.
COMMON STOCK
All shares of Common Stock have equal voting rights and, when validly
issued and outstanding, have one vote per share in all matters to be voted upon
by shareholders. The shares of Common Stock have no preemptive, conversion or
redemption rights and may only be issued as fully paid and nonassessable shares.
Cumulative voting in the election of directors is not allowed. The holders of a
majority of the issued and outstanding shares of Common Stock are able to elect
all directors of the Company. Each holder of Common Stock, upon liquidation of
the Company, is entitled to receive a pro rata share of the Company's assets
available for distribution to common stockholders.
T(2) Warrants
The Company issued the T(2) Warrants pursuant to the T(2) Settlement
Agreement. Each T(2) Warrant currently entitles the registered holder to
purchase one share of Common Stock at an exercise price of $22.125 during the
period commencing at the time of issuance of the T(2) Warrants and ending on the
fourth anniversary thereof. The exercise price of the T(2) Warrants was
determined by negotiation between the Company and the Representative Plaintiffs
and should not be construed to be predictive of, or to imply that, any price
increases will occur in the Company's securities. The exercise price of the T(2)
Warrants and the number and kind of shares of Common Stock or other securities
and property to be obtained upon exercise of the T(2) Warrants are subject to
adjustment in certain circumstances, including a stock split, combination or
dividend or upon a consolidation or merger or in the case of a sale, lease or
transfer of all or substantially all of the assets of the Company, so as to
enable warrantholders to purchase the kind and number of shares or other
securities or property receivable in such event by a holder of the kind and
number of shares of Common Stock that might otherwise have been purchased upon
exercise of such T(2) Warrant. The T(2) Warrants may be exercised upon surrender
of the T(2) Warrant certificate on or prior to the expiration date of such T(2)
Warrants at the principal offices of the Company, or at the offices of its stock
transfer agent, accompanied by payment of the full exercise price (by certified
check payable to the Company) for the number of T(2) Warrants being exercised.
Shares of Common Stock issuable upon exercise of the T(2) Warrants upon payment
in accordance with their
14
<PAGE> 15
terms will be fully paid and non-assessable. The T(2) Warrants do not confer
upon the T(2) Warrantholders any voting or other rights of a stockholder of the
Company.
LEGAL MATTERS
Certain legal matters have been passed upon for the Company by Brobeck,
Phleger & Harrison LLP, Denver, Colorado.
EXPERTS
The consolidated financial statements of the Company at December 31, 1995
and 1994 and for the years then ended incorporated by reference in this
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference herein.
The consolidated financial statements of the Company incorporated by reference
in this Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as to combination only, as set forth in their report
thereon incorporated by reference herein. The financial statements of those
entities underlying the combination were audited by Deloitte & Touche LLP as it
relates to T(2) as of September 30, 1993, and for the two years in the period
ended September 30, 1993 (whose report expresses an unqualified opinion and
includes an explanatory paragraph relating to material uncertainties concerning
certain pending claims against T(2)), and as of December 31, 1993 and for the
two years in the period then ended, and by KPMG Peat Marwick LLP, as it relates
to Curaflex, Arthur Andersen LLP, as it relates to HealthInfusion and Coopers &
Lybrand, Independent Accountants, as it relates to Medisys, each for the year
ended December 31, 1993. The financial statements referred to above are
incorporated by reference in reliance upon such reports given upon the authority
of such firms as experts in accounting and auditing.
15
<PAGE> 16
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THE OFFERING BEING MADE HEREBY NOT CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN
IMPLICATION THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information.................
2
Incorporation of Certain Documents by
Reference...........................
2
The Company...........................
4
Certain Financial Information.........
4
Risk Factors..........................
5
Use of Proceeds.......................
11
Determination of Offering Price.......
11
Selling Stockholders..................
11
Plan of Distribution..................
13
Description of Securities.............
14
Legal Matters.........................
15
Experts...............................
15
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
CORAM HEALTHCARE
CORPORATION
2,686,656 SHARES
OF COMMON STOCK
-----------------
PROSPECTUS
-----------------
JULY 1, 1996
- ------------------------------------------------------
- ------------------------------------------------------
