<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
COMMUNITY CARE SERVICES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
JOEL QUALL
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee required:
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
COMMUNITY CARE SERVICES, INC.
18 SARGENT PLACE
MT. VERNON, NEW YORK 10550
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
------------------------
To the Shareholders:
Notice is hereby given that the Annual Meeting of the Shareholders of
Community Care Services, Inc. (the "Company") will be held at the offices of
Gordon Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York,
New York, on January 28, 1998, at 9:00 a.m. (local time), for the following
purposes:
1. To elect five directors of the Company to hold office for a one year
term;
2. To consider and vote upon ratification of the reservation by the
Company of 250,000 additional shares of the Company's authorized but
unissued Common Stock for issuance under the Company's 1996 Stock
Option Plan;
3. To consider and vote upon the ratification of the appointment of
Richard A. Eisner & Company, LLP as independent certified public
accountants for the Company for the year April 1, 1997 through March
31, 1998; and
4. To consider and to transact such other business as may properly come
before the meeting or any adjournments thereof.
A Proxy Statement describing matters to be considered at the meeting is
attached to this Notice. Shareholders of record at the close of business on
December 24, 1997 will be entitled to notice of and to vote at said meeting or
any adjournments thereof.
To ensure your representation at the meeting, please sign date and return
the enclosed form of Proxy in the envelope provided.
By Order of the Board of Directors,
DONALD FARGNOLI,
Secretary
December 26, 1997
<PAGE> 3
COMMUNITY CARE SERVICES, INC.
18 SARGENT PLACE
MT. VERNON, NEW YORK 10550
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is being furnished in connection with the solicitation
by the Board of Directors of Community Care Services, Inc. (the "Company") of
Proxies of the Shareholders to be voted at the Annual Meeting of Shareholders to
be held on January 28, 1998 or at any adjournments thereof (the "Annual
Meeting"). The approximate date of mailing this Proxy Statement is December 26,
1997.
Only holders of shares of voting Common Stock, $.01 par value ("Common
Stock"), of record at the close of business on December 26, 1997 will be
entitled to vote at the Annual Meeting. The Common Stock is the only class of
the Company's voting securities outstanding. On that date there were 6,587,243
outstanding shares of Common Stock, each of which is entitled to one vote.
Where a choice has been specified in a Proxy, the Proxy will be voted as
specified. Each Proxy will be voted FOR each matter unless a contrary choice is
specified as to that matter. If the accompanying Proxy is executed and returned,
the Shareholder may nevertheless revoke it at any time prior to the voting
thereof by delivering a later-dated Proxy, delivering written notice of
revocation to the Company's Secretary, or voting in person at the Annual
Meeting.
Proxies are being solicited by mail directly and through brokerage and
banking institutions. The Company will pay all expenses in connection with the
solicitation of Proxies. In addition to the use of the mails, Proxies may be
solicited by directors, officers, and employees of the Company, personally or by
telephone, telegraph or facsimile machine. The Company may reimburse brokers and
other persons holding shares of the Company in their names, or in the names of
nominees, for their reasonable expenses in sending materials to Shareholders and
obtaining their Proxies.
<PAGE> 4
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting to serve until the
1998 Annual Meeting of Shareholders and until their respective successors are
duly elected and qualified.
The persons listed below have been nominated by the present Board of
Directors. All the nominees are presently members of the Board of Directors of
the Company, and the Board of Directors knows of no reason why any of the
nominees will be unable to serve. The persons named as Proxies in the
accompanying Proxy intend to vote for these nominees or, if any of them will be
unable to serve (the Board has no present knowledge of such fact), will vote for
substitute nominees which the Board of Directors may propose.
INFORMATION WITH RESPECT TO NOMINEES FOR ELECTION AS DIRECTORS.
Set forth below are the names and ages of the nominees for director, their
principal occupations at present and for at least the past five years and
certain directorships held by each.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE FIVE NOMINEES
LISTED BELOW.
<TABLE>
<CAPTION>
NAME, PRESENT POSITION WITH THE DIRECTOR
COMPANY, AND BUSINESS EXPERIENCE AGE SINCE
-------------------------------------------------------- --- ------------
<S> <C> <C>
Dean L. Sloane
Chairman of the Board................................... 51 July 1992
Mr. Sloane has been Chairman of the Board, President and
a Director of Community Medical Transport, Inc., a
publicly traded company, since December 1988.
Bruce L. Ansnes
Vice Chairman........................................... 54 August 1996
Mr. Ansnes, has been a private investor since 1986. From
1978 to 1983, Mr. Ansnes was Treasurer, and from 1983
until 1986, Treasurer and Vice President, of Culbro
Corporation. He has a B.A. from Colby College and an
M.B.A. from Columbia University.
Bernard M. Kruger, M.D.
Director................................................ 54 August 1996
Dr. Kruger has been in the private practice of internal
medicine and medical oncology since 1979, and is
affiliated with Lenox Hill Hospital, Beth Israel
Hospital, Mount Sinai Hospital and the Orthopedic
Institute. Dr. Kruger is a director of Community
Medical Transport, Inc., a publicly traded company.
Craig V. Sloane
Director................................................ 45 July 1992
Mr. Sloane, has served as Vice President -- Operations
and a director of Community Medical Transport, Inc., a
publicly traded company, since December 1990.
Donald Fargnoli
Vice President, Secretary and Director.................. 51 May 1997
Donald Fargnoli has served as Vice President and
Secretary of the Company since May 1997. He is also
Vice President of the Company's wholly-owned
subsidiary, Metropolitan Respirator Service, Inc.
("MRS"). Prior to joining the Company, Mr. Fargnoli
was a principal owner of MRS and served that Company
in a variety of executive positions, including
President, from June 1994 through May 1997.
</TABLE>
Dean L. Sloane and Craig V. Sloane are brothers.
Information concerning ownership of the Company's equity securities by the
nominees is contained below, under the caption "Principal Shareholders and Other
Information".
2
<PAGE> 5
COMMITTEES OF THE BOARD OF DIRECTORS; MEETINGS
The Board of Directors has a standing Audit Committee, the members of which
are Dean L. Sloane and Bruce L. Ansnes, which confers with Richard A. Eisner &
Associates, LLP, the Company's external auditors, regarding the scope and
results of their audits and any recommendations they may have with respect to
internal accounting controls and other matters related to accounting and
auditing. The Board of Directors also has a Stock Option Committee, the members
of which are Dr. Bernard M. Kruger and Craig V. Sloane, which is responsible for
administering the Company's 1996 Stock Option Plan. The Board of Directors does
not have any other committees. During the year ended March 31, 1997, the Board
of Directors met two times and the Audit Committee met one time, not including
actions taken by unanimous written consent, and the Stock Committee had no
meetings. During that year, each director, attended at least seventy-five
percent of the aggregate of (1) the total number of meetings of the Board of
Directors and (2) the total number of meetings held by all committees of the
Board on which he served.
EXECUTIVE OFFICERS OF THE COMPANY NOT A
DIRECTOR OR NOMINEE FOR DIRECTOR
The following table sets forth certain information about the executive
officers of the Company or its subsidiaries who are not a Director or nominee
for Director.
<TABLE>
<CAPTION>
AGE
---
<S> <C>
Saverio D. Burdi
Chief Operating Officer................................................ 39
Saverio D. Burdi joined the Company in May 1997 as Senior Vice
President and was appointed Chief Operating Officer in July 1997.
Prior to joining the Company, Mr. Burdi was an owner of MRS and was
employed by MRS from June, 1989 through May 1997, and served as Vice
President -- Sales of MRS from June 1992 through May 1997.
Joel Quall
Chief Financial Officer................................................ 39
Joel Quall joined the Company in October 1996 and was appointed Chief
Financial Officer in December 1996. Prior to joining the Company, Mr.
Quall was employed as a manager with the accounting firm of Richard
A. Eisner & Company, LLP, where he worked on several healthcare
related companies. Mr. Quall is a Certified Public Accountant and has
a B.S. from City University of New York.
Matthew J. McDonough
Vice President -- Operations........................................... 35
Matthew J. McDonough joined the Company in February 1996 as Operations
Manager. In February 1997, Mr. McDonough was promoted to Vice
President -- Operations. From December 1992 to July 1994, Mr.
McDonough was a Regional Manager for the Mayflower Group, Inc., and
from July 1994 to February 1996 was an Assistant Station Manager with
Airborne Express, Inc. Mr. McDonough has also gained significant
operational experience as an engineering officer in the United States
Navy. He has a B.S. from Old Dominion University.
Louis Rocco
Vice President and President, MRS...................................... 46
Louis Rocco joined the Company in May 1997 as Vice President. He also
serves as President of MRS. Mr. Rocco was a founder of MRS and held
various executive positions in MRS from its inception through May
1997.
Wade Wilson
Vice President -- Operating Systems.................................... 37
Wade Wilson joined the Company in May 1997 as Vice
President -- Operating Systems. He previously was employed by MRS as
General Manager from January 1996 through May 1997 and as Vice
President at At Home HealthCare from August 1991 through December
1995.
</TABLE>
3
<PAGE> 6
PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock on November 30, 1997 with respect to (a)
each person or group known to the Company to be the beneficial owner of more
than 5% of the outstanding shares of Common Stock, (b) each director of the
Company, (c) each executive officer of the Company and (d) all officers and
directors of the Company as a group. Except as set forth below, all of such
shares are held of record and beneficially.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
-------------------------------------------------- --------------------- ----------------
<S> <C> <C>
Bruce L. Ansnes................................... 110,000 1.67%
15 Glen Park Road
Purchase, NY 10577
Saverio D. Burdi.................................. 87,243(1) 1.32%
18 Sargent Place
Mt. Vernon, NY 10550
Donald Fargnoli................................... 0(2) *
18 Sargent Place
Mt. Vernon, NY 10550
Alan Goldfeder.................................... 225,500 3.42%
49 Keene Lane
Woodsburgh, NY 11598
Bernard M. Kruger, M.D. .......................... 18,334 *
170 East 78th Street
New York, NY 10021
Matthew McDonough................................. 0(3) *
18 Sargent Place
Mt. Vernon, NY 10550
Joel Quall........................................ 2,000(4) *
18 Sargent Place
Mt. Vernon, NY 10550
Louis Rocco....................................... 0(5) 0%
18 Sargent Place
Mt. Vernon, NY 10550
Alan T. Sheinwald................................. 2,142,250(6) 32.52%
203 Briarwood Drive
Somers, NY 10589
Craig V. Sloane................................... 428,450 6.50%
45 Morris Street
Yonkers, NY 10705
Dean L. Sloane.................................... 1,713,800(7) 26.02%
45 Morris Street
Yonkers, NY 10705
Wade Wilson....................................... 0(8) *
18 Sargent Place
Mt. Vernon, NY 10550
All Officers and Directors as a Group............. 2,359,827 35.82%
</TABLE>
- ---------------
* Less than one percent.
(1) Does not include options to purchase 25,000 shares of common stock at an
exercise price of $4.00 per share granted to Mr. Burdi. Include 17,842
shares held in escrow. (See "Certain Relationships and Related
Transactions.")
(2) Does not include 330,937 shares of common stock which may be issued to Mr.
Fargnoli upon the conversion of a $1,176,400 promissory note issues by the
Company to Mr. Fargnoli on May 10, 1997 in connection with the Company's
acquisition of Metropolitan Respirator Service, Inc. (See "Certain
Relationships and Related Transactions.")
(3)Does not include options to purchase 10,000 shares granted to Mr. McDonough.
4
<PAGE> 7
(4) Does not include options to purchase 15,000 shares granted to Mr. Quall.
(5) Does not include 366,320 shares of common stock which may be issued to Mr.
Rocco upon the conversion of a $1,302,182 promissory note issued by the
Company to Mr. Rocco on May 10, 1997 in connection with the Company's
acquisition of Metropolitan Respirator Service Inc. (See "Certain
Relationships and Related Transactions.")
(6) Does not include options to purchase 20,000 shares at an exercise price of
$4.00 per share granted to Mr. Sheinwald's brother-in-law, Wade Wilson, or
125,000 shares of common stock which may be issued to Mr. Wilson upon the
conversion of a $444,430 promissory note issues by the Company to Mr. Wilson
on May 10, 1997 in connection with the Company's acquisition of Metropolitan
Respirator Service, Inc. (See "Certain Relationships and Related
Transactions.")
(7) Includes 100,000 Shares owned by Mr. Sloane's wife, Mary Sloane, and 800
shares owned by Mr. Sloane's son, Joshua Sloane.
(8) Does not include options to purchase 20,000 shares at an exercise price of
$4.00 per share granted to Mr. Wilson. Does not include 125,000 shares of
Common Stock which may be issued to Mr. Wilson upon the conversion of a
$444,300 promissory note issued by the company to Mr. Wilson on May 10, 1997
in connection with the Company's acquisition of Metropolitan Respirator
Service, Inc. (See "Certain Relationships and Related Transactions.")
The persons referenced in the foregoing chart constitute all of the persons
who, at any time during the Company's fiscal year ended March 31, 1997 ("Fiscal
1997"), were directors, officers or beneficial owners of more than ten percent
of the Company's Common Stock. Based solely on a review of Forms 3 and 4, and
all amendments thereto, furnished to the Company during Fiscal 1997, and Forms 5
and amendments thereto furnished to the Company with respect to Fiscal 1997, and
all written representations received by the Company from persons with reporting
obligations, the Company believes that none of such persons filed a late report
during, or with respect to, the year.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The remuneration of the Chief Executive Officer and the four other most
highly compensated executive officers of the Company and its Subsidiaries whose
total annual salary and bonus exceeded $100,000 for all services in all
capacities to the Company for its fiscal years ended March 31, 1997, 1996 and
1995, was as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
-------------------------------------- RESTRICTED ----------------------------------
NAME & PRINCIPAL FISCAL OTHER ANNUAL STOCK SECURITIES UNDERLYING LTIP ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) AWARDS($) OPTIONS/SAR'S(#) PAYOUTS($) COMPENSATION
- ---------------- ------ --------- -------- --------------- --------- --------------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alan T.
Sheinwald..... 1997 $ 138,000 0 $ 9,000 0 0 0 0
Chief Executive
Officer(2)(3)... 1996 $ 48,000 0 $ 3,000 0 0 0 0
Allan
Goldfeder..... 1997 $ 115,000 0 $10,000 0 0 0 0
Chief Operating 1996 $ 110,000 0 $10,000 0 0 0 0
Officer(1)(3)... 1995 $ 119,000 0 $10,000 0 0 0 0
</TABLE>
- ---------------
(1) Mr. Goldfeder was the Company's principal executive officer for the fiscal
year ended March 31, 1995.
(2) Mr. Sheinwald's employment with the Company commenced November 13, 1995.
(3) Mr. Sheinwald and Mr. Goldfeder were terminated by the Company on July 1,
1997.
5
<PAGE> 8
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Alan T. Sheinwald,
President and Chief Executive Officer of the Company upon the completion of its
initial public offering in October 1996. The agreement has a three year term
which renews for an additional year on each anniversary of the agreement, and
provides for an annual base compensation of $150,000. The agreement provides for
certain employee benefits including medical insurance, vacation and a car
allowance, and also contains a non-competitive provision covering the term of
the agreement plus one year following termination. On July 1, 1997, Mr.
Sheinwald's services were terminated by the Company.
The Company also entered into an employment agreement with Allan C.
Goldfeder, Chief Operating Officer of the Company upon the completion of its
initial public offering in October 1996. The agreement has a three-year term,
which renews for an additional year on each anniversary of the agreement, and
provides for an annual base compensation of $120,000. The agreement provides for
certain employee benefits including medical insurance, vacation and a car
allowance, and also contains a non-competition provision cover the term of the
agreement plus one year following termination. On July 1, 1997, Mr. Goldfeder's
services were terminated by the Company.
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives a fee of
$1,000 for each Board meeting attended and a fee of $500 for each committee
meeting attended, in addition to being reimbursed for expenses incurred on
behalf of the Company. Commencing with the last quarter if 1997, Dean Sloane,
Chairman of the Company, and Bruce L. Ansnes, Vice Chairman of the Company, have
received stipends of $5,000 per quarter for management services they provide to
the Company. These stipends will cease upon the appointment by the Company of a
new Chief Executive Officer.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 10, 1997, the Company acquired 68% of the outstanding shares of
Metropolitan Respirator Service, Inc. ("MRS.") from Messrs. Donald Fargnoli,
Louis Rocco and Saverio D. Burdi. The purchase price was approximately
$5,993,000, consisting of (i) approximately $2,800,000 in cash, of which
$970,598 was paid to Mr. Fargnoli, $1,063,502 was paid to Mr. Rocco and $765,900
was paid to Mr. Burdi; (ii) Promissory Notes with a face value of $2,967,000
accruing interest at a rate of 6% per annum, including a $1,176,400 Promissory
Note issued to Mr. Fargnoli, a $1,302,182 Promissory Note issued to Mr. Rocco
and Promissory Notes issued to certain MRS employees, including a Promissory
Note for $444,340 issued to Wade Wilson, who was appointed Vice President,
Operation Systems, of the Company, and (iii) 62,243 shares of the Company's
common stock with a value of $226,000 issued to Saverio D. Burdi, of which
17,842 shares are being held in escrow by the Company until May 10, 1999. The
Promissory Notes are payable in two payments. On January 2, 1999, one half of
the principal and accrued interest is payable and the remaining one half of the
principal and accrued interest is payable January 2, 2000. In lieu of cash
payment, the Promissory Note Holder ("Note Holder") may elect to convert up to
eighty percent (80%) of the outstanding principal balance of the Promissory Note
and the accrued interest thereon payable on the dates set forth above into
shares of common stock, par value $.01 per share, based on a valuation of $4.00
per share, irrespective of the actual market value of the shares on the date of
such conversion. If the Note Holder does not make such election, the Company may
do so. With respect to the remaining twenty (20%) of the payment due, the Note
Holder may, but is not obligated to, require that such amount be converted into
shares or take such payment in cash. In the aggregate, the Promissory Notes may
be converted into 835,000 shares of common stock of the Company. At any time
subsequent to the first anniversary of the execution of the Promissory Note, if
the Company conducts a secondary public offering of Company's common stock, the
Note Holder shall have the opportunity to sell the shares in such offering to
the same extent and in proportion to the rights that the other executive
officers of the Company have.
Upon the closing of the MRS acquisition, Mr. Fargnoli was appointed to the
Company's Board of Directors, Messrs. Fargnoli and Rocco were appointed as Vice
Presidents of the Company, Saverio D. Burdi
6
<PAGE> 9
was appointed as Senior Vice President of the Company, and Wade Wilson was
appointed as Senior Vice President, Operation Systems, of the Company. Mr. Burdi
was subsequently appointed Chief Operating Officer of the Company. The Company
entered into three year employment agreements with Messrs. Fargnoli, Rocco,
Burdi and Wilson, providing for annual base compensation of $110,000 for Messrs.
Fargnoli and Rocco and $120,000 for Messrs. Burdi and Wilson. Messrs. Burdi and
Wilson were granted options to purchase 25,000 and 20,000 common shares,
respectively, under the Company's 1996 Stock Option Plan. Each of the agreements
provides for certain employee benefits and contains a non-competition provision
covering the term of the agreement plus one year following termination. Messrs.
Fargnoli, Rocco, Burdi and Wilson also entered into Non-Competition Agreements
with the Company which run through May 10, 2001, or the length of their
respective Employment Agreement plus one year, whichever is longer.
Wade Wilson is the brother-in-law of Alan T. Sheinwald, the former
President, Chief Executive Officer and Chairman of the Company. Mr. Sheinwald's
employment as President and Chief Executive Officer of the Company was
terminated on July 1, 1997. Mr. Sheinwald resigned as Chairman and a director of
the Company on July 7, 1997.
AMENDMENT TO 1996 STOCK OPTION PLAN
At the Annual Meeting the holders of Common Stock of the Company will be
asked to approve an amendment to the Company's 1996 Stock Option Plan (described
below) to provide that the number of shares of Common Stock reserved for
issuance thereunder be increased by 250,000 shares from the 513,500 remaining
shares reserved for issuance as of November 30, 1997 to 763,500 shares. The
favorable vote of the holders of a majority of the shares of Common Stock,
represented in person or by Proxy at the meeting, will be required for such
approval. The increase in the number of shares of Common Stock issuable will
enable the Company to attract new highly qualified personnel (both as employees
and directors) and to continue to compensate key employees and outside directors
by the grant of stock options.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE AMENDMENT TO THE COMPANY'S 1996 OPTION PLAN.
STOCK OPTION PLAN
The Company's Board of Directors has adopted its 1996 Stock Option Plan
(the "Plan") for officers, employees, directors and consultants of the Company
or any of its subsidiaries. The Plan authorizes the granting of stock options to
purchase an aggregate of not more than 603,000 shares of the Company's Common
Stock. As of the date hereof, options to purchase an aggregate of 95,500 shares
of Common Stock have been granted and options to purchase 6,000 shares of common
stock have been canceled. Options to purchase an aggregate of 513,500 shares of
Common Stock are available for grant under the Plan.
The Plan is administered by a Stock Option Committee (the "Committee")
consisting of two outside directors, Craig V. Sloane and Bernard M. Kruger. In
general, the Committee will select the persons to whom options will be granted
and will determine, subject to the terms of the Plan, the number, the exercise
period and other provisions of such options. The options granted under the Plan
will be exercisable in such installments as may be provided in the grant.
Options granted to employees may be either incentive stock options under
the Internal Revenue Code ("ISOs") or nonqualified options. Options granted to
non-employees must be nonqualified options. The Board may determine the exercise
price, provided that, in the case of ISOs, such price may not be less than 100%
(110% in the case of ISOs granted to holders of more than 10% of the voting
power of the Company's stock) of the fair market value (as defined in the Plan)
of the Company's Common Stock at the date of grant. The aggregate fair market
value (determined at time of option grant) of stock with respect to which ISOs
become exercisable for the first time in any year cannot exceed $100,000. The
Company does not expect the exercise price of nonqualified options to be less
than fair market value.
The options are evidenced by a written agreement containing the above terms
and such other terms and conditions consistent with the Plan as the Board of
Directors may impose. Each option, unless sooner terminated, shall expire no
later than 10 years (five years in the case of ISOs granted to holders of more
than 10% of the voting power of the Company's stock) from the date of the grant,
as the Board may determine. The Board has the right to amend, suspend or
terminate the Plan at any time, provided, however, that unless
7
<PAGE> 10
ratified by the Company's shareholders within 12 months thereafter, no amendment
or change in the Plan will be effective: (a) increasing the total number of
shares which may be issued under the Plan; (b) reducing below fair market value
on the date of grant the price per share at which any option which is an ISO may
be granted; (c) extending the term of the Plan or period during which any option
which is an ISO may be granted or exercised; (d) altering in any way the class
of persons eligible to participate in the Plan; (e) materially increasing the
benefits accruing to participants under the Plan; or (f) with respect to options
which are ISOs, amending the Plan in any respect which would cause such options
to no longer qualify for incentive stock option treatment pursuant to the
Internal Revenue Code of 1986.
As of November 30, 1997, the market value of a share underlying an option
granted under the Plan was $2.625, and the aggregate market value of all shares
reserved for the Plan was $1,582,875 on that date.
FEDERAL TAX CONSEQUENCES
The following discussion is a summary of the major Federal income tax
consequences of the Plan. An employee generally will not recognize taxable
income upon the grant or exercise of an ISO. (The employee may, however, be
subject to an alternative minimum tax upon exercise of the option.) When shares
purchased for cash pursuant to the exercise of an ISO are sold, and the employee
has held the shares for at least one year from the date the shares were
transferred to the employee and two years from the date on which the ISO was
granted, the employee ordinarily will recognize capital gain (or loss) equal to
the difference between the amount realized on the disposition of the shares and
option price.
If the employee disposes of any of the shares purchased upon exercise of an
ISO before the end of the one-year and two-year periods described above, the
employee generally has made a "disqualifying disposition" with respect to those
shares. In the event of a "disqualifying disposition", the employee generally
will recognize ordinary income in the year of the "disqualifying disposition"
equal to the excess of the fair market value of the shares on the date of
exercise over the option price. Any additional gain resulting from such
disposition ordinarily will be treated as capital gain to the employee. If,
however, the amount realized in the "disqualifying disposition" of the shares is
less than the fair market value of the shares on the date of exercise and if
such disposition is a sale or exchange in which a loss (if sustained) would be
recognized, the ordinary income recognized upon disposition will not exceed the
excess (if any) of the amount realized in the disposition over the option price.
If a "disqualifying disposition" is made by an employee who is subject to
Section 16(b) of the Securities Exchange Act of 1934 ("Section 16(b)"), special
rules may apply to the computation of gain or loss resulting from such
disposition.
If shares of Company common stock are surrendered in full payment of the
option price under an ISO, the employee generally will not recognize taxable
income on the exchange and all of the shares transferred to the employee will be
subject to both the one-year and two-year periods described in the preceding
paragraphs. Special rules may apply, however, in determining an employee's gain
or loss from later dispositions of the shares received, including "disqualifying
dispositions".
The Company will not be entitled to any deduction on the grant or exercise
of an ISO. However, the Company generally will be entitled to a Federal income
tax deduction equal to the amount included by an employee for tax purposes as
ordinary income in connection with a "disqualifying disposition" of ISO shares,
provided that such amount qualifies as an ordinary and necessary business
expense of the Company. Any deduction will be available to the Company for its
taxable year corresponding to the year in which the employee includes ordinary
income from the "disqualifying disposition". The employee will be deemed to have
included an amount as part of income for tax purposes if the Company has timely
complied with any applicable tax reporting requirements with respect to that
income.
No income will be recognized by an optionee at the time a nonqualified
option is granted by the Company. Upon the exercise of a nonqualified option,
the optionee generally will recognize ordinary income equal to the excess of the
fair market value of the shares purchased (as of the exercise date) over the
option price. However, for optionees who are subject to Section 16(b), special
rules may apply to the computation and timing of income resulting from the
exercise of a nonqualified option.
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If shares of Company common stock are surrendered in full payment of the
option price under an ISO, the optionee will not recognize income upon such
exercise to the extent that the optionee receives shares that are equal in
number to the shares surrendered. To the extent that the optionee receives
shares in excess of the number of shares surrendered (the "additional shares"),
the optionee will recognize ordinary income in the year of exercise equal to the
fair market value of the additional shares, determined as of the date of
exercise. If, however, the optionee is subject to Section 16(b), special rules
may apply to the computation and timing of income resulting from the exercise of
a nonqualified option.
If an optionee disposes of shares acquired by the exercise of a
nonqualified option, the optionee will recognize gain (or, under certain
conditions, loss) in the year of such disposition equal to the difference
between any amount realized on the disposition and the optionee's tax basis in
the shares (the optionees tax basis generally being the sum of the option price
plus the income recognized upon exercise of the option). Ordinarily, this gain
(or loss) will be a capital gain (or loss).
The Company generally will be entitled to a Federal income tax deduction
equal to the amount included by an optionee for tax purposes as ordinary income
in connection with the exercise of a nonqualified stock option, provided that
such amount qualifies as an ordinary and necessary business expense of the
Company. Any deduction will be available to the Company for its taxable year
corresponding to the year in which the optionee includes ordinary income from
the exercise. The optionee will be deemed to have included an amount as part of
income for tax purposes if the Company has timely complied with any applicable
tax reporting requirements with respect to that income.
MATERIAL CHANGES RESULTING FROM THE PROPOSED AMENDMENT
The proposed amendment to the Company's 1996 Stock Option Plan will
increase the number of shares of Common Stock reserved for issuance thereunder
from 603,000 to 853,000. As of November 30, 1997 outstanding options to purchase
89,500 shares had been granted under the Plan), leaving options for 513,500
shares available for issuance. The proposed amendment will increase the number
of shares available for issuance to 763,500. Adoption of the proposed amendment
will assist the Company in its efforts to attract new highly qualified personnel
and to continue to retain its key employees by the grant of stock options.
If the amendment to the Plan is approved by the Shareholders, the second
sentence of paragraph 3 of the Plan will be deleted and replaced with the
following: "The maximum number of shares of Common Stock which may be issued
pursuant to Options granted under the Plan shall not exceed 853,000 shares,
subject to adjustment in accordance with the provisions of Section 12 hereof."
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL OF
THE PROPOSED AMENDMENT TO THE COMPANY'S 1996 STOCK OPTION PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Subject to ratification by the Shareholders, the Board of Directors has
appointed Richard A. Eisner & Company, LLP as independent certified public
accountants for the Company for the year ending March 31, 1998. Management will
present to the Annual Meeting a proposal that such appointment be ratified. The
favorable vote of the holders of a majority of the shares of Common Stock,
represented in person or by Proxy at the meeting, will be required for such
ratification. A representative of Richard A. Eisner & Company, LLP will attend
the meeting with the opportunity to make a statement if he desires to do so.
That representative will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
APPOINTMENT OF RICHARD A. EISNER & COMPANY, LLP AS THE COMPANY'S INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS.
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SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholder proposals intended to be presented at the next annual meeting
of Shareholders must be received by the Company not later than August 29, 1998
in order to be included in the Company's Proxy Statement and form of Proxy
relating to that meeting. Any such proposal should be communicated in writing to
the Secretary of the Company, 18 Sargent Place, Mt. Vernon, New York, 10550.
OTHER MATTERS
Management does not know of any other matters to be presented at the Annual
Meeting. If any additional matters are properly presented, the persons named in
the accompanying Proxy will have discretion to vote in accordance with their own
judgment on such matters.
By Order of the Board of Directors,
DONALD FARGNOLI
Secretary
December 26, 1997
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PROXY COMMUNITY CARE SERVICES, INC.
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints each of Dean L. Sloane and Bruce L. Ansnes (with
full power to act without the other and each with full power to appoint his
substitute) as the undersigned's Proxies to vote all shares of Common Stock of
the undersigned in Community Care Services, Inc. (the "Company"), a New York
corporation, which the undersigned would be entitled to vote at the Annual
Meeting of Shareholders of the Company to be held at the offices of Gordon
Altman Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New
York, on January 28, 1998, at 9:00 a.m. (local time) or at any adjournments
thereof as follows:
1. ELECTION OF DIRECTORS
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as marked contrary to all nominees listed below
below)
Dean L. Sloane, Bruce L. Ansnes, Bernard M. Kruger, M.D.,
Craig V. Sloane, Donald Fargnoll
(INSTRUCTIONS: To withhold authority to vote for any individual nominees,
write that nominee's name in the space provided below.)
2. PROPOSAL TO RATIFY THE RESERVATION BY THE COMPANY OF 250,000 ADDITIONAL
SHARES OF THE COMPANY'S AUTHORIZED BUT UNISSUED COMMON STOCK FOR ISSUANCE
UNDER THE COMPANY'S 1996 STOCK OPTION PLAN.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL TO RATIFY SELECTION OF RICHARD A. EISNER & COMPANY, LLP AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE YEAR ENDING MARCH 31,
1998.
/ / FOR / / AGAINST / / ABSTAIN
(Continued and to be signed and dated on the reverse side)
<PAGE> 14
(Continued from other side)
4. In their discretion, upon such other business as may properly come before
the meeting or any adjournments thereof.
The shares of Common Stock represented by this Proxy will be voted in
accordance with the foregoing instructions. In the absence of any instructions,
such shares will be voted FOR the election of the nominees listed in Item 1 and
FOR the proposals in Items 2, 3 and 4.
The undersigned hereby revokes any Proxy or Proxies to vote shares of
Common Stock of the Company heretofore given by the undersigned.
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(Date)
- ----------------------------------------------------------------
- ----------------------------------------------------------------
Please date, sign exactly as name appears on this Proxy, and promptly return in
the enclosed envelope. When signing as guardian, executor, administrator,
attorney, trustee, custodian, or in any other similar capacity, please give
full title. If a corporation, sign in full corporate name by president or other
authorized officer, giving his title, and affix corporate seal. If a
partnership, sign in the partnership name by authorized person. In the case of
joint ownership, each joint owner must sign.
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
