<PAGE> 1
THE PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
COMMUNITY CARE SERVICES, INC.
(Name of Registrant as Specified In Its Charter)
(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:
<PAGE> 2
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 3
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, on February 8, 1999, at 10:00 a.m.
(local time), for the following purposes:
1. To consider and vote upon approval of a reverse split of the Company's
common stock, par value $.01 by a ratio of 1:4;
2. To elect five directors of the Company to hold office for a one year
term;
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, 1998 through March 31, 1999; 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
January 6, 1999 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,
Louis Rocco,
Secretary
January 22, 1999
<PAGE> 4
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 February 8, 1999 or at any adjournments thereof (the "Annual
Meeting"). The approximate date of mailing this Proxy Statement is January 22,
1999.
Only holders of shares of voting Common Stock, $.01 par value ("Common
Stock"), of record at the close of business on January 6, 1999 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 7,162,891
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> 5
REVERSE STOCK SPLIT
At the Annual Meeting the holders of Common Stock of the Company will
be asked to approve a reverse split of the Common Stock by a ratio of 1:4. 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 decrease in the number of outstanding shares of the Common Stock
resulting from the reverse stock split will increase the average trading price
of the Common Stock to over $1.00 per share, assuring continued listing on the
NASDAQ SmallCap Stock Market.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF THE REVERSE STOCK SPLIT.
MATERIAL CHANGES RESULTING FROM THE PROPOSED REVERSE STOCK SPLIT
The Board of Directors has unanimously decided to submit to a vote of
the shareholders a proposal to reduce the number of outstanding shares of the
Common Stock, which is to be achieved by undertaking a reverse split of the
Common Stock whereby every four (4) shares of the Common Stock outstanding on
the close of business on January 6, 1999 (the "Existing Shares") shall be
exchanged for one (1) share of Common Stock (the "New Shares") having terms
identical in every respect to the Existing Shares (the transaction shall be
referred to hereafter as the "Reverse Split"). Fractional shares resulting from
the Reverse Split shall be rounded up to the nearest whole number.
The reason for the proposed reverse stock split of the Common Stock is
to assure continued listing on the NASDAQ SmallCap Stock Market. The Company is
required to maintain a minimum bid price per share of $1.00. The minimum bid
for the Common Stock has been below $.50, and the Company has been advised by
NASDAQ that unless the Company takes action to insure that the Common Stock
maintains a minimum bid price per share of $1.00 or more for 10 consecutive
trading days, it will be delisted from the NASDAQ SmallCap Market on Febuary
15, 1999. While the Company may appeal such action, the Company has determined
that it is advisable to attempt to increase the price of the Common Stock.
If the Reverse Split is approved by the shareholders, it will occur at
the close of business on February 8, 1999. At the close of business on January
6, 1999 the Company had approximately 7,162,891 shares of Common Stock
outstanding. The Reverse Split will reduce this number to approximately
1,790,723. Except as a result of the receipt by some shareholders of additional
shares as a result of rounding up fractional shares, the Reverse Split, in
itself, will not effect any shareholders' percentage holdings in the Company.
If the Reverse Split is approved by the shareholders, each shareholder
will, as soon as practicable after the Meeting, be notified that their shares of
the Existing Shares have been converted to a reduced number of New Shares
pursuant to the Reverse Split and shareholders will then be asked to exchange
their certificates representing the Existing Shares for new certificates
evidencing the New Shares.
The Company's Board of Directors believes that maintenance of the
NASDAQ listing is beneficial to the Company and its shareholders and recommends
a vote for the proposed Reverse Split of the Common Stock. The Board of
Directors believes the proposed Reverse Split will create long-term benefit for
the Company by increasing market interest in the Common Stock and increasing the
nominal per share value and per share earnings of the Common Stock. Given the
volatility of the Common Stock, the Board of Directors believes that the
proposed Reverse Stock Split will help maintain a sufficient minimum bid price
per share to ensure continued listing on the NASDAQ SmallCap Stock Market.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR APPROVAL
OF THE REVERSE STOCK SPLIT.
2
<PAGE> 6
ELECTION OF DIRECTORS
Five directors are to be elected at the Annual Meeting to serve until the
2000 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.
Name, Present Position with the Director
Company, and Business Experience Age Since
Dean L. Sloane
Chairman of the Board................................. 53 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........................................... 55 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.................................................. 57 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.
3
<PAGE> 7
Craig V. Sloane
Director.................................................. 48 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.
Louis Rocco
Vice President, President of MRS and
Director........................................ 48 March 1998
Louis Rocco joined the Company in May 1997 as Vice
President. He also serves as President of the Company's
subsidiary, Metropolitan Respirator Service, Inc.
("MRS"). Mr. Rocco was a founder of MRS and held various
executive positions in MRS from its inception through May
1997.
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".
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, 1998, the Board
of Directors met five (5) times and the Audit Committee met one (1) time, not
including actions taken by unanimous written consent, and the Stock Option
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.
4
<PAGE> 8
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.
AGE
SAVERIO D. BURDI 40
Chief Operating Officer..............................................
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.
ELIA GUARNERI 42
Acting Chief Financial Officer.......................................
Elia Guarneri joined the Company in January 1998 as
Corporate Controller and was appointed Acting Chief
Financial Officer in October 1998, upon the resignation of
Joel Quall. Prior to joining the Company, Mr. Guarneri was
Senior Accountant at Puglisi, Midler & Co. from December
1995 to January 1998 and was a Staff Accountant at Tobin &
Company from October 1994 to December 1995. Prior to October
1994, Mr. Guarneri attended Pace University. Mr. Guarneri
received a B.B.A. from Pace University and is a Certified
Public Accountant.
MATTHEW J. McDONOUGH 36
Vice President - Operations...........................................
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.
5
<PAGE> 9
PRINCIPAL SHAREHOLDERS AND OTHER INFORMATION
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock on December 28, 1998 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 1.54%
15 Glen Park Road
Purchase, NY 10577
- ------------------------------------------- ----------------------------------------- ---------------------------------
Saverio D. Burdi.................... 87,243(1) 1.22%
18 Sargent Place
Mt. Vernon, NY 10550
- ------------------------------------------- ----------------------------------------- ---------------------------------
Elia Guarneri....................... 0 0%
18 Sargent Place
Mr. Vernon, NY 10550
- ------------------------------------------- ----------------------------------------- ---------------------------------
Bernard M. Kruger, M.D.......... 18,334 *
170 East 78th Street
New York, NY 10021
- ------------------------------------------- ----------------------------------------- ---------------------------------
Matthew McDonough............... 1,050(2) *
18 Sargent Place
Mt. Vernon, NY 10550
- ------------------------------------------- ----------------------------------------- ---------------------------------
Louis Rocco...........................
18 Sargent Place 293,056 4.09%
Mt. Vernon, NY 10550
- ------------------------------------------- ----------------------------------------- ---------------------------------
</TABLE>
(1) Includes options to purchase 25,000 shares of common stock at an exercise
price of $4.00 per share granted to Mr. Burdi. Includes 17,842 shares held in
escrow. (See "Certain Relationships and Related Transactions.")
(2) Does not include options to purchase 10,000 shares granted to Mr. McDonough.
6
<PAGE> 10
<TABLE>
<CAPTION>
- ------------------------------------------- ----------------------------------------- ---------------------------------
Name and Address of Amount and Nature of
Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------------------------- ----------------------------------------- ---------------------------------
<S> <C> <C>
Alan T. Sheinwald.................... 2,142,250(3) 29.91%
203 Briarwood Drive
Somers, NY 10589
- ------------------------------------------- ----------------------------------------- ---------------------------------
Craig V. Sloane....................... 428,450 5.98%
45 Morris Street
Yonkers, NY 10705
- ------------------------------------------- ----------------------------------------- ---------------------------------
Dean L. Sloane....................... 1,363,000(4) 19.03%
45 Morris Street
Yonkers, NY 10705
- ------------------------------------------- ----------------------------------------- ---------------------------------
All Officers and Directors as a Group
2,301,133 32.13%
</TABLE>
*Less than one percent.
Based solely on a review of Forms 3 and 4, and all amendments thereto,
furnished to the Company during Fiscal 1998, and Forms 5 and amendments thereto
furnished to the Company with respect to Fiscal 1998, and all written
representations received by the Company from each person who was director,
officer or beneficial owner of more than ten percent of a class of equity
securities of the Company during the fiscal year ended March 31, 1998, the
Company believes that none of such persons filed a late report during, or with
respect to, the year.
- ----------
(3) 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, 50,000
shares of Common Stock owned by Mr. Wilson, or 62,500 shares of Common Stock
which may be issued to Mr. Wilson upon the conversion of the remaining
outstanding portion of the $444,430 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. Mr. Wilson served as Vice President -
Operation Systems of the Company from May 10, 1997 through October 5, 1998 (See
"Certain Relationships and Related Transactions.")
(4) Does not include 100,000 Shares owned by Mr. Sloane's wife, Mary Sloane, 800
shares owned by Mr. Sloane's son, Joshua Sloane and 200,000 Shares owned by the
Sloane Family Foundation for which Mr. Sloane disclaims beneficial ownership.
7
<PAGE> 11
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 $100,000 for all services in all
capacities to the Company for its fiscal years ended March 31, 1998, 1997 and
1996, was as follows:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
----------------------------------- ----------------------------------------------------------------
Name & Principal Fiscal Other Annual Restricted Securities LTIP All Other
Position Year Salary($) Bonus($) Compensation($) Stock Awards($) Underlying Payouts($) Compensation
Options/SAR's (#)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Alan T. Sheinwald 1998 $84,000 0 $5,000 0 0 0 0
Chief Executive 1997 $138,000 0 $9,000 0 0 0 0
Officer (1) 1996 $48,000 0 $3,000 0 0 0 0
Saverio D. Burdi 1998 $139,000 0 $7,000 0 25,000 0 0
Chief Operating 1997 $0 0 $0 0 0 0 0
Officer 1996 $0 0 $0 0 0 0 0
Louis Rocco 1998 $112,000 0 $6,000 0 0 0 0
President of 1997 $0 0 $0 0 0 0 0
MRS 1996 $0 0 $0 0 0 0 0
</TABLE>
- -----------------
(1) Mr. Sheinwald's employment with the Company commenced on November 13, 1995
and was terminated on July 1, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows information regarding stock options granted
during the fiscal year ended March 31, 1998 with respect to 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
$100,000 for all services in all capacities to the Company for the fiscal year
ended March 31, 1998. The Company has never granted any stock appreciation
rights.
8
<PAGE> 12
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
% OF TOTAL
NUMBER OF OPTIONS
SECURITIES GRANTED TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED(#)* YEAR PRICE($/SH) DATE
- ---- ----------- ---- ----------- ----
<S> <C> <C> <C> <C>
Alan T. Sheinwald(1) 0 0% 0 0
Saverio D. Burdi 25,000 37% $4.00 May 2007
Louis Rocco 0 0% 0 0
</TABLE>
- ------------
(1) Mr. Sheinwald's employment as Chief Executive Officer was terminated by the
Company on July 1, 1997.
* All options set forth were granted under the Company's Stock Option Plan at
100% of the fair market value of the shares at the time the options were granted
and are intended to be, and with few exceptions, will be, incentive stock
options. All options are exercisable in full two years and expire ten years
after the date of grant.
Options have value to the listed executives and to all option recipients
only if the stock price advances beyond the grant date price shown in the table
during the effective option period.
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 entered into an employment agreement with Saverio D. Burdi,
Chief Operating Officer of the Company, on May 10, 1997, which was amended as
of January 1, 1999 and expires May 10, 2002. The agreement can be renewed for
additional one year terms on each anniversary of the agreement and provides for
an annual base compensation of $120,000. The agreement provides for certain
benefits and contains a non-competition provision covering the term of the
agreement plus one year following termination. Pursuant to the agreement, Mr.
Burdi was granted options to purchase 75,000 shares of the Common Stock, which
vest over a three year period, at an exercise price of $.50 per share and is
eligible for an additional grant of options to purchase 75,000 shares of the
Common Stock, subject to the discretion of the Board of Directors of the
Company.
The Company entered into an employment agreement with Louis Rocco,
Vice-President of the Company and President of MRS, on May 10, 1997, which was
amended on March 1, 1998 and as of January 1, 1999 and expires May 10, 2002. The
agreement can be renewed for additional one year terms on each anniversary of
the agreement, and provides for a base compensation of $19,478 per month and
entitles Mr. Rocco to payments of $10,311 for the remainder of the term in the
event that the agreement is terminated for any reason prior to the end of the
term. The agreement provides for certain benefits and contains a non-competition
provision covering the term of the agreement plus one year following
termination. Pursuant to the agreement, Mr. Rocco was granted options to
purchase 75,000 shares of the Common Stock, which vest over a three year period,
at an exercise price of $.50 per share, and is
9
<PAGE> 13
eligible for an additional grant of options to purchase 75,000 shares of the
Common Stock, subject to the discretion of the Board of Directors of 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 of 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.
In March 1998, Mr. Rocco surrendered his $1,302,000 Promissory Note issued
in connection with the Company's acquisition of MRS. In consideration for such
action, the Company converted eighty percent of the Promissory Notes into shares
of Common Stock, with Mr. Rocco receiving 293,056 shares and a cash payment of
$73,000. The remaining amount of the Promissory Notes and interest thereon will
be repaid monthly in installments of $10,000.
Also, In March 1998, Mr. Fargnoli surrendered his $1,176,000 Promissory
Note issued to him in connection with the Company's acquisition of MRS. In
consideration for such action, the Company converted eighty percent of the
Promissory Notes into shares of Common Stock, with Mr. Fargnoli receiving
264,750 shares and a cash payment of $66,000. The remaining amount of the
Promissory Notes and interest thereon will be repaid monthly in installments of
$9,000. In May 1998, Mr. Fargnoli resigned from the Company. Mr. Fargnoli also
entered into a Consulting Agreement with the Company for a term of two years
expiring May 2000 for a fee of $55,000 per year.
Mr. Wilson's Promissory Note is payable in two payments. On January 2,
1999, one half of the principal and accrued interest was paid through the
issuance to him of 50,000 shares of Common Stock and the payment of $50,000 and
the remaining one half of the principal and accrued interest is payable January
2, 2000. In lieu of cash payment, Mr. Wilson 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 50,000
shares of Common Stock, 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 Mr.
Wilson does not make such election, the Company may do so. With respect to the
remaining twenty (20%) of the payment due, Mr. Wilson may, but is not obligated
to, require that such amount be converted into shares or take such payment in
cash. At any time subsequent to the first anniversary of the execution of the
10
<PAGE> 14
Promissory Note, if the Company conducts a secondary public offering of
Company's common stock, Mr. Wilson 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. Mr. Wilson was terminated as an
officer and employee of the Company as of October 5, 1998, but continues to
provide consulting services to the Company.
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 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 was
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 Rocco's
employment agreements are described above. 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. Mr. Fargnoli has subsequently
resigned and Mr. Wilson's employment was terminated. Messrs. Burdi and Rocco's
employment agreements have been amended as described above.
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.
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, 1999. 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.
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 28, 1999
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.
11
<PAGE> 15
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,
Louis Rocco,
Secretary
January 22, 1999
12
<PAGE> 16
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, on February 8, 1999, at 10:00 a.m. (local
time) or at any adjournments thereof as follows:
1. PROPOSAL TO APPROVE THE REVERSE SPLIT OF THE COMPANY'S COMMON STOCK, PAR
VALUE $.01 BY A RATIO OF 1:4.
FOR / / AGAINST / / ABSTAIN / /
2. ELECTION OF DIRECTORS WITHHOLD AUTHORITY
FOR all nominees listed below to vote for all nominees
(except as marked contrary to below) / / listed below / /
Dean L. Sloane
Bruce L. Ansnes
Bernard M. Kruger, M.D.
Craig V. Sloane
Louis Rocco
(INSTRUCTIONS: To withhold authority to vote for any individual nominees,
write that nominee's name in the space provided below).
3. PROPOSAL TO RATIFY SELECTION OF RICHARD A. EISNER & COMPANY, LLP AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE YEAR ENDING MARCH 31,
1999.
FOR / / AGAINST / / ABSTAIN / /
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 2 and
FOR the proposals in Items 1, 3 and 4.
<PAGE> 17
The undersigned hereby revokes any Proxy or Proxies to vote shares of
Common Stock of the Company heretofore given by the undersigned.
________________________________, 1999 (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.
2
