<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[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 240.14a-11(c) or 240.14a-12
</TABLE>
BIRMAN MANAGED CARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] 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:
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(4) Date Filed:
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<PAGE> 2
BIRMAN MANAGED CARE, INC.
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 12, 1999
NOTICE IS HEREBY GIVEN that the Special Meeting of Stockholders of Birman
Managed Care, Inc. (the "Company") will be held at the Company's principal
executive office located at 1025 Highway 111 South, Cookeville, Tennessee, 38501
on May 12, 1999 at 9:00 a.m. for the following purposes:
1. To authorize the non-public offering through the placement agent, Royce
Investment Group, Inc., a member of the National Association of
Securities Dealers, Inc., of 3,500 shares to 5,000 shares of its Series
A 10% Senior Convertible Preferred Stock to accredited and qualified
investors who meet the suitability standards for this offering, which
may include officers and directors of the Company.
Only stockholders of record at the close of business on April 23, 1999 are
entitled to notice of and to vote at the Special Meeting. A complete list of the
stockholders of the Company entitled to vote at the Special Meeting will be
available for the examination of any stockholders for at least ten (10) days
prior to the Special Meeting at the Company's principal executive office located
at 1025 Highway 111 South, Cookeville, Tennessee, 38501, and will also be
available for inspection at the Special Meeting.
By Order of the Board of Directors
/s/ SUE D. BIRMAN
--------------------------------------
Sue D. Birman
Executive Vice President
Secretary and Director
Cookeville, Tennessee
April 26, 1999
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO ADDITIONAL POSTAGE IF MAILED IN THE UNITED STATES. YOUR PROXY
WILL BE REVOCABLE ANY TIME PRIOR TO ITS EXERCISE EITHER IN WRITING OR BY VOTING
YOUR SHARES PERSONALLY AT THE SPECIAL MEETING.
<PAGE> 3
BIRMAN MANAGED CARE, INC.
1025 HIGHWAY 111 SOUTH
COOKEVILLE, TENNESSEE 38501
------------------------
PROXY STATEMENT
------------------------
FOR SPECIAL MEETING OF STOCKHOLDERS
MAY 12, 1999
GENERAL
This Proxy Statement is furnished in connection with the proposal (the
"Proposal") by Birman Managed Care, Inc., a Delaware corporation (the "Company")
to offer and sell in a non-public offering from 3,500 shares (the "Minimum
Offering") to 5,000 shares (the "Maximum Offering") of newly-issued Series A 10%
Senior Convertible Preferred Stock (the "Preferred Stock"). The shares will be
placed by Royce Investment Group, Inc., a member of the National Association of
Securities Dealers, Inc. (the "Placement Agent") on a "best efforts all or none"
basis for the Minimum Offering and on a "best efforts" basis up to the Maximum
Offering. The Preferred Stock will be sold for a price of $100.00 per share for
an aggregate offering of from $350,000 to $500,000.
The additional capital is sought in order to restore the Company's
aggregate net tangible assets to $4,000,000, which is the minimum level required
by the Nasdaq Stock Market, Inc. for continued listing on its national market.
The Company will appear before a committee of the Nasdaq Stock Market, Inc., on
June 3, 1999 to demonstrate its ability to meet this requirement on a current
and going-forward basis. Should the Company not meet this net tangible asset
test, the Company's common stock will be de-listed from the Nasdaq National
Market. The Company's Certificate of Incorporation already vests with the Board
of Directors the authority to issue and sell the Preferred Stock; however,
Marketplace Rule 4460(i)(1)(A) of the Nasdaq Stock Market, Inc. requires
shareholder approval of any plan by which officers and/or directors of a listed
company may acquire shares of that company's stock. Since officers and directors
of the Company intend to participate in the offering, this authorization by the
Company is being sought.
The Proposal will be considered at a Special Meeting of Stockholders to be
held at the Company's principal executive office located at 1025 Highway 111
South, Cookeville, Tennessee 38501 on May 12, 1999 at 9:00 a.m., and at any and
all adjournments thereof. This Proxy Statement and the enclosed form of proxy
are being mailed to stockholders on or before April 30, 1999.
A form of proxy is enclosed for use at the Special Meeting. The proxy must
be signed and dated by you or your authorized agent. A proxy may be revoked at
any time before it is exercised by giving written notice of revocation to the
Secretary of the Company or by submitting, prior to the time of the Special
Meeting, a properly executed proxy bearing a later date. It may also be revoked
by attendance at the Special Meeting and election to vote thereat. Stockholders
having executed and returned a proxy, who attend the Special Meeting and desire
to vote in person, are requested to so notify the Secretary of the Company prior
to the time of the Special Meeting. Subject to such revocation, all shares
represented by a properly executed proxy received in time for the Special
Meeting will be voted by the proxy holders in accordance with the instructions
on the proxy.
If no instructions are specified on the proxy, all shares represented by
valid proxies received pursuant to this solicitation (and not revoked before
they are voted) will be voted "FOR" the Proposal. For purposes of determining
whether the Proposal has received the necessary votes to be approved,
abstentions from voting on any matter will have the effect of a vote "AGAINST"
the Proposal.
If you hold your shares of Common Stock in "street name" and you fail to
instruct your broker or nominee as to how to vote such shares of Common Stock,
your broker or nominee may, in its discretion, vote your shares of Common Stock
"FOR" the Proposal.
<PAGE> 4
MATTERS TO BE CONSIDERED
The matters to be considered and voted upon at the Special Meeting are as
follows:
1. To authorize the non-public offering through the placement agent, Royce
Investment Group, Inc., a member of the National Association of
Securities Dealers, Inc., of 3,500 shares to 5,000 shares of its Series
A 10% Senior Convertible Preferred Stock to accredited and qualified
investors who meet the suitability standards for this offering, which
may include officers and directors of the Company.
COSTS OF SOLICITATION OF PROXIES
The Company will bear the costs of this solicitation, including the expense
of preparing, assembling, printing and mailing this Proxy Statement and the
material used in this solicitation of proxies. It is contemplated that proxies
will be solicited principally through the mails, but directors, officers and
regular employees of the Company may solicit proxies personally or by telephone.
Although there is no formal agreement to do so, the Company may reimburse banks,
brokerage houses and other custodians, nominees and fiduciaries for the
reasonable expense in forwarding these proxy materials to their principals. In
addition, the Company may pay for and utilize the services of individuals or
companies not regularly employed by the Company in connection with the
solicitation of proxies if the Board of Directors of the Company determines that
this is advisable.
OUTSTANDING SHARES AND VOTING RIGHTS
There were 8,756,254 shares of the Company's common stock issued and
outstanding, par value, $0.001 per share ("Common Stock"), as of April 23, 1999,
the record date (the "Record Date") for the stockholders entitled to notice of
and to vote at the Special Meeting. Each stockholder of record at the close of
business on April 23, 1999 is entitled to one vote for each share of common
stock then held on each matter, or any adjournments thereof. The Company's
Certificate of Incorporation also authorizes the issuance of up to 5,000,000
shares of preferred stock, par value $0.001 per share, of which no shares are
currently issued and outstanding. Upon authorization by the shareholders of this
offering for the Shares, the Company will file with the Delaware Secretary of
State a Certificate of Designations, Preferences and Rights of Series A
Preferred Stock. The Preferred Stock shall consist of one series to be
designated and known as "Series A Preferred Stock." The number of shares
constituting the Series A Preferred Stock shall be Ten Thousand (10,000).
A majority of the outstanding shares of Common Stock entitled to vote at
the Special Meeting must be present in person or represented by proxy at the
Special Meeting in order to constitute a quorum for the transaction of business.
Abstentions and broker non-votes will be treated as shares present and entitled
to vote for purposes of determining the presence of a quorum.
The Company's Certificate of Incorporation does not authorize cumulative
voting. The authorization of the Proposal requires the affirmative vote of the
majority of the shares of the Common Stock present at the Meeting in person or
by proxy and entitled to vote.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of Common Stock of
the Company as of the Record Date by (i) each person (or group of affiliated
persons) who is known by the Company to own beneficially more than five percent
(5%) of the outstanding shares of Common Stock; (ii) each director or nominee
for director of the Company; (iii) the Chief Executive Officer of the Company;
(iv) each of the four other most highly compensated executive officers of the
Company (the "Named Executives"); and (v) all directors and Named Executives as
a group.
<TABLE>
<CAPTION>
COMMON SHARES
BENEFICIALLY OWNED(1)(5)
-------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(3) NUMBER PERCENT(2)
--------------------------------------- ---------- -----------
<S> <C> <C>
David N. Birman, M.D., Chairman, Director, CEO(4)........... 5,081,606 57.91%
Sue D. Birman, Director, Executive Vice President(4)........ 5,081,606 57.91%
Rockey C. Talley, M.D., Senior Vice President............... 10,000 *
John Higgins, Director(6)................................... 3,000 *
James J. Rhodes, Director(7)................................ 5,000 *
Warren E. Aut, Director(9).................................. -- *
Directors and officers as a group (5 persons)(8)............ 5,099,606 58.12%
</TABLE>
- ---------------
* Less than 1%
(1) Except as indicated in footnotes to this table, the stockholders named in
this table are known to the Company to have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them subject to community property laws where applicable. Shares shown as
beneficially owned by any person have been determined in accordance with the
requirements of Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended.
(2) Shares of Common Stock issuable upon exercise of stock options exercisable
within 60 days of the Record Date are deemed outstanding for computing the
percentage of the person or entity holding such securities but are not
deemed outstanding for computing the percentage of any other person or
entity.
(3) The address for each of the beneficial owners is in care of the Company:
1025 Highway 111 South, Cookeville, Tennessee 38501.
(4) Includes 666,667 Escrow Shares. David N. Birman, M.D. disclaims beneficial
ownership as to 550,693 shares beneficially owned by Sue D. Birman
individually. Sue D. Birman disclaims beneficial ownership as to 3,936,010
shares beneficially owned by David N. Birman, M.D. individually.
(5) Includes options to purchase shares of Common Stock scheduled to become
exercisable within 60 days after the Record Date.
(6) Mr. Higgins was granted options under the Company's 1996 Directors' Options
Plan to acquire 3,000 shares of the Company's Common Stock at an exercise
price of $7.50 per share and 6,000 shares at an exercise price of $7.00 per
share.
(7) Mr. Rhodes was granted options under the Company's 1996 Directors' Option
Plan to acquire 6,000 shares of the Company's Common Stock at an exercise
price of $5.00 per share and 3,000 shares at an exercise price of $7.00 per
share.
(8) Includes shares subject to options exercisable currently to acquire 18,000
for all officers and directors as a group.
(9) Warren E. Aut was granted options under the Company's 1996 Directors' Option
Plan to acquire 6,000 shares of the Company's Common Stock at an exercise
price of $5.50 per share.
3
<PAGE> 6
INTEREST OF CERTAIN PERSONS IN OR
OPPOSITION TO MATTERS TO BE ACTED UPON
The offering will be conducted through the Placement Agent, Royce
Investment Group, Inc., which is a member of the National Association of
Securities Dealers, Inc. The Placement Agent will receive a placement fee of
five percent (5%) of the sales price for each Share sold in the offering. The
Company will also pay the Placement Agent an unaccountable expense allowance of
two percent (2%) of the sales price of each Share sold in the offering. John D.
Higgins, a director of the Company, is Senior Vice President, Corporate Finance,
of the Placement Agent. The Company believes that the terms of Royce's
engagement are equal to or better than the usual and customary fees charged by
members of its industry and were approved by a disinterested majority of the
Board of Directors of the Company.
The Company's Board of Directors authorized the proposed offering on March
31, 1999. The stockholders who oppose the Proposal have no right under Delaware
law or under the Corporation's Certificate of Incorporation or By-Laws to
dissent from any of the provisions adopted in the Amendment and Restatement.
AUTHORIZATION TO ISSUE 3,500 TO 5,000 SHARES
OF ITS SERIES A 10% SENIOR CONVERTIBLE PREFERRED STOCK
INTRODUCTION
The Company requests shareholder authorization for the non-public offering
through Royce Investment Group, Inc. (the "Placement Agent"), a member of the
National Association of Securities Dealers, Inc., of 3,500 shares (the "Minimum
Offering") to 5,000 shares (the "Maximum Offering") of its Series A 10% Senior
Convertible Preferred Stock (the "Shares") to accredited and qualified investors
who meet the suitability standards for this offering, which may include officers
and directors of the Company.
TITLE AND AMOUNT OF SECURITIES TO BE ISSUED
The title of the Securities to be issued is Series A 10% Senior Convertible
Preferred Stock (the "Series A Preferred Stock"). The amount of Securities to be
issued is 3,500 shares to 5,000 shares.
DESCRIPTION OF THE SECURITIES
This summary is qualified entirely by the actual terms of the Series A
Preferred Stock which are attached hereto as Appendix "A" and is incorporated
herein by this reference.
4
<PAGE> 7
The Company's Series A 10% Senior Convertible Preferred Stock is the only
preferred stock authorized by the Company to date and will be its senior
preferred stock. The following are key features of the Series A Preferred Stock:
<TABLE>
<S> <C>
Shares Authorized............................ 10,000
Shares Offered............................... 3,500 to 5,000
Purchase Price............................... $100.00 per Share
Liquidation Preference....................... $100.00 per Share
Cumulative Dividend.......................... 10% per annum payable in kind for first three years;
thereafter, payable either in kind or cash at election
of holder.
Convertible at Election of Holder............ Convertible into shares of the Company's common stock
at any time.
Conversion Price to Common................... $1 1/8 per share of Common Stock*
*The conversion price for the Shares is the public
market price at which the Company's shares of common
stock were sold on March 31, 1999, the day the Board
of Directors authorized this offering.
Restrictions on Other Shares................. No dividends may be paid on other Company stock until
all dividends on the Series A Preferred and its
liquidation preference have been paid.
Callable..................................... Shares may be called by the Company five years after
date of first issuance upon payment of 120% of the
Liquidation Preference, plus any accrued but unpaid
dividends.
Voting Rights................................ Holders of Series A Preferred Shares may cast votes
for all matters voted on by shareholders equal to the
number of his Shares of Series A Preferred divided by
the Conversion Price. In addition, only the Series A
Preferred Shares may vote, by a 60% majority, to
change their powers, preferences and special rights.
</TABLE>
THE TRANSACTION IN WHICH THE SECURITIES ARE TO BE ISSUED
The Company intends to offer through the Placement Agent 3,500 shares to
5,000 shares of its Series A 10% Senior Convertible Preferred Stock to
accredited and qualified investors who meet the suitability standards for this
offering, which may include directors and officers of the Company. Terms are all
cash, payable upon subscription. The price is $100.00 per share and the minimum
purchase is 100 shares, or $10,000. The Company reserves the right to accept or
reject, in whole or in part, any subscription. The offering will be conducted
for a maximum of sixty (60) days from the date of the Company's Private
Placement Memorandum or until the Maximum Offering has been subscribed,
whichever occurs first. The Company may terminate the offering at any time. If
the offering is terminated prior to completion of the Minimum Offering, all
subscription proceeds will be returned without deduction or interest.
The Shares will be sold only to accredited investors (as defined in Rule
501 of the Securities and Exchange Commission) and to a maximum of thirty-five
(35) other qualified investors. Qualified Investors are those who by reason of
experience, training or receipt of professional advice can be deemed by the
Company to have an adequate basis on which to assess the risk of this investment
and who demonstrate, through completion of the Subscription Documents, adequate
financial resources with which to bear the risk of an investment in the Shares.
Each subscriber will be required to complete the Subscription Documents in order
for the Company to determine whether such investor meets these suitability
standards. The Company will rely exclusively on such Subscription Documents and
will make no independent investigation to confirm the facts set forth therein.
The net proceeds to be received by the Company from the issuance and sale
of the Series A 10% Senior Convertible Preferred Stock are estimated to be
approximately $332,500 (approximately $450,000 if the Maximum Offering is fully
subscribed). The net proceeds of the offering of the shares will be used for
working capital and general corporate purposes.
5
<PAGE> 8
REASONS FOR THE PROPOSED AUTHORIZATION
The Company asks the shareholders to approve the Proposal. The additional
capital from the Proposal is sought in order to restore the Company's aggregate
net tangible assets to $4,000,000, which is the minimum level required by the
Nasdaq Stock Market, Inc. for continued listing on its national market. The
Company's net tangible assets are $3,870,244 at December 31, 1998. The Company
will appear before a committee of the Nasdaq Stock Market, Inc. on June 3, 1999
to demonstrate its ability to meet this requirement on a current and
going-forward basis. In addition to obtaining additional capital in the proposed
offering, the Company expects to report a one-time gain on sale of approximately
$90,000.00 in connection with a pending letter of intent to sell the operations
of its Hughes & Associates, Inc. subsidiary to its management. Should the
Company not meet this net tangible asset test, the Company's common stock will
be de-listed from the Nasdaq National Market. The Company's Certificate of
Incorporation already vest with the Board of Directors the authority to issue
and sell the Preferred Stock; however, Marketplace Rule 4460(i)(1)(A) of the
Nasdaq Stock Market, Inc. requires shareholder approval of any plan by which
officers and/or directors of a listed company may acquire shares of that
company's stock. Since officers and directors of the Company intend to
participate in the offering, this authorization by the Company is being sought.
EFFECT ON CURRENT SHARES
In the event the offering of Series A Preferred Stock is completed, the
holders of the common stock will be affected in a number of ways. Holders of
Series A Preferred will be able to vote on all matters presented to the
shareholders for approval. Each share of Series A Preferred will be able to cast
eight-nine(89) votes ($100.00 divided by the common stock conversion price of
$1.125 per share). Assuming the Minimum Offering is sold, holders of the Series
A Preferred in the aggregate will be able to cast 311,111 votes; assuming the
Maximum Offering is sold, holders of the Series A Preferred in the aggregate
will be able to cast 444,444 votes. In addition, a vote of sixty percent (60%)
of the Series A Preferred Stock is required to change the rights, preferences
and privileges of the Series A Preferred. No common share will be able to
receive a dividend until all quarterly dividends on the Series A Preferred have
been paid, nor will the common shares be entitled to receive a dividend until
the liquidation preference of $100.00 per share of Series A Preferred has been
repaid, the Series A Preferred shares have been converted to common by the
holders thereof or have been redeemed by the Company.
FINANCIAL AND OTHER INFORMATION
The Financial and Other Information are omitted pursuant to Instruction 1
to Item 13 of Schedule 14A (Rule 14a-101), which provides in part that "any or
all of the information required by paragraph (a) of this item, not material for
the exercise of prudent judgment in regard to the matter to be acted upon may be
omitted . . . . the information is not deemed material where the matter to be
acted upon is . . . the authorization of preferred stock for issuance for cash
in an amount constituting fair value."
The Board of Directors of the Company found that the offering price for the
issuance of the preferred stock was fair value. The preferred stock has a
liquidation value at $100.00 per share and is being sold for cash at $100.00 per
share; the conversion at which the preferred stock converts to common stock is
the market price at which the Company's common stock traded on March 31, 1999,
the day on which the Company's Board of Directors authorized the proposed
offering.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL
BY ORDER OF THE BOARD OF DIRECTORS
/s/ SUE D. BIRMAN
--------------------------------------
SUE D. BIRMAN
Executive Vice President
Secretary and Director
Cookeville, Tennessee
April 26, 1999
6
<PAGE> 9
APPENDIX A
BIRMAN MANAGED CARE INC.
A DELAWARE CORPORATION
SERIES A SENIOR 10% CONVERTIBLE PREFERRED STOCK
SECTION 1. Designation. The Preferred Stock shall consist of one series to
be designated and known as "Series A Senior Convertible Preferred Stock" (the
"Series A Preferred Stock"). The number of shares constituting the Series A
Preferred Stock shall be Ten Thousand (10,000).
SECTION 2. Liquidation Rights.
(A) In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets or surplus funds of the Corporation to the
holders of the Common Stock of the Corporation by reason of their ownership
thereof, an amount equal to One Hundred Dollars ($100.00) per share, plus
accrued and unpaid dividends, if any (collectively, the "Series A Liquidation
Value"). If assets of the Corporation available for distribution to stockholders
are insufficient to permit payment in full of amounts to which the holders of
Series A Preferred Stock are entitled pursuant to this Paragraph (A), such
holders of Series A Preferred Stock shall participate in such available assets
in equal amounts per share.
(B) All the preferential amounts to be paid to the holders of the Series A
Preferred Stock under Paragraph (A) of this Section 2 shall be paid or set apart
for payment before the payment or setting apart for payment of any other amount
for, or the distribution of any assets of the Corporation to, the holders of the
Common Stock in connection with such liquidation, dissolution or winding up.
After the payment or the setting apart of the payment to the holders of the
Series A Preferred Stock of the preferential amounts payable to them pursuant to
Paragraph (A), the holders of the Common Stock shall be entitled to receive pro
rata on the basis of each share held all remaining assets of the Corporation.
(C) A consolidation or merger of the Corporation with another corporation
or entity or a sale of all or substantially all of the assets of the Corporation
shall be regarded as a liquidation, dissolution or winding up of the affairs of
the Corporation with respect to the Series A Preferred Stock within the meaning
of this Section 2 unless such consolidation or merger is not intended to effect
a change in the ownership or control of the Corporation or of its assets and is
not intended to alter materially the business or assets of the Corporation,
including, by way of example and without limiting the generality of the
foregoing, a consolidation or merger which merely changes the identity, form or
place or organization of the Corporation, or which is between or among the
Corporation and any of its direct or indirect subsidiaries; however, any such
event shall not be treated as a liquidation, dissolution or winding up unless
such treatment is approved by holders of at least two-thirds of the Preferred
Stock then outstanding, voting on an "as if converted" basis.
SECTION 3. Conversion. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(A) Right to Convert. Each share of Series A Preferred Stock shall be
convertible, without the payment of any additional consideration by the holder
thereof and at the option of the holder thereof, at any time after the date of
issuance of such share on or prior to the close of business on the day prior to
the Redemption Date fixed pursuant to Section 4 hereof, at the office of the
Corporation or any transfer agent for the Series A Preferred Stock, into such
number of fully paid and non-assessable shares of Common Stock as is determined
by dividing One Hundred Dollars ($100.00) by the Conversion Price, determined as
hereinafter provided, in effect at the time of conversion for such Series A
Preferred Stock. The Conversion Price at which shares of Common Stock shall be
deliverable upon conversion without the payment of any additional consideration
by the holder thereof (the "Conversion Price") shall initially be One Dollar
($1.00) per share of Common Stock. Such initial Conversion Price shall be
subject to adjustment, in order to adjust the number of shares of Common Stock
into which Series A Preferred Stock is convertible, as hereafter provided. In
the
A-1
<PAGE> 10
event of a notice of redemption of any shares of Series A Preferred Stock
pursuant to Section 4 hereof, the right to convert shall terminate as to the
shares designated for redemption on the close of business on the day prior to
the Redemption Date, unless default is made in payment of the Redemption Price,
in which case the conversion rights for such shares shall continue until such
payment is made. In the event of default, holders of Series A Preferred Stock
who converted between the date notice was sent and the Redemption Date shall be
entitled to reconvert the Common Stock received into the Series A Preferred
Stock so converted.
(B) Mechanics of Conversion. No fractional shares of Common Stock shall be
issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the Conversion
Price then in effect with respect to Series A Preferred Stock. Before any holder
of the Series A Preferred Stock shall be entitled to convert the same into full
shares of Common Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Series A Preferred Stock, and shall give written notice to the
Corporation at such office that he elects to convert the same and shall state
therein his name or the name or names of his nominees in which he wishes the
certificate or certificates for shares of Common Stock to be issued. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock or to his nominee or nominees,
a certificate or certificates for the number of Shares of Common Stock to which
he shall be entitled as aforesaid, together with cash in lieu of any fraction of
a share. Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the shares of Series A
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
(D) Adjustments to Conversion Price for Diluting Issues:
(i) Adjustments for Dividends, Distributions, Subdivisions, Combinations
or Consolidations of Common Stock. At any time after the date on which a share
of Series A Preferred Stock is first issued:
(1) STOCK DIVIDENDS, DISTRIBUTIONS OR SUBDIVISIONS: In the event the
Corporation shall issue additional shares of Common Stock (or securities
convertible into Common Stock) in a stock dividend, stock distribution or
subdivision or other distribution payable with additional shares of Common Stock
(or securities convertible into Common Stock) with respect to Common Stock or
effect a split or subdivision of the outstanding shares of the Corporation's
Common Stock, the Conversion Price in effect with respect to Series A Preferred
Stock immediately prior to such stock dividend, stock distribution or
subdivision or such declaration thereof, shall, concurrently with the
effectiveness of such stock dividend, stock distribution or subdivision, or the
earlier declaration thereof, be proportionately decreased.
(2) COMBINATIONS OR CONSOLIDATIONS: In the event the outstanding
shares of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Conversion Price
in effect with respect to Series A Preferred Stock immediately prior to such
combination or consolidation shall, concurrently with the effectiveness of such
combination or consolidation, be proportionately increased.
(ii) Adjustment for Merger or Reorganization, etc. In case of any
consolidation or merger of the Corporation with or into another corporation or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation or entity, each share of Series A Preferred Stock shall
thereafter be convertible into the number of shares of stock or other securities
or property to which a holder of the number of shares of Common Stock of the
Corporation deliverable upon conversion of Series A Preferred Stock would have
been entitled upon such consolidation, merger or conveyance; and, in any such
case, appropriate adjustment (as determined in good faith by the Board of
Directors) shall be made in the application of the provisions set forth with
respect to the rights and interest thereafter of the holders of Series A
Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustments of the Conversion
Price in effect with respect to the Series A Preferred Stock) shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares of
stock or other property thereafter deliverable upon conversion of the Series A
Preferred Stock.
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(E) No Impairment. The Corporation will not, by amendment of its Articles
of Incorporation or By-Laws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of Series A
Preferred Stock against impairment.
(F) No Equal or Senior Rights. The Corporation will not, by amendment of
its Articles of Incorporation or By-Laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, create any class or series of capital stock with the
right to share in or receive any distribution of any of the assets or surplus
funds of the Corporation prior to the distribution in full of the Liquidation
Value of the Series A Preferred Stock.
(G) Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment of the Conversion Price in effect with respect to Series A
Preferred Stock pursuant to this Section 3, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of Series A Preferred Stock a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation shall, upon
the written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Price at the time in
effect with respect to Series A Preferred Stock, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of a share of Series A Preferred Stock.
(H) Notices of Record Date. In the event of any taking by the Corporation
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend which is the same as cash dividends paid in previous
quarters) or other distribution, the Corporation shall mail to each holder of
Series A Preferred Stock at least ten (10) days prior to the date specified
herein, a notice specifying the date on which any such record is to be taken for
the purpose of such dividend or distribution.
(I) Common Stock Reserved. The Corporation shall reserve and keep available
out of its authorized but unissued Common Stock such number of shares of Common
Stock as shall from time to time be sufficient to effect conversion of the
Series A Preferred Stock.
SECTION 4. Redemption.
(A) Nothing herein shall require the Corporation to redeem any of the
Series A Preferred Stock. The Series A Preferred Stock may be redeemed by the
Corporation, at the Corporation's sole election, at any time which is five (5)
years or more after the date on which such Stock was issued. If the Corporation
elects to redeem less than all of the then-outstanding Series A Preferred Stock,
it shall redeem not less than twenty percent (20%) of such Stock at any one
time. Any Series A Preferred Stock redeemed by the Corporation shall be redeemed
at a price (the "Redemption Price") of one hundred twenty percent (120%) of the
Series A Redemption Value as it is on the day immediately preceding the date of
redemption.
(B) The number of shares to be redeemed from each holder of Series A
Preferred Stock and redemptions under this Section 4 shall be the number of
whole shares determined, as nearly as practicable, to the nearest share, by
multiplying the total number of shares of Series A Preferred Stock then held by
such holder and the denominator of which is the total number of shares of Series
A Preferred Stock then outstanding.
(C) The Corporation shall give notice to each holder of Series A Preferred
Stock of the date of redemption (the "Redemption Date"), the date upon which
conversion rights terminate, the Redemption Price and the number of shares to be
redeemed, and the place where payment can be obtained at the address of such
holder shown on the Corporation's records not more than sixty (60) nor less than
thirty (30) days prior to the date on which such redemption is to be made.
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(D) For each share of Series A Preferred Stock which is to be redeemed by
the Corporation pursuant to this Section 4, the Corporation will be obligated to
pay on the Redemption Date to the holder thereof, upon surrender by such holder
at the Corporation's principal office of the certificate representing such
shares (or evidence necessary for the replacement of such certificate) duly
endorsed in blank or accompanied by an appropriate form of assignment, in an
amount equal to the Redemption Price, regardless of whether the Corporation is
legally permitted to make such payment on such redemption date (but nothing
herein will require any actual payment prior to the time that such payment may
be made without contravening applicable law). If payment of any amount of the
Redemption Price which has accrued by reason of cumulated dividends may not be
paid pursuant to applicable law, then the Corporation shall pay to the holder of
such stock the maximum amount of the Redemption Price which may be paid pursuant
to applicable law and shall pay the remainder of the Redemption Price to such
holder at the earliest time permitted by law. In case less than all shares of
Series A Preferred Stock represented by any certificate surrendered to the
Corporation are redeemed in any redemption pursuant to this Section 4, the
Corporation will issue a new certificate to the holder representing the
unredeemed stock.
(E) If the required notice of redemption has been given, no share of Series
A Preferred Stock is entitled to any dividends declared after its Redemption
Date and on such Redemption Date, all rights of the holder of such share as a
stockholder of the Corporation by reason of the ownership of such share will
cease, except the right to receive the Redemption Price of such share plus any
dividends declared, accrued or accumulated but unpaid as of the Redemption Date,
and such share will not be determined to be outstanding after such Redemption
Date. However, if the Corporation fails to pay any of the Redemption Price, the
holder of Series A Preferred Stock entitled to receive such payment will
continue to be entitled to receive dividends, dividends shall continue to
cumulate and be payable and the holder shall continue to possess all rights of a
holder of such Series A Preferred Stock until the Redemption Price is paid in
full.
SECTION 5. Voting Rights.
The holders of shares of Series A Preferred Stock shall be entitled to
cast, with respect to all matters voted on by the shareholders of the
Corporation, that number of votes which equal the number of shares (rounded to
the nearest whole share) of Common Stock into which their outstanding Series A
Preferred Stock is then convertible. A shareholder who is entitled to vote at an
election for directors may vote, in person or by proxy, the number of shares
owned by him for as many persons as there are directors to be elected and for
whose election it has a right to vote. Holders of Series A Preferred Stock shall
vote together with holders of Common Stock on all matters except for (a) those
matters upon which applicable law requires that voting shall be by class, (b)
any vote to increase or decrease the aggregate number of authorized shares of
preferred stock or alter or change the powers, preferences or special rights of
the shares of any class or series of the Corporation's stock so as adversely to
affect the Series A Preferred Stock or (c) as provided elsewhere in this
Certificate. As to the matters denominated under (b) of this Section 5, the
affirmative vote of sixty percent (60%) of the outstanding Series A Preferred
Stock shall be required.
SECTION 6. Dividend Rights.
(A) Each share of Series A Preferred Stock shall accrue a dividend from and
after the date on which it is issued in an amount equal to Ten Dollars ($10.00)
per annum (computed on the basis of four fiscal quarters per year). The
Corporation shall pay such dividends once each fiscal quarter upon such dates as
the Board of Directors from time to time shall determine. Cumulated but unpaid
dividends shall not bear interest. However, all unpaid and cumulated dividends
shall be paid.
(i) Until three years from the date of the issuance of the first share
of Series A Preferred Stock, all dividends shall be paid in additional share(s)
of Series A Preferred Stock.
(ii) From and after three years from the date of the issuance of the
first share of Series A Preferred Stock, dividends on the Series A Preferred
Stock shall be paid in cash or additional share(s) of Series A Preferred Stock
as elected by the holder thereof. Each such holder shall be deemed to have
elected to receive payment in additional shares of Series A Preferred Stock
unless such holder shall have delivered to the Corporation, or to a transfer
agent for the Series A Preferred Stock, prior to the record date for each fiscal
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quarter an election in writing to be paid a cash dividend. Each such election
shall continue until superseded by a subsequent election.
(B) Until all accrued dividends, whether or not then payable, and unpaid
dividends shall have been paid in full on the Series A Preferred Stock, the
Corporation will not declare or pay any dividend on, or make any sinking fund
payment, redemption or repurchase with respect to, any shares of any other class
of its capital stock, or directly or indirectly, through a subsidiary or
otherwise, purchase, redeem or otherwise retire or make any other distribution
in respect of any shares of any class of its capital stock, except with respect
to repurchase of shares of Common Stock in connection with termination of
employees or officers.
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BIRMAN MANAGED CARE, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS -- MAY 12, 1999
(THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY)
The undersigned stockholder of Birman Managed Care, Inc. hereby appoints Sue D.
Birman, with full power of substitution, proxy to vote all shares of stock
which the undersigned could vote if personally present at the Special Meeting
of Stockholders of Birman Managed Care, Inc. to be held at the Company's
principal executive office located at 1025 Highway 111 South, Cookeville,
Tennessee 38501, on May 12, 1999, telephone number 931-372-7800, at 9:00 a.m.
(central standard time), or any adjournment thereof.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
<PAGE> 15
PLEASE MARK YOUR
[X] VOTES AS IN THIS
EXAMPLE
PLEASE DATE, SIGN AND MAIL YOUR
PROXY CARD BACK AS SOON AS POSSIBLE
SPECIAL MEETING OF STOCKHOLDERS
BIRMAN MANAGED CARE, INC.
MAY 12, 1999
1. To authorize the non-public offering through the placement agent, Royce
Investment Group, Inc., a member of the National Association of Securities
Dealers, Inc., of 3,500 shares to 5,000 shares of its Series A 10% Senior
Convertible Preferred Stock to accredited and qualified investors who meet
the suitability standards for this offering, which may include officers and
directors of the Company.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
UNLESS OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL 1.
SIGNATURE(S) ______________________________________ DATED: ____________
NOTE: Please date and sign exactly as your name appears hereon. If shares are
held jointly, each stockholder should sign. Executors, administrators,
trustees, etc. should use full title, and, if more than one, all should
sign. If the stockholder is a corporation, please sign full corporate name
by an authorized officer.
