<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant / /
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
COMPREHENSIVE CARE
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
COMPREHENSIVE CARE
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 transactions applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:1
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
/ / 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:
- --------------------------------------------------------------------------------
- -------------------------
1Set forth the amount on which the filing fee is calculated and state how it was
determined.
<PAGE> 2
COMPREHENSIVE CARE CORPORATION ("COMPCARE")*
March , 1994
Dear CompCare Stockholder:
The Board of Directors proposes (1) a reverse stock split, (2) an
adjustment in the number of Common shares authorized and (3) a par value of one
cent ($0.01) for each reclassified share, respectively, that in the Board of
Directors' judgment are in the best interests of the Company and its
Stockholders. These proposals, and their possible advantages and disadvantages,
are described in the enclosed Proxy Statement. Each of the proposals are
recommended by your Board of Directors. Your Board will be authorized to go
forward with these proposals, that are believed to serve best the interests of
CompCare, only if a majority of the Company's outstanding shares of Common Stock
consent. It is intended that Stockholder Consents will be received on or prior
to May 6, 1994. A card is enclosed for the purpose of giving Consent.
Proposal 1 is to amend CompCare's Restated Certificate of Incorporation to
effect a reverse stock split. A reverse stock split is hoped will result in a
more active trading market in the Company's shares of Common Stock. Proposal 2
will sometimes adjust downward the number of authorized shares, but makes no
adjustment upward in the number of authorized shares. Proposal 2 is of no effect
except if Proposal 1 is approved and a reverse stock split shall have taken
place. Proposal 2 would result in lower franchise tax expense, and the Company
may experience savings of up to an estimated $87,500 per year. Proposal 3 is to
reduce the par value per share of stock to one cent ($0.01).
The Board of Directors recommends Proposal 1 because it believes that
CompCare's common shares have at the present time a relatively low market price
as compared with typical shares traded on the national securities exchanges. A
stock's low price can impair the stock's marketability to many investors. A low
price per share also creates an unfavorable impression with the investing
public. These factors can be expected to depress the price.
The Board recommends a reverse stock split because, as a consequence of the
proposed reverse stock split, there will be a decrease in the number of shares
outstanding. A decrease in number of shares outstanding should result in an
immediate increase in the price per share. An increase, as a result of a reverse
stock split, in the price per share of Common Stock may stimulate interest by
more investors in acquiring shares of Common Stock and possibly promote greater
future liquidity for Stockholders. Nevertheless there can be no assurance that
the aggregate market value of your shares after a reverse stock split will be as
great as the aggregate market value of your shares before a reverse stock split.
It is not likely that the market price of Common Stock will increase immediately
in full proportion to the reduction in shares outstanding. Favorable market
reaction may not occur or may occur after a lapse of time.
A reverse stock split will not alter your proportionate ownership interest
in CompCare. For example, if you presently own 100 shares and there were a total
of 1,000 shares outstanding, you would own 10% of the total shares outstanding.
You would continue to own 10% of the total shares outstanding immediately after
a reverse stock split. If, for example, CompCare implements a one-for-ten
reverse stock split, as intended, you would give up your 100 old shares for 10
new shares; and (because all the stockholders aggregately would give up 1,000
old shares for an aggregate of 100 new shares) there would be a total of only
100 new shares outstanding immediately after the reverse stock split.
The Board of Directors is hopeful that a reverse stock split, an adjustment
in the number of authorized shares, and a reduction in par value will help
position the Company for a more successful long-term future. Please SIGN, DATE
and MAIL the enclosed Consent card as soon as possible.
Sincerely,
/s/ CHRISS W. STREET
Chriss W. Street
Chairman of the Board of Directors
* Logo a registered trademark of Comprehensive Care Corporation. All rights
reserved.
<PAGE> 3
COMPREHENSIVE CARE CORPORATION
SOLICITATION OF CONSENT
TO THE STOCKHOLDERS:
The Board of Directors of Comprehensive Care Corporation (the "Company")
requests your consent in writing, without a meeting, for the following purposes:
1. To authorize a reverse stock split (the "Reverse Stock Split") as
described in the accompanying Proxy Statement, in which the Stockholders
surrender shares of the Company's outstanding Common Stock (sometimes
called the "Old Common Stock") and the Company will issue reclassified
shares of the Company's common stock (sometimes called the "New Common
Stock"). If the Stockholders approve, the Board of Directors will have
authority to determine the ratio of the Reverse Stock Split within a
specified range (i.e., at least a 1 for 2 ratio and not greater than a 1
for 10 ratio).
2. If Proposal 1 is approved and a Reverse Stock Split is effected, to
reclassify the Common Stock by changing the number of authorized shares
of New Common Stock to the lowest of (a) 30,000,000, (b) a number equal
to the product of five (5) times the number of shares of New Common
Stock expected to be outstanding or reserved or otherwise committed for
future issuance immediately following the Reverse Stock Split (ignoring
the effects of payment in cash in lieu of issuing fractional shares), or
(c) a lower number, in the Board's discretion, but not less than
12,500,000.
3. To reclassify the Company's shares by changing the par value of each
share of Common Stock (as reclassified sometimes called the "New Common
Stock") and of Preferred Stock (as reclassified sometimes called the
"New Preferred Stock") to one cent ($.01) per share.
Only Stockholders of record at the close of business on March 16, 1994 (the
"Record Date") are entitled to receive the accompanying Proxy Statement and
Consent card, and each Stockholder is urged to sign, date and mail the enclosed
Consent card as promptly as possible in the postage prepaid envelope enclosed to
Continental Stock Transfer & Trust Co., 2 Broadway, New York, New York 10004.
By Order of the Board of Directors,
/s/ KERRI RUPPERT
Kerri Ruppert
Secretary
March , 1994
Chesterfield, Missouri
YOUR CONSENT IS IMPORTANT
TO ENSURE YOUR CONSENT BEING COUNTED, YOU ARE REQUESTED TO COMPLETE, SIGN AND
DATE THE ENCLOSED CONSENT CARD AS PROMPTLY AS POSSIBLE AND MAIL IT IN THE
ENCLOSED ENVELOPE.
<PAGE> 4
COMPREHENSIVE CARE CORPORATION
------------------------------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND CONSENTING
GENERAL
The Board of Directors hereby requests consent from the holders of Common
Stock of Comprehensive Care Corporation (the "Company"). Please indicate your
"Consent" by signing, dating and mailing the enclosed Consent card (the
"Consent") to the Company's Stock Registrar using the pre-addressed envelope
provided for your convenience. The Company's Stock Registrar is Continental
Stock Transfer & Trust Co., 2 Broadway, New York, New York 10004, telephone
(212) 509-4000, fax (212) 509-5150.
These materials were mailed to Stockholders on or about March , 1994.
Requests for information or documents may be directed to the attention of
Ann Hiles, Corporate Administration, by telephone at (800) 678-2273 or by fax at
(314) 537-2476 or by delivery to the Company's principal executive office. The
principal executive office of the Company is located at 16305 Swingley Ridge
Drive, Suite 100, Chesterfield, Missouri 63017 and its telephone number is (314)
537-1288.
CONTENTS
In order to change the number of shares outstanding, or number of shares
authorized or the par value of any class of its stock, a corporation should
adopt an amendment of its certificate of incorporation ("Amendment"). Therefore,
each Proposal herein provides for a corresponding Amendment. The Amendment
related to each Proposal is specifically set forth in the proposed resolutions
in Exhibit B. Each Proposal will result in some form of reclassification or
change to come into effect. A change to the rights, preferences, privileges and
restrictions of stock is generally called a "reclassification." An Amendment
corresponding to each Proposal is necessary in order to effect a stock
reclassification such as the Reverse Stock Split (See Proposal 1); or the change
in the number of shares authorized (See Proposal 2); or the reduction in the par
value to one cent ($0.01) (See Proposal 3).
The General Corporation Law of Delaware prescribes that an Amendment must
be authorized by the Corporation's board, authorized by the stockholders and
certified by the principal officers and then filed with the Delaware Secretary
of State. The Company desires to file a Restated Certificate of Incorporation in
order to put each Amendment into effect and to restate the Company's certificate
of incorporation as theretofore amended and supplemented. The proposed Restated
Certificate of Incorporation is set forth in full in Exhibit A.
RECORD DATE
Stockholders of record at the close of business on March 16, 1994 (the
"Record Date") are entitled to receive this Proxy Statement and to give Consents
to the actions proposed. At the Record Date, an aggregate of 21,986,916 shares
of the Company's Common Stock, $.10 par value per share, and 0 shares of the
Company's Preferred Stock, $50.00 par value per share, were outstanding.
Therefore, only holders of Common Stock are entitled to consent on the
proposals.
REVOCABILITY OF CONSENTS
In accordance with the guidelines applicable to companies with securities
listed on the New York Stock Exchange (the "NYSE"), the Company will not use
Consents received from the Stockholders for a minimum period (the "Consent
Solicitation Period") after the date of commencing this solicitation of 30 days.
The Consent Solicitation Period as to all Proposals shall end at 5:00 o'clock
p.m. New York City time, on the later of (a) Friday, May 6, 1994 or (b) the
first date on which the Company holds a number of Consents sufficient to be used
to effect all of the actions proposed.
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<PAGE> 5
Any Consent given pursuant to this solicitation is considered revocable by
the person giving it at any time before it is used by the Company. If prior to
the end of the Consent Solicitation Period, the Company's Stock Registrar
receives a written notice of revocation of a Consent or a duly executed Consent
bearing a later date, any earlier-dated Consent will be revoked.
Under Section 228(c) of the General Corporation Law of Delaware, none of
the Consents will be effective to take the proposed actions unless Consents from
record holders of a majority of the shares of Common Stock have been received
within the 60-day period immediately following the first dated Consent received.
The Consent Solicitation Period, if not earlier ended, shall end prior to the
60th day, on a business day determined in the discretion of the Stock Registrar.
VOTING
Each share of Common Stock has one vote. There are 21,986,916 shares of
Common Stock outstanding; and for approval of each proposal consent is required
from the record holders of 10,993,459 or more shares, which is a majority of the
shares outstanding. "Disapproving" or "abstaining" on a proposal, and brokers'
indicating a "non-vote" in any other manner, all have the same effect and none
is counted as a Consent on such proposal. If a preference is not indicated on a
signed and dated Consent delivered by any Stockholder, the Consent will be
counted as FOR Proposals 1, 2 and 3.
Section 228(c) of the General Corporation Law of Delaware requires that
each Consent have a dated signature of each Stockholder who signs the Consent.
An undated Consent cannot be used. Only record holders of Common Stock may give
a Consent. The Consent card provided may be executed by the record holder or
pursuant to authority given by the record holder's written proxy. Under NYSE
Rules, NYSE member firms are not permitted to execute a Consent without written
instruction from the customer.
SOLICITATION
The Company has retained Continental Stock Transfer & Trust Co., a
full-service firm, to provide Consent or Proxy solicitation services. The cost
of soliciting Consents or Proxies will be borne by the Company at a cost of
approximately $ , plus reasonable out-of-pocket expenses.
The Company is required to undertake to reimburse, and does reimburse,
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding solicitation materials to such beneficial owners.
Consents may be solicited personally or by telephone or telegram by certain
of the Company's directors, officers and regular employees, without additional
compensation.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Proposals of Stockholders of the Company which are intended to be presented
by such Stockholders at the Company's 1994 Annual Meeting must be received by
the Company no later than July 20, 1994, in order that proposals which are
otherwise appropriate may be included in the proxy statement and form of proxy
relating to that next annual meeting.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning the beneficial
ownership of Common Stock by any beneficial holders known to the Company of at
least 5% of the Common Stock, by the directors of the Company, by the chief
executive officer and by the four (4) other executive officers who were most
highly compensated during the 1993 fiscal year and by all directors and
executive officers as a group. Such information is given as of March 16, 1994,
the Record Date. Except as otherwise indicated herein, Management does not know
of any persons who beneficially owned more than 5% of the Common Stock as of the
Record Date. The business address of each of the persons named below is that of
the Company (unless otherwise indicated). According to rules adopted by the
Securities and Exchange Commission, a person is the
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<PAGE> 6
"beneficial owner" of securities if he or she has, or shares, the power to vote
them or to direct their investment. Except as otherwise noted, the indicated
owners have sole voting and investment power with respect to shares beneficially
owned. An asterisk in the percent of common stock outstanding column indicates
beneficial ownership of less than 1% of the outstanding Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP COMMON STOCK OUTSTANDING
- ----------------------------------------------------- -------------------- ------------------------
<S> <C> <C>
William H. Boucher................................... (1) (*)
J. Marvin Feigenbaum................................. (2) (*)
Harvey G. Felsen..................................... 179,200(3) (*)
Howard S. Groth...................................... 41,000(4) (*)
Charles Moore........................................ 73,900(5) (*)
W. James Nicol....................................... 42,460(6) (*)
Robert H. Osburn..................................... 120,000(7) (*)
Michael K. O'Toole................................... 43,250(8) (*)
Norman L. Perry...................................... 273,133(9) 1.2%
Richard C. Peters.................................... 50,267(10) (*)
Chriss W. Street..................................... (11) (*)
Stephen J. Toth...................................... 20,466(12) (*)
All executive officers and directors as a group...... 854,093(13) 3.8%
</TABLE>
- -------------------------
(1) Includes shares held directly and shares subject to options which
are presently exercisable or exercisable within 60 days of the date of this
Proxy Statement.
(2) Includes shares held directly and shares subject to options which
are presently exercisable or exercisable within 60 days of the date of this
Proxy Statement.
(3) Includes 139,200 shares held directly and 40,000 shares subject to options
which are presently exercisable or exercisable within 60 days of the date
of this Proxy Statement.
(4) Includes 1,000 shares held indirectly by Stan Groth & Associates and 40,000
shares subject to options which are presently exercisable or exercisable
within 60 days of the date of this Proxy Statement.
(5) Includes 5,000 shares held directly, 28,900 shares held indirectly by
Charles Moore IRA and 40,000 shares subject to options which are presently
exercisable or exercisable within 60 days of the date of this Proxy
Statement. Mr. Moore resigned from the Board of Directors effective
February 10, 1994. Mr. Moore's business address is .
(6) Includes 564 shares held by Mr. Nicol's spouse as custodian for his three
minor children, all of whom reside with Mr. Nicol, an aggregate of 1,896
shares held by the trustee of the Company's 401(k) Plan and 40,000 shares
subject to options which are presently exercisable or exercisable within 60
days of the date of this Proxy Statement.
(7) Includes 100,000 shares held directly and 20,000 shares subject to options
which are presently exercisable or exercisable within 60 days of the date
of this Proxy Statement.
(8) Includes 3,250 shares held directly and 40,000 shares subject to options
which are presently exercisable or exercisable within 60 days of the date
of this Proxy Statement.
(9) Includes 80,000 shares held by Tree Products Enterprises, Inc. and 90,000
shares held by Tree Products Enterprises Profit Sharing Trust, both of
which are controlled by Mr. Perry; 23,133 shares held by a company for
which Mr. Perry serves as a director (beneficial ownership disclosed based
on shared voting and investment power but denied in fact); and 80,000
shares subject to options which are presently exercisable or exercisable
within 60 days of the date of this Proxy Statement. Mr. Perry resigned from
the Board of Directors effective January 12, 1994. Mr. Perry's business
address is .
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<PAGE> 7
(10) Includes 43,600 shares held directly and 6,667 shares subject to options
which are presently exercisable or exercisable within 60 days of the date
of this Proxy Statement.
(11) Includes shares held directly and shares subject to options
which are presently exercisable or exercisable within 60 days of the date
of this Proxy Statement.
(12) Includes 676 shares held directly, an aggregate of 1,873 shares held by the
trustee of the Company's 401(k) Plan and 17,917 shares subject to
outstanding options that are exercisable until October 6, 1993. Mr. Toth
resigned from all positions held by him with the Company effective July 8,
1993. Mr. Toth's business address is RehabCare Corp., 7733 Forsyth
Boulevard, Suite 1700, Clayton, Missouri 63105.
(13) Includes a total of shares subject to outstanding options that are
presently exercisable or exercisable within 60 days of the date of this
Proxy Statement.
4
<PAGE> 8
PROPOSAL 1:
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
The Board of Directors believes that it would be in the best interests of
the Company and its Stockholders for the Stockholders to give Consent as
recommended by the Board of Directors to include an amendment (the "Amendment")
in the Company's Restated Certificate of Incorporation to effect a reverse stock
split.
The intent of the Board of Directors insofar as recommending a reverse
stock split is to increase the long-term marketability and liquidity of the
Common Stock.
The Board of Directors believes that the relatively low per share market
price of the Common Stock impairs the marketability of the Common Stock to
institutional investors and members of the investing public and creates a
negative impression with respect to the Company when compared with the Company's
competitors. Thus, any increase in trading price resulting from a reverse stock
split is intended to be attractive to the financial community, the investing
public, and to consumers of the Company's products.
Theoretically, the number of shares of Common Stock outstanding should not,
by itself, affect the marketability of the Common Stock, the type of investor
who acquires it or the Company's reputation in the financial community. In
practice this is not necessarily the case, as many investors look upon low
priced stock as unduly speculative in nature and, as a matter of policy, avoid
investing in such stocks. The foregoing factors are believed to adversely affect
not only the liquidity of the Common Stock, but also the Company's ability to
raise additional capital through a sale of equity securities or other similar
transactions.
If a reverse stock split is approved by the Stockholders of the Company,
the Board will select, in its discretion, a number of shares of Old Common Stock
to be reclassified into one each (1) share of New Common Stock (the "ratio").
Its determination of the reverse-split ratio must be a whole-number ratio within
the stated limits of one-for-two and one-for-ten, both inclusive. The
Stockholders are requested to approve a Reverse Stock Split in any of the ratios
of one-for-two; one-for-three; one-for-four; one-for-five; one-for-six;
one-for-seven; one-for-eight; one-for-nine; and one-for-ten (individually the
"Reverse Stock Split" and collectively the "Reverse Stock Splits"), and the
Board can choose any one or none of these alternatives in its discretion; and
the remaining alternative Reverse Stock Splits would be abandoned by the Board
pursuant to Section 242(c) of the General Corporation Law of Delaware without
further action by the Stockholders of the Company. A Reverse Stock Split will be
effected only upon a determination by the Board of Directors that a Reverse
Stock Split is in the best interests of the Company and the Stockholders. A
Reverse Stock Split would become effective on any date (the "Effective Date")
selected by the Board of Directors occurring within the nine months after the
Consent Solicitation Period ends. If no Reverse Stock Split is effected by such
date, the Board of Directors will take action to abandon all of the Reverse
Stock Splits pursuant to Section 242(c) of the DGCL.
The Board currently expects to effect a Reverse Stock split in the ratio of
one-for-ten, and intends to re-examine that ratio in light of all relevant
requirements for supplemental listing of the New Common Stock for trading on the
NYSE. It is intended that timing be optimized in order to maximize the benefit
to the Company and its Stockholders; however, no assurance will be given that
the timing will be proper in practice. The Board of Directors is hopeful that
positive developments will occur and that the Company will achieve positive
visibility with the financial community until implementation of the Reverse
Stock Split. The Board may consider the advice of financial advisors and factors
deemed relevant by the Board, which may include but not be limited to belief as
to future marketability and liquidity of the Common Stock, prevailing market
conditions, the likely effect on the market price of the Common Stock and other
relevant factors.
EFFECTS OF THE REVERSE STOCK SPLIT
Consummation of a Reverse Stock Split will not alter the number of
authorized shares of Common Stock, which will remain at 30,000,000 shares,
unless the Stockholders approve Proposal 2. For the effect on authorized shares
if Proposal 2 is approved, see Proposal 2, below.
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<PAGE> 9
Consummation of a Reverse Stock Split will not alter the par value of
Common Stock or Preferred Stock, which will remain at $0.10 per share of Common
Stock, unless the Stockholders approve Proposal 3.
If the Reverse Stock Split takes place, a number of outstanding shares will
resume the status of authorized and unissued, and these shares will again be
available for issuance. Effective with the Reverse Stock Split, the conversion
rate of outstanding debentures and options would be adjusted proportionately so
that if a one-for-ten Reverse Stock split is effected each convertible debenture
would thereafter be convertible into one-tenth as many shares of New Common
Stock and if a one-for-two Reverse Stock Split is effected each convertible
debenture would thereafter be convertible into one-half as many shares of Common
Stock. Outstanding options to purchase Common Stock would be similarly adjusted.
Shares that are no longer necessary for issuance upon conversion or exercise
will become uncommitted or unreserved and available for future issuance or
commitment or reservation.
Proportionate voting rights and other rights of Stockholders will not be
altered by any Reverse Stock Split (other than as a result of payment in cash in
lieu of fractional shares).
Consummation of a Reverse Stock Split should have no material federal tax
consequences to most Stockholders; however, tax effects, which are especially
dependent upon a Stockholder's individual circumstances, may be material to you;
and each Stockholder must obtain his or her own tax advice; and the general
description below is not tax advice.
The Common Stock is listed for trading on the New York Stock Exchange. On
the Record Date, the reported closing price of the Common Stock on the New York
Stock Exchange was $ per share. No assurance can be made as to the future price
of New Common Stock.
The New Common Stock has not yet been approved for listing on the NYSE.
After the Stockholders approve Proposal 1, the NYSE will consider a supplemental
listing of New Common Stock after the Reverse Stock Split. Certain standards
must be met for listing the New Common Stock. The NYSE requires for the minimum
average monthly trading volume at least 100,000 shares, for the number of record
or beneficial stockholders at least 2,000, as for the number of "round-lot"
holders (i.e., 100 or more shares) to at least maintain 2,200 holders of 100
shares or more, and as for the dollar value of all shares of Common Stock held
by the non-affiliated public (the "public float") to at least maintain $18
million of public float. A reverse stock split may cause a substantial reduction
in the number of persons who hold 100 shares or more and in the volume of shares
traded. At December 31, 1993, the Company reported its public float at
approximately $17.5 million. Approval for NYSE listing of New Common Stock when
issued may require that the Company achieve positive developments sufficient to
ensure that the NYSE supplemental listing standards will be met.
If supplemental listing is not approved by the NYSE, the New Common Stock
would not trade on the NYSE. If the Board of Directors believes that to effect a
Reverse Stock Split is more important than continued listing on the NYSE, the
Board may effect a Reverse Stock Split regardless of the NYSE numerical
standards. If listing approval from the New York Stock Exchange is considered
more important than to effect the Reverse Stock Split, the Board may defer or
abandon the Reverse Stock Split notwithstanding Stockholder approval in the best
interests of the Company and its Stockholders, depending upon this and other
factors. There can be no assurance that a Reverse Stock Split will occur. The
Board of Directors presently intends to choose the maximum one-for-ten ratio, as
approved by the Board of Directors on March 7, 1994. However, the Board also may
establish the greatest lesser whole number ratio below one-for-ten reasonably
then believed by the Board to be reasonably likely to permit listing of the New
Common Stock on the NYSE when issued or based on other factors deemed relevant
in the Board's discretion.
POSSIBLE ADVANTAGES
The Board believes that a decrease in the number of shares of Common Stock
outstanding without any material alteration of the proportionate economic
interest in the Company represented by individual shareholdings may increase the
trading price of such shares and that a higher price should be more appropriate
for an exchange-listed security, although no assurance can be given that the
market price of the Common
6
<PAGE> 10
Stock will rise in proportion to the reduction in the number of shares
outstanding resulting from any Reverse Stock Split.
Additionally, the Board believes that an appropriate price for shares of
New Common Stock should promote greater interest by the brokerage community in
marketing shares of Common Stock to their customers. The current per share price
of the Common Stock may limit the effective marketability of the Common Stock
because of the reluctance of many brokerage firms and institutional investors to
recommend lower-priced stocks to their clients or to hold them in their own
portfolios. Certain policies and practices of the securities industry may tend
to discourage individual brokers within those firms from dealing in lower-priced
stocks. Some of those policies and practices involve time-consuming procedures
that make the handling of lower-priced stocks economically unattractive. The
brokerage commission on a sale of lower-priced stock may also represent a higher
percentage of the sale price than the brokerage commission on a higher-priced
issue.
Any reduction in brokerage commissions resulting from a Reverse Stock Split
may be offset, however, in whole or in part, by increased brokerage commissions
which will be required to be paid by Stockholders selling "odd lots" created by
such Reverse Stock Split.
The increase in the spread between the authorized number of shares of
Common Stock and the number of shares outstanding or committed could have an
advantage of permitting the Company to issue shares for acquisition, sale of
equity, conversion of convertible debt, and other purposes that could improve
the financial position of the Company.
If the Reverse Stock Split is approved by Stockholders, the Board will have
authority without further Stockholder approval to effect a Reverse Stock Split
of one (1) share for each outstanding ten (10) or fewer shares, corresponding to
the ratios shown in the following Table. The following Table shows the number of
shares of Common Stock that would be outstanding (based on the 21,986,916 shares
outstanding as of the Record Date) immediately after a Reverse Stock Split of
the respective ratio. The reduction of the number of shares outstanding in each
Reverse Stock Split has the inverse effect on authorized and unissued shares.
The table does not attempt to account for cashing out fractional shares.
<TABLE>
<CAPTION>
RATIO OF
REVERSE COMMON STOCK AUTHORIZED AND
STOCK SPLIT OUTSTANDING UNISSUED COMMON STOCK
- ----------- ------------ ---------------------
<S> <C> <C>
None......................................... 21,986,916 8,013,084
1 for 2...................................... 10,993,458 19,006,542
1 for 3...................................... 7,328,972 22,671,028
1 for 4...................................... 5,497,729 24,503,271
1 for 5...................................... 4,397,383 25,602,617
1 for 6...................................... 3,664,486 26,335,514
1 for 7...................................... 3,140,988 26,859,012
1 for 8...................................... 2,748,364 27,251,636
1 for 9...................................... 2,442,990 27,557,010
1 for 10..................................... 2,198,691 27,801,309
</TABLE>
Upon determination of the exact ratio of the Reverse Stock Split and the
filing of appropriate documents to effect such Reverse Stock Split, the Board
will notify Stockholders that the Reverse Stock Split has been effected. In
addition, the Board shall have authority to determine the exact timing of the
Reverse Stock Split, which may be effected at any time within nine months
following the end of the Consent solicitation. The timing will be determined on
the basis of advice to the Board from its financial advisors and will be
effected with the intention of maximizing the benefit to Stockholders and the
Company of the Reverse Stock Split.
The Board of Directors reserves the right, notwithstanding Stockholder
approval and without further action by the Stockholders, to abandon the Reverse
Stock Split, if, at any time prior to filing the Amendment with the Delaware
Secretary of State, the Board of Directors, in its sole discretion, determines
that the Reverse Stock Split is no longer in the best interests of the Company
and its Stockholders. Nevertheless, no assurance will be made that a Reverse
Stock Split, if approved, will be effected only if the circumstances are
7
<PAGE> 11
auspicious or only under favorable conditions. The Board of Directors may also
take into account any factors deemed material in the Board's discretion.
The Board of Directors believes that leaving the discretion to the Board of
Directors in these regards will permit flexibility to make an attempt to
effectuate the Reverse Stock Split in an appropriate and well-planned manner.
The Company's reporting obligations under the Securities Exchange Act of
1934 should not be affected by the changes in capitalization contemplated
pursuant to the Reverse Stock Split because no significant reduction should be
anticipated in the number of record holders of the Common Stock below its Record
Date level of approximately or, of course, below the Securities
Exchange Act of 1934's going-private threshold of fewer than 300 record holders.
POSSIBLE DISADVANTAGES
The Board of Directors is hopeful that the decrease in the number of shares
of Common Stock outstanding will stimulate interest in the Company's Common
Stock and possibly promote greater liquidity. However, the possibility does
exist that such liquidity may be adversely affected by the reduced number of
shares which would be outstanding if the proposed Reverse Stock Split is
effected.
The Board of Directors is hopeful that the proposed Reverse Stock Split
will result in a price level for the shares that will mitigate the present
reluctance, policies and practices on the part of brokerage firms referred to
above and diminish the adverse impact of trading commissions on the potential
market for the Company's shares. However, there can be no assurance that the
proposed Reverse Stock Split will achieve these desired results outlined above,
nor can there be any assurance that the price per share of the Common Stock
immediately after the proposed Reverse Stock Split will increase proportionately
with the reverse split or that any increase can be sustained for a prolonged
period of time.
In addition, the Board of Directors is hopeful that the Reverse Stock Split
can be effected in conformity with NYSE securities listing standards; however,
no assurance is possible that the Reverse Stock Split can be effected in
conformity with these standards.
Any increase in the uncommitted number or percentage of shares of Common
Stock would facilitate the anti-takeover effect of the Company's Common Stock
Purchase Rights issued pursuant to the Stockholder Rights Plan that has been in
effect since 1988. The Reverse Stock Split does not result in triggering the
rights (which the Board intends to occur only in the best interests of the
Company and its Stockholders when faced with a specific attempt to obtain
control). Management of the Company is not aware of any present efforts by any
persons to accumulate Common Stock or to obtain control of the Company. The
Amendment is being sought primarily to enhance the image of the Company and to
price the stock in a price range more acceptable to the brokerage community and
to investors generally.
The Reverse Stock Split will reduce the number of shares outstanding held
by the public (excluding the Company and all affiliates of the Company) to
between (if a one-for-ten Reverse Stock Split is effected) and
(if a one-for-two Reverse Stock Split is effected). The fewer the
publicly held shares, the lower the trading volume, the less the financial
community is likely to be interested in the shares. No assurance can be made
that a lower trading volume will not depress the Common Stock market price.
One purpose of Proposal 1 is to provide for a sufficient number of
authorized but unissued and uncommitted shares which will be available in the
event the Board of Directors determines that it is necessary and appropriate to
raise additional capital through the sale of securities in the public or private
market, enter into a strategic partnership with another company, grant options
to the Company's employees or acquire another company, business or assets, or in
other events. Common Stock would be authorized to be issued in the discretion of
the Board of Directors without Stockholder approval of each issuance. After
Proposal 1 is approved by the Stockholders, the Board does not intend to solicit
further Stockholder approval prior to the issuance of any additional shares of
Common Stock. If applicable law or regulation does not require Stockholder
approval as a condition to the issuance of such shares in any particular
transaction, it is expected that such approval will not be sought. The Company
may fund its existing obligations by raising capital
8
<PAGE> 12
through the sale or conversion of shares. Any increase in the number of shares
authorized or outstanding may depress the price of shares and impair the
liquidity of Stockholders. In addition, the issuance may be on terms that are
dilutive to Stockholders. Issuance of additional shares also could have the
effect of diluting the earnings per share and book value per share of shares
outstanding. The Company anticipates offering a reduced conversion price for a
temporary period to the holders of 7 1/2% Convertible Subordinated Debentures
Due April 15, 2010 pursuant to a voluntary reduction provision of the Indenture
under which the Convertible Debentures were issued. Although no price is
established, the Company offered such a conversion privilege in 1991, and such a
transaction is hoped to improve the Company's financial position and reduce
current interest expense.
From time to time, the Company has engaged in discussions concerning
possible acquisitions or financing arrangements. The Company may not be required
to disclose ongoing negotiations in all cases, and as a policy does not disclose
ongoing negotiations. However, except for the Board's intention to temporarily
reduce the conversion price of Convertible Debentures sometime after the Reverse
Stock Split is effected, and except for outstanding debentures and options and
option plans, there are no existing agreements or agreements in principle which
call for the issuance of any shares of Common Stock or Preferred Stock that are
not presently reserved or committed. Further, the Company has no existing
agreements or agreements in principal which call for the issuance of any shares
of Common Stock or Preferred Stock in connection with any new financing.
POTENTIAL ANTI-TAKEOVER EFFECT OF AUTHORIZED BUT UNISSUED SECURITIES AND BYLAW
PROVISION
The Reverse Stock Split results in a greater spread between the number of
authorized shares and the number of outstanding shares. The issuance of shares
of Common Stock or Preferred Stock under particular circumstances may have the
effect of discouraging an attempt to change control of the Company, especially
in the event of a hostile takeover bid. The increase in the spread between
authorized and issued (and committed) Common Stock recommended by the Board of
Directors could have the overall effect of rendering more difficult the
accomplishment of an acquisition, and to make more difficult the removal of
incumbent Management. The spread between authorized shares and outstanding (or
committed) shares might be used to the stock ownership or voting rights of
persons seeking to obtain control of the Company; and this anti-takeover effect
could benefit incumbent Management at the expense of the Stockholders. Also the
Board of Directors will continue to have broad discretion with respect to
designating and establishing the terms of each series of Preferred Stock prior
to its issuance. As mentioned above with respect to Common Stock, the Preferred
Stock may be used in connection with the acquisition of other businesses or
properties or to obtain additional financing for the Company.
The issuance of shares of Common Stock or Preferred Stock under particular
circumstances may have the effect of discouraging an attempt to change control
of the Company, especially in the event of a hostile takeover bid. The increase
in the spread between authorized and issued (and committed) Common Stock
recommended by the Board of Directors could have the overall effect of rendering
more difficult the accomplishment of an acquisition, and to make more difficult
the removal of incumbent Management. Common Stock would be authorized to be
issued in the discretion of the Board of Directors without Stockholder approval
of each issuance. The proportionate increase in the authorized number of shares
of Common Stock could have an advantage of permitting the Company to issue
shares for other purposes that could improve the financial position of the
Company. However, the proportionately larger spread of additional authorized to
outstanding (and committed) shares might be used to impair the stock ownership
or voting rights of persons seeking to obtain control of the Company; and this
anti-takeover effect could benefit incumbent Management at the expense of the
Stockholders. Issuance of additional shares also could have the effect of
diluting the earnings per share and book value per share of shares outstanding
of Common Stock. Also the anti-takeover purpose of the Company's Rights Plan
adopted April 19, 1988 may be advanced by increasing the spread of the shares
authorized over the shares outstanding. The Rights Plan commits the Company to
issue one share of Common Stock for each right in order to dilute an acquiror or
to pay the holder of each right a redemption price. In the Board of Directors'
discretion, the Rights may be redeemed for a nominal value. An additional amount
of authorized and unissued and uncommitted shares may facilitate its
anti-takeover purposes.
9
<PAGE> 13
The Company has a class of securities listed on the NYSE, and certain NYSE
rules may apply to the Company as a listed company (under the NYSE listing
agreements), which could have the effect of requiring a Stockholder vote to
approve certain issuances of Common Stock, but there can be no assurance that
Stockholders will be entitled to vote on any particular issuance.
The Company may issue new securities without first offering them to
Stockholders. The holders of Common Stock of the Company have no preemptive
rights. Preemptive rights would have given Stockholders a right to purchase pro
rata new securities issued by the Company. Preemptive rights protect such
holders from dilution to some extent by allowing holders to purchase shares
according to their percentage ownership in each issuance of new securities.
Therefore, the Company may issue its shares in a manner that dilutes current
Stockholders.
The Company's Board of Directors believe the Rights Plan to be in the best
interests of the Company and the Stockholders in that it gives the Board
discretion to temporarily delay or prevent a takeover in order to attempt to
obtain other bids or otherwise obtain or secure the greatest value for the
Stockholders. If Proposal 1 is approved (and the Reverse Stock Split ratio is 1
for 2 or more shares), the spread should be sufficient to accommodate the
issuance of shares under the Rights Plan; whereas, the authorized Common Stock
of the Company prior to the Reverse Stock Split is insufficient to issue Common
Stock on account of the Rights attached to shares of Common Stock. The Company
may be obligated to cause additional shares of Common Stock to be authorized in
order to satisfy the commitment of shares pursuant to the Rights Plan. If not,
the Rights Plan may be ineffective or may be effective only when Stockholders
bring an action successfully to require the Company to cause additional shares
of Common Stock to be authorized for such purpose. Therefore, the Reverse Stock
Split may facilitate the anti-takeover effect of the Rights Plan.
The Company has a class of Preferred Stock authorized, and might issue
Preferred Stock or Preferred Stock Purchase Rights for reasons analogous to the
reasons for issuance of Common Stock.
Others anti-takeover defenses the Company might employ include a
variable-sized Board of Directors pursuant to Article III, Section 1 of the
Bylaws of the Company. The Board of Directors consists of not more than 15 and
not fewer than 3 directors. The exact number of directors on the Board may be
fixed within the variable range either by resolution of the Board or approval of
the Stockholders. Although not intended by the Company to have an anti-takeover
effect, the authority of the Board to change the size of the Board could prevent
or make more difficult a takeover of the Company. Because the Board is
authorized under Article III, Section 1 to expand the size of the Board and to
appoint additional directors to fill vacancies resulting from such expansion,
the Board could make it more difficult for an outside party to obtain majority
representation on the Board. Expansion of the Board in such a circumstance would
also make it more difficult to remove control of the Board from the incumbent
directors. The Board does not consider the variable sized Board of Directors to
be an effective deterrent against abusive takeovers.
ACCOUNTING FOR REVERSE STOCK SPLIT
The Reverse Stock Split will cause the number of "odd-let" holders to go up
and cause the number of "round-lot" holders of the Common Stock to go down. The
number of round lot holders is a common measure of a stock's distribution, and a
lower number may reflect more negatively on the Company's shares.
Higher numbers of odd-lot holders may become reluctant to trade their
shares because of any stigma or higher commissions associated with odd-lot
trading. This may negatively impact the average trading volume and thereby
diminish interest in Common Stock by some investors and advisors.
If a Reverse Stock Split is declared, it will require that an amount equal
to the number of fewer shares issued times such shares' par value be transferred
to the Company's Surplus Account (specifically, its Capital Surplus Account) and
from its Capital Account.
The number of shares of Common Stock outstanding will be reduced. As a
consequence, the aggregate par value of the outstanding Common Stock will be
reduced, while the aggregate capital in excess of par value attributable to the
outstanding Common Stock for statutory and accounting purposes will be increased
correspondingly. The resolutions approving the Reverse Stock Splits provide that
this increase in capital in
10
<PAGE> 14
excess of par value will be treated as capital for statutory purposes. However,
under Delaware law, the Board of Directors of the Company will have the
authority, subject to various limitations, to transfer some or all of such
increased capital in excess of par value from capital to surplus, which
additional surplus could be distributed to Stockholders as dividends or used by
the Company to repurchase outstanding stock. The Company currently has no plans
to use any surplus so created to pay any such dividend or to repurchase stock
(and is prohibited from paying dividends at the present time pursuant to
existing agreements with creditors).
The following tables illustrate the principal effects of the Reverse Stock
Split to the Company's capital accounts on a pro forma basis as at :
<TABLE>
<CAPTION>
PRIOR TO AFTER 1-FOR-2 AFTER 1-FOR-5 AFTER 1-FOR-10
REVERSE STOCK REVERSE STOCK REVERSE STOCK REVERSE STOCK
NUMBER OF SHARES SPLIT SPLIT SPLIT SPLIT
- -------------------------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Common Stock
Authorized................................ 30,000,000 30,000,000 30,000,000 30,000,000
Outstanding............................... 21,986,916 10,993,458 4,397,383 2,198,691
Available for Future Issuance(1).......... 8,013,084 19,006,542 25,602,617 27,801,309
------------- ------------- ------------- --------------
Preferred Stock
Authorized................................ 60,000 60,000 60,000 60,000
Outstanding............................... 0 0 0 0
Available for Future Issuance............. 60,000 60,000 60,000 60,000
</TABLE>
<TABLE>
<CAPTION>
PRIOR TO AFTER 1-FOR-2 AFTER 1-FOR-5 AFTER 1-FOR-10
REVERSE STOCK REVERSE STOCK REVERSE STOCK REVERSE STOCK
NUMBER OF SHARES SPLIT SPLIT SPLIT SPLIT
- -------------------------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Stockholders' Equity
Common Stock, $0.10 par value............. $ 2,198,692 $ 1,099,346 $ 439,738 $219,869
Preferred Stock, $50.00 par value......... $ 0 $ 0 $ 0 $ 0
Additional Paid-in Capital................ $ $ $ $
Treasury Stock............................ $ $ $ $
Retained Earnings......................... $ $ $ $
Total Stockholders' Equity................ $ $ $ $
Book Value per common share............... $ $ $ $
</TABLE>
- -------------------------
(1) Excludes any adjustment resulting from the repurchase of fractional shares.
The Company's outstanding convertible debentures were convertible into
shares of Common Stock on the Record Date or within 60 days thereof.
If the conversion price of debentures is reduced to the market price of the
Common Stock on the Record Date, shares of Common Stock would be
issuable. The Company's outstanding options were convertible into shares of
Common Stock on the Record Date or within 60 days thereof. Under the
Company's Common Stock Purchase Rights Plan, shares are committed for
future issuance. other shares of Common Stock are reserved or
committed.
LIQUIDATION OF FRACTIONAL SHARES
At the Effective Date, each share of the Common Stock issued and
outstanding immediately prior thereto (the "Old Common Stock"), will be
reclassified as and changed into the appropriate fraction of a share of the
Company's Common Stock (the "New Common Stock"). All fractional share interests
that are not combined into whole shares will be subject to the treatment of
fractional share interests as described below. Shortly after the Effective Date,
the Company will send transmittal forms to the holders of the Old Common Stock
to be used in forwarding their certificates formerly representing shares of Old
Common Stock for (i) surrender and exchange for certificates representing whole
shares of New Common Stock and (ii) cash in lieu of any fraction of a share of
New Common Stock to which such holders would otherwise be entitled.
The Company will either deposit sufficient cash with the Exchange Agent or
set aside sufficient cash for the purchase of the above referenced fractional
interests. Stockholders are encouraged to surrender their certificates to the
Exchange Agent for certificates evidencing whole shares of the New Common Stock
and to
11
<PAGE> 15
claim the sums, if any, due them for fractional interests, as promptly as
possible following the Effective Date. No interest will accrue or be payable to
Stockholders on account of such deposit. The Company shall be entitled to
earnings, if any, on funds deposited.
Stockholders should be aware that, under the escheat laws of the various
jurisdictions where Stockholders reside, where the Company is domiciled, and
where the funds will be deposited, sums due for fractional interests that are
not timely claimed after the Effective Date may be required to be paid to the
designated agent for each such jurisdiction, unless correspondence has been
received by the Company or the Exchange Agent concerning ownership of such funds
within the time permitted in such jurisdictions. Thereafter, Stockholders
otherwise entitled to receive such funds will have to seek to obtain them
directly from the state to which they were paid.
The ownership of a fractional interest will not give the holder thereof any
voting, dividend, or other rights except to receive payment therefor as
described herein. No service charge will be payable by Stockholders in
connection with the exchange of certificates or the issuance of cash for
fractional interests, all of which costs will be borne and paid by the Company.
The number of holders of the Common Stock on the Record Date was
. The Company does not anticipate that the payment in cash in lieu
of fractional shares following any Reverse Stock Split would result in a
significant reduction in the number of such holders.
Pursuant to Section 155 of the General Corporation Law of Delaware, the
Company may arrange for the disposal of fractional interests by the Stockholders
entitled thereto or pay cash in the fair value of the fraction of a share as of
the time when those Stockholders entitled to receive such fractions are
determined. Such arrangements, if any, will only be announced when an Amendment
is filed and the Effective Date shall have been determined. A period will be set
and announced for such purpose in which brokers and nominees may advise the
Exchange Agent as to their full and fractional share requirements. Stockholders
may be required to buy or sell fractional interests (if the Exchange Agent is
set up to do so in Management's discretion) to purchase fractions to make whole
shares or to sell fractions to which entitled. If instructions are not received,
fractional interests may be sold. Costs will be paid by the Company.
FEDERAL INCOME TAX CONSEQUENCES
The following description of federal income tax consequences is based on
the Internal Revenue Code of 1986, as amended (the "Code"), the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices as in effect on the date of this Proxy
Statement. This discussion is for general information only and does not discuss
the federal income tax consequences which may apply to non-resident aliens,
broker-dealers, Stockholders who receive Common Stock in compensatory
transactions or insurance companies. This discussion does not address any
foreign, state or local tax consequences that may be relevant to the Company's
Stockholders. Accordingly, each Stockholder is urged to consult his or her own
tax advisor to determine the particular consequences to them of the Reverse
Stock Split.
The exchange of shares of Old Common Stock for shares of New Common Stock
will not result in recognition of gain or loss (except in the case of cash
received for fractional shares as described below). The holding period of the
shares of New Common Stock will include the Stockholder's holding period for the
shares of Old Common Stock exchanged therefor, provided that the shares of Old
Common Stock were held as a capital asset. The aggregate of the adjusted basis
of the shares of New Common Stock will be the same as the aggregate of the
adjusted basis of the Old Common Stock exchanged therefor, reduced by the basis
applicable to the receipt of cash in lieu of fractional shares described below.
A Stockholder who receives cash in lieu of fractional shares will be
treated as if the Company has issued fractional shares to him and then
immediately redeemed such shares for cash. Such Stockholder should generally
recognize gain or loss, as the case may be, measured by the differences between
the amount of cash received and the basis of his Old Common Stock allocable to
such fractional shares, had they actually been issued, provided that such a
redemption is not essentially equivalent to a dividend. Such gain or loss will
be
12
<PAGE> 16
capital gain or loss (if such Stockholder's Old Common Stock was held as a
capital asset), and any such capital gain or loss will generally be long-term
capital gain or loss to the extent such Stockholder's holding period for his or
her Old Common Stock then exceeds twelve months.
In the event the payment in cash for a fractional share is essentially
equivalent to a dividend, the amount received will be taxable as ordinary income
to the extent of the Company's current and accumulated earnings and profits
determined on a pro rata basis. Any amount distributed which is not a dividend
will first be applied against and reduce a Stockholder's basis in his or her
Common Stock and thereafter be treated as gain from the sale or exchange of
property.
REQUIRED VOTE
Under Delaware law, approval of the foregoing proposal requires Consent of
at least a majority of the shares outstanding of Common Stock.
MANAGEMENT RECOMMENDS A CONSENT OR VOTE FOR
PROPOSAL 1:
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT
13
<PAGE> 17
PROPOSAL 2:
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO ADJUST THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED
GENERAL
A Reverse Stock Split itself has no effect upon the number of authorized
shares of Common Stock. The Company currently has 30,000,000 authorized shares
of Common Stock. The effects of a Reverse Stock Split are described above. (See
Proposal 1)
Under the present capital structure of the Company, approximately 83% of
the authorized shares are issued or reserved for issuance, leaving approximately
17% for future issuances or commitments. The number of authorized shares
remaining unissued was on the Record Date 8,013,084 and the number of such
shares that was on the Record Date uncommitted was 0.
PURPOSE OF AMENDMENT
The Board of Directors believes that fewer shares authorized may be
advisable in order that the annual Delaware Franchise Tax payable by the Company
be lower by $50 or more per 10,000 authorized shares. The difference between
30,000,000 and 12,500,000 shares authorized would be 17,500,000. The Delaware
Franchise Tax paid by the Company each year at present rates is $87,500 higher
today than it would be if the Company effected a 1 for 10 Reverse Stock Split
and if Proposal 2 is approved by the Stockholders reducing the number of shares
of Common Stock authorized to the minimum of 12,500,000.
On the Record Date 21,986,916 of the authorized shares of Common Stock were
issued and outstanding; shares were held in the Company's treasury; at
least 367,270 are reserved for issuance upon conversion of the $9,538,000
principal amount of the Company's outstanding 7 1/2% Convertible Subordinated
Debentures Due April 15, 2010 at their regular conversion price and without
counting additional shares that would issue upon conversion at a reduced
conversion price per share (a transaction not finally approved and a reduced
conversion price not determined); approximately 950,000 shares are reserved or
committed for future issuance under the Company's 1988 Incentive Stock Option
Plan and Nonqualified Stock Option Plan (the "1988 Plan"); and approximately
1,030,000 shares were reserved for issuance upon exercise of outstanding
nonqualified options granted outside the 1988 Plan. The aggregate of shares
issued and shares reserved or committed for future issuance is 1,980,000.
Another approximately 23,967,000 shares of Common Stock are committed for
issuance under the Company's Common Stock Purchase Rights Plan. There are
relatively few additional shares available for issuance by the Company at the
present time.
EFFECT OF AMENDMENT
The principal purpose and effect of this proposed amendment (the
"Amendment") to the Company's Restated Certificate of Incorporation will be to
provide for an adjustment in the number of authorized shares of Common Stock.
Proposal 2 is conditioned upon the approval of Proposal 1. The effect of
Proposal 2 will depend upon the ratio of the Reverse Stock Split.
If the Reverse Stock Split is effected, and there is no change in the
number of authorized shares pursuant to Proposal 2, there will be an automatic
decrease in the number of outstanding, reserved or committed shares, and thereby
an inverse increase in the number of authorized but unissued shares which will
be available for future issuance or commitment.
Assuming a one-for-ten Reverse Stock Split, the number of authorized but
unissued, unreserved and uncommitted shares would increase from approximately 5
million to 27.5 million, or approximately to 91 2/3% of the total Common Stock
authorized.
The Board of Directors believes that it is advisable in connection with the
proposed Reverse Stock Split to have afterward a greater authorized capital
available for future issuances and commitments. One of the reasons the Board of
Directors recommends Proposal 2, however, is that if Proposal 1 is approved and
if the
14
<PAGE> 18
Reverse Stock ratio is 1 for 5, the spread between the outstanding (and
committed) and the number of authorized shares will be increased more than
sufficiently in the Board's present opinion to accommodate possible use of the
Rights Plan and all other likely purposes and the Board of Directors feels that
a reduction of authorized shares can therefore be accomplished in order to
reduce taxes and fees related to authorized capital that the Company incurs in
Delaware.
The Board of Directors proposes an Amendment to be included in the Restated
Certificate of Incorporation to set the number of shares of Common Stock
authorized from and after the Effective Date to the lowest as of the Effective
Date of (a) 30,000,000, (b) a number equal to the product of five (5) times the
number of shares of New Common Stock expected to be outstanding or reserved or
otherwise committed for future issuance immediately following the Reverse Stock
Split (ignoring the effects of payment in cash in lieu of issuing fractional
shares), or (c) a lower number, in the Board's discretion, but not less than
12,500,000. Assuming a one-for-ten reverse stock split, and 2,500,000 or fewer
shares anticipated to be outstanding, reserved or committed (excluding
commitments under the Rights Plan) immediately thereafter, the Amendment would
require the number of authorized shares to be not more than 12,500,000 shares
because 5 times 2,500,000 outstanding or committed shares equals 12,500,000.
While the proposed Amendment will reduce the spread between the authorized
and the outstanding (or committed), the spread after the Reverse Stock Split and
proposed change in authorized shares will nevertheless be proportionately higher
than was the spread between the authorized shares and the shares outstanding (or
committed) prior to the Reverse Stock Split. Taking the same example of a 1 for
10 Reverse Stock Split, despite a decrease of the authorized Common Stock to
12,500,000 shares if Proposal 2 is approved, the spread between the outstanding
(or committed excluding commitments under the Rights Plan) shares and the total
authorized shares will increase from approximately 17% to 80% of the total
authorized Common Stock. Assuming a 1 for 10 Reverse Stock Split, 12,500,000
shares authorized after the split and approximately 2,500,000 shares issued (or
committed excluding commitments under the Rights Plan) would be proportionally
equivalent to having 125,000,000 authorized shares compared with the current
approximately 25,000,000 issued (or committed excluding commitments under the
Rights Plan) shares of Common Stock.
The following Table illustrates the effects on total authorized shares, and
on the uncommitted (excluding commitments under the Rights Plan) and unissued
shares, of Common Stock assuming the Reverse Stock Split takes effect and
Proposal 2 is approved:
<TABLE>
<CAPTION>
RATIO OF (A) (B) (C)
REVERSE COMMON STOCK COMMON STOCK PERCENT OF AUTHORIZED
STOCK SPLIT AUTHORIZED UNISSUED AND UNCOMMITTED REPRESENTED BY COL. (B)
- --------------------------------- ------------ ------------------------ -----------------------
<S> <C> <C> <C>
None............................. 30,000,000 5,000,000 17%
1 for 2.......................... 30,000,000 17,500,000 58%
1 for 3.......................... 30,000,000 21,666,666 72%
1 for 4.......................... 30,000,000 23,750,000 79%
1 for 5.......................... 25,000,000 20,000,000 80%
1 for 6.......................... 20,833,333 16,666,664 80%
1 for 7.......................... 17,857,140 14,285,712 80%
1 for 8.......................... 15,625,000 12,500,000 80%
1 for 9.......................... 13,888,885 11,111,108 80%
1 for 10......................... 12,500,000 10,000,000 80%
</TABLE>
If Proposal 2 is not approved and the Reverse Stock Split is effected, the
number of authorized shares shall continue to be 30,000,000, which would result
in even larger numbers of unissued and uncommitted shares and even larger
percentages of the authorized shares being represented by the unissued and
uncommitted shares. Assuming a 1 for 10 Reverse Stock Split, the spread between
the outstanding (or committed excluding commitments under the Rights Plan)
shares and the total authorized shares will increase from 17% to 92%. 30,000,000
shares would be authorized after the split and approximately 2,500,000 shares
would be issued (or committed excluding commitments under the Rights Plan); and
this would be
15
<PAGE> 19
proportionally equivalent to having 300,000,000 authorized shares compared with
the current approximately 25,000,000 issued (or committed excluding commitments
under the Rights Plan) shares of Common Stock.
REQUIRED VOTE
Under Delaware law, approval of the foregoing proposal requires Consent of
at least a majority of the shares outstanding of Common Stock. If Proposal 1 is
not also approved, approval of Proposal 2 will be of no force or effect.
MANAGEMENT RECOMMENDS A CONSENT OR VOTE FOR
PROPOSAL 2:
THE AMENDMENT OF THE COMPANY'S CERTIFICATE OF INCORPORATION TO ADJUST
THE NUMBER OF SHARES OF COMMON STOCK AUTHORIZED
16
<PAGE> 20
PROPOSAL 3:
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO DECREASE THE PAR VALUE OF EACH SHARE OF
COMMON STOCK AND PREFERRED STOCK
GENERAL
The par value of each share of the Common Stock of the Company is $.10; and
the par value of each share of the Preferred Stock is $50.00. The Board of
Directors proposes that the par value of each share of each of the Common Stock
and Preferred Stock be reduced to one cent ($.01), thereby reducing the
Company's stated capital.
The Board of Directors proposed to reduce the par value for reasons include
reducing the Company's obligations for taxes and charges levied by the various
jurisdictions on the basis of aggregate par value of a corporation's shares.
Certain states and jurisdictions impose taxes and other charges on the basis of
stated capital, i.e., aggregate par value of shares.
Under Generally Accepted Accounting Principles ("GAAP"), the Company
financial statements reflect Total Stockholders' Equity of $10,447,000
approximately at November 30, 1993 (unaudited) and approximately $12,951,000 at
May 31, 1993 (audited). The Total Stockholders Equity includes Common Stock's
"stated capital" of approximately $2,199,000 on November 30, 1993 (unaudited)
and approximately $2,199,000 on May 31, 1993 (audited). If the stated capital is
the product of the par value of one (1) share times the number of shares issued,
then reducing the number of shares issued (See Proposal 1) and reducing the par
value of each one (1) share will reduce stated capital. This should yield a cost
savings in taxes and fees based on the stated capital. Also, this should
increase the Additional Paid-In Capital account one dollar for every one dollar
that stated capital is reduced. Additional Paid-In Capital can be distributed to
Stockholders as dividends, whereas stated capital is restricted against being
distributed to Stockholders.
WHAT IS PAR VALUE STOCK?
As a general rule, corporations are allowed to issue their stock either
with or without par value. When a corporation is initially formed, its
certificate of incorporation will state whether or not its stock will be issued
with a par value. The par value of a share of stock is simply an amount fixed as
the nominal value of the Stockholder's interest in such share of stock.
Historically, par value was intended to represent the sum of money or value of
property or services which was supposed to have been contributed to the
corporation in exchange for each share in the corporation's ownership. The par
value of the authorized capital stock historically also indicated the minimum
level of capital available to creditors of a corporation and a corresponding
prohibition against payment of certain dividends to Stockholders.
Today, par value means very little, other than from an accounting and state
corporation law perspective. State corporation law generally provides that a
corporation's stock may not be originally sold by the corporation for less than
its par value. However, there may be a significant difference between the par
value of a corporation's stock and the actual amount at which such stock may
originally be sold or the price at which such stock may be traded at a later
date. Nevertheless, although there may be little or no relationship between a
stock's par value and its current value, state corporation law requires that
certain procedures be followed if a corporation's stock carries with it a stated
par value.
DISTINGUISH CAPITAL ACCOUNT AND SURPLUS ACCOUNT
In order to understand the Board's proposal for a change in the par value
of the Company's common stock, a Stockholder should understand two terms.
The first term, "Capital Account" represents the number of shares of a
corporation's stock outstanding at any point in time, multiplied by such stock's
par value amount. For example, 21,986,916 shares of the Company's common stock
issued at March 16, 1994 (at a $0.10 per share value) would generate a Capital
Account equal to $2,198,692. The second term, "Surplus Account," is the amount
of a corporation's "net
17
<PAGE> 21
assets" in excess of its Capital Account. For this determination, the term net
assets means the amount by which the corporation's total assets exceeds its
total liabilities. For example, the Company's total assets of approximately
$39,273,000 at November 30, 1993, less its total liabilities (excluding capital)
of approximately $28,826,000, would yield net assets approximately equal to
$10,447,000. This amount of net assets less the Company's Capital Account of
$2,198,692, would yield a Surplus Account as of November 30, 1993 of
approximately $8,248,000.
Note also that the sum of a corporation's Capital Account and its Surplus
Account equals what is commonly referred to as the corporation's Total
Stockholders' Equity. The following chart demonstrates the relationship between
these various accounts and shows the accounting effect of a change in the
Company's Par Value per share of New Common Stock and New Preferred Stock.
<TABLE>
<CAPTION>
PRO FORMA AMOUNT
WITH CHANGE
COMPANY AMOUNT ON IN PAR VALUE TO
ACCOUNT NOVEMBER 30, 1993 $0.01 PER SHARE HOW DERIVED
- ------------------------------------ ----------------- ---------------- --------------------------
<S> <C> <C> <C>
Number of shares
outstanding times par
Capital Account..................... $ 2,198,692 $ 219,869 value per share
Company net assets in
Surplus Account*.................... 8,248,000 10,227,000** excess of Capital Account
----------------- ----------------
Sum of Capital Account and
Total Stockholders' Equity.......... $10,447,000 $ 10,447,000 Surplus Account
</TABLE>
- -------------------------
* For purposes of General Accepted Accounting Principals (GAAP), the Surplus
account is further segregated into Additional Paid-In Capital, which is a
"Capital Surplus" type of Account, and a "Retained Earnings (Accumulated
Deficit)" Account. A Capital Surplus Account represents the excess of amounts
paid for the stock over its stated par value, and may also include amounts
transferred from a Retained Earnings Account when a stock dividend is issued.
A Retained Earnings Account represents net income (loss) over a life of a
corporation less all income distributions. On November 30, 1993, the
Company's Additional Paid-In Capital and Retained Earnings (Accumulated
Deficit) Accounts were, respectively, approximately $37,883,000 (unaudited)
and ($29,635,000) (unaudited). For purposes of state corporation law, the sum
of these two amounts equals the Company's Surplus Account of $8,248,000.
** With a change in the Company's Common Stock Par Value from $0.10 per share to
$0.01 per share, the Company's Capital Surplus Account (see footnote above)
would be increased by $1,978,823 from approximately $8,248,000 to
approximately $10,227,000. There would be no change in the Company's Retained
Earnings Account, nor would there be any change in the Company's Total
Stockholders' Equity.
POSSIBLE ADVANTAGES
State taxes and qualification fees may be levied based on a corporation's
stated capital. These kinds of costs can be reduced by reducing aggregate par
value.
State corporation law also distinguishes between the Company's Capital
Account and Surplus Account, and restricts only the Capital Account, for two
purposes: (1) determining the source from which funds may be drawn for the
purchase or redemption by the Company of shares outstanding, and (2) determining
the source from which cash dividends and stock dividends may be paid and stock
splits declared to the Company's Stockholders on their shares outstanding.
Note that cash dividends involve an actual monetary payment to a
stockholder based on his ownership of Company Common Stock. In contrast, the
payment of a stock dividend or the declaration of a stock split involves the
issuance of additional shares of Company Common Stock to a Stockholder based on
ownership of Common Stock. Thus, the payment of a stock dividend or the
declaration of a stock split will merely increase the number of shares of Common
Stock issued and outstanding but will not increase the total capitalization of
the Company (i.e., there will be no change in Total Stockholders' Equity). Nor
will the payment of a stock
18
<PAGE> 22
dividend or the declaration of a stock split increase any Stockholder's
ownership percentage in the Common Stock. Throughout this discussion, the
Stockholder should keep in mind the distinction between the payment of cash
dividends and the payment of stock dividends or the declaration of stock splits.
The Company has no present intention of effecting a future repurchase or
redemption. Although the Company contemplates both the declaration of stock
splits and the issuance of stock dividends on its Common Stock in the future, it
currently has no anticipation of either the declaration of a stock split or the
issuance of a stock dividend. However, if the Company should in the future
declare either a stock split or issue a stock dividend, dollar amounts have to
be transferred from the Company's Surplus Account to its Capital Account. The
Stockholder should understand how this need to transfer dollar amounts could
limit the ability of the Company to declare a stock split or issue a stock
dividend.
If the Company declares a stock split, it will transfer an amount equal to
the number of additional shares issued times each share's par value from the
Company's Surplus Account (specifically, its Capital Surplus Account) to its
Capital Account. If the Company declares a stock dividend, then the amount
transferred from the Company's Surplus Account (specifically, from its Retained
Earnings Account) will be equal to the difference between the fair market value
of the stock dividends and such new shares' par value. Thus, when a stock
dividend is declared, an amount equal to the aggregate par value of all new
shares issued pursuant to the stock dividend will be transferred to the
Company's Capital Account. Any excess of such new stock's fair market value over
its par value will be transferred to the Company's Capital Surplus Account.
The need to transfer amounts from the Surplus Account can create
difficulties when the Company declares a stock split or issues a stock dividend
because the Company's Common Stock carries a $0.10 par value and the Company has
a limited dollar amount in its Surplus Account. As of November 30, 1993, the
Company's Surplus Account equaled approximately $8,248,000. This amount could be
depleted if future stock splits were declared or stock dividends were issued. In
such cases, the ability of the Company to declare stock splits or issue stock
dividends would be limited potentially.
For these reasons, the Board is asking that Stockholders ratify a change in
the par value of the Company's Common Stock and Preferred Stock from $0.10 and
$50.00, respectively, per share to $0.01 per share in each case.
This change will provide the Company better flexibility in its future
efforts to meet its Stockholders' needs through the occasional declaration of
stock splits and the issuance of stock dividends.
It should also be stressed that the change in par value will have
absolutely no effect on the value of each share of the Company's Common Stock.
Nor will the change have any effect on the dollar amount of the Company's Total
Stockholder's Equity.
POSSIBLE DISADVANTAGES
As discussed above, par value has relevance only with respect to certain
state corporation law procedural requirements.
The Company cannot originally issue shares of Common Stock at a price less
than the stated par value. By reducing par value, the Amendment would also be
reducing the lowest possible price for which the Company's fully-paid shares may
be sold by the Company. There can be no assurance that the Company will not at
some future time have an issuance of shares for a price per share below the
present par value of $0.10.
REQUIRED VOTE
Under Delaware law, approval of the foregoing proposal requires Consent of
at least a majority of the shares outstanding of Common Stock.
19
<PAGE> 23
MANAGEMENT RECOMMENDS A CONSENT OR VOTE FOR
PROPOSAL 3:
AMENDMENT TO CERTIFICATE OF INCORPORATION
TO DECREASE THE PAR VALUE OF EACH SHARE OF
COMMON STOCK AND PREFERRED STOCK
MARKET FOR THE COMPANY'S COMMON STOCK
The Company's Common Stock is traded and listed on the NYSE under the
symbol "CMP." The table below summarizes the high and low closing sales prices
based on actual trades on the NYSE by fiscal quarter for the complete fiscal
quarters indicated.
<TABLE>
<CAPTION>
CLOSING PRICE ON NYSE
--------------------------
HIGH LOW
---------- ----------
<S> <C> <C>
JUNE 1, 1993 -- NOVEMBER 30, 1993
Second.................................... $ $
First..................................... $ $
JUNE 1, 1992 -- MAY 31, 1993
Fourth.................................... $ $
Third..................................... $ $
Second.................................... $ $
First..................................... $ $
JUNE 1, 1991 -- MAY 31, 1992
Fourth.................................... $ $
Third..................................... $ $
Second.................................... $ $
First..................................... $ $
</TABLE>
The closing price of the Common Stock was $ on the Record Date.
The number of holders of record of Common Stock of the Company as of the
Record Date was approximately . If effected, the Reverse Stock Split should
not result in a significant reduction of the number of Stockholders of the
Company, although the Company may choose to engage in a repurchase of odd lot
stock holdings subsequent to the Reverse Stock Split which may result in such a
reduction. The number of "even lot" holders may decrease. The number of "even
lot" holders of an issuer's stock as a result of a Reverse Stock Split may be
unpredictable. The trading volume may depend more on trading by even lot holders
than on trading by odd lot holders. The Company has no present intention to
cause the number of Stockholders to decrease; and notwithstanding the present
intention, the acts of the Company in the future may directly or indirectly
cause such decrease, and such a decrease could impair the trading market in the
Company's shares.
Holders of New Common Stock will continue to be entitled to receive such
dividends as may be declared by the Board of Directors. To date no dividends on
the Common Stock have been paid by the Company and the Company's bank loan and
other similar agreements now, or in the future may, prohibit the payment of
dividends.
It is intended that the New Common Stock will be listed on the NYSE when
issued. The Company does not intend to effect a reclassification that impairs
the existing listing status of Old Common Stock or the intended listing of
reclassified New Common Stock.
EXCHANGE OF STOCK CERTIFICATES
Continental Stock Transfer & Trust Co. will act as the Company's exchange
agent (the "Exchange Agent") to act for holders of Old Common Stock in
implementing the exchange of their certificates. Do not send stock certificates
until you receive a notice requesting you to transmit them to the Exchange
Agent.
If the proposals are approved by Stockholders and the Company files the
Amendment, the Amendment will become effective on the date therein specified as
the effective date of such filing (the "Effective Date").
20
<PAGE> 24
After the Amendment is filed, but before or after the Effective Date,
Stockholders will be notified and requested to surrender their certificates
representing shares of Old Common Stock to the Exchange Agent in exchange for
certificates representing New Common Stock. Beginning on the Effective Date,
each certificate representing shares of the Company's Old Common Stock will be
deemed for all corporate purposes to evidence ownership of a proportionate
number of shares of New Common Stock and a right to payment in cash for
fractional interests.
BOARD OF DIRECTORS' DISCRETION AND RESERVATION OF RIGHTS
The Board of Directors reserves the right, notwithstanding Stockholders'
approval and without further action by the Stockholders, to elect not to proceed
with any of the proposed actions, if at any time prior to filing the Company's
Restated Certificate of Incorporation with the Secretary of State of the State
of Delaware, the Board of Directors, in its sole discretion determines that the
proposed action is no longer in the best interests of the Company and its
Stockholders. Pursuant to Section 242(c) of the General Corporation Law of
Delaware, the reservation by the Board of Directors of this right to abandon a
proposed amendment of the Company's Certificate of Incorporation is set forth in
the resolutions adopting the Amendments.
Under each of the Proposals, the Board reserves the right to delay the
filing of the Amendment for up to nine months following the receipt of a
sufficient number of Stockholder Consents to approve the Amendment. Also under
Proposal 1, if approved by the stockholders, the Board of Directors will have
authority to determine the exact amount of the Reverse Stock Split within the
range of from one share of New Common Stock for each ten shares outstanding of
Old Common Stock to one share of New Common Stock for each two shares
outstanding of Old Common Stock. Also under Proposal 2, if approved by the
stockholders, the Board of Directors will have authority to determine the exact
number of authorized shares of New Common Stock up to the lowest of (a)
30,000,000, (b) five (5) times the number of shares outstanding, reserved or
otherwise committed for issuance as of immediately following the Reverse Stock
Split, or (c) a lower number in the Board of Directors' discretion.
The Board of Directors also retains the authority to take or to authorize
discretionary actions as may be appropriate to carry out the purposes and
intentions of the proposed actions.
NO DISSENTERS' RIGHTS
Under Delaware law, Stockholders are not entitled to dissenter's rights of
appraisal with respect to the proposed amendment to the Company's Restated
Certificate of Incorporation under any of the Proposals.
INCORPORATION BY REFERENCE
Provided herewith, for the purpose of providing Stockholders with
substantially the financial information that Item 13 of Schedule 14A under the
Securities Exchange Act identifies, are the Company's Annual Report to
Stockholders related to the fiscal year ended May 31, 1993, and the Company's
Current Reports on Form 10-Q for the fiscal quarters ended August 31, 1993 and
November 30, 1993. Only the financial statements and the Management's Discussion
and Analysis of each such document are incorporated herein.
MANAGEMENT RECOMMENDS A CONSENT OR VOTE FOR PROPOSALS 1, 2 AND 3.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Kerri Ruppert
Kerri Ruppert
Secretary
March , 1994
Chesterfield, Missouri
21
<PAGE> 25
COMPREHENSIVE CARE CORPORATION
EXHIBIT INDEX
PRELIMINARY PROXY STATEMENT
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- --------------------------------------------------------------------- ------------
<S> <C> <C>
10.49 Restated Certificate of Incorporation of Comprehensive Care
Corporation
(filed herewith).
10.50 Proposed Stockholder Resolutions of Comprehensive Care Corporation
(filed herewith).
</TABLE>
<PAGE> 26
(FORM OF FRONT OF CARD)
COMPREHENSIVE CARE CORPORATION
CONSENT
CONSENT IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. The Board of Directors
of Comprehensive Care Corporation RECOMMENDS CONSENT on every proposal.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THIS CONSENT CARD.
Stockholders are urged to mark, sign, date and mail promptly this Consent card
in the envelope provided. Consents must be received at the address of the Stock
Registrar by 5:00 p.m. New York City time, on Friday, May 6, 1994, unless the
deadline is extended without further notice.
THIS CONSENT CARD IS INTENDED TO OBTAIN CONSENT; AND THIS CARD SHALL BE DEEMED
TO INDICATE A CONSENT IF NOT INDICATED TO THE CONTRARY.
EACH CONSENT MUST BE SIGNED AND DATED.
Sign exactly as addressed to you. Joint owners should each sign. If signing as
executor, administrator, attorney, trustee, or guardian, give title as such. If
a corporation, sign in full corporate name by authorized officer. If a
partnership, sign in the name of authorized person. Please do not forget to SIGN
and DATE this Consent card.
<PAGE> 27
(FORM OF BACK OF CARD)
PLEASE INDICATE APPROVAL BELOW to include an amendment in the Company's Restated
Certificate of Incorporation that will result in a reclassification of the
Company's shares such that
PROPOSAL 1: ( ) APPROVE ( ) DISAPPROVE ( ) ABSTAIN
Proposal 1. REVERSE STOCK SPLIT. ... at the Effective Time each one (1) share
outstanding of Common Stock, par value $0.10, shall be and become a fraction of
one (1) validly-issued, fully-paid and non-assessable share of the Company's
reclassified common stock. The numerator of such fraction shall be equal to one
(1) and the Board of Directors shall determine the denominator thereof which
shall be any whole number within the range of two (2) through ten (10), both
inclusive. The form of Restated Certificate of Incorporation in Exhibit A is
hereby approved, including the incidental changes contemplated therein. The
recitals and resolutions, including the incidental changes contemplated therein,
in Exhibit B related to Proposal 1 in the Proxy Statement are hereby approved.
PROPOSAL 2: ( ) APPROVE ( ) DISAPPROVE ( ) ABSTAIN
Proposal 2. NUMBER OF SHARES AUTHORIZED. ... at and after the Effective Time the
number of shares of the Company's reclassified common stock which the Company
shall be authorized to issue shall be equal to the product of five (5) times the
number of shares outstanding or reserved or otherwise committed for future
issuance of New Common Stock expected to be outstanding immediately following
the Reverse Stock Split (ignoring the effects of payment in cash in lieu of
issuing fractional shares) or 30,000,000, whichever is less (or any lower number
in the Board's discretion but not less than 12,500,000). The form of Restated
Certificate of Incorporation in Exhibit A is hereby approved, including the
incidental changes contemplated therein. The recitals and resolutions, including
the incidental changes contemplated therein, in Exhibit B related to Proposal 2
in the Proxy Statement are hereby approved. Proposal 2 is conditional upon
Proposal 1 being approved and a Reverse Stock Split being effected.
PROPOSAL 3: ( ) APPROVE ( ) DISAPPROVE ( ) ABSTAIN
Proposal 3. PAR VALUE PER SHARE. ... at the Effective Time the par value per one
(1) validly-issued, fully-paid and non-assessable share of the Company's
reclassified common stock shall be one cent ($0.01); and the par value per one
(1) validly-issued, fully-paid and nonassessable share of the Company's
reclassified preferred stock shall be one cent ($0.01). The form of Restated
Certificate of Incorporation in Exhibit A is hereby approved, including the
incidental changes contemplated therein. The recitals and resolutions, including
the incidental changes contemplated therein, in Exhibit B related to Proposal 3
in the Proxy Statement are hereby approved.
SIGNATURE(S)
- ------------------------------------------
- ------------------------------------------
Date: , 1994
<PAGE> 1
EXHIBIT 10.49
RESTATED CERTIFICATE OF INCORPORATION
OF
COMPREHENSIVE CARE CORPORATION
(ORIGINALLY INCORPORATED UNDER THE NAME NEURO-PSYCHIATRIC & HEALTH SERVICES,
INC.)
(ORIGINAL CERTIFICATE OF INCORPORATION FILED JANUARY 28, 1969)
COMPREHENSIVE CARE CORPORATION, a corporation duly organized and existing
under the General Corporation Law of Delaware (the "corporation"), does hereby
certify as follows:
1. The following provisions of the Restated Certificate of Incorporation of
the Corporation, shall be and become the certificate of incorporation of the
corporation effective at 9:00 o'clock a.m. on , 199 [to be completed
prior to filing with a date not later than the 90th day after the date of filing
of this instrument with the Delaware Secretary of State chosen in the discretion
of the officers filing this instrument] (the "Effective Time"), and shall be
amended and restated to read in its entirety as follows:
FIRST. The name of the corporation is
COMPREHENSIVE CARE CORPORATION
SECOND. Its registered office in the State of Delaware is located at
32 Loockerman Square, Suite L-100, in the City of Dover, County of Kent.
The name and address of its registered agent are The Prentice-Hall
Corporation System, Inc., 32 Loockerman Square, Suite L-100, Dover,
Delaware 19901.
THIRD. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH. The corporation shall have authority to issue two classes of
shares of stock to be designated, respectively, "Preferred Stock" and
"Common Stock." The total number of shares which the corporation shall have
authority to issue is ( )" [if Proposal 2 is not approved, to
be completed with "thirty million sixty thousand (30,060,000)" or, if
Proposal 2 is approved, to be completed based on the sum of 60,000
authorized preferred shares and the number of authorized common shares as
completed below]. The total number of shares of Preferred Stock which the
corporation shall have authority to issue shall be sixty thousand (60,000);
and each such share shall have a par value of ( ) to be
completed with "one cent ($0.01)" if Proposal 3 is approved and otherwise
with "fifty dollars ($50.00)"]; and the total number of shares of Common
Stock which the Corporation shall have authority to issue shall be
( ) [if Proposal 2 is not approved, to be completed with "thirty
million (30,000,000)"; and if Proposal 1 and Proposal 2 are approved, to be
completed with the product of five (5) times the number of shares expected
to be outstanding after the Reverse Stock Split or 30,000,000, whichever is
less (or any lower number in the Board's discretion).]
Simultaneously with the Effective Date, each share of the Company's
Common Stock, par value $0.10 per share, issued and outstanding immediately
prior to the Effective Date (the "Old Common Stock") shall automatically
and without any action on the part of the holder thereof be reclassified as
and changed into one-x (1/x) [x is to be completed with a whole number in
the range of two (2) through ten (10), both inclusive, hereafter approved
by the Board of Directors] of a share of the Company's Common Stock, par
value [to be completed as provided above] per share (the "New Common
Stock"), subject to the treatment of fractional share interests as
described below. Each holder of a certificate or certificates which
immediately prior to the Effective Date represented shares outstanding of
Old Common Stock (the "Old Certificates," whether one or more) shall be
entitled to receive upon surrender of such Old Certificates to the
Company's Transfer Agent for cancellation, a certificate or certificates
(the "New Certificates," whether one or more) representing the number of
whole shares of the New Common Stock into which and for which the shares of
the Old Common Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof. From and after the
Effective
1
<PAGE> 2
Date, Old Certificates shall represent only the right to receive New
Certificates (and, where applicable, cash in lieu of fractional shares, as
provided below) pursuant to the provisions hereof. No certificates or scrip
representing fractional share interests in New Common Stock will be issued,
and no such fractional share interest will entitle the holder thereof to
vote, or to any rights of a stockholder of the Company. A holder of Old
Certificates shall receive, in lieu of any fraction of a share of New
Common Stock to which the holder would otherwise be entitled, a cash
payment therefor on the basis of the closing price of the Old Common Stock
on the New York Stock Exchange on the Effective Date, as reported on the
composite tape of the New York Stock Exchange, Inc. (or in the event the
Company's Common Stock is not so traded on the Effective Date, such closing
price on the next preceding day on which such stock was traded on the New
York Stock Exchange). If more than one Old Certificate shall be surrendered
at one time for the account of the same Stockholder, the number of full
shares of New Common Stock for which New Certificates shall be issued shall
be computed on the basis of the aggregate number of shares represented by
the Old Certificates so surrendered. In the event that the Company's
Transfer Agent determines that a holder of Old Certificates has not
tendered all his certificates for exchange, the Transfer Agent shall carry
forward any fractional share until all certificates of that holder have
been presented for exchange such that payment for fractional shares to any
one person shall not exceed the value of one share. If any New Certificate
is to be issued in a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so surrendered
shall be properly endorsed and otherwise in proper form for transfer, and
the person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or provide
funds for their purchase, or establish to the satisfaction of the Transfer
Agent that such taxes are not payable. From and after the Effective Date
the amount of capital represented by the shares of the New Common Stock
into which and for which the shares of the Old Common Stock are
reclassified under the terms hereof shall be the same as the amount of
capital represented by the shares of Old Common Stock so reclassified,
until thereafter reduced or increased in accordance with applicable law.
Each share of Common Stock shall be entitled to one vote at all
meetings of Stockholders of the corporation and, subject to the rights of
the holders of Preferred Stock, shall be entitled to receive dividends,
when and as declared by the Board of Directors of the corporation.
The following is a statement of the powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, of the
respective classes of stock, and a statement of the authority vested in the
Board of Directors of this corporation to adopt a resolution or resolutions
from time to time providing for the issue of such stock and making
provision for such matters:
1. Except as otherwise provided in the resolution or resolutions of the
Board of Directors adopted pursuant to paragraphs (4) and (5) of this
Article FOURTH, each share of Common Stock shall entitle the holder
thereof to one vote, provided that at all elections of directors of
this corporation each stockholder shall be entitled to as many votes
as shall equal the number of votes which (except for this provision)
he would be entitled to cast for the election of directors with
respect to his shares of stock multiplied by the number of directors
to be elected, and he may cast all of such votes for a single director
or may distribute them among the number to be voted for, or any two or
more of them, as he may see fit.
2. Subject to any preferential dividend rights of the holders of
Preferred Stock determined as provided in paragraph (6) of this
Article FOURTH, the holders of Common Stock shall be entitled to
receive dividends out of any funds of the corporation legally
available therefor, when and as declared by the Board of Directors.
3. In the event of any dissolution of, or upon any distribution of the
assets of, this corporation, subject to all of the preferential
rights, if any, of the holders of Preferred Stock, the holders of the
Common Stock shall be entitled to receive, ratably and without
distinction as to class, all of the remaining assets of this
corporation.
4. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized to fix or alter
the dividend rights, dividend rates, conversion rights, voting rights,
2
<PAGE> 3
rights and terms of redemption (including sinking fund provisions),
the redemption price or prices and the liquidation preferences of any
wholly unissued series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or any of
them.
5. The holders of the Preferred Stock or any series thereof shall be
entitled to such voting powers, full or limited, as shall be stated
and expressed in the resolution or resolutions providing for the issue
of such stock adopted by the Board of Directors. The Board of
Directors may issue one or more series of Preferred Stock without any
voting power.
6. The holders of Preferred Stock or any series thereof shall be entitled
to receive dividends at such rates, on such conditions and at such
times as shall be stated and expressed in the resolution or
resolutions providing for the issue of such stock adopted by the Board
of Directors, payable in preference to, or in relation to, the
dividends payable on any other class or classes of stock, or series
thereof and cumulative as shall be so stated and expressed.
7. The holders of the Preferred Stock or any series thereof shall be
entitled to such rights upon the dissolution of, or upon any
distribution of the assets of, this corporation as shall be stated and
expressed in the resolution or resolutions providing for the issue of
such stock adopted by the Board of Directors.
8. The Preferred Stock may be subject to redemption at such time or times
and at such price or prices and may be issued in such series, with
such designations, preferences and relative participating, optional or
other special rights, and qualifications, limitations or restrictions
thereof as shall be stated and expressed in the resolution or
resolutions of the Board of Directors providing for the issue of the
Preferred Stock. Without in any manner limiting the foregoing, the
Board of Directors may, but is not required to, establish and provide
for a sinking fund in connection with any such redemptions, providing
for such payments, at such time and otherwise upon such terms and
conditions, as may be established in any such resolution or
resolutions of the Board of Directors.
9. The Preferred Stock or any series thereof may be made convertible into
other classes or series of stock upon such terms and conditions as are
stated and expressed in the resolution or resolutions of the Board of
Directors providing for the issue of such series of Preferred Stock.
FIFTH: In the furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to
make, alter, amend or repeal the by-laws of the corporation.
SIXTH. Whenever the vote of stockholders at a meeting thereof is
required or permitted to be taken for or in connection with any corporate
action, the meeting and vote may be dispensed with on the written consent
of the holders of a majority of the stock entitled to vote upon such
corporate action; provided that in no case shall the written consent be by
the holders of stock having less than the minimum percentage of the vote
required by statute for the proposed corporate action, and provided that
prompt notice be given to all stockholders of the taking of corporate
action without a meeting and by less than unanimous written consent.
SEVENTH. Election of directors need not be by ballot unless the
by-laws of the corporation shall so provide.
EIGHTH. To the fullest extent permitted by Delaware General
Corporation Law as the same exists or may hereafter be amended, a director
of the corporation shall not be liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a
director.
2. The Board of Directors of the corporation duly adopted resolutions that
set forth the foregoing Restated Certificate of Incorporation (which restates
and integrates and also further amends the corporation's certificate of
incorporation, as heretofore amended or supplemented), declared the proposed
amendment and restatement to be advisable, and directed that the amendment and
restatement be submitted to the corporation's stockholders for adoption by
written consent.
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3. The Restated Certificate of Incorporation was duly adopted by the a
majority of the holders of all shares outstanding of Common Stock, being the
holders of all shares outstanding of capital stock entitled to vote thereon, by
written consent in accordance with the applicable provisions of Sections 228,
242 and 245 of the General Corporation Law of Delaware and notice has been given
as provided in Section 228 of the General Corporation Law of Delaware.
IN WITNESS WHEREOF, the corporation has caused this instrument is executed
as of the day of , 199 and each of the signatories to this
instrument acknowledges or affirms under penalties of perjury that this
instrument is the act and deed of the corporation and that the matters set forth
in this instrument are true.
COMPREHENSIVE CARE CORPORATION
By:
Chriss W. Street, Chairman
ATTEST:
By:
Kerri Ruppert, Secretary
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EXHIBIT 10.50
PROPOSED STOCKHOLDER RESOLUTIONS
OF
COMPREHENSIVE CARE CORPORATION
PROPOSAL 1: THE REVERSE STOCK SPLIT.
RESOLVED, that Article FOURTH of the Company's Restated Certificate of
Incorporation be amended by addition of the following provision:
Simultaneously with the Effective Date, each share of the Company's
Common Stock, par value $0.10 per share, issued and outstanding immediately
prior to the Effective Date (the "Old Common Stock") shall automatically
and without any action on the part of the holder thereof be reclassified as
and changed into one-[to be completed] (1/[to be completed]) of a share of
the Company's Common Stock, par value [to be completed] per share (the "New
Common Stock"), subject to the treatment of fractional share interests as
described below. Each holder of a certificate or certificates which
immediately prior to the Effective Date represented shares outstanding of
Old Common Stock (the "Old Certificates," whether one or more) shall be
entitled to receive upon surrender of such Old Certificates to the
Company's Transfer Agent for cancellation, a certificate or certificates
(the "New Certificates," whether one or more) representing the number of
whole shares of the New Common Stock into which and for which the shares of
the Old Common Stock formerly represented by such Old Certificates so
surrendered, are reclassified under the terms hereof. From and after the
Effective Date, Old Certificates shall represent only the right to receive
New Certificates (and, where applicable, cash in lieu of fractional shares,
as provided below) pursuant to the provisions hereof. No certificates or
scrip representing fractional share interests in New Common Stock will be
issued, and no such fractional share interest will entitle the holder
thereof to vote, or to any rights of a stockholder of the Company. A holder
of Old Certificates shall receive, in lieu of any fraction of a share of
New Common Stock to which the holder would otherwise be entitled, a cash
payment therefor on the basis of the closing price of the Old Common Stock
on the New York Stock Exchange on the Effective Date, as reported on the
composite tape of the New York Stock Exchange, Inc. (or in the event the
Company's Common Stock is not so traded on the Effective Date, such closing
price on the next preceding day on which such stock was traded on the New
York Stock Exchange). If more than one Old Certificate shall be surrendered
at one time for the account of the same stockholder, the number of full
shares of New Common Stock for which New Certificates shall be issued shall
be computed on the basis of the aggregate number of shares represented by
the Old Certificates so surrendered. In the event that the Company's
Transfer Agent determines that a holder of Old Certificates has not
tendered all his certificates for exchange, the Transfer Agent shall carry
forward any fractional share until all certificates of that holder have
been presented for exchange such that payment for fractional shares to any
one person shall not exceed the value of one share. If any New Certificate
is to be issued in a name other than that in which the Old Certificates
surrendered for exchange are issued, the Old Certificates so surrendered
shall be properly endorsed and otherwise in proper form for transfer, and
the person or persons requesting such exchange shall affix any requisite
stock transfer tax stamps to the Old Certificates surrendered, or provide
funds for their purchase, or establish to the satisfaction of the Transfer
Agent that such taxes are not payable. From and after the Effective Date
the amount of capital represented by the shares of the New Common Stock
into which and for which the shares of the Old Common Stock are
reclassified under the terms hereof shall be the same as the amount of
capital represented by the shares of Old Common Stock so reclassified,
until thereafter reduced or increased in accordance with applicable law.
RESOLVED FURTHER, that the form, terms, and provisions of the Restated
Certificate of Incorporation as set forth in Exhibit A are approved, ratified
and confirmed; and
RESOLVED FURTHER, that pursuant to Section 242(c) of the Delaware General
Corporation Law, at any time prior to the filing of the amendment with the
Delaware Secretary of State, notwithstanding
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authorization of the proposed amendment by the Stockholders of the Corporation,
the Board of Directors may abandon the proposed amendment without further action
by the Stockholders; and
RESOLVED FURTHER, that the Board of Directors' actions taken and authorized
prior to the date of these resolutions are hereby confirmed and ratified and the
Board of Directors shall have authority to take such further action and to
authorize such further action as may be necessary, appropriate or incidental to
the carrying out of the purposes and effects of the foregoing resolutions,
including without limitation making such editorial, conforming, typographical
and similar incidental changes to the Amendment and the Restated Certificate of
Incorporation as such officer acting in the matter may deem necessary or
appropriate to approve, such approval to be conclusively evidenced by the taking
of such action or the execution and delivery of documents taking such action.
PROPOSAL 2: THE CHANGE IN THE NUMBER OF AUTHORIZED SHARES.
RESOLVED, that Article FOURTH of the Company's Restated Certificate of
Incorporation be amended by addition of the following provision:
FOURTH. The corporation shall have authority to issue two classes of
shares of stock to be designated, respectively, "Preferred Stock" and
"Common Stock." The total number of shares which the corporation shall have
authority to issue is ( )" [to be completed based on the
sum of 60,000 authorized preferred shares and the number of authorized
common shares as completed below]. The total number of shares of Preferred
Stock which the corporation shall have authority to issue shall be sixty
thousand (60,000); and each such share shall have a par value of
( ) [to be completed with "one cent ($0.01) if Proposal 3 is
approved and otherwise with "fifty dollars ($50.00)"]; and the total number
of shares of Common Stock which the Corporation shall have authority to
issue shall be ( ) [to be completed with the lowest of
(a) 30,000,000, (b) five (5) times the number of shares of New Common Stock
anticipated to be outstanding (excluding the effect of repurchasing
fractional shares), reserved or otherwise committed for issuance
immediately after the Effective Date, or (3) a lower number in the Board of
Directors' discretion]; and each such share shall have a par value of one
cent ($0.01).
RESOLVED FURTHER, that the form, terms, and provisions of the Restated
Certificate of Incorporation as set forth in Exhibit A are approved, ratified
and confirmed; and
RESOLVED FURTHER, that pursuant to Section 242(c) of the Delaware General
Corporation Law, at any time prior to the filing of the amendment with the
Delaware Secretary of State, notwithstanding authorization of the proposed
amendment by the Stockholders of the Corporation, the Board of Directors may
abandon the proposed amendment without further action by the Stockholders; and
RESOLVED FURTHER, that the Board of Directors' actions taken and authorized
prior to the date of these resolutions are hereby confirmed and ratified and the
Board of Directors shall have authority to take such further action and to
authorize such further action as may be necessary, appropriate or incidental to
the carrying out of the purposes and effects of the foregoing resolutions,
including without limitation making such editorial, conforming, typographical
and similar incidental changes to the Amendment and the Restated Certificate of
Incorporation as such officer acting in the matter may deem necessary or
appropriate to approve, such approval to be conclusively evidenced by the taking
of such action or the execution and delivery of documents taking such action.
PROPOSAL 3: THE REDUCTION IN THE PAR VALUE PER SHARE.
RESOLVED, that Article FOURTH of the Company's Restated Certificate of
Incorporation be amended by addition of the following provision:
FOURTH. The corporation shall have authority to issue two classes of
shares of stock to be designated, respectively, "Preferred Stock" and
"Common Stock." The total number of shares which the corporation shall have
authority to issue is ( )" [to be completed based on
the sum of 60,000 authorized preferred shares and the number of authorized
common shares as completed
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below]. The total number of shares of Preferred Stock which the corporation
shall have authority to issue shall be sixty thousand (60,000); and each
such share shall have a par value of one cent ($0.01); and the total number
of shares of Common Stock which the Corporation shall have authority to
issue shall be ( ) [to be completed with the lowest
of (a) 30,000,000, (b) five (5) times the number of shares of New Common
Stock anticipated to be outstanding (excluding the effect of repurchasing
fractional shares), reserved or otherwise committed for issuance
immediately after the Effective Date, or (3) a lower number in the Board of
Directors' discretion]; and each such share shall have a par value of one
cent ($0.01).
RESOLVED FURTHER, that the form terms, and provisions of the Restated
Certificate of Incorporation as set forth in Exhibit A are approved, ratified
and confirmed; and
RESOLVED FURTHER, that pursuant to Section 242(c) of the Delaware General
Corporation Law, at any time prior to the filing of the amendment with the
Delaware Secretary of State, notwithstanding authorization of the proposed
amendment by the Stockholders of the Corporation, the Board of Directors may
abandon the proposed amendment without further action by the Stockholders; and
RESOLVED FURTHER, that the Board of Directors' actions taken and authorized
prior to the date of these resolutions are hereby confirmed and ratified and the
Board of Directors shall have authority to take such further action and to
authorize such further action as may be necessary, appropriate or incidental to
the carrying out of the purposes and effects of the foregoing resolutions,
including without limitation making such editorial, conforming, typographical
and similar incidental changes to the Amendment and the Restated Certificate of
Incorporation as such officer acting in the matter may deem necessary or
appropriate to approve, such approval to be conclusively evidenced by the taking
of such action or the execution and delivery of documents taking such action.
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