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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 7 ON
SCHEDULE 13E-4/A-7
ISSUER TENDER OFFER STATEMENT
(PURSUANT TO SECTION 13(e)(1) OF THE SECURITIES EXCHANGE
ACT OF 1934)
Comprehensive Care Corporation
(Name of Issuer)
Comprehensive Care Corporation
(Name of Person(s) Filing Statement)
7 1/2% Convertible Subordinated Debentures due April 15, 2010
(Title of Class of Securities)
204620AA6
(CUSIP Number of Class of Securities)
Chriss W. Street, 1111 Bayside Drive, Suite 100,
Corona del Mar, CA 92625 (714) 222-2273
(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications on Behalf of the Person(s) Filing Statement)
Not Applicable
(Date Tender Offer First Published, Sent or Given
to Security Holders)
Calculation of Filing Fee
Transaction
valuation* Amount of Filing Fee
$3,179,333 $635.87
* Estimated solely for the purpose of calculating the filing fee, pursuant to
Rule 0-11(a)(4) and 0-11(b)(2), paid on September 14, 1995 upon originally
filing this Schedule 13E-4 (as hereafter from time to time may be amended herein
called the "Schedule") which was equal to one-fiftieth (1/50th) of one percent
of an amount equal to one-third of the value, determined as described below, of
the maximum amount of Debentures to be received by the Issuer (the "Transaction
Value"). The Issuer has an accumulated capital deficit, thereby qualifying to
base the Transaction Value on one-third of the $9,538,000 outstanding principal
amount pursuant to Rule 0-11(a)(4).
/X/Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid. Identify
the previous filing by registration statement number or the Form or Schedule and
the date of its filing
Amount Previously Paid: $635.87
Form or Registration Number: SC 13E-4 (Schedule 13E-4); File No. 005-19482
Filing Party: Comprehensive Care Corporation
Date Filed: September 14, 1995
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ITEM 1. SECURITY AND ISSUER
(a) Comprehensive Care Corporation (the "Issuer") has its
principal executive office at 1111 Bayside Drive, Suite 100,
Corona del Mar, California 92625.
(b) For each $1,000 outstanding principal amount (the "face
amount") of the Issuer's 7 1/2% Convertible Subordinated
Debentures due April 15, 2010 ("Debentures") and a waiver of
approximately $208.98 of interest accrued and unpaid as of
November 15, 1996, and all other rights thereunder, the Issuer
proposes to exchange (the "Exchange Offer") consideration
comprised of the following: a payment of principal of $500 in
cash plus sixteen (16) shares of the Issuer's authorized and
previously unissued Common Stock, par value $.01 per share
("Common Stock") and an interest payment of $80 in cash plus
eight (8) additional shares of Common Stock. The combined
aggregate of the Issuer's cash and Common Stock exchangeable
per $1,000 face amount of Debentures is called the "Exchange
Consideration." The shares of Common Stock included in the
Exchange Consideration are herein sometimes called the "Common
Shares." Debentures that are tendered (and not withdrawn) at
the date the Exchange Offer terminates (the "Expiration
Date"), will be accepted for payment (the "Exchange"). The
Expiration Date will be at least five (5) business days after
the Exchange Offer is or becomes substantially funded. The
Expiration Date, in turn, must occur at least five business
days prior to the record date for the payment of overdue
installments of interest. The Debentures were issued pursuant
to an Indenture dated April 25, 1985 (the "Indenture") between
the Issuer and Bank of America National Trust and Savings
Association, as Trustee (including any successors, herein
called the "Trustee").
The Issuer is seeking to Exchange an aggregate of $5,532,000
in cash and 228,912 Common Shares for up to all of the
Debentures, if tendered and accepted in the Exchange. The
aggregate principal amount of outstanding Debentures is
$9,538,000 as of November 14, 1996.
(c) The Debentures are traded over-the-counter, although trading
in these securities is limited and sporadic. The sections
headed "Price of Securities Prior to Announcement" on page 11
of the Offering Circular, "Price Range of Debentures" on page
11 thereof and "Price Range of the Common Shares" on page 24
thereof are incorporated herein by this reference.
ITEM 2. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a) The section in the Offering Circular entitled "Exchange Offer
Funding Requirements and Sources" is incorporated herein by
this reference. Exhibit 99.25 is incorporated herein by this
reference.
ITEM 3. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE ISSUER OR
AFFILIATE
The Debentures are currently due and payable pursuant to an
acceleration thereof that occurred when Debentureholders who
purportedly owned of record an aggregate of at least 25% of the
outstanding principal amount gave notice of acceleration on or about
February 10, 1995. The rescission of the acceleration will be solicited
by the Issuer. Exhibit 99.14, the Issuer's Debenture Consent
Solicitation Statement, is incorporated herein by this reference.
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The purpose of the tender offer is to rescind the Debenture
acceleration by offering the Exchange Consideration, as defined in Item
1(b), in exchange for each $1,000, or integral multiple thereof, in
principal amount of up to 100% of the outstanding Debentures, provides
that each Debenture accepted in the Exchange be accompanied by the
Consent being solicited from Debentureholders. The information in the
Offering Circular under the heading, "The Debenture Acceleration," is
incorporated herein by this reference.
The Issuer is a party to a letter agreement dated March 3, 1995 (the
"Letter Agreement") with Mr. Jay H. Lustig, an individual who was
representing certain holders of outstanding Debentures (therein
represented to the Issuer as holding at least 26% of the principal
amount and called the "Participating Securityholders"). The Letter
Agreement is filed as Exhibit 99.20 hereto and is incorporated herein
by this reference. The Letter Agreement provided for the Issuer
offering an exchange for all of the Debentures that were outstanding
and properly tendered by the Debentureholders in the Issuer's second
quarter of fiscal 1996, but such proposed exchange offer was not
effected. Although the Issuer has increased the Exchange consideration
to compensate for delays, the Issuer believes that the provision in the
Letter Agreement requiring the Issuer to complete the exchange in the
second quarter of fiscal year 1996 is not binding upon the Issuer
because of the failure on the part of Participating Securityholders,
believed to represent a 25% portion of the outstanding principal, to
use best efforts, as necessary, to perform their obligations to provide
effective notices of rescission of acceleration, signed by holders of a
majority of the outstanding principal amount of Debentures. The
Exchange Offer is being made by the Issuer as a means to obtain consent
of Debentureholders to rescission of acceleration and includes certain
of the concepts of the Letter Agreement as a framework for the proposed
Exchange. Mr. Jay H. Lustig delivered, and the Issuer received, a
letter dated March 21, 1996 concerning the Letter Agreement. Mr. Lustig
indicated in such letter his opinion in support of the Exchange
Consideration's increase, per $1,000 in principal amount of Debentures,
by $55 in cash or 7 1/3 shares for delays from September 3, 1995 to May
1, 1996. See Exhibit 99.21, "Letter dated March 21, 1996 from Jay H.
Lustig," incorporated herein by this reference.
The Issuer conditions its obligation to accept the tendered Debentures
in the Exchange upon conditions including rescission of the Debenture
acceleration, which requires action by the holders of at least a
majority in principal amount of Debentures outstanding, and which also
requires that the Issuer have paid the interest due on non-tendered
Debentures in order to cure the Events of Default respecting the
aggregate principal amount of Debentures that are not exchanged. The
Issuer anticipates that it is likely that between 30% and 100% of the
outstanding principal amount of Debentures will be tendered by
Debentureholders and exchanged. The Issuer estimates that, as of
December 31, 1996, approximately $3.0 million dollars in cash in the
aggregate would be necessary to make full payment of Exchange
Consideration for 30% of the outstanding Debentures, which is the least
amount that the Issuer anticipates to be exchanged, plus interest and
default interest due on the unexchanged 70% of Debentures. Regardless
of when the exchange is consummated, payment of the Exchange
Consideration in the event of an exchange of 100% of the outstanding
Debentures, which is the maximum in terms of funds required, would
require approximately $5.5 million in cash. The Issuer estimates that
$75,000, which is included in the amounts given above will be necessary
to pay any and all costs and expenses incurred to consummate the
Exchange.
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The tender of Debentures inherently includes the waiver of a portion of
the face value and the accrued interest respecting the tendered
Debentures. The Exchange Consideration is the only principal or
interest the Debentureholder does not waive in the Exchange. For an
Exchange of $1,000 of principal amount of Debentures, the
Debentureholder would receive $500 in cash and sixteen (16) Common
Shares. To the extent that the $1,000 face value differs from the $500
in cash and 16 shares of Common Stock designated as principal, the
tender of Debentures is a waiver of principal. It is estimated that the
interest (and default interest thereon) accrued through November 15,
1996 would be approximately $208.98 per $1,000 of principal amount of
Debentures. To the extent this accrual exceeds or differs from the $80
in cash plus the eight (8) shares of Common Stock designated as
interest, the tender of Debentures is a waiver of interest accrued and
unpaid or accruing to the date of the Exchange.
The Debentures received by the Exchange Agent from the tendering
Debentureholders will be acquired by the Issuer upon consummation of
the Exchange, and once so acquired may neither be voted by the Issuer
nor counted in calculating the amount of consents required. Debentures
which are exchanged for Exchange Consideration will thereafter be
delivered on behalf of the Issuer to the Debenture Registrar for
cancellation as soon as practicable after the completion of the
Exchange. It is planned that the Trustee shall also act as the Exchange
Agent and the paying agent for the interest payable respecting
non-tendered Debentures, in addition to its acting in the capacity of
Registrar.
In connection with the proposed Exchange, the Issuer has not taken any
action with the purpose of deregistering Debentures in accordance with
the Securities Exchange Act of 1934, as amended (the "Exchange Act");
provided, that, prior to the Exchange Offer the Debentures have been
held by fewer than 300 record holders. At any given time one or more
record holders may request certificates to be issued in the names of
one or more successor record holders. As of May 9, 1996 there were
approximately 42 record holders and the Issuer has no reason to believe
that Debentures were held of record in one "street" name by more than
one beneficial holder in order to avoid the provisions of the Exchange
Act by making the Debentures deregistrable. Record holders, including
clearing agencies and brokers, hold Debentures for one or more
beneficial holders in the ordinary course of their business. Based on
the Issuer's May 1996 written communication to brokers believed to hold
Debentures for beneficial holders, brokers hold Debentures for an
aggregate of 170 beneficial holders. Therefore, the maximum total
number of potential record holders at that time may be approximately
230. The Debentures continue to have been deregistrable, effective
ninety (90) days after filing with the Commission a certification on
Form 15 that there are fewer than 300 record holders. The Issuer may
consider deregistration of Debentures at some future time if
circumstances continue to exist under which the Debentures will be
deregistrable after the Exchange Offer. After the prescribed 90-day
time period, deregistration will affect to some extent the
applicability of certain federal securities laws to the Debentures.
The Issuer has no present intention to retire any Debentures prior to
their original maturity date except pursuant to the Exchange Offer. In
approximately the past five years, the Issuer has not purchased or
otherwise acquired any Debentures. In accordance with Rules and
Regulations promulgated under the Exchange Act, the Issuer cannot
acquire Debentures otherwise than pursuant to the Exchange Offer before
or during the period the Exchange Offer is open and until at least ten
business days after the termination of the Exchange Offer, provided
that the Company complies with Rule 13e-4(f)(6). Thereafter, the Issuer
may, from time to time, make purchases of Debentures in the open market
or in privately negotiated transactions, either at or with reference to
market prices, or at negotiated prices; in the event that these
purchases take place, either without all of the protections of Section
13(e) of the Exchange Act after an Exchange Act deregistration of
Debentures, or if Rule 13(e) promulgated under the Exchange Act is
otherwise inapplicable pursuant to its existing or future exemptions
and exceptions. The Indenture provides for the Issuer's Board of
Directors to be able either to temporarily reduce the Debenture
conversion price (in order to provide a financial incentive for
Debentureholders to convert Debentures into Common Stock), or to redeem
Debentures for cash equal to their face amount.
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The Issuer has elected to subtract from its sinking fund obligations
the approximately $36.5 million principal amount of Debentures
converted by Debentureholders in March 1991 and previously cancelled,
effectively removing the sinking fund redemption obligation. The
information under the heading "The Proposals - Proposal No. 4" is
incorporated herein by this reference.
The information in the Offering Circular under the headings "Purpose of
the Exchange Offer," "Exchange Offer Funding Requirements and Sources,"
"Use of Proceeds," "Dividend Policy," "Pro Forma Consolidated Balance
Sheets and Statements of Operations," and "Changes in Accountants" is
incorporated herein by this reference.
Except to the extent indicated in the preceding paragraphs, the Issuer
has no plans or proposals of the type enumerated in Item 3 of Schedule
13E-4.
ITEM 4. INTEREST IN SECURITIES OF THE ISSUER
To the best knowledge of the Issuer, there have been no transactions in
the Debentures by the Issuer or any of its executive officers,
directors, affiliates, or any associate or subsidiary thereof, during
the forty (40) business days of the Issuer immediately preceding the
filing hereof.
For this purpose, "affiliate" or "associate" is assumed to include
subsidiaries and other entities that are controlled, directly or
indirectly, by the Issuer and the executive officers and directors of
each thereof.
ITEM 5. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE ISSUER'S SECURITIES.
The third full paragraph of Item 3 is incorporated herein by this
reference.
The Company has received a firm commitment, expiring in August 1997,
from Lindner Funds to purchase at least $5,000,000 of face amount of
15% fully secured promissory notes that will not be due or callable for
at least 15 months from the date of issue, as set forth in Exhibit
99.25, which is incorporated herein by this reference.
Item 6 of this Schedule 13E-4 is incorporated herein by this reference.
The information presented in the Offering Circular on the "Offering
Circular Cover Page," and under the headings "The Debenture
Acceleration," "Risk Factors," including "Risk Factors-Ability of
Company to Continue as a Going Concern; Explanatory Paragraph in
Auditors' Report,""Other Factors to Consider," "The Exchange Offer,"
including "The Exchange Offer - Terms of the Exchange Offer," "The
Company," "Interests of Certain Persons," "Principal Stockholders,"
"Use of Proceeds," "Dividend Policy," "Pro Forma Balance Sheets and
Statements of Operations Information," "Changes in Accountants,"
"Description of Debentures," "Description of Capital Stock," "Exchange
Offer Funding Requirements and Sources," "Purpose of the Exchange
Offer," and "Conditions of the Exchange Offer," is incorporated herein
by this reference.
ITEM 6. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Exchange Offer is being made by the Issuer in reliance upon the
exemption from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), afforded by Section 3(a)(9)
thereof. The Issuer, therefore, will not pay any commission or other
remuneration to any broker, dealer, salesman, or other person for
soliciting tenders of the Debentures in the Exchange Offer. Regular
employees, officers and directors of the Issuer and its subsidiaries,
who will not receive additional compensation therefor, may solicit
Exchanges from holders of the Debentures.
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The Trustee, which has been appointed as Exchange Agent for the
Exchange Offer (the "Exchange Agent") and which also serves as the
Debenture Registrar, and Continental Stock Transfer & Trust Company,
serving as the Common Stock Registrar and Transfer Agent, are engaged
to perform administrative services. The Issuer will provide, or will
cause to be provided, copies of the Schedule 13E-4, the Offering
Circular and other documents upon request. The Trustee is available for
appropriate written requests addressed to the Trustee as indicated in
the Offering Circular.
ITEM 7. FINANCIAL INFORMATION
The information under the heading "Legal Proceedings," included in the
Issuer's Form 10-K for the fiscal year ended May 31, 1996, as filed
with the Securities and Exchange Commission (the "Commission") on
August 29, 1996, and the information under the headings "Selected
Financial Data," "Management's Discussion and Analysis," the
Consolidated Financial Statements, and the Notes thereto, and the
auditors' or accountants' reports thereon, and "Risk Factors," included
in the Issuer's Form 10-K/A-2 for the fiscal year ended May 31, 1996,
as filed with the Securities and Exchange Commission (the "Commission")
on November 7, 1996 are incorporated herein by this reference.
The information under the headings "Management's Discussion and
Analysis," the Condensed Consolidated Financial Statements, and the
notes thereto, "Risk Factors," and "Legal Proceedings," included in the
Issuer's Form 10-Q for the fiscal quarter ended August 31, 1996, as
filed with the Commission on October 15, 1996 are incorporated herein
by this reference.
The information in the section of the Offering Circular entitled "Ratio
of Earnings to Fixed Charges," which is located at page 10 thereof, is
incorporated herein by this reference.
The information in the section of the Offering Circular entitled "Pro
Forma Consolidated Balance Sheets and Statements of Operations," which
is located at pages 49 through 57 thereof, is incorporated herein by
this reference.
ITEM 8. ADDITIONAL INFORMATION
The seventh and eighth paragraphs of Item 5 are incorporated herein by
this reference.
The information in the Offering Circular in the seventh, eighth and
tenth paragraphs under "The Exchange Offer" below the heading "Terms of
the Exchange Offer" is incorporated herein by this reference.
The information in the Offering Circular included in the following
"Risk Factors" is incorporated herein by this reference: "Important
Factors Relating to Forward Looking Statements," "Continued Listing on
NYSE," and "Uncertainty of Future Funding."
The Company's Current Reports on Forms 8-K filed with the Commission on
June 6, July 25, August 16, October 4, October 23, and November 4,
1996, respectively, are incorporated herein by this reference.
The Company's Debentures are convertible at a conversion price of
approximately $250 per share of Common Stock. On November 4, 1996, the
Common Stock closing price of $11 1/2 was equal to approximately only
4.7% of the conversion price.
The Company believes that the Exchange Offer for Debentures, which
involves the Company's acquisition of a technically convertible
security ("Debenture") and issuance of shares, is not the kind of
transaction that would constitute a manipulative or deceptive device or
contrivance comprehended within the purpose of Rule 10b-6 under the
1934 Act.
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The information presented in the Offering Circular under the headings
"Description of Debentures," "Risk Factors," and "The Exchange Offer --
Conditions of the Exchange Offer," "Purpose of the Exchange Offer," and
"Exchange Offer Funding Requirements and Sources," is hereby
incorporated herein by this reference.
On December 30, 1996, the Company closed the Debenture Exchange
Offer. An aggregate of $6,846,000 principal amount of Debentures were
tendered for exchange to the Company pursuant to the terms of the
Exchange Offer. All such Debentures were accepted for exchange by the
Company, and the Company paid an aggregate of $3,970,680 in cash to
tendering Debentureholders and issued an aggregate of 164,304 shares of
the Company's Common Stock.
With respect to an aggregate of $2,692,000 principal amount of
Debentures which were not tendered for exchange, the Company paid an
aggregate of $552,701 in interest and default interest with respect
to all Debentures which had not been tendered for exchange.
The Company was advised by the Exchange Agent that affirmative consents
in excess of 82% had been received, and that all propositions had been
consented to and approved by Debentureholders. As a result, the Company
is no longer in default with respect to such Debentures.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
The Exhibit Index attached to this Schedule is incorporated herein by
this reference.
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, correct and complete.
COMPREHENSIVE CARE CORPORATION
/S/ KERRI RUPPERT
----------------------------------------------------
Kerri Ruppert
Senior Vice President, Secretary/Treasurer and Chief
Financial Officer
Date: January 9, 1997
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No.
<S> <C> <C>
23.5 Consent of Ernst & Young LLP dated November 4, 1996
23.6 Consent of Arthur Andersen LLP dated November 7, 1996
99.8 (a) (i) Offering Circular and Cover Letter*
99.9 (ii) Letter of Transmittal*
99.10 (iii) Guidelines for Certification of Taxpayer Identification Number on Form W-9*
99.11 (iv) First, Second, Third, Fourth, Fifth and Sixth Notices of Default from Trustee to
Debentureholders (incorporated by reference to Exhibit 99.11 of
the Consent Solicitation Statement, as defined below)*
99.12 (v) Form of Notice to Debentureholders of Interest Payment Date (incorporated by reference to the
Preliminary Consent Solicitation Statement, as filed with the Commission on October
7, 1996 (the "Preliminary Consent Solicitation Statement")
99.13 (vi) News Release for Debenture Exchange Offer's and Consent Solicitation Statement's commencement
(incorporated by reference to the referenced exhibit of the Consent Solicitation Statement)*
99.14 (vii) Definitive Consent Solicitation Statement on Schedule 14A (the "Consent Solicitation
Statement"), for solicitation of Debentureholders, as filed by the Issuer with the
Commission on November 18, 1996, pursuant to the Exchange Act (incorporated herein
by reference)*
99.15 (viii) Script for use by persons answering questions (incorporated by reference to the
referenced exhibit of the Consent Solicitation Statement)
99.16 (ix) Letter to Brokers*
99.17 (x) Letter to Clients of Brokers and Others*
99.18 (xi) Notice of Conversion Price Adjustment (incorporated by reference to the referenced
exhibit in the Consent Solicitation Statement)*
99.19 (c) (i) Indenture dated April 25, 1985 between the Issuer
and Bank of America National Trust and Savings
Association, is incorporated by reference to the
referenced exhibit of Exhibit 4 to the Issuer's Form
S-3 Registration No. 2-97160 filed April 25, 1985
regarding an aggregate $46,000,000 original principal
amount of the Debentures (incorporated herein by
reference)*
99.20 (ii) Letter Agreement dated March 3, 1995 between the Issuer and Mr. Jay H. Lustig, as a
representative of certain holders of Debentures (incorporated by reference to the
referenced exhibit in the Consent Solicitation Statement)*
99.21 (iii) Letter dated March 21, 1996 from Mr. Jay H. Lustig to the Issuer concerning the present terms
of the Exchange (incorporated by reference to the referenced exhibit in the Consent Solicitation
Statement)*
99.22 (iv) Letter dated March 1, 1996 from the Trustee to the Issuer concerning sinking fund
provisions of the Indenture (incorporated by reference to the referenced exhibit in the
Consent Solicitation Statement)*
99.23 (v) Letters dated March 27, 1996 from the Issuer to the Trustee concerning the Trustee's
letter dated March 1, 1996 (incorporated by reference to the referenced exhibit in the
Consent Solicitation Statement)*
99.24 (vi) No-Action Letters regarding the Section 3(a)(9) exemption under the Securities Act of
1933 for an exchange of securities (incorporated by reference to Exhibit 99.24 to
Amendment No. 4 of the Preliminary Consent Solicitation Statement)
99.25 (vii) Mutual Fund's Firm Commitment dated August 8, 1996 (incorporated by reference to
the referenced exhibit in the Preliminary Consent Solicitation Statement)
99.28 (viii) Notice of Guaranteed Delivery*
99.31 Form 8-K/A dated December 30, 1996 (incorporated by
reference as filed with the Commission on January 9, 1997 reflecting
the closing and final results of the Company's Exchange Offer and
Consent Solicitation related to its 7-1/2% Convertible Subordinated
Debentures.)
</TABLE>
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* Exhibits that are to be distributed to Debentureholders along with this
Schedule 13E-4.
