SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
Commission Only (as Permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
-----------------
CONTINENTAL HEALTH AFFILIATES, INC.
(Name of Registrant as Specified in its Charter)
-----------------
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Dated Filed:
<PAGE>
CONTINENTAL HEALTH AFFILIATES, INC.
910 SYLVAN AVENUE
ENGLEWOOD CLIFFS, NEW JERSEY 07632
---------
Notice of Annual Meeting of Stockholders
January 26, 1998
----------
To the Stockholders of CONTINENTAL HEALTH AFFILIATES, INC.
Notice is hereby given that the Annual Meeting of Stockholders of
Continental Health Affiliates, Inc., will be held at the RIHGA Royal Hotel,
151 West 54th Street, New York, New York on January 26, 1998 at 10 A.M.,
for the following purposes:
1. To elect six directors for the ensuing year.
2. To consider and act upon a proposal to amend the
Company's certificate of Incorporation in order to
effectuate a reverse stock split.
3. To transact such other business as may properly come
before the meeting.
Only stockholders of record at the close of business on December
12, 1997 will be entitled to notice of or to vote at the meeting or any
adjournments of the meeting. The Company's transfer books will not be
closed.
IF YOU DO NOT INTEND TO BE PRESENT IN PERSON AT THE MEETING,
PLEASE SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY. IF YOU ATTEND THE
MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED.
By Order of the Board of Directors
ISRAEL INGBERMAN
Secretary
December 17, 1997
<PAGE>
PROXY STATEMENT
-----------
CONTINENTAL HEALTH AFFILIATES, INC.
The accompanying Proxy is solicited by the Board of Directors of
Continental Health Affiliates, Inc. (the "Company"). All shares
represented by proxies will be voted in the manner designated. If no
designation is made on a proxy, it will be voted for the election of the
six directors named below. This Proxy Statement and the accompanying form
of Proxy are being mailed to the Company's stockholders on or about
December 19, 1997.
REVOCATION
Execution and delivery of the enclosed proxy will not affect the right
of any person to attend the meeting and vote in person. Any stockholder
who gives a proxy has the power to revoke it at any time before it is voted
by delivery of a written instrument of revocation or a duly executed proxy
bearing a later date to the Secretary of the Company, 910 Sylvan Avenue,
Englewood Cliffs, New Jersey 07632, or at the meeting. The presence of a
stockholder at the meeting will not operate to revoke a proxy, but the
casting of a ballot by a stockholder who is present at the meeting will
revoke a proxy as to the matter on which the ballot is cast.
SOLICITATION EXPENSES
The Company will bear the cost of soliciting proxies. Proxies are
being solicited by mail and, in addition, directors, officers and employees
of the Company may solicit proxies personally or by telephone or telegraph.
The Company will reimburse custodians, brokerage houses, nominees and other
fiduciaries for the cost of sending proxy material to their principals.
VOTING SECURITIES
Only stockholders of record at the close of business on December 12,
1997 will be entitled to vote at the meeting. The outstanding voting
securities of the Company on that date were 10,212,844 shares of Common
Stock. Each of the outstanding shares is entitled to one vote. Jack
Rosen, Joseph Rosen and Israel Ingberman, who together own 27% of the
Common Stock (including stock held by their wives as custodians for their
children and by their children), intend to vote for the election to
the Board of Directors of all the nominees named in the section of this
Proxy Statement captioned "Election of Directors" and intend to vote
in favor of the proposal regarding an amendment to the Certificate
of Incorporation in order to effectuate a reverse stock split.
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table contains information concerning the ownership of
the Company's voting securities on December 12, 1997 by the only persons
who owned of record or, insofar as the Company is aware, owned beneficially
more than 5% of any class of the Company's voting securities:
<TABLE>
- ----------------------------------------------------------------------------------------
Amount and Nature
Name and Address of
Title of Class Of Beneficial Owner Beneficial Ownership Percent of Class
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Jack Rosen 1,457,400 shares 13.6%
910 Sylvan Avenue (a)(b)
Englewood Cliffs, NJ 07632
Common Stock Colonial Management 530,000 shares 5.2%
Associates, Inc.
1 Financial Center
Boston, MA 02111
Common Stock Michael Klein 939,160 shares 9.3%
Preferred Stock 100 Shoreline Highway 3,305 shares 23.8%
Building A, Suite 190
Mill Valley, CA 94941
Common Stock U.S. Management, Inc. 541,176 shares 5.3%
129 South 8th Street
Brooklyn, NY 11211
Common Stock Private Opportunity 775,000 shares 7.6%
Partners, II Ltd.
201 South Biscayne Blvd.,
Suite 2950
Miami, FL 33131
Common Stock Israel Ingberman 875,372 shares 8.6%
910 Sylvan Avenue
Englewood Cliffs, NJ 07036
Common Stock Joseph Rosen 922,827 shares 9.0%
910 Sylvan Avenue (b)(c)
Englewood Cliffs, NJ 07632
____________________
(a) Includes shares of Common Stock issuable on exercise of outstanding
stock options as follows: Jack Rosen 500,000 shares.
(b) Includes shares of common stock held by children as follows: Jack
Rosen, 19,500 shares, Joseph Rosen, 9,750 shares, and Israel Ingberman,
41,666 shares.
(c) Includes 19,500 shares of Common Stock held as custodian for
children.
</TABLE>
2
<PAGE>
As of December 12, 1997, the Company's directors, its chief executive
officer, its other executive officers whose cash compensation exceeded
$100,000 during the fiscal year ended June 30, 1997, and all its officers
and directors as a group, beneficially owned the following numbers of
shares of voting securities of the Company:
<TABLE>
- ----------------------------------------------------------------------------------------
Amount and Nature
of
Title of Class Name of Beneficial Owner Beneficial Ownership Percent of Class
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Jack Rosen 1,457,400 shares 13.6%
(a)(c)
Common Stock Carl D. Glickman 96,000 shares (a) (b)
Common Stock Israel Ingberman 875,072 shares (c) 8.6%
Common Stock Joseph Rosen 922,827 shares 9.0%
(c)(d)
Common Stock Bruce Slovin 112,000 shares (a) 1.1%
Common Stock Joseph M. Giglio 115,517 shares (a) 1.1%
Common Stock Benjamin Geizhals 17,000 shares (a) (b)
Common Stock All directors and 3,596,116 shares (a) 32.6%
Executive officers
as a group (8 persons)
____________________
(a) Includes shares of Common Stock issuable on exercise of outstanding
stock options as follows: Mr. Rosen 500,000 shares; Mr. Giglio, 105,000
shares; Mr. Glickman, 95,000 shares; Mr. Slovin, 105,000 shares; Mr.
Geizhals, 17,000 shares; all directors and executive officers as a group,
822,000 shares.
(b) Less than 1%.
(c) Includes shares of common stock held by children as follows: Jack
Rosen, 19,500 shares, Joseph Rosen, 9,750 shares and Israel Ingberman,
41,666 shares.
(d) Includes shares of Common Stock held as Custodian for children, as
follows: Jack Rosen, 125,000 shares, Joseph Rosen, 144,500 shares, Israel
Ingberman 83,333 shares.
</TABLE>
On December 12, 1997, Cede & Co. owned of record 6,608,873 shares of
the Company's Common Stock, constituting 64.7% of the outstanding Common
Stock. The Company understands those shares were held beneficially for
various brokerage houses, some of whom may in turn have been holding
shares beneficially for customers.
3
<PAGE>
ELECTION OF DIRECTORS
Nominees for Election
It is the intention of the people named in the accompanying proxy to
vote for the following people as directors of the Company (except as
otherwise directed in proxies which are submitted), to hold office until
the next annual meeting of stockholders and until their successors are
elected and qualify:
<TABLE>
Served on
the Board of
Directors
Name Age Since
---- --- ------------
<S> <C> <C>
Jack Rosen........................... 51 .................. 1981
Joseph Rosen......................... 46 .................. 1981
Israel Ingberman..................... 51 .................. 1981
Joseph Giglio........................ 56 .................. 1981
Bruce Slovin......................... 61 .................. 1988
Carl D. Glickman..................... 71 .................. 1989
</TABLE>
Jack Rosen has served as the chief executive officer (the President or
Chairman of the Board) and as a Director of the Company since its
incorporation in 1981 and of its subsidiaries from their respective dates
of incorporation, the first of which was in 1976. Mr. Rosen is also the
President and a Director of CompreMedx Corporation ("CompreMedx"), an
89.1% owned subsidiary of the Company, and the Chairman of the Board of
Directors and Chief Executive Officer of Infu-Tech, Inc. ("Infu-Tech"), a
58% owned subsidiary of the Company. He is actively engaged, together with
Joseph Rosen and Israel Ingberman, who are officers and directors, and
along with Jack Rosen, are the three principal stockholders of the Company
(the "Principal Stockholders"), in a variety of enterprises, including real
estate development and hotel ownership (the "Rosen-Ingberman Enterprises").
Jack Rosen is the brother of Joseph Rosen.
Joseph Rosen has served as a Vice President and as a Director of the
Company since its incorporation in 1981 and as a director and officer of
all its subsidiaries (including CompreMedx and Infu-Tech) from their
respective dates of incorporation. He became an Assistant Secretary of the
Company in March 1983. He is actively engaged, together with the other
Principal Stockholders, in the Rosen-Ingberman Enterprises and with Israel
Ingberman in nursing home ownership and management ("R-I nursing homes").
He is the brother of Jack Rosen.
Israel Ingberman has served as Secretary, Treasurer and as a Director
of the Company since its incorporation in 1981 and as a director and
officer of all its subsidiaries (including CompreMedx and Infu-Tech)
from their respective dates of incorporation. He is actively engaged,
together with the other Principal Stockholders, in the Rosen-Ingberman
Enterprises and in the R-I nursing homes with Joseph Rosen.
4
<PAGE>
Joseph M. Giglio has been a director of the Company since January
1983 and is also a Director of Infu-Tech. Since December 1993, he has been
serving as the Chairman of Apogee Research, Inc., an infrastructure
consulting firm. From December 1993 until August 1994, he was the Senior
Advisor to the First Southwest Company. From April 1992 to November 1993,
he was an Executive Vice President of Smith Barney & Co. And from June
1991 to April 1992, he was a Managing Director of that firm. From January
1990 to June 1991, he was the President of Chase Municipal Securities,
Inc., an affiliate of The Chase Manhattan Bank, N.A. From August 1988
through December 1989, Mr. Giglio was a Senior Vice President at Chase
Securities, Inc. in the Municipal Finance Division. For more than five
years prior to joining Chase, Mr. Giglio was the Senior Managing Director
of the Public Finance Department at Bear Stearns & Co., Inc. Mr. Giglio
served as Chairman of the National Council on Public Works Improvement,
which released its final report, "Fragile Foundation," in February 1988.
Mr. Giglio chaired the U.S. Senate Budget Committee's Private Sector
Advisory Panel on Infrastructure Financing. He serves on the board of
directors of The Hudson Institute. Mr. Giglio has served as an Associate
Professor of Finance at New York University. He is a graduate of Rutgers
University, and holds a Master of Public Administration degree from New
York University and a Master's degree in Business from Columbia University.
Carl D. Glickman has been a director of the Company since August 1989
and is also a Director of Infu-Tech. Since 1953, he has been the president
of The Glickman Organization, a real estate ownership and management
company. In addition, Mr. Glickman is a director of Bear Stearns
Companies, Inc. (an investment banking company), Jerusalem Economic
Corporation (an Israeli real estate company), Alliance Tyre and Rubber Co.
(an Israeli tire manufacturer), Franklin Holdings, Inc. (an investment
company), Lexington Corporate Properties, Inc. (a real estate investment
trust), Modern Video Co. (a motion picture production company) and
Office Max, Inc. (an office supply retailer).
Bruce Slovin has been a Director of the Company since June 1988 and
is also a Director of Infu-Tech. Mr. Slovin is a graduate of Harvard Law
School and Cornell University. Since 1980, he has been president and a
director of MacAndrews & Forbes Group, Inc., an industrial holding company.
Since 1985, he has been president and a director of Revlon Group
Incorporated, a consumer products holding company. In addition, Mr. Slovin
is a director of Andrews Group Incorporated (industrial holding company),
M&F Worldwide Corp., (producer of licorice extract and other flavoring
agents), Cantel Industries, Inc. (distributor of medical equipment) and
The Coleman Company, Inc. (outdoor recreational equipment manufacturer).
Vote Required
The election of a director requires a plurality of the votes cast
for the position on the Board of Directors. Because no minimum vote is
required, shares which are present at the meeting but are not voted
(whether due to abstentions or otherwise) will not directly affect the
outcome of the election.
5
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the compensation received during each
of the years ended June 30, 1997, 1996 and the six months ended June 30,
1995, by the Company's chief executive officer and its other executive
officers whose annual salary and bonus during fiscal 1997 totaled more
<TABLE>
SUMMARY COMPENSATION TABLE
- -------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------- --------------------------------
Awards Payouts
--------------------------------
Other
Annual Restricted Options/ LTIP All Other
Name and Principal Salary Bonus Compen- Stock SARs Payouts Compen-
Position Year ($) ($) sation Award(s) (#) ($) sation
($) ($) ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jack Rosen, Chairman, 1997 368,000** $150,000**
President and Chief 1996 300,000** None None None None None None
Executive Officer 1995* 150,000** None
- -------------------------------------------------------------------------------------------------------------------------
Israel Ingberman, Treasury, 1997 150,000
Secretary and President of 1996 150,000
TNS Nursing Homes, Inc. 1995* 75,000 None None None None None None
- -------------------------------------------------------------------------------------------------------------------------
S. Colin Neill 1997 147,212 25,000
Vice President and 1996 -- None None None -- None None
Chief Financial Officer 1995* -- --
- -------------------------------------------------------------------------------------------------------------------------
Benjamin Geizhals, 1997 137,712 5,000
Vice President 1996 130,000 None None None 2,000 None None
1995* 65,000 --
- -------------------------------------------------------------------------------------------------------------------------
* Six months ended June 30, 1995
** Includes compensation paid by Infu-Tech
</TABLE>
Directors' Fees
Since 1993, the directors have waived directors' fees (which, prior
to 1993, had been paid to directors who were not employees at the rate
of $10,000 plus $500 for each directors' meeting attended). Since 1994
directors have received options in consideration of their waiver of
directors fees. In January 1997 the Board of Directors approved the annual
grant of options to purchase 10,000 shares of the Company's common stock to
each of the independent directors.
6
<PAGE>
Option Plans
The following table sets forth certain information with regard to
options granted during the year ended June 30, 1997 to the Company's
executive officers:
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
- ----------------------------------------------------------------------------------------------------------------
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation For
Individual Grants Option Term
- -----------------------------------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs
underlying Granted to Exercise or
option/SARs Employees in Base Price Expiration
Name Granted (#) Fiscal Year (%) ($/Sh) Date 5% ($) 10% ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Benjamin Geizhals 5,000 3.4 2.22 10/18/06 7,000 17,000
- -----------------------------------------------------------------------------------------------------------------
S. Colin Neill 25,000 17% 2.17 07/08/06 34,000 86,500
</TABLE>
The following table sets forth certain information with regard to
exercises of options during year ended June 30, 1997 and the number of
options held at June 30, 1997.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
- -------------------------------------------------------------------------------------------------------------------
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Options Options
at Fiscal Year-End* at Fiscal Year End
(#) ($)**
---------------------------------------------------
Shares Value
Name Acquired on Realized Exercisable(E)/ Exercisable(E)/
Exercise (#) ($) Unexercisable(U) Unexercisable(U)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jack Rosen -- -- 500,000(E) $875,000(E)
0(U) 0(U)
- -------------------------------------------------------------------------------------------------------------------
Benjamin Geizhals -- -- 17,000(E) $25,025*(E)
0(U) 0(U)
- -------------------------------------------------------------------------------------------------------------------
S. Colin Neill -- -- 25,000(E) $14,500(E)
0(U) 0(U)
- -------------------------------------------------------------------------------------------------------------------
* The Corporation has not granted any stock appreciation rights.
** Based upon the amount by which the high bid price of the Company's
Common Stock on June 30, 1997 ($2.75 per share) exceeded the exercise price
of the options.
</TABLE>
7
<PAGE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
Transactions between the Company and members of its Board of Directors
during 1997 were as follows:
Early in 1990 a dispute over management fees between the Company and
three nursing homes owned by the Principal Stockholders was resolved by
the nursing homes' agreeing to pay a total of $1,940,000 in satisfaction of
all their December 31, 1989 obligations to the Company. In early 1992,
the settlement agreement between the Company and the three nursing homes
was modified to provide that the then-existing balance of $1,046,000 would
be paid in sixteen equal quarterly payments of $76,000 each (which included
interest at 7 1/2% and principal) beginning June 15, 1992 and continuing
through March 15, 1996. The balances remaining on the modified settlement
agreement at December 31, 1994 and 1993 (including accrued interest due to
payment delinquencies) were $839,000 and $783,000. In January 1995 the
settlement agreement was further modified to provide for a $227,000
principal and interest payment to be made on or before March 30,1995 with
the remaining balance of $626,000 to be paid in twelve equal quarterly
installments of $60,000 each (including interest at 8 1/2%) beginning July
1, 1995 and continuing through March 31, 1998. In June 1997, a credit of
$300,000 was applied against the balance then due, because the purchase
price obtained by the Company for the sale of one of its properties was
enhanced by $300,000 due to the contemporaneous sale of a property owned by
the principal stockholders to the same buyer. As of June 30, 1997, the
balance was $326,000 including interest and scheduled payments of $88,000
were in arrears.
At June 30, 1997, the Company was owed a total of $246,000 from two
entities owned by the Principal Stockholders resulting from loans to the
entities from various corporations which now are subsidiaries of the
Company, but which were not owned by the Company when the loans were made.
The Company is also owed $15,000 for health insurance premiums and other
charges with regard to the R-I nursing homes.
During 1997, the Company (including its Infu-Tech subsidiary) was
charged $46,000 by a corporation owned by Jack Rosen for use of an airplane
owned by that corporation. The Company believes the rates it was charged
for use of that airplane were lower than those which would have been
available from an independent charter company for use of a similar
airplane.
During 1997, Carl Glickman, a director of the Company and Infu-
Tech, was paid $59,000 by the Company for financial consulting fees,
including his $5,000 fee as a director of Infu-Tech.
REPORT OF THE COMPENSATION COMMITTEE
During the year-ended June 30, 1997, the Company's Compensation
Committee reviewed and approved the compensation of the Chairman of the
Board/Chief Executive Officer. Executive officers have been hired by
the chief executive officer. Because of the level of compensation of the
officer received salary and bonus totaling more than $150,000 during
fiscal year ending June 30, 1997), the compensation
8
<PAGE>
of the executive officers other than the chief executive officer himself
has been set by the chief executive officer without consultation with,
or action by, the Compensation Committee.
Stock options have been granted by a committee of the Company's Board
of Directors, of which the Chief Executive Officer is a member, in
accordance with recommendations by the Chief Executive Officer. A total
of 147,000 stock options were granted in 1997 to persons other than the
chief executive officer. These options were granted to provide the
officers to whom they were granted with incentives related to the
performance of the Company's stock.
In October 1996, the Chief Executive Officer's employment agreement
was renegotiated and extended to July 31, 2000 (in August 1995, it had
been renegotiated and extended to July 1998). The salary was set at
$400,000 (including compensation paid by Infu-Tech). The agreement
includes a bonus provision (negotiated in 1995) based upon (a) 2% of
the Company's net income and (b) 2% of the amount of any increase over 300%
in market cap over a May 1995 base. In October 1996, the Chief Executive
Officer was granted a $150,000 bonus (including $75,000 paid by Infu-Tech).
The renegotiation and extension of the employment agreement, as well as the
bonus, were proposed by the non-employee directors of the Company in
recognition of the Company's performance during the year-ended June 30,
1996.
In January 1994, the Chief Executive Officer was granted a seven-year
option to purchase 500,000 shares of the Company's Common Stock for $1 per
share. This option was proposed by the non-employee directors of the
Company in recognition that a 1993 financial restructuring of the Company,
which included the issuance of common and preferred stock in exchange for
debt, had substantially reduced the percentage of the Company's stock owned
by the Chief Executive Officer. These directors felt that, in view of the
substantial effort that restructuring required, and the substantial benefit
to the Company from the restructuring, it would be appropriate to give the
Chief Executive Officer an option which, if exercised, would restore the
Chief Executive Officer's stock ownership to approximately the same
percentage of the outstanding Common Stock that he owned before the
restructuring (approximately 16%).
During 1992, in anticipation of a public offering of stock of Infu-
Tech, Inc. which reduced the Company's ownership of Infu-Tech from 100%
to 58%, it was decided that Infu-Tech would pay the Chief Executive
Officer $100,000 per year for acting as Chief Executive Officer of Infu-
Tech, and that his salary from the Company would be reduced by that
amount. This allocation of the Chief Executive Officer's salary between
the Company and Infu-Tech was approved by the Board of Directors of Infu-
Tech, which at the time consisted of the chief executive officer of the
Company and the other two Principal Stockholders (one of whom is the
Chief Executive Officer's brother). At the time the Board of Directors
of the Company voted to approve the public offering of Infu-Tech stock,
it was aware that the Chief Executive Officer's total compensation from the
Company and Infu-Tech would remain at $300,000 per year, with $200,000 paid
by the Company and $100,000 paid by Infu-Tech. Although the Board of
Directors of the Company was not asked to take action with regard to this
arrangement, it did not object to it.
CARL GLICKMAN
BRUCE SLOVIN
JOSEPH GIGLIO
9
<PAGE>
BOARD MEETINGS AND COMMITTEES
The Company's Board of Directors met six times during the year-ended
June 30, 1997. All the directors attended all of these meetings, except Mr.
Giglio, who attended five meetings, Mr. Glickman, who attended five
meetings, and Mr. Slovin, who attended four meetings. The Company has an
Audit Committee consisting of Joseph Giglio, Carl D. Glickman and Bruce
Slovin. The principal functions of this Committee are reviewing
arrangements for and scope of the engagement of the Company's independent
auditors and reviewing with those auditors any concerns they may have about
the Company's financial reporting or internal controls. The Audit
Committee met one time during 1997. The Company has a Compensation
Committee consisting of Joseph Giglio, Carl D. Glickman and Bruce Slovin.
The principal functions of this committee are to review and approve the
compensation of the Chief Executive Officer and review the compensation of
the other officers of the Company. The Compensation Committee met two
times during 1997. There also is a subcommittee of the Board of Directors
which considers and grants stock options, consisting of Jack Rosen, Joseph
Rosen and Israel Ingberman. The subcommittee informally met several times
in 1997. No formal meetings were held by the subcommittee. All members of
the subcommittee attended all the informal meetings.
PROPOSAL REGARDING A REVERSE SPLIT
The Company proposes to effect a one-for-three reverse split of its
Common Stock (the "Reverse Split"), which will cause each outstanding
share of Common Stock to become one-third of a share. The Reverse Split
will affect all the outstanding Common Stock, and therefore will not
change the proportionate holdings of any of the Company's stockholders.
The Reverse-Split will be carried out by the Company's amending its
Certificate of Incorporation to provide that (a) each outstanding share
of Common Stock, par value $.02 per share, of the Company will become
one-third of a share of Common Stock, par value $.06 per share, and (b) the
name of the Company will be changed to "Kuala Healthcare, Inc." A copy of
the Company's Restated Certificate of Incorporation, as proposed to be
amended, is attached as Exhibit A.
The reason the Company wants to do the Reverse Split is to increase
the market price per share of the Company's Common Stock. In June 1997,
the Common Stock was admitted to trading on the NASDAQ Small-Cap market.
However, due to a change in the requirements for eligibility to be traded
on the NASDAQ Small-Cap market, NASDAQ will not permit the Common Stock to
continue to be traded in that market unless it trades for a significant
period of time at a trading price of at least $4.00 per share. Since the
Common Stock was admitted to trading on the NASDAQ Small-Cap market its
trading price has been between $3.25 and $1.875. The last reported sale
price of the Common Stock on December 16, 1997 was $2.69. The Company
believes it is beneficial to its stockholders to have the Common Stock
traded on the NASDAQ Small-Cap market. Therefore, the Company's Board of
Directors approved the Reverse Split. In theory, the Reverse Split should
cause the trading price of a share of Common Stock after the Reverse Split
to be three times what it would have been if the Reverse Split had not
taken place. However, this will not necessarily be the case.
10
<PAGE>
NASDAQ has made a preliminary determination to terminate trading in
the Common Stock on its Small-Cap market. A hearing on that determination
is scheduled for November 19, 1997. The Company hopes that, based on the
Company's decision to effect the Reverse Split if its stockholders approve
it, NASDAQ will rescind its determination, subject to the Reverse Split's
being approved and taking place. If NASDAQ does not rescind the
determination, the Board of Directors will decide whether the Company
should nonetheless effect the Reverse Split. If the Board of Directors
decides that the Company should not effect the Reverse Split, the proposal
regarding the Reverse Split will not be presented to the meeting, and
therefore proxies will not be voted with regard to the Reverse Split.
However, because the proposal to approve the Reverse Split may be presented
to the meeting even if the Reverse Split will not result in continued
trading of the Common Stock on the NASDAQ Small-Cap market, in deciding
whether to vote for the proposal, stockholders should not base their
decision solely on the possibility that the Reverse Split will enable the
Common Stock to continue to be traded on the NASDAQ Small-Cap market.
In connection with the Reverse Split, cash will be paid in lieu of
fractional shares at the rate of $.896 per full post-Reverse Split share.
Following the Reverse Split, the Company's stockholders will be asked
to exchange the certificates representing their pre-Reverse Split shares
for certificates representing post-Reverse Split shares. When certificates
representing pre-Reverse split shares are surrendered for exchange, the
holders will receive any cash in lieu of fractional shares to which they
may be entitled (without interest). When certificates representing
pre-Reverse Split shares are presented for transfer, the transferee will
receive certificates representing the number of post-Reverse Split shares
into which the pre-Reverse Split shares were combined. The reason the
Company's name is being changed in connection with the Reverse Split is to
reduce the likelihood that stockholders who have not exchanged the
certificates representing their pre-Reverse Split shares for stock
certificates representing post-Reverse Split Shares will think they still
own the pre-Reverse Split number of shares.
The Reverse Split will not affect the proportionate interests of
stockholders in the net assets or operating results of the Company. It
will, however, alter the per share interests in the Company's net assets
and operating results to reflect the reduced number of shares which will
result from the Reverse Split (i.e., to make them three times what the per
share net assets and operating results of the Company were immediately
before the Reverse Split).
Because the Reverse Split will reduce the number of outstanding
shares of Common Stock, but will not reduce the number of shares the
Company is authorized to issue, the Reverse Split will increase the number
of shares the Company can issue without approval of its stockholders. The
Company is authorized to issue 15,000,000 shares of Common Stock and, after
the Reverse Split, will have approximately 3,376,000 shares outstanding.
The Board of Directors believes an increase in the number of shares the
Company can issue without requiring shareholder approval is appropriate.
Those shares will be available for issuance, among other things, in
connection with employee incentive plans or acquisitions (although the
Company is not currently engaged in any discussions regarding acquisitions
which would involve the issuance of stock).
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Vote Required
Approval of the amendments to the Company's Certificate of
Incorporation, and therefore approval of the Reverse Split, requires
the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock which are entitled to vote at the meeting.
IT IS IMPORTANT THAT ALL STOCKHOLDERS VOTE WITH REGARD TO THE
PROPOSAL REGARDING THE REVERSE SPLIT. A FAILURE TO VOTE HAS THE SAME
EFFECT AS A VOTE AGAINST THE REVERSE SPLIT.
The Board of Directors recommends a vote FOR this Proposal.
FILING OF REPORTS
To the best of the Company's knowledge, no director, officer, or
beneficial owner of more than 10% of the Company's stock failed to file
on a timely basis reports required by 16(a) of the Securities
Exchange Act of 1934, as amended, during the year ended June 30, 1997.
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick audited the accounts of the Company for 1997.
The Company has not yet determined who will audit its accounts for 1998.
A representative of KPMG Peat Marwick is expected to be present at
the stockholders meeting, will be given an opportunity to make a statement
if so desired and will be available to respond to appropriate questions.
OTHER MATTERS
The management knows of no matters other than the ones described above
which will be presented for action at the meeting. If any other matters
properly come before the meeting, or any adjournments, the people voting
the management proxies will vote them in accordance with their best
judgement.
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STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Stockholder proposals intended to be presented at the 1998 Annual
Meeting must be received not later than August 31, 1998. Proposals
should be addressed to the Secretary of the Company, 910 Sylvan Avenue,
Englewood Cliffs, New Jersey 07632 and should be sent Certified Mail-
Return Receipt Requested.
By order of the Board of Directors
ISRAEL INGBERMAN
Secretary
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EXHIBIT A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
CONTINENTAL HEALTH AFFILIATES, INC.
The undersigned, the Chairman of the Board of Continental
Health Affiliates, Inc. (the "Corporation"), a Delaware corporation,
certifies as follows:
1. At duly called meetings of the Corporation's Board of
Directors held on December 4, 1997 and December 17, 1997, at each of which
a quorum was present at all times, the Board of Directors adopted and
declared advisable the amendments to the Corporation's Certificate of
Incorporation described in Paragraph 3.
2. At the Annual Meeting of Stockholders of the Corporation
held on January 26, 1998, at which a quorum was present or represented by
proxy at all times, the amendments to the Corporation's Certificate of
Incorporation described in Paragraph 3 were adopted by the vote of a
majority of the shares of outstanding stock entitled to vote on it.
Therefore, those amendments were duly adopted in accordance with Section
242 of the General Corporation Law of the State of Delaware.
3. The Amendments to the Corporation's Certificate of
Incorporation which were adopted as described in Paragraphs 1 and 2 were as
follows:
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A. To amend Article 1 of the Corporation's Certificate of
Incorporation so that, as amended, Article 1 reads as follows:
1. The name of the Corporation is Kuala Healthcare, Inc.
B. To amend Article 4 of the Corporation's Certificate of
Incorporation so that, as amended, Article 4 reads as follows:
4. The total number of shares of stock which the
corporation shall have the authority to issue is 16,000,000
shares, of which 15,000,000 shares, with a par value of $.06 per
share, will be common stock, and 1,000,000 shares, with a par
value of $.02 per share, will be preferred stock.
The Board of Directors may cause the preferred
stock to be issued from time to time in one or more series. The
designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions of the preferred
stock and each series thereof, including, without limitation,
voting rights, if any, and conversion rights, if any, shall be
determined by the Board of Directors.
4. The shares of common stock, par value $.02 per share, which
are outstanding immediately before this Certificate of Amendment is filed
with the Secretary of State of Delaware will be combined so that, when this
Certificate of Amendment is filed with the Secretary of State of Delaware,
each three shares of common stock, par value $.02 per share, will become
one share of common stock, par value $.06 per share, with any holder who
would be entitled to a fraction of a share as a result of the combination
receiving, in lieu of that fraction of a share, cash in an amount
determined by the Board of Directors
IN WITNESS WHEREOF, I have signed this Certificate on January
, 1998.
_____________________________
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CONTINENTAL HEALTH AFFILIATES, INC. PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of CONTINENTAL HEALTH AFFILIATES, INC.,
hereby appoints JACK ROSEN, JOSEPH ROSEN and ISRAEL INGBERMAN, or any of them
present, with full power of substitution, as attorneys and proxies of the
undersigned to appear at the Annual Meeting of Stockholders of CONTINENTAL
HEALTH AFFILIATES, INC., to be held on January 20, 1998, and at any and all
adjournments of that meeting, and there to act for the undersigned and vote all
shares of stock of CONTINENTAL HEALTH AFFILIATES, INC. standing in the name of
the undersigned, with all the powers the undersigned would posses if
personally present, as follows:
(1) ELECTION OF DIRECTORS:
FOR all nominees listed below (except WITHHOLD AUTHORITY to vote
as marked to the contrary below) for any nominee listed below
Jack Rosen, Joseph Rosen, Israel Ingberman, Joseph M. Giglio, Bruce Slovin and
Carl D. Glickman.
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
------------------------------------------
(2) REVERSE STOCK SPLIT
FOR approval of the amendment to the AGAINST approval of the amendment
Certificate of Incorporation to to the Certificate of Incorporation
effectuate a reverse stock split to effectuate a reverse stock split
(3) In their discretion, the proxies are authorized to vote upon any other
business that may properly come before the meeting
(SIGN ON REVERSE SIDE)
<PAGE>
Please sign exactly as name appears below. Where shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, sign in partnership name by authorized
person.
Dated ____________________ 199_
_______________________________
SIGNATURE
______________________________
SIGNATURE IF HELD JOINTLY
THIS PROXY IS BEING SOLICITED BY THE BOARD OF
DIRECTORS OF CONTINENTAL HEALTH AFFILIATES,
INC. UNLESS OTHERWISE SPECIFIED, THIS PROXY
WILL BE VOTED FOR THE ELECTION OF ALL SIX OF
THE NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS LISTED ABOVE AND FOR THE PROPOSAL
TO AMEND THE CERTIFICATE OF INCORPORATION
TO EFFECTUATE A REVERSE STOCK SPLIT.
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