-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BrFolhPysFiZyctlA+M05L77C/jjq0tl37rwHnJUeV/pLCu6HeVriB2zAUwsDzTi 2NJ7mFWQvqy6jaBXwNS1Rw== 0000897204-97-000252.txt : 19971110 0000897204-97-000252.hdr.sgml : 19971110 ACCESSION NUMBER: 0000897204-97-000252 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971215 FILED AS OF DATE: 19971107 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL HEALTH AFFILIATES INC CENTRAL INDEX KEY: 0000354761 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 222362097 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: SEC FILE NUMBER: 001-09255 FILM NUMBER: 97710489 BUSINESS ADDRESS: STREET 1: 900 SYLVAN AVE CITY: ENGLEWOOD CLIFFS STATE: NJ ZIP: 07632 BUSINESS PHONE: 2015674600 MAIL ADDRESS: STREET 1: 900 SYLVAN AVENUE CITY: ENGLEWOOD STATE: NJ ZIP: 07632 PRE 14A 1 CONTINENTAL HEALTH AFFILIATES, INC. 910 SYLVAN AVENUE ENGLEWOOD CLIFFS, NEW JERSEY 07632 _______________ NOTICE OF ANNUAL MEETING OF STOCKHOLDERS NOVEMBER [ ], 1997 ________________ 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 NOVEMBER [ ], 1997 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 October 15, 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 November [ ], 1997 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 NOVEMBER [ ], 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 October 15, 1997 will be entitled to vote at the meeting. The outstanding voting securities of the Company on that date were 10,127,151 shares of Common Stock. Each of the outstanding shares is entitled to one vote. Jack Rosen, Joseph Rosen and Israel Ingberman, who together own 26.7% 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. PRINCIPAL STOCKHOLDERS The following table contains information concerning the ownership of the Company's voting securities on October 15, 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:
Name and Address Amount and Nature Title of Class Of Beneficial Owner of Percent of Class Beneficial Ownership _______________________________________________________________________________________________________ Common Stock Jack Rosen 1,398,876 shares (a)(b) 13.2% 910 Sylvan Avenue Englewood Cliffs, NJ 07632 Common Stock Colonial Management Associates, 530,000 shares 5.2% 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. 600,000 shares 5.9% 129 South 8th Street Brooklyn, NY 11211 Common Stock Private Opportunity Partners, II 775,000 shares 7.7% 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 (b)(c) 9.1% 910 Sylvan Avenue Englewood Cliffs, NJ 07632 ____________________ (a)Includes shares of Common Stock issuable on exercise of outstanding stock options as follows: Mr. 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.
2 As of October 15, 1997, the Company's directors, its chief executive officer, its other executive officers whose cash compensation exceeded $100,000 during the fiscal year ending 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:
Name of Beneficial Owner Amount and Nature Title of Class of Percent of Class Beneficial Ownership ________________________________________________________________________________________________________ Common Stock Jack Rosen 1,398,876 shares (a)(c) 13.2% 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 (c)(d) 9.1% Common Stock Bruce Slovin 92,000 shares (a) 1.1% Common Stock Joseph M. Giglio 95,517 shares (a) 1.1% Common Stock Benjamin Geizhals 17,000 shares (a) (b) Common Stock S. Colin Neill 25,000 shares (a) (b) Common Stock All directors and 562,592 shares (a) 32.5% 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; Mr. Neill, 25,000 shares; all directors and executive officers as a group, 847,000 shares. (b) Less than 1%. (c) Includes shares of common stock held by children as follows: Jack Rosen, 19,500 shares and 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.
On October 15, 1997, Cede & Co. owned a record of 6,608,773 shares of the Company's Common Stock, constituting 65.3% 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 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:
SERVED ON THE BOARD OF DIRECTORS NAME AGE SINCE ---- --- ------------ 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 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 59% 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 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 PROPOSAL REGARDING A REVERSE SPLIT REQUIRED VOTE 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 " ". 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 November [ ], 1997 was $[ ]. 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. In connection with the Reverse Split, cash will be paid in lieu of fractional shares at the rate of $[ ] 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. 6 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). 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. 7 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:
SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Compensation ------------------- ---------------------- Awards Payouts ------ ------- Name and Year Salary Bonus Other Restricted Options/ LTIP All Other Principal ($) ($) Annual Stock SARs Payouts Compensation Position Compensation Award(s) (#) ($) ($) Jack Rosen, 1997 368,000{**} $150,000{**} Chairman, 1996 300,000{**} None None None None None None President 1995{*} 150,000{**} None and Chief Executive Officer Israel 1997 150,000 Ingberman, 1996 150,000 None None None None None Treasury, 1995{*} 75,000 Secretary and President of TNS Nursing Homes, Inc. S. Colin 1997 147,212 25,000 Neill 1996 - None None None - None Vice 1995{*} - - President and Chief Financial Officer Benjamin 1997 Geizhals, 1996 137,712 None None None 5,000 None Vice 1995{*} 130,000 2,000 President 65,000 * Six months ended June 30, 1995 ** Includes compensation paid by Infu-Tech
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 $500 for each directors' meeting attended). Since 1994 Directors have received options in consideration of their waiver of directors fees. In January 1997 the Board of Directors approved the annual grant of options to purchase 10,000 shares of the Company's common stock to each of the independent directors. 8 OPTION PLANS The following table sets forth certain information with regard to options granted during the year end June 30, 1997 to the Company's executive officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR Individual Grants Number of Percent of Total Securities Options/SARs underlying Granted to option/SARs Employees in Granted (#) Fiscal Year (%) Exercise or Base Price ($/Sh) Expiration Date 5% ($) 10% (5) Name Benjamin Geizhals 5,000 3.4 2.22 10/18/06 7,000 17,000 S. Colin Neill 25,000 17% 2.17 07/08/06 34,000 86,500
The following table sets forth certain information with regard to exercises of options and SARs during year end June 30, 1997 and options and SARs held at June 30, 1997.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES Number of Securities Value of Underlying Unexercised Unexercised in-the-Money Options/SARs Options/SARs at Fiscal Year-End* at Fiscal Year End (#) ($) Name Shares Value Exercisable(E)/ Exercisable(E) Acquired on Realized Unexercisable(U) Unexercisable(U) Exercise (#) ($) Jack Rosen - - 500,000(E) $875,000(E) 0(U) 0(U) Benjamin - - 17,000(E) $25,000(E) Geizhals 0(U) 0(U) S. Colin Neill - - 25,000(E) $14,500(E)
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION DECISIONS During the year ended June 30, 1997, the Company's Compensation Committee reviewed and approved the compensation of the Chairman of the Board. Compensation of the Company's senior executive officers, other than its Chairman of the Board, was set by the Chairman of the Board. 9 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 72% 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 and 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, the Company issued 600,000 shares of common stock to U.S. Management, Inc. in exchange for the extinction of $2,542,174 of trade debt owed by the Company. 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. In November 1993, as part of a financial restructuring, the Company offered to exchange 530 shares of its Common Stock for each $1,000 principal amount of its 14-1/8% Subordinated Debentures due 1996 ("Subordinated Debentures"). In response to this offer, The 1965 Trust, of which Carl D. Glickman, a 10 director of the Company and of Infu-Tech is the sole trustee, tendered $1,774,000 principal amount of Subordinated Debentures, which it had purchased on October 12, 1993 for $709,600 (40% of their principal amount) and received in exchange 940,220 shares of the Company's Common Stock. Prior to the purchase of the Subordinated Debentures, the Board of Directors had been informed of the proposed purchase and had determined that the Company would not at that time be able to purchase the Subordinated Debentures for the price at which they were being made available to The 1965 Trust. The day after it purchased the Subordinated Debentures, The 1965 Trust gave the Company the option, exercisable until October 12, 1994, to purchase 939,160 of the shares it would receive in exchange for the Subordinated Debentures for $779,680 (which was 110% of the amount The 1965 Trust paid for the Subordinated Debentures). The option expired without being exercised. 11 REPORT ON COMPENSATION BY THE BOARD OF DIRECTORS 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 executive officers (no executive officer other than the chief executive officer received salary and bonus totaling as much as $150,000 during fiscal year ending June 30, 1997), the compensation 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 as of 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. JOSEPH GIGLIO CARL GLICKMAN ISRAEL INGBERMAN JACK ROSEN JOSEPH ROSEN BRUCE SLOVIN 12 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 and 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. 13 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 and Exchange Act of 1934, as amended, during the year ended June 30, 1996. 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. 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 send Certified Mail-Return Receipt Requested. By order of the Board of Directors ISRAEL INGBERMAN Secretary 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 December , 1997, 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 possess 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 AGAINST approval of the amendment the Certificate of Incorporation to the Certificate of Incorporation to 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) 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. 2 -----END PRIVACY-ENHANCED MESSAGE-----