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:
|X| Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CORNICHE GROUP INCORPORATED
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] 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:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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<PAGE>
CORNICHE GROUP INCORPORATED
272 Rte 206, Bldg B #1.1, Flanders, New Jersey 07836
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
May ___, 1998
To the Stockholders of CORNICHE GROUP INCORPORATED:
The Annual Meeting of Stockholders of Corniche Group Incorporated will be
held at the Hyatt Regency Hotel, located at 1800 East Putnam Avenue, Old
Greenwich, CT 06870 on _______, May ___, 1998, at 10:00 a.m. (local time) for
the purpose of considering and acting upon the following matters:
1. Election of five directors;
2. Approval of the proposed reduction of the par value of the Corporation's
Common Stock from $.10 to $.001 per share;
3. Approval of a transaction whereby (a) a new series of Series B
Convertible Redeemable Preferred Stock, $.01 par value per share, will be
created, (b) 825,000 shares of Series B Convertible Redeemable Preferred Stock
will be issued to certain individuals, including 710,000 shares to Joel San
Antonio, and (c) Mr. San Antonio will obtain control of the Corporation, with
the present intent to cause it to enter certain segments of the insurance
business;
4. Approval of the 1998 Corniche Employees Stock Option Plan;
5. Approval of the Corniche Independent Directors Compensation Plan; and
6. Transaction of such other business as may properly come before the
meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on April 17, 1998 as
the record date for the determination of stockholders entitled to notice of, and
to vote at, the meeting or any adjournment or postponements thereof.
Your proxy vote is important. Whether or not you expect to attend the
meeting in person, you are urged to mark, sign, date and return the enclosed
proxy in the enclosed prepaid envelope.
Your attention is directed to the Proxy Statement which is set forth on the
following pages. By order of the Board of Directors,
James J. Fyfe
April __, 1998 Vice President
<PAGE>
CORNICHE GROUP INCORPORATED
272 Route 206, Bldg B #1.1, Flanders, New Jersey 07836
PROXY STATEMENT
SOLICITATION OF PROXY
The enclosed proxy is being mailed and solicited on or about the 23rd day
of March 1998, by and on behalf of the Board of Directors of Corniche Group
Incorporated (the "Corporation"), whose principal executive office is at 272
Route 206, Bldg. B #1.1, Flanders, New Jersey 07836, for use in connection with
the Annual Meeting of Stockholders to be held at 10:00 a.m. (local time) on
______, May ___, 1998 at the Hyatt Regency Hotel, located at 1800 East Putnam
Avenue, Old Greenwich, CT 06870 and at any adjournments or postponements
thereof. The matters to be considered and acted upon at such meeting are
referred to in the preceding Notice and are more fully discussed below. All
shares represented by proxies which are returned properly signed will be voted
as specified on the proxy card. If choices are not specified on the proxy card,
the shares will be voted in favor of (1) the Board's nominees for director named
herein, (2) the amendment to reduce the par value of the Common Stock, (3) the
"Transaction" described below, including issuance of 825,000 shares of Series B
Convertible Redeemable Preferred Stock, (4) approval of the 1998 Corniche
Employees Stock Option Plan, and (5) approval of the Corniche Independent
Directors Compensation Plan. The By-Laws of the Corporation require that the
holders of a majority of the total number of shares entitled to vote at the
meeting be represented in person or by proxy in order for the business of the
meeting to be transacted with respect to such matters.
The cost of this solicitation will be paid by the Corporation. In addition
to soliciting proxies by mail, the Corporation may make requests for proxies by
telephone, telegraph or messenger, or by personal solicitation by officers,
directors or employees of the Corporation at nominal cost to the Corporation or
by any one or more of the foregoing means. The Corporation will reimburse
brokers, dealers, banks and others authorized by the Corporation for their
reasonable expenses in forwarding proxy solicitation material to the beneficial
owner of shares.
REVOCATION OF PROXY
A proxy may be revoked by a stockholder by giving written notice of
revocation to James Fyfe at the office of the Corporation, by filing a later
dated proxy with James Fyfe at the office of the Corporation at any time prior
to the exercise of such proxy, or by voting in person at the meeting.
STOCK OUTSTANDING
On April 17, 1998 ("Record Date"), there were 6,105,271 shares of Common
Stock, par value, $.10 per share, outstanding and entitled to vote at the Annual
Meeting. Holders of record of Common Stock on the Record Date will be entitled
to one vote
<PAGE>
for each share held on all matters properly coming before the meeting. On the
Record Date, there were 1,196 holders of record of Common Stock. Holders of
shares of the Corporation's Series A $0.07 Convertible Preferred Stock, par
value $.01 per share, are not entitled to vote on any of the matters described
in this Proxy Statement.
HISTORY AND 1996 UK RECEIVERSHIP PROCEEDING
From its inception through March 1995, the Corporation was engaged in the
development, design, assembly, marketing and sale of medical imaging products
through a wholly-owned subsidiary, Fidelity Medical, Inc., a New Jersey
corporation ("FMI"). On March 2, 1995 the Corporation acquired Corniche
Distribution Ltd. ("CDL"), a United Kingdom ("UK") corporation established in
1992. At such time, CDL was a holding company for two operating subsidiaries,
Chessbourne International Ltd. ("Chessbourne"), a distributor/supplier of
stationery products and office furniture and The Stationery Company Limited
("TSCL"), a stationery retailer. The acquisition of CDL resulted in the former
stockholders of CDL, Brian J. Baylis and Susan A.M. Crisp, owning a majority of
the outstanding common shares of the Corporation after the acquisition and was
treated as a recapitalization of CDL with CDL being treated as the acquirer.
Effective March 25, 1995, the Corporation sold its wholly-owned medical imaging
products subsidiary.
Following the sale of FMI, the Corporation's business operations consisted
of the retail stationery operations and brand marketing and stationery wholesale
operations of TSCL and Chessbourne respectively. These operations were funded in
large part from loans made by the Bank of Scotland to each of CDL, TSCL and
Chessbourne over a period of several years. In accordance with customary UK
practice, the Bank of Scotland, when making such loans, obtained security for
these loans. The Corporation experienced large operating losses and net cash
outflows from operating activities during fiscal 1996 resulting in severe
liquidity problems.
Receivership Proceedings
As a result of the Corporation's inability to overcome its liquidity
problems and reverse the trend of recurring and significant operating losses,
the Bank of Scotland appointed receivers to Chessbourne and TSCL on February 7,
1996 and to CDL on February 28, 1996. The receiverships resulted in the
discontinuation of all of the Corporation's business operations. Since such
time, the Corporation has been inactive.
In connection with the receiverships, Brian J. Baylis and Susan A.M. Crisp,
the Corporation's then chief executive officer and chief financial officer, who
together owned approximately 45% of the Corporation's outstanding common stock,
entered into pledge agreements (the "Pledge Agreements") dated February 19, 1996
and February 21, 1996, respectively, whereby they pledged their common shares of
the Corporation to the Bank of Scotland as collateral against the shortfall
which was to be realized by the Bank of Scotland in the receivership
proceedings. Pursuant to Pledge Agreements, Mr. Baylis and Ms. Crisp pledged
877,800 shares and 219,450 shares, respectively, of the Corporation's common
stock to the Bank of Scotland. The shares were pledged to collateralize the
February 19, 1996 personal guarantees
<PAGE>
of Mr. Baylis and Ms. Crisp to the Bank of Scotland with respect to certain
liabilities of CDL, TSCL and Chessbourne to the Bank of Scotland. Of the pledged
shares, 1,042,250 shares were subsequently sold by the Bank of Scotland to
twelve unrelated persons. The remaining 55,000 shares were retained by the Bank
of Scotland and it is the Corporation's understanding that the Bank of Scotland
continues to hold these shares.
For a discussion of the Corporation's 1997 equity financing see Note 7 of
the Notes to the Corporation's unaudited financial statements included in the
Corporation's Quarterly Report on Form 10-Q for the quarter ended December 31,
1997 which is incorporated by reference herein.
INTERESTS OF CERTAIN PERSONS
IN MATTERS TO BE ACTED UPON
Proposal 3
If Proposal 3 is approved, Messrs. Joel San Antonio, Robert H. Hutchins,
Ronald Glime, and Glen Aber, each of whom is a nominee for election as director,
would be permitted to subscribe for 710,000 shares, 15,000 shares, 25,000 shares
and 15,000 shares, respectively, of the Series B Convertible Redeemable
Preferred Stock of the Corporation ("{Series B Convertible Redeemable Preferred
Stock"), at a price of $0.10 per share. See "Proposal 3."
Pursuant to the terms of the Stock Purchase Agreement relating to the
Transaction that is the subject of Proposal 3, the initial purchasers of Series
B Convertible Redeemable Preferred Stock, which would represent greater than a
majority of the voting stock of the Corporation, would be required, through June
30, 2000, to vote for Mr. Fyfe or his nominee to serve as a director of the
Corporation. In addition, Mr. Fyfe would be granted 10,000 shares of Series B
Convertible Redeemable Preferred Stock if Proposal 3 is approved. See "Proposal
3."
Proposal 4
Officers and employees of the Corporation may be granted stock options
under the 1998 Employee Incentive Stock Option Plan if stockholders approve
Proposal 4. See "Proposal 4."
Proposal 5
If the Independent Directors Compensation Plan that is the subject of
Proposal 5 is approved by stockholders, independent directors of the Corporation
would receive $2,500 and 500 shares of the Corporation's Common Stock each
calendar quarter. Messrs. Fyfe, Glime and Aber, each of whom is a nominee for
election as director but not intended to be an officer or employee of the
Corporation, would be eligible to participate in the Independent Directors
Compensation Plan.
<PAGE>
DISSENTERS' RIGHTS
Stockholders do not have dissenters' rights with respect to any Proposal.
PROPOSAL ONE
ELECTION OF DIRECTORS
The size of the Board Directors has been fixed at five members. Five
directors have been nominated by the Board for election at the forthcoming
Annual Meeting, to hold office until the next annual meeting and until their
successors are elected and qualified. Shares represented by proxies which are
returned properly signed will be voted for the nominees unless the stockholder
indicates on the proxy that authority to vote the shares is withheld for one or
more or for all of the nominees listed. Should a nominee become unable to serve
as a director (which is not anticipated), the proxy will be voted for the
election of a substitute nominee who shall be designated by the Board. Directors
are elected by a plurality of the votes cast in person or by proxy at the Annual
Meeting. Shares underlying broker non-votes and abstentions will not be counted
as having been voted in person or by proxy and accordingly will have no effect
on the election of directors.
The Board will consider stockholder recommendations regarding candidates
for director submitted in writing to the Chairman of the Board of the
Corporation, in accordance with Delaware law and sufficiently in advance of an
annual meeting for action to be brought before stockholders.
The following directors of the Corporation have resigned since the 1995
annual meeting of stockholders at the dates indicated, each for personal
reasons: Brian J. Baylis (March 1996), Susan A.M. Crisp (March 1996) and George
Lombardi (January 1996). In September 1996 Matthew Pazaryna ceased all his
activities relating to his engagement as a director. Efforts to contact him were
unsuccessful and although no formal resignation was received, he was deemed to
have resigned effective September 1996. Mr. James Fyfe's term as director
expires at the Annual Meeting.
Information as to Nominees for Election as Director
Information with respect to each nominee including the principal occupation
of each for the past five years, positions and offices held with the
Corporation, membership on other boards of directors and age is set forth below.
There are no family relationships among any of the Corporation's directors and
officers. However, as to the nominees for election as director, Mr. Aber is Mr.
San Antonio's brother-in-law. For information with respect to beneficial
ownership of the Corporation's Common Stock, see "Voting Securities of Certain
Beneficial Owners and Management."
James Fyfe, 43
Director since May 1995
Mr. Fyfe became a director and Vice President and Chief Operating Officer
of the Corporation in May 1995. From January 1991 to May 1995, he was an
independent business consultant. During the period from May 1995 through
February 1996 he was an employee of the Corporation's U.K holding company, CDL.
In March 1996, he resumed his activities as an independent business consultant.
From May 1996 through August 1997 he was an outside director of Medical Laser
Technologies, Inc.
Pursuant to the terms of the Stock Purchase Agreement relating to the
Transaction and the issuance of the Series B Convertible Redeemable Preferred
Stock, the Initial Purchasers of the Series B Convertible Redeemable Preferred
Stock will be required to continue to nominate Mr. Fyfe or his nominee to serve
as director through June 30, 2000, the date when the right to redeem the Series
B Convertible Redeemable Preferred Stock will expire. See "Proposal 3."
Joel San Antonio, 45
Mr. San Antonio founded Warrantech Corporation (Nasdaq Symbol: WTEC) in
1983. Warrantech is a business services company with a core business in the
administration of warranties and extended warranties. He was a Director, Chief
Executive Officer and President of Warrantech Corporation from incorporation
through February 1988. Since February 1988, Mr. San Antonio has been a Director,
Chief Executive Officer and Chairman of the Board of Directors of Warrantech. On
February 2, 1998, Mr. San Antonio resumed responsibilities as President of
Warrantech. Since October 27, 1989, he has also been Chairman and Chief
Executive Officer of Warrantech's principal operating subsidiaries. If Mr. San
Antonio is elected as a director and the Transaction is approved, Mr. San
Antonio would serve as Chairman of the Board of the Corporation.
Robert H. Hutchins, 69
Mr. Hutchins began his insurance career with the Great American Indemnity
Insurance Co. in 1951. He joined the American Casualty Insurance Co. in 1958.
American Casualty Insurance Co. was bought by Continental Casualty Insurance Co.
in 1964, and is now known as CNA Insurance. At CNA he served as Branch Manager,
Regional Vice President, Vice President of Field Operations and ultimately
Senior Vice President of the Liability, Property and Surety Division. Since
1975, he has served in executive positions with INA, Gulf Insurance, and
American Hardware Mutual Insurance Co. He was a consultant to the Warranty
Division of AIG for 18 months and for the past 2-1/2 years has been employed by
Warrantech Automotive, Inc. as National Claims Manager. If Mr. Hutchins is
elected as a director and the Transaction is approved, Mr. Hutchins would serve
as President of the Corporation.
<PAGE>
Ronald Glime, 53
Mr. Glime is currently President of Warrantech Automotive, Inc., a position
he has held since October 1992.
Glen Aber, 49
Mr. Aber was president of his own company, GFA Industries, Inc. ("GFA"), a
corporation engaged in the design, merchandising and sale of imported fabrics to
manufacturers of children's, ladies' and men's clothing until July 1997 when GFA
ceased operations. Since July 1997 Mr. Aber has been managing his personal
investment portfolio. Mr. Aber is Mr. San Antonio's brother-in-law.
Section 16 Beneficial Ownership Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's directors, executive officers and 10% stockholders to file with
the Securities and Exchange Commission ("SEC") certain reports regarding such
persons' ownership of the Corporation's securities. Mr. Baylis and Ms. Crisp
were required to file reports on Form 4 in connection with the reduction of
their respective ownership interests in the Corporation resulting from the sale
of shares pledged by them following a default in the obligations of the
Corporation's former U.K. subsidiaries to the Bank of Scotland in 1996. Mr.
Baylis and Ms. Crisp, each of whom resides in the U.K., were not fully aware of
their obligations to file a Form 4 following the sale of pledged shares but have
been notified regarding such obligations. Bruce Paul became a 10% stockholder in
May 1997. By June 1997, his ownership interest was below 10% due to additional
stock issuances by the Corporation. To the Corporation's knowledge, Mr. Paul did
not file a Form 3 upon becoming a 10% stockholder. The Corporation is not aware
of any other late filings of reports under Section 16 this past year.
The Board of Directors
There were no formal meetings of the Board in the Corporation's fiscal year
ended March 31, 1997 and as the board has consisted of a single director since
September, 1996, there have been no formal meetings of the Board in its current
fiscal year ending March 31, 1998. There have also been no committees of the
Board in fiscal 1997 and 1998.
Committees of the Board of Directors
Currently, the Board does not have an audit committee nor a compensation or
nominating committee. The functions that would be performed by such committees
are performed by the Board as a whole. If the proposed Transaction is approved
(see "Proposal 3"), an audit committee of the Board would be formed and would
consist of Messrs. Fyfe and Aber. The audit committee's functions will include
periodic consultation with the Corporation's financial personnel and independent
public accountants on matters relating to appropriate record-keeping,
classifications and other internal financial controls and procedures.
<PAGE>
Voting Securities of Certain Beneficial Owners and Management
The following table sets forth, as of January 1, 1998, information and pro
forma information assuming completion of the Transaction concerning the
beneficial ownership of Common Stock (i) by each person which is known by the
Corporation to own beneficially more than 5% of its outstanding Common Stock (or
who will own more than 5% of its Common Stock following consummation of the
Transaction), (ii) by each director and nominee, (iii) by each of the current
executive officers named in the compensation table and (iv) by all directors and
executive officers as a group.
<TABLE>
<CAPTION>
Current After Transaction
Amount and
Nature of
Name and Address of Beneficial Percentage Pro Forma Pro Forma
Beneficial Owner Ownership of Class Amount(1) Percentage(1)
<S> <C> <C> <C> <C> <C>
James Fyfe(2)............................ 3,000(3) (4) 103,000 0.7
Joel San Antonio......................... -0- -0- 7,100,000 49.5%
Robert Hutchins.......................... -0- -0- 150,000 1.0%
Ronald Glime............................. 50,000 0.8% 300,000 2.1%
Glen Aber................................ -0- -0- 150,000 1.0%
Bruce H. Paul(5)......................... 400,000 6.6% 400,000 2.8%
All directors, nominees and executive
officers as a group (5 persons)....... 53,000 0.9% 7,803,000 54.4%
</TABLE>
(1) In the Transaction, shares of Class B Preferred Stock are issuable, which
shares are convertible into shares of Common Stock on a one-for-ten basis
if certain conditions are met. See "Proposal 3." The foregoing pro forma
information assumes the consummation of the Transaction and the conversion
of all shares of Series B Convertible Redeemable Preferred Stock into
shares of Common Stock.
(2) Mr. Fyfe's address is c/o the Corporation.
(3) Represents exercisable options.
(4) Less than 0.1%.
(5) Mr. Paul's address is 1 Hampton Road, Purchase, NY, to the best knowledge
of the Corporation.
Executive Compensation
The following table sets forth the aggregate compensation paid during the
three years ended March 31, 1998 to the only person who served as a officer of
the Corporation during fiscal 1998.
<PAGE>
Summary Compensation Table
Long-Term Compensation
--------------------------
Annual Compensation Awards Payouts
-------------------- ------ -----------
All
Name Other
and Options/ Compen-
Principal Salary SARs sation
Position Year ($) (#) ($)
James J. Fyfe(1) 1998 -0- -0- -0-
1997 -0- 1,500 -0-
1996 $76,000 -0- -0-
_________________
(1) Mr. Fyfe became sole officer on March 6, 1996 following the resignations of
Brian J. Baylis and Susan A.M. Crisp. His 1996 salary was paid to Mr. Fyfe
by the former U.K. subsidiary.
All officers hold office until the meeting of the Board following the next
annual meeting of stockholders or until the earlier of their resignation or
removal.
If the Transaction is approved, Mr. San Antonio would become Chairman of
the Board of the Corporation but would not be an employee of the Corporation.
Mr. San Antonio would not be involved in the day-to-day operations of the
Corporation. Mr. Hutchins would become President of the Corporation and would
devote substantially all of his business time to managing the Corporation. He
would receive an annual salary of $85,000 and would be eligible to receive a
discretionary bonus in an amount, if any, determined by the Board of Directors.
<PAGE>
<TABLE>
<CAPTION>
OPTION/SAR Grants in Last Fiscal Year
Individual Grants
- ------------------------ ------------------ -------------------- ----------------- -----------------------
Number of % of
Shares of Total
Common Stock Options/
Underlying SARs
Options/ Granted to Exercise
SARs Employees or Base
Granted in Fiscal Price Expiration
Name (#) Year ($/Sh) Date
<S> <C> <C> <C> <C>
James J. Fyfe 1,500 100% $.3125 May 2002
</TABLE>
<TABLE>
Aggregated Options/SAR Exercises in Last Fiscal Year
and FY-End Options/SAR /Values
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
At FY-End (#) At FY-End ($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
James J. Fyfe -0- -0- 0/3000 0/0
</TABLE>
Compensation of Directors
Currently, directors who are not full-time members of management receive
$300 per Board of Directors meeting attended, in addition to reimbursement of
travel expenses. Such directors are also compensated for special assignments
from time to time. No compensation for special assignments was paid in fiscal
1997 or 1998. No directors' fees are payable to employees of the Corporation who
serve as directors.
All directors receive options to purchase 1,500 shares of the Corporation's
common stock each May under the Corporation's 1992 Stock Option Plan for
Directors ("Director Option Plan"). In each of May 1997 and May 1996, Director
Fyfe received options to purchase 1,500 shares at a price of $.4065 per share in
1996 and $.3125 per share in 1997. The Director Option Plan will continue
whether or not Proposal 5 is adopted.
Subject to approval of Proposal 5, effective April 30, 1998, each director
who is not an officer or employee of the Corporation will be entitled to receive
compensation of $2,500 per calendar quarter plus 500 shares of Common Stock per
calendar quarter of board service. Outside directors would be compensated for
committee service at $500 per calendar quarter plus 125 shares of Corporation
stock per calendar quarter.
<PAGE>
PROPOSAL 2
PROPOSED AMENDMENT TO THE CORPORATION'S
CERTIFICATE OF INCORPORATION TO REDUCE
THE PAR VALUE OF COMMON STOCK
The Corporation's Certificate of Incorporation presently provides that the
authorized capital stock of the Corporation consists of 30,000,000 shares of
Common Stock, par value $.10 per share, and 5,000,000 shares of Preferred Stock,
par value $.01 per share. On February 27, 1997, the Corporation's Board of
Directors approved, subject to the stockholders' approval, an amendment to the
Corporation's Certificate of Incorporation to decrease the par value of the
Common Stock to $.001 per share. Approval of this Proposal 2 requires the
affirmative vote of a majority of the outstanding shares of Common Stock on the
Record Date. Accordingly, abstentions and broker non-votes will have the effect
of a vote against Proposal 2.
If the Transaction described in Proposal 3 below is approved, the
Corporation will be required to issue 825,000 shares of the Corporation's Series
B Convertible Redeemable Preferred Stock (described under Proposal 3). The par
value of the Common Stock is being reduced to $0.001 to conform to the amounts
being paid for the Series B Convertible Redeemable Preferred Stock pursuant to
the Transaction, as each share of the Series B Convertible Redeemable Preferred
Stock, par value of $0.01 per share, is convertible into ten (10) shares of
Common Stock.
The form of this proposed amendment to the Corporation's Certificate of
Incorporation is annexed to this Proxy Statement as Exhibit A.
A decrease of the par value of the Common Stock is required as a condition
to the Transaction that is the subject of Proposal 3. If you vote FOR Proposal
3, you must also vote FOR Proposal 2. See "Proposal 3."
PROPOSAL 3
ISSUANCE OF SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK,
CHANGE IN CONTROL AND NEW BUSINESS OPERATIONS
On March 4, 1998, the Corporation entered into a Stock Purchase Agreement
("Agreement"), conditioned upon the approval of the Corporation's stockholders,
with Mr. Joel San Antonio and certain other individuals (the "Initial
Purchasers") whereby the Initial Purchasers will acquire an aggregate of 765,000
shares of a newly created Series B Convertible Redeemable Preferred Stock, par
value $.01 per share. Thereafter the Initial Purchasers will endeavor to
establish for the Corporation new business operations in the insurance sector,
more specifically the property and casualty specialty insurance markets. Mr. San
Antonio, who has
<PAGE>
many years experience in these sectors, is in the process of exploring a number
of specialty insurance opportunities for the development of new business
operations. A copy of the Agreement is annexed to this Proxy Statement as
Exhibit B. The description of the Agreement contained herein is supplemented by
reference to the Agreement.
The Agreement provides for Mr. San Antonio to subscribe for 710,000 shares
of Series B Convertible Redeemable Preferred Stock at $0.10 per share, a total
consideration of $71,000 and Messrs. Glime, Hutchins and Aber to subscribe for
25,000, 15,000 and 15,000 shares, respectively, of Series B Convertible
Redeemable Preferred Stock at the same price per share. Pursuant to the
Agreement, the Corporation will pay certain expenses of the Initial Purchasers
in connection with the Transaction, which expenses are currently estimated to be
approximately $50,000, for legal expenses. In addition, the Corporation would
issue 50,000 shares of Series B Convertible Redeemable Preferred Stock to Alan
Zuckerman as compensation for his assistance to the Corporation in the
identification and review of business opportunities and this Transaction and for
his assistance in bringing the Transaction to fruition. Additionally, the
Corporation would issue 10,000 shares of Series B Convertible Redeemable
Preferred Stock to James Fyfe for his work in bringing this Transaction to
fruition. If Proposal 3 is approved, these issuances would dilute the voting
rights of existing stockholders by approximately 57%.
A majority of the votes cast by the holders of Common Stock is required for
approval of this Proposal 3. Abstentions and shares underlying broker non-votes
will not be counted as votes cast and accordingly will have no effect on this
Proposal 3.
Business Strategy
If this Proposal is approved, Mr. San Antonio's initial goal will be to
complete the development of a comprehensive strategic and operational business
plan for the Corporation and to secure the services of a quality management
team. In connection with this process, Mr. San Antonio has agreed to act as
Chairman of the Corporation and Mr. Hutchins has agreed to act as President of
the Corporation. The following description represents Mr. San Antonio's current
plans for the Corporation, which are subject to change as business necessities
require during the course of implementation. No assurances can be given that Mr.
San Antonio will be successful in implementing his business plan as currently
envisioned.
Mr. San Antonio's plans for the Corporation involve having the Corporation
enter into insurance and/or insurance-related businesses. The thrust of the
Corporation will be to optimize spread of risk and seek "niche" business
opportunities that do not fit what is often referred to in the industry as
"mainstream" business. The Corporation may also explore opportunities for
"fronting" insurance for service contract business and other property and
casualty insurance business, whereby all or a portion of the risk of such
policies written by the Corporation would be ceded to a reinsurer. As part of
any such strategy the Corporation anticipates that it will reinsure heavily on a
"quote share" or "pro-rata" basis with other operators with whom proposed new
management has achieved successful business relationships in the past. In "quote
share" or "pro-rata" reinsurance, one or more reinsurers bears an agreed upon
proportion of the specified risk, rather than a fixed dollar amount of risk or
the excess above a fixed dollar amount of risk.
<PAGE>
In connection with the implementation of these strategies, it may become
necessary for the Corporation to become licensed in one or more states in order
to enable it to conduct operations. No assurances can be given that the
Corporation will be able to obtain such licenses.
The Corporation does not presently anticipate dealing with insurance
products in the worker's compensation, personal insurance or environmental
insurance product areas. The Corporation presently anticipates that its
marketing efforts in the property and casualty sectors of the insurance market
will focus on operating on a conservative basis using both facultative and
treaty reinsurance support to minimize its exposure. Facultative reinsurance
generally involves a reinsurer agreeing to bear the risk of loss over a
specified dollar amount for a specified risk. Treaty reinsurance generally
involves a reinsurer agreeing to bear a portion of the risk associated with a
specified category or "book" of business, and may be done on an excess or quote
share basis. As part of this strategy, the Corporation may consider direct
selling, brokerage and agency produced business and may evaluate potential
opportunities to participate in the reinsurance sector of commercial property
and casualty insurance on both a "quote share" and "excess" basis.
The Corporation currently anticipates that business development and future
market growth will be concentrated on "short tail" casualty business and package
product lines, primarily focused in the retail/service industry marketplace.
"Short tail" casualty business provides for coverage during the term of the
policy or within a relatively short period, as distinguished from "long-tail"
business, such as occurrence-based policies, in which the insurer is obligated
to make payment, whether or not the policy has expired, as long as the insurable
injury occurred during the term of the policy. Examples of "long tail" insurance
include worker's compensation, medical malpractice and products liability
insurance for products with long lives, such as automobiles and airplanes. The
Corporation anticipates that it will seek short tail business because of the
relatively greater availability of reinsurance and lower reinsurance costs, and
the relatively greater certainty, predictability and ability to price policies
and reinsurance policies associated with short tail business. An example of
short-tail business on which the Corporation might concentrate is retail and
wholesale products liability for consumer products that have limited useful
lives. In addition the Company anticipates that it will provide package product
lines, that is, insure service contracts for products that have a limited useful
life on a claims made basis for a term of no greater than three years. If
successfully developed, the customer base generated by these segments could
become a source to seek out other property and casualty insurance business
opportunities.
As part of its overall business plan, the Corporation may pursue other and
different business activities than those described above, but it has no current
plans to do so.
The description of the Corporation's proposed new business operations and
intended strategy after the Transaction are forward-looking statements under
Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy or
<PAGE>
anticipated. Future events and actual results, financial and otherwise, could
differ materially from those set forth in or contemplated by the forward-looking
statements herein. Important factors that could contribute to such differences
include changes in economic and market conditions, and regulatory changes in the
insurance business, as well as the other factors described herein.
Terms of Preferred Stock
The following summarizes the terms of the Series B Convertible Redeemable
Preferred Stock, which terms are more fully set forth in the Certificate of
Designation annexed hereto as Exhibit C. The Series B Convertible Redeemable
Preferred Stock would carry a zero coupon and each share of the Series B
Convertible Redeemable Preferred Stock would be convertible into ten shares of
the Corporation's Common Stock. The holder of a share of the Series B
Convertible Redeemable Preferred Stock would be entitled to ten times any
dividends paid on the Common Stock. Mr. San Antonio would assume control of the
Corporation as the holder of such 710,000 shares of Series B Convertible
Redeemable Preferred Stock, since the Series B Convertible Redeemable Preferred
Stock will have ten votes per share and vote as one class with the Common Stock.
Accordingly, Mr. San Antonio, with over 49% of the voting power, will almost by
himself have sufficient voting power to elect all of the Board of Directors.
However, the Initial Purchasers of the Series B Convertible Redeemable Preferred
Stock, including Mr. San Antonio, would be required to vote in favor of Mr. Fyfe
or his designee as a director of the Corporation through June 30, 2000.
Pursuant to the terms of the Agreement and the Certificate of Designation,
from March 31, 2000 to June 30, 2000, the Corporation would have the right to
repurchase or redeem such shares of Series B Convertible Redeemable Preferred
Stock from the holders for a total consideration of $.10 per share ($76,500 in
the aggregate) unless, during the period from the date of the closing of the
Transaction through March 31, 2000:
(i) the Corporation's shares of common stock maintain a minimum closing
bid price of not less than $2 per share on a public market during a
period of any 10 consecutive trading days, and either
(ii) the Corporation raises a minimum of $2.5 million of new equity capital
through a placement of Common Stock, or
(iii)the Corporation has net revenues of at least $1 million in any fiscal
quarter through the fiscal quarter ending March 31, 2000
(collectively, the "Trigger Conditions").
Mr. Fyfe or the director designated by Mr. Fyfe will have the ability to
determine if the Corporation will elect to exercise this redemption right on
behalf of the Corporation.
Each Series B Convertible Redeemable Preferred Share would be convertible
into ten shares of Common Stock. Upon liquidation, the Series B Convertible
Redeemable Preferred
<PAGE>
Stock would be junior to the Corporation's Series A Preferred Stock and would
share ratably with the Common Stock with respect to liquidating distributions.
There can be absolutely no assurance that any business plan implemented by
Mr. San Antonio would be successful or that the Corporation would be successful
in obtaining necessary licensing. Furthermore, while the Corporation would have
the right to redeem the Series B Convertible Redeemable Preferred Stock if such
business plan is not successful (as measured by the Trigger Conditions), there
can be absolutely no assurance that the Corporation would have sufficient funds
to redeem the Series B Convertible Redeemable Preferred Stock or that the
Corporation will not otherwise be damaged or insolvent if such business plan
fails so that the redemption right would not be available or viable.
An increase of the number of authorized shares is required as a condition
to the Transaction. If you vote FOR Proposal 3, you must also vote FOR Proposal
2.
PROPOSAL 4
1998 EMPLOYEE INCENTIVE STOCK OPTION PLAN
The Corporation has adopted, subject to stockholder approval, the 1998
Employee Incentive Stock Option Plan (the "1998 Plan") to grant stock options to
eligible employees (including employees serving on the Board of Directors) to
enable the Corporation to compete successfully in attracting, motivating and
retaining employees with outstanding abilities by making it possible for them to
purchase shares of the Corporation's Common Stock on terms which will give them
a direct and continuing interest in the future success of the Corporation. A
majority of the votes cast by the holders of Common Stock is required for
approval of this Proposal 4. Abstentions and shares underlying broker non-votes
will not be counted as votes cast and accordingly will have no effect on
Proposal 4. A copy of the 1998 Plan is annexed hereto as Exhibit D.
<PAGE>
Under the 1998 Plan, the maximum aggregate number of shares which may be
issued under options is 300,000 shares of Common Stock. The aggregate fair
market value (determined at the time the option is granted) of the shares for
which incentive stock options are exercisable for the first time under the terms
of the 1998 Plan by any eligible employee during any calendar year cannot exceed
$100,000. The option exercise price of each option is 100% of the fair market
value of the underlying stock on the date the option is granted, except that no
option will be granted to any employee who, at the time the option is granted,
owns stock possessing more than 10% of the total combined voting power of all
classes of stock of the Corporation or any subsidiary unless (a) at the time the
option is granted, the option exercise price is at least 110% of the fair market
value of the shares of Common Stock subject to the option and (b) the option by
its terms is not exercisable after the expiration of five years from the date
such option is granted. At least one-half of the shares issued upon exercise of
any option granted pursuant to the 1998 Plan must be retained by the optionee
for at least one year.
The 1998 Plan would be administered by a committee of disinterested
directors of the Board of Directors of the Corporation ("Option Committee"). The
Option Committee would have the power to interpret the 1998 Plan and to
establish rules and regulations for its administration. The Option Committee may
determine the number of shares, if any, optioned in each year, the employees to
whom options are granted, the number of shares optioned to each employee
selected and the term of the option granted. The Option Committee, in its sole
discretion, would determine whether any particular stock options shall become
exercisable in one or more installments, specify the installment dates, and,
within the limitations provided in the 1998 Plan, specify the term during which
any stock option is exercisable. However, no option may be exercised sooner than
one year from the date of grant nor may an option be exercisable for a period
longer than ten years from the date granted.
Shares subject to options which for any reason expire or terminate without
being exercised become available for other options under the 1998 Plan. Shares
issued on exercise of options may be authorized but unissued shares, or shares
reacquired and held in the Corporation's treasury. In the event of any change in
the stock subject to the 1998 Plan as a result of change in par value,
combination, split, reverse split, reclassification, distribution of a dividend
payable in stock, or the like, appropriate adjustments will be made in the
number of shares to be issued under options and the option price per share. In
the event of merger, consolidation or similar transaction, the successor to the
Corporation shall assume the Corporation's obligations with respect to
outstanding options granted under the 1998 Plan.
To accept an option under the 1998 Plan, an optionee must enter into a
written Option Agreement which will contain such terms, provisions and
conditions consistent with the 1998 Plan as may be determined by the Option
Committee from time to time. The Option Committee may permit payment of the
option price for stock purchased under options in cash, in Common Stock or a
combination thereof. A stock option shall not be transferable other than by will
or the laws of descent and distribution and shall be exercisable during the
optionee's lifetime only by the optionee.
<PAGE>
The 1998 Plan also provides that if the optionee ceases to be an employee
of the Corporation for any reason other than death or disability, stock options
to the extent they were exercisable prior to the date of termination of
employment shall expire on the earlier of the date provided in the option or the
30th day after the date of termination. If an optionee's employment terminates
because of death or disability, stock options to the extent they were
exercisable on the last date of employment shall expire on the earlier of the
date provided in the option or the one year anniversary of optionee's death or,
in the case of a disabled optionee, the one year anniversary of the date such
optionee ceased employment. In the event an optionee dies while employed by the
Corporation or any subsidiary, the optionee's estate, or any person to whom the
option passes by will or by the laws of descent and distribution, may exercise
the option to the extent it was exercisable by the optionee.
The Board may not, without prior stockholder approval, amend the 1998 Plan
to increase the maximum number of shares subject to option under such Plan, or
modify the limitation on the maximum aggregate fair market value of stock for
which options may be granted to any eligible employee in any calendar year. The
1998 Plan terminates on the tenth anniversary of its Effective Date (the date
approved by stockholders) sooner terminated by the Board of Directors. However,
termination will not adversely affect options previously granted.
For federal tax purposes an optionee will not realize income at the time of
exercise of an option if the optionee (i) holds the shares transferred under the
option for a minimum of two years after the date the option is granted and for a
minimum of one year after the shares are transferred to the optionee, and (ii)
remains employed by the Corporation from the time the option is granted until
three months before it is exercised. If an option is exercised after the death
of an optionee by the estate of the decedent, or by a person to whom the option
has passed under the laws of descent and distribution, no income will be
realized at the time of exercise, regardless of whether or not the above two
conditions are met. When an optionee who has met the two conditions sells or
exchanges the shares issued under an option, the income realized will be taxed
using applicable capital gain rates. However, when an optionee fails to meet
either of the two conditions, part or all of the income realized will be taxed
as ordinary income in the year of disposition, and the Corporation will be
entitled to a corresponding deduction in the same year. Neither the Corporation
nor any subsidiary may take a business deduction with respect to the grant or
exercise of options.
If the 1998 Plan is approved, the Board of Directors will terminate the
Corporation's 1986 Stock Option Plan, as amended. There are currently no options
outstanding under such plan.
PROPOSAL 5
INDEPENDENT DIRECTORS COMPENSATION PLAN
In order to be able to attract qualified independent directors in the
future, the Corporation has adopted, subject to stockholder approval, the
Independent Directors Compensation Plan, pursuant to which each director who is
not an officer or employee would receive compensation
<PAGE>
of $2,500 plus 500 shares of the Corporation's Common Stock each quarter. If
approved such Plan would be effective as of April 30, 1998.
Independent directors will also continue to be eligible to receive stock
options each year under the Director Option Plan at the rate of 1,500 options
per year at fair market value. There are currently 3,000 options outstanding
under such plan held by James Fyfe.
A majority of the votes cast by the holders of Common Stock is required for
approval of this Proposal 5. Abstentions and shares underlying broker non-votes
will not be counted as votes cast and accordingly will have no effect on
Proposal 4.
INDEPENDENT PUBLIC ACCOUNTANTS
On July 20, 1995, the Corporation appointed Mahoney Cohen & Corporation,
P.C. ("Mahoney Cohen") as the Corporation's independent auditors responsible for
the audit of the Corporation's financial statements. This action was recommended
by the Corporation's Audit Committee and approved by its Board of Directors. The
Corporation had not consulted Mahoney Cohen regarding any accounting or
financial reporting issues prior to that firm being retained by the Corporation.
In connection with Mahoney Cohen's audit of the Corporation's financial
statements for the fiscal year ended March 25, 1995, and in the subsequent
interim period through on or about April 17, 1997 when the relationship was
formally terminated and it resigned as the Corporation's independent auditors,
there were no disagreements between Mahoney Cohen and the Corporation on any
matters of accounting principles or practices, financial statement disclosure or
auditing scope and procedures which, if not resolved to the satisfaction of
Mahoney Cohen, would have caused Mahoney Cohen to make reference to such matters
in their report. Mahoney Cohen's report on the Corporation's financial
statements for the fiscal year ended March 25, 1995 expressed an unqualified
opinion on those financial statements based upon their audit, but included a
paragraph noting a "substantial doubt about the Corporation's ability to
continue as a going concern" based upon the several matters summarized in such
report.
In February 1997 the Corporation appointed Simontacchi & Co., P.A.
("Simontacchi") as the Corporation's independent auditors responsible for the
audit of the Corporation's financial statements. This action was approved by the
Corporation's board of directors. The Corporation had not consulted Simontacchi
regarding any accounting or financial reporting issues prior to that firm being
retained by the Corporation.
Simontacchi has audited the Corporation's financial statements for the
fiscal year ended March 31, 1997. Simontacchi's report on the Corporation's
financial statements for such fiscal year expressed an unqualified opinion on
those financial statements based upon their audit, but included a paragraph
noting a "substantial doubt about the Corporation's ability to continue as a
going concern" based upon the several matters summarized in such report.
<PAGE>
Simontacchi has been engaged to audit the Corporation's financial
statements for the fiscal year ended March 31, 1998. Representatives of
Simontacchi are expected to be present at the Annual Meeting of Stockholders, to
make a statement, if they desire to do so, and to respond to appropriate
questions.
STOCKHOLDER PROPOSALS
Stockholder proposals intended for inclusion in the Proxy Statement
for the 1999 Annual Meeting of Stockholders must be received at the
Corporation's principal executive offices, 272 Route 206 Bldg B#1.1, Flanders,
New Jersey 07836 by December ___, 1998.
OTHER BUSINESS
The Annual Meeting of Stockholders is called for the purposes set forth in
the Notice. The Board of Directors does not know of any matter for action by
stockholders at such meeting other than the matters described in the Notice.
However, the enclosed proxy will confer discretionary authority with respect to
matters which are not known at the date of printing hereof which may properly
come before the meeting. It is the intention of the person named in the proxy to
vote in accordance with his judgment on any such matter.
ANNUAL AND QUARTERLY REPORTS
INCORPORATION BY REFERENCE
The Corporation's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997 (the "1997 Annual Report") containing financial statements
reflecting the financial position of the Corporation as of March 31, 1997 and
March 31, 1996, and the results of operations and statements of cash flows for
each of the three years in the period ended March 31, 1997, and the Company's
Quarterly Report on Form 10-Q for the quarter ended December 31, 1997 (the
"Quarterly Report") containing interim unaudited financial statements, have been
mailed with this proxy material to all stockholders. The 1997 Annual Report and
the Quarterly Report are not to be regarded as proxy soliciting material or as a
communication by means of which any solicitation is to be made except that the
financial statements and management's discussion contained therein (at pages 10
to 35 of the Annual Report and Part I of the Quarterly Report) are incorporated
herein by reference as if such pages were set forth herein in full.
You are cordially invited to attend the Annual Meeting in person. Your
participation in and discussion of the Corporation's affairs will be welcome.
By Order of the Board of Directors
James J. Fyfe, Vice President
<PAGE>
Exhibit A
AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
CORNICHE GROUP INCORPORATED
In order to reduce the par value of the Common Stock of the Corporation from
$0.10 to $0.001 per share, the first paragraph of Article Fourth of the
Certificate of Incorporation, as amended, of the Corporation is deleted and the
following is substituted in lieu thereof:
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is THIRTY FIVE MILLION (35,000,000) consisting of (i)
Thirty Million (30,000,000) shares of Common Stock of the par value of $.001 per
share and (ii) Five Million (5,000,000) shares of Preferred Stock of the par
value of $0.01 per share.
(Changes in italics)
<PAGE>
Exhibit B
STOCK PURCHASE AGREEMENT
CORNICHE GROUP INCORPORATED
---
JOEL SAN ANTONIO
ROBERT H. HUTCHINS
RONALD GLIME
GLEN ABER
Dated March 4, 1998
<PAGE>
Exhibit B
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated this 4th day of March,
1998, between Corniche Group Incorporated, a Delaware corporation (the
"Corporation"), and the Initial Purchasers listed on Exhibit A, attached hereto
(collectively the "Initial Purchasers" and each an "Initial Purchaser").
W I T N E S S E T H:
SECTION 1. Issuance and Sale of Stock. Upon the terms and subject to all of
the conditions set forth herein, the Corporation agrees to issue and sell to the
Initial Purchasers, and the Initial Purchasers agree to purchase from the
Corporation on the closing date (as defined in Section 7 hereof) (the "Closing
Date") the number of shares of Series B Convertible Preferred Stock, par value
$.01 per share (the "Series B Preferred Stock"), of the Corporation as set forth
next to each Initial Purchaser's name on Exhibit A, attached hereto, having such
rights, preferences and designations as are set forth in Exhibit B, attached
hereto.
SECTION 2. Consideration for Series B Preferred Stock. In consideration for
the issuance and sale of the Series B Preferred Stock by the Corporation to the
Initial Purchasers and the other transactions contemplated hereunder, on the
Closing Date hereof Initial Purchasers shall pay to the Corporation the sum of
$.10 per share or $76,500.00 in the aggregate (the "Purchase Price").
SECTION 3. Representations and Warranties of the Corporation. The
Corporation represents and warrants that:
(a) Organization; Capital Stock. The Corporation is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware and has the corporate power to carry on its business as it is now being
and contemplated to be conducted. The authorized capital stock of the
Corporation consists of 30,000,000 shares of Common Stock, par value $.10 per
share, which will be reduced to $.001 per share as part of the shareholder
approval for this transaction (the "Common Stock") and 5,000,000 shares of
Preferred Stock, par value $.01 per share, of which 1,000,000 shares have been
designated as Series A Convertible Preferred Stock ("Series A Preferred Stock").
There are 6,105,231 shares of Common Stock and 893,908 shares of Series A
Preferred Stock issued and outstanding which are the only shares of capital
stock of the Corporation issued and outstanding on the date hereof. All of the
issued and outstanding Common Stock and Series A Preferred Stock of the
Corporation is duly authorized, validly issued, fully paid and non-assessable.
There are 276,207 shares of Common Stock issuable, pursuant to presently
outstanding options, warrants or other rights to purchase capital stock of the
Corporation (whether or not presently exercisable) and there are no other
options, warrants or other rights to purchase capital stock of the Corporation
outstanding except that the
<PAGE>
Corporation has offered to sell 200,000 shares of Common Stock at $.50 per
share. Except as set forth in the "SEC Documents" as defined below, there are no
authorized, outstanding or existing:
(i) proxies, voting trusts or other agreements or understandings with
respect to the voting of any capital stock of the Corporation;
(ii) securities convertible into or exchangeable for any capital stock
of the Corporation other than the Series A Preferred stock;
(iii) options, warrants or other rights to purchase or subscribe for
any capital stock of the Corporation (whether or not presently exercisable), or
securities convertible into or exchangeable for any capital stock of the
Corporation other than as disclosed above except that the Corporation has
offered to sell 200,000 shares of Common Stock at $.50 per share;
(iv) pre-emptive rights or rights of first refusal of any holder of
capital stock, or agreements of any kind relating to the issuance of any capital
stock of the Corporation, any such convertible or exchangeable securities or any
such options, warrants or rights; or
(v) agreements that may obligate the Corporation to issue or purchase
any of its securities.
(b) Subsidiaries. Except as disclosed in the SEC Documents, the Corporation
has no Subsidiaries. As used herein, the term "Subsidiary" means any
corporation, limited liability company, partnership or other entity of which
more than fifty percent (50%) of the shares of stock, or other ownership
interests having ordinary voting power (including stock or such other ownership
interests having such voting power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, limited liability company, partnership or other entity, are at
the time owned, directly or indirectly, through one or more intermediaries, or
both, by the Corporation.
(c) Corporate Power, etc. The Corporation presently conducts no business
and has, since February 28, 1996, conducted no business.
(d) Due Authorization; No Conflict. This Agreement has been duly authorized
by all necessary corporate action of the Corporation except for shareholder
approval as contemplated by Section 5(c) hereof. Neither this Agreement nor any
of the transactions provided for herein conflicts with or violates (i) any
provision of the Corporation's Certificate of Incorporation or By-laws, (ii) any
agreement by which the Corporation, or any of its properties, is bound, (iii)
any federal, state or local law, rule or regulation, except where such conflict
or violation would not have a material adverse effect upon the transactions
contemplated by this Agreement; or (iv) any judicial order. This Agreement is,
when duly executed and delivered, binding on the Corporation, and enforceable
against the Corporation in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights or remedies of creditors
<PAGE>
generally, and the effect of general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(e) Series B Preferred Stock. The Series B Preferred Stock to be issued and
sold pursuant to Section 1 hereof, and the Common Stock issuable upon conversion
thereof, have been duly authorized, and in each case when issued by the
Corporation will be fully paid and non-assessable (assuming payment by the
Initial Purchasers of the consideration set forth in Section 2 hereof,) and free
and clear of any lien, claim or right of any other person.
(f) Financial Statements; Undisclosed Liabilities (i) The balance sheet of
the Corporation as of March 31, 1997, and the related statements of income,
stockholders' equity and cash flows for the fiscal year ending March 31, 1997,
have been certified by the Corporation's independent certified public
accountants, and together with the balance sheet and the related statements of
income and cash flows for the fiscal quarter ending December 31, 1997, have been
prepared in accordance with GAAP consistently applied, and present fairly the
financial position of the Corporation as of such dates and the results of its
operations for such periods. The Balance Sheet of the Corporation dated December
31, 1997 is herein called the "Balance Sheet," and December 31, 1997 is herein
called the "Balance Sheet Date."
(ii) As of the date hereof the Corporation does not have any liability
of any nature (matured or unmatured, fixed contingent or otherwise) which is,
individually or in the aggregate, material to the Corporation and which was not
reflected on the Balance Sheet.
(g) Material Adverse Change. Except as set forth on Schedule 3(g), since
the Balance Sheet Date there has not been any change in the properties or
financial condition of the Corporation, other than in the ordinary course of
business, which individually or in the aggregate, has had or may reasonably be
expected to have a material adverse effect on the properties or financial
condition of the Corporation.
(h) Litigation; No Default. Except as set forth in the SEC Documents, there
are no claims, actions, suits, investigations or proceedings pending against or,
to the knowledge of the Corporation, overtly threatened against the Corporation
or the transactions contemplated by this Agreement, by any person, governmental
body or agency or by any securities exchange or national securities association.
Except as set forth there is not in existence any order, judgment or decree of
any court, governmental authority or agency or arbitration board or tribunal
enjoining the Corporation from taking, or requiring the Corporation to take,
action of any kind with respect to the business of the Corporation. The
Corporation is not in violation of any material laws or governmental rules or
regulations, and is not in default under any contract or commitment to which it
is a party or by which its assets are bound, which violation or default would
have a material adverse effect on the operations of the Corporation as currently
conducted.
(i) Consents. No consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority or any other
person on the part of the Corporation is required in connection with the
execution, delivery and performance of this
<PAGE>
Agreement, or the offer, issue, sale or delivery of the Series B Preferred Stock
or the Common Stock issuable on conversion of the Series B Preferred Stock,
except for shareholder approval contemplated by Section 5(c) hereof.
(j) Taxes. The Corporation has delivered to Initial Purchasers copies of
all federal and state income tax returns of the Corporation for the fiscal years
ended March 25, 1995, March 31, 1996 and March 31, 1997. To the knowledge of the
Corporation all income, gross receipts, ad valorem, sales, use, franchise,
property employment and other tax returns required to be filed by the
Corporation in any jurisdiction have in fact been filed, and are true and
correct in all material respects, and all taxes, assessments, fees and other
governmental charges upon the Corporation or upon any of its properties, income
or franchises, which are due and payable have been paid. To the knowledge of the
Corporation, the provisions for taxes on the books of the Corporation are
adequate. The Corporation has not granted or agreed to any extension of the
period of limitations with respect to any open tax year.
(k) Disclosure. Taken as a whole, the representations and warranties by the
Corporation contained herein, and all information contained in Securities and
Exchange Commission ("SEC") forms 10-K, 10-Q, 8-K or other filings made by the
Corporation, including, but not limited to, the draft Proxy Statement relating
to approval of this transaction (which draft has been delivered to and reviewed
by the Initial Purchasers) (the "SEC Documents"), do not contain any untrue
statement of a material fact and do not omit to state a material fact necessary
to make the statements contained therein not misleading.
SECTION 4. Representations and Warranties of the Initial Purchasers. The
Initial Purchasers represent and warrant that:
(a) Authority and Capacity. Each Initial Purchaser has the legal capacity
to enter into this Agreement and to perform the transactions contemplated
hereby.
(b) Execution and Delivery. This Agreement and such other agreements and
instruments required to be delivered hereby or executed in connection herewith,
have been duly executed and delivered by each Initial Purchaser and when
executed and delivered by the Corporation, will constitute, legal, valid and
binding obligations of the Initial Purchasers enforceable against the Initial
Purchasers in accordance with their respective terms, subject to the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights or remedies of creditors
generally, and the effect of general principles of equity and the discretion of
the court before which any proceeding therefor may be brought.
(c) Investment Intent. The Initial Purchasers are acquiring the Series B
Preferred Stock for their own accounts, with no present intention of reselling
or otherwise distributing the same. The Initial Purchasers understand and agree
that they may dispose of the Series B Preferred Stock, or the Common Stock
issuable upon conversion thereof, only in compliance with the Securities Act of
1933, as amended, and applicable state securities laws, as then in effect. The
Initial Purchasers agree to the imprinting, so long as required by law, of a
<PAGE>
legend on certificates representing all of the shares of Series B Preferred
Stock to be issued and any Common Stock issued upon conversion thereof to the
following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS
OF SUCH ACT OR SUCH LAWS."
(d) Transfer; Pledge. The Initial Purchasers have not entered into any
contracts, undertakings, agreements or arrangements with any person to sell,
transfer or pledge to such person or anyone else the Series B Preferred Stock
and have no present plans or intentions to enter into any such contracts,
undertakings, agreements or arrangements.
(e) Economic Risk. Each Initial Purchaser can bear the economic risk of
losing his or her entire investment in the Series B Preferred Stock and is
prepared to bear the economic risk of this investment for an indefinite time.
(f) Overall Commitment. The overall commitment of any Initial Purchaser to
investments which are not readily marketable is not disproportionate to his or
her net worth, and an investment in the Series B Preferred Stock will not cause
such overall commitment to become excessive. Each Initial Purchaser's need for
diversification in his or her investment portfolio will not be impaired by an
investment in the Corporation.
(g) Short Term Liquidity. Each Initial Purchaser has adequate means of
satisfying his or her short term needs for cash and has no present need for
liquidity which would require him or her to sell his or her Series B Preferred
Stock.
(h) Sophisticated Investors. The Initial Purchasers are sophisticated
investors and have substantial experience in making investment decisions of this
type and/or are relying on their own advisors in making this investment decision
and, therefore, either alone or together with their advisors, the Initial
Purchasers have such knowledge and experience in financial and business matters
that they are capable of evaluating the merits and risks of an investment in the
Corporation.
(i) Principal Address. The principal business address of each Initial
Purchaser, or if the Initial Purchaser is an individual, his or her principal
residence, is in the state indicated in the address set forth on Exhibit A.
Unless otherwise indicated, all communications, contacts and discussions
relating to the offering of the Series B Preferred Stock occurred in the state
in which the undersigned maintains its office, or if the Initial Purchaser is an
individual, in the state in which he or she maintains his or her residence.
<PAGE>
(j) No Conflict. The execution and delivery by the Initial Purchasers of
this Agreement, the consummation of the transactions contemplated hereby, and
the purchase and delivery of the Series B Preferred Stock, will not create any
conflict of interest between the Initial Purchasers and Warrantech Corporation
and, to the Initial Purchasers knowledge, will not violate any law, legal
doctrine, rule or regulation which governs the relationship between the Initial
Purchasers and Warrantech Corporation.
(k) Proxy Information. The information provided in writing to the
Corporation by the Initial Purchasers for the purpose of being included in the
Corporation's Proxy Statement presently contemplated to be distributed as soon
as practical after SEC review, if any, is, to the Initial Purchasers knowledge,
true and correct as of the date hereof. Prior to the annual meeting to which the
Proxy Statement relates, the Initial Purchasers agree to use all reasonable good
faith efforts and take all actions necessary, proper or advisable to update such
information and to advise the Corporation of any change or event which could
reasonably be expected to render such information inaccurate, incomplete or
misleading.
SECTION 5. Conditions Precedent to Obligations of Initial Purchasers. The
obligations of the Initial Purchasers under this Agreement are subject to and
conditioned upon the satisfaction at or prior to the Closing of each of the
following conditions:
(a) Representations; Performance. The representations and warranties of the
Corporation contained in this Agreement shall be true and correct in all
material respects at and as of the date hereof. The Corporation shall have duly
performed and complied in all material respects with all agreements and
conditions required by this Agreement to be performed or complied with by it
prior to or on the Closing Date. The Corporation shall have delivered to the
Initial Purchasers a certificate, dated the Closing Date and signed by duly
authorized officers of the Corporation, to the foregoing effect and with respect
to incumbency of officers and such other matters as Initial Purchasers may
reasonably request.
(b) Corporate Proceedings. All corporate and other proceedings of the
Corporation in connection with this Agreement and the transactions contemplated
hereby, and all documents and instruments incident thereto, shall be reasonably
satisfactory in substance and form to the Initial Purchasers and their counsel,
and the Initial Purchasers and their counsel shall have received all such
documents and instruments, or copies thereof, certified if requested, as may be
reasonably requested.
(c) Stockholder Approval(c) Stockholder Approval. Prior to the Closing, the
Corporation will have obtained stockholder approval of the transactions
contemplated by this Agreement, including, without limitation, approval of any
amendment to the Corporation's Certificate of Incorporation necessary to
consummate the transactions contemplated by this Agreement, and for the issuance
and sale of the Series B Preferred Stock to Initial Purchasers.
(d) Stockholder Meeting(d) Stockholder Meeting. Prior to the Closing, a
stockholders' meeting shall have been held and the transactions contemplated by
this Agreement, including, without
<PAGE>
limitation, the approval of any amendment to the Corporation's Certificate of
Incorporation, shall have been approved by the stockholders of the Corporation.
(e) Certificate of Designation(e) Certificate of Designation. Prior to the
Closing, the Corporation will file with the Secretary of State of the State of
Delaware a Certificate of Designation with respect to the Series B Preferred
Stock in the form set forth in Exhibit B hereto.
(f) Tender of the Series B Preferred Stock. The Series B Preferred Stock,
as defined herein, shall be properly issued and tendered for delivery and sale
to the Initial Purchasers at the Closing.
(g) Legal Proceedings. There shall be no law, rule or regulation and no
order shall have been entered and not vacated by a court or administrative
agency of competent jurisdiction in any litigation, which (a) enjoins,
restrains, makes illegal or prohibits consummation of the transactions
contemplated hereby or (b) materially adversely affects the financial condition,
results of operations, properties or assets, business or prospects of the
Corporation; and, except as set forth on Schedule 3(h), there shall be no
litigation pending before a court or administrative agency of competent
jurisdiction, or threatened, seeking to do, or which, if successful, would have
the effect of, any of the foregoing.
(h) Other Documents. Corporation shall have delivered to the Initial
Purchasers such other documents as the Initial Purchasers shall have reasonably
requested.
(i) Waiver. The Initial Purchasers may, in their sole and absolute
discretion, waive or elect not to waive, any conditions precedent to the
obligations of the Initial Purchasers.
SECTION 6. Conditions Precedent to Obligations of Corporation. The
obligations of the Corporation to deliver the Series B Preferred Stock on the
Closing Date are subject to and conditioned upon the satisfaction at or prior to
the Closing of each of the following conditions:
(a) Representations; Performance. The representations and warranties of the
Initial Purchasers contained in this Agreement shall be true and correct in all
material respects at and as of the date hereof. The Initial Purchasers shall
have duly performed and complied in all material respects with all agreements
and conditions required by this Agreement to be performed or complied with by
them prior to or on the Closing Date. The Initial Purchasers shall have
delivered to the Corporation a certificate, dated the Closing Date, to the
foregoing effect.
(b) Proper Authority; Corporate Proceedings. All authorization by the
Initial Purchasers in connection with this Agreement and the transactions
contemplated hereby, and all documents and instruments incident thereto, shall
be reasonably satisfactory in substance and form to the Corporation, and the
Corporation shall have received all such documents and instruments, or copies
thereof, certified if requested, as may be reasonably requested.
<PAGE>
(c) Employment of Officers. Prior to the Closing, those Initial Purchasers
listed on Exhibit C, attached hereto, shall have entered into Employment
Agreements with the Corporation on terms mutually acceptable to the parties
thereto.
(d) Stockholder Approval. Prior to the Closing, the Corporation will have
obtained stockholder approval of the transactions contemplated by this
Agreement, including, without limitation, approval of any amendment to the
Corporation's Certificate of Incorporation necessary to consummate the
transactions contemplated by this Agreement, and for the issuance and sale of
the Series B Preferred Stock to Initial Purchasers.
(e) Stockholder Meeting. Prior to the Closing, a stockholders' meeting
shall have been held and the transactions contemplated by this Agreement,
including, without limitation, the approval of any amendment to the
Corporation's Certificate of Incorporation, shall have been approved by the
stockholders of the Corporation.
(f) Certificate of Designation. Prior to the Closing, the Corporation will
file with the Secretary of State of the State of Delaware a Certificate of
Designation with respect to the Series B Preferred Stock in the form set forth
in Exhibit B hereto.
(g) Legal Proceedings. There shall be no law, rule or regulation and no
order shall have been entered and not vacated by a court or administrative
agency of competent jurisdiction in any litigation, which (a) enjoins,
restrains, makes illegal or prohibits consummation of the transactions
contemplated hereby or (b) materially adversely affects the financial condition,
results of operations, properties or assets, business or prospects of the
Corporation; and, except as set forth on Schedule 3(h), there shall be no
litigation pending before a court or administrative agency of competent
jurisdiction, or threatened, seeking to do, or which, if successful, would have
the effect of, any of the foregoing.
(h) Other Documents. Corporation shall have delivered to the Initial
Purchasers such other documents as the Initial Purchasers shall have reasonably
requested.
(i) Consents. All consents needed for the execution, delivery and
performance by the Initial Purchasers of this Agreement shall have been
obtained.
(j) Waiver. The Corporation may, in its sole and absolute discretion, waive
or elect not to waive, any conditions precedent to the obligations of the
Corporation.
SECTION 7. The Closing. A closing of the transactions contemplated hereby
shall be held at the offices of McCarter & English, 100 Mulberry Street, Newark,
N.J. in accordance with the provisions hereof (the "Closing") and shall take
place as promptly as practicable after satisfaction of the conditions precedent
to closing set forth in Sections 5 and 6 of this Agreement, but in no event
later than June 30, 1998 unless otherwise agreed by the parties hereto. The date
of the Closing is referred to herein as the "Closing Date." At the Closing, the
parties hereto will execute and deliver all documents and instruments necessary
to effect the
<PAGE>
transfers provided for herein and not theretofore effected and to evidence their
respective compliance with the provisions of this Agreement.
SECTION 8. Covenants.
(a) Covenants of the Corporation. The Corporation covenants and agrees
that:
(i) Maintenance of Existence, etc. The Corporation at all times will
use its best efforts to do or cause to be done, all things necessary to
maintain, preserve and renew its corporate existence.
(ii) Stockholder Approval. The Corporation will duly call and give
notice of a meeting of stockholders of the Corporation to be held approximately
one month after the SEC review period of the preliminary proxy statement has
been completed, for the purpose, among others, of obtaining stockholder approval
for the amendment of the Corporation's Certificate of Incorporation, the
issuance and sale of the Series B Preferred Stock to the Initial Purchasers, and
the transactions contemplated hereby.
(iii) Nomination of Directors. So long as any shares of the Series B
Preferred Stock are outstanding, through June 30, 2000, the Corporation shall
nominate James J. Fyfe ("Fyfe"), or a person designated by Fyfe, for election to
the Corporation's Board of Directors.
(iv) Conditions Precedent. The Corporation will take all action
required to insure that the conditions precedent to the obligations of the
Initial Purchasers contained in Section 5 hereof are satisfied in accordance
with the terms set forth therein and herein.
(v) Further Actions.
(A) The Corporation agrees to use all reasonable good faith
efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated hereby on the Closing Date.
(B) The Corporation will, as promptly as practicable, file or
supply, or cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by the Corporation pursuant to
applicable law in connection with this Agreement, the issuance and sale of the
Series B Preferred Stock pursuant to this Agreement and the consummation of the
other transactions contemplated hereby and thereby.
(vi) Further Assurances. Following the Closing, the Corporation shall
from time-to-time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably requested by the Initial Purchasers, to confirm and assure
the rights and obligations provided for in this Agreement and render effective
the consummation of the transactions contemplated hereby.
<PAGE>
(b) Covenants of the Initial Purchasers(b) Covenants of the Initial
Purchasers. Each Initial Purchaser covenants and agrees that:
(i) Election of Director. So long as any shares of the Series B
Preferred Stock are outstanding, through June 30, 2000, the Initial Purchasers
will vote in favor of James Fyfe or any other person nominated pursuant to
paragraph 8(a)(iii) hereof for election to the Corporation's Board of Directors
(ii) Conditions Precedent. The Initial Purchasers will take all action
required to insure that the conditions precedent to the obligations of the
Corporation contained in Section 5 hereof are satisfied in accordance with the
terms set forth therein and herein.
(iii) Further Actions.
(A) The Initial Purchasers agree to use all reasonable good faith
efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated hereby on the Closing Date.
(B) The Initial Purchasers will, as promptly as practicable, file
or supply, or cause to be filed or supplied, all applications, notifications and
information required to be filed or supplied by the Initial Purchasers pursuant
to applicable law in connection with this Agreement, the issuance and sale of
the Series B Preferred Stock pursuant to this Agreement and the consummation of
the other transactions contemplated hereby and thereby.
(iv) Further Assurances. Following the Closing, the Initial Purchasers
shall from time-to-time, execute and deliver such additional instruments,
documents, conveyances or assurances and take such other actions as shall be
necessary, or otherwise reasonably requested by the Corporation, to confirm and
assure the rights and obligations provided for in this Agreement and render
effective the consummation of the transactions contemplated hereby.
SECTION 9. Survival. The representations and warranties set forth
herein shall not survive the Closing.
SECTION 10. Termination. This Agreement may be terminated and
abandoned, at any time prior to Closing:
(a) by mutual written agreement executed by the Initial Purchasers and
the Corporation;
(b) by the Initial Purchasers pursuant to written notice given in
accordance with Section 12 hereof if any of the conditions specified in Section
5 shall not have been satisfied (or are incapable of being satisfied or waived)
on or before June 30, 1998; or
<PAGE>
(c) by the Corporation pursuant to written notice given in accordance
with Section 12 hereof if any of the conditions specified in Section 6 shall not
have been satisfied (or are incapable of being satisfied or waived) on or before
June 30, 1998.
SECTION 11. Entire Agreement; Amendments. This Agreement (and the
Schedules and Exhibits hereto) are intended by the parties as the final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
therein with respect to the securities sold pursuant hereto. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to such subject matter hereof and thereof. No term, covenant, agreement
or condition of this Agreement may be amended, or compliance therewith waived
(either generally or in a particular instance and either retroactively or
prospectively), unless agreed to in writing by the Initial Purchasers and the
Corporation.
SECTION 12. Notices. All notices required or permitted hereunder shall
be in writing and shall be sufficiently given if: (a) hand delivered (in which
case the notice shall be effective upon delivery); (b) telecopied, provided that
in such case a copy of such notice shall be concurrently sent by registered or
certified mail, return receipt requested, postage prepaid (in which case the
notice shall be effective two days following dispatch); (c) delivered by Express
Mail, Federal Express or other nationally recognized overnight courier service
(in which case the notice shall be effective one business day following
dispatch); or (d) delivered or mailed by registered or certified mail, return
receipt requested, postage prepaid (in which case the notice shall be effective
three days following dispatch), to the parties at the following addresses and/or
telecopier numbers, or to such other address or number as a party shall specify
by written notice to the others in accordance with this Section 12.
If to the Corporation:
Corniche Group Incorporated
272 Rte. 206, Bldg. B, #1.1
Flanders, New Jersey 07836
Attn: James J. Fyfe
with a copy to:
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, New Jersey 07068
Attn: Alan Wovsaniker, Esq.
If to Initial Purchasers:
Joel San Antonio
<PAGE>
c/o Warrantech Corporation
300 Atlantic Street
Stamford, Connecticut 06901
with a copy to:
McCarter & English
4 Gateway Center
100 Mulberry Street
Newark, New Jersey 07102
Attn: Kenneth E. Thompson, Esq.
SECTION 13. Sections and Counterparts. The section headings contained
in this Agreement are for reference purposes only and shall not affect the
interpretation of this Agreement. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute the same agreement.
SECTION 14. Governing Law. This Agreement shall be governed by the
internal laws of the State of New Jersey without giving effect to the conflict
of laws principles or rules thereof. Notwithstanding the foregoing, any
transactions contemplated by this Agreement which are governed by the Delaware
General Corporation Law shall remain governed thereby.
SECTION 15. Expenses. Each party shall pay its own fees, costs and
expenses in connection with this Agreement and the transactions contemplated
thereby. Notwithstanding the foregoing, it is expressly agreed and understood
that the Corporation will reimburse the Initial Purchasers for their reasonable
legal and other expenses associated with the negotiation, execution and delivery
of this Agreement and the investigation and consummation of the transactions
contemplated hereby either (1) at Closing or (2) upon termination of this
Agreement provided, however, that the Initial Purchasers' expenses will not be
reimbursed if termination is due to (a) a breach by the Initial Purchasers or
failure of the Initial Purchasers to perform any of their representations,
covenants, and obligations hereunder or (b) failure to obtain any regulatory
approval required for this transaction arising from the Initial Purchasers'
actions, status or omissions or failure to provide information.
SECTION 16. Remedies. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other remedy,
and each and every remedy shall be cumulative of and shall be in addition to
every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or otherwise. The election of any one or more remedies by
Initial Purchasers or the Corporation shall not constitute a waiver of the right
to pursue other available remedies.
SECTION 17. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, successors, assigns, executors, administrators and personal
representatives. No party may assign its rights under this Agreement without the
written consent of the other party.
<PAGE>
SECTION 18. Schedules. Any fact, event, item or document disclosed by
the Corporation on any Schedule hereto shall be deemed incorporated into each of
the other Schedules attached hereto.
SECTION 19. Knowledge. When use herein, the phrase "to the knowledge
of" any person, "to the best knowledge of" any person or any similar phrase
shall mean, (i) with respect to any individual, the actual knowledge of such
person, and (ii) with respect to any corporation, the actual knowledge of any of
the officers, directors or controlling persons of such corporation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized representatives as of the day and year
first above written.
CORNICHE GROUP INCORPORATED
By: /s/ James J. Fyfe
Name: James J. Fyfe
Title: Vice President
/s/ Joel S. Antonio
JOEL SAN ANTONIO
/s/ Robert H. Hutchins
ROBERT H. HUTCHINS
/s/ Ronald Glime
RONALD GLIME
/s/ Glen Aber
GLEN ABER
<PAGE>
EXHIBIT A
INITIAL PURCHASERS
Name and Address Number of Shares
Joel San Antonio 710,000
56 N. Stanwich Road
Greenwich, CT 06831
Robert H. Hutchins 15,000
C/O Warrantech Automotive
1441 West Airport Freeway
Euless, TX 76040
Ronald Glime 25,000
C/O Warrantech Automotive
1441 West Airport Freeway
Euless, TX 76040
Glen Aber 15,000
1 Stratton Road
Purchase, NY 10577
<PAGE>
EXHIBIT B
CERTIFICATE OF DESIGNATION
The Certificate of Designation is attached to the Proxy Statement as
Exhibit C.
<PAGE>
EXHIBIT C
EMPLOYMENT AGREEMENTS
ROBERT H. HUTCHINS
<PAGE>
Exhibit C
CERTIFICATE OF DESIGNATION
of
SERIES B CONVERTIBLE PREFERRED STOCK
of
CORNICHE GROUP INCORPORATED
(Pursuant to Section 151 (g) of the
Delaware General Corporation Law)
_____________________________________
It is hereby certified that:
1. The name of the corporation is Corniche Group Incorporated
(hereinafter called the "corporation").
2. The Certificate of Incorporation of the corporation, as amended
(the "Certificate of Incorporation") authorizes the issuance of 5,000,000 shares
of Preferred Stock, par value $.01 per share, and expressly vests in the Board
of Directors of the corporation the authority to issue any or all of said shares
in one or more series and by resolution to fix the designation and number of
shares of the class and series acted upon, the full or limited voting powers or
the denial of voting powers, and the relative rights, preferences and
limitations and other distinguishing characteristics of each such class and
series to be issued.
3. Pursuant to such authority, the following resolutions were duly
adopted by the Board of Directors of the corporation as required by Subsection
151(g) of the Delaware General Corporation Law by unanimous consent on February
27, 1998 creating a series of Series B Convertible Preferred Stock.
RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of this corporation in accordance with the provisions of the
Certificate of Incorporation, the Board of Directors hereby creates a series of
Preferred Stock, par value $.01 per share, of the corporation and hereby states
the designation and number of shares, and fixes the relative rights,
preferences, and limitations thereof (in addition to the provisions set forth in
the Certificate of Incorporation, which are applicable to the Preferred Stock of
all series) as follows:
<PAGE>
ARTICLE TWELFTH
SERIES B CONVERTIBLE REDEEMABLE PREFERRED STOCK,
PAR VALUE $.01 PER SHARE
Section 1. Designation and Amount; Rank
There is hereby established a series of preferred stock which is
designated "Series B Convertible Redeemable Preferred Stock" (referred to herein
as "Series B Convertible Redeemable Preferred Stock"). The number of shares
which will constitute such series shall be Eight Hundred Twenty-Five Thousand
(825,000). The Series B Convertible Redeemable Preferred Stock shall rank junior
to the corporation's Series A $0.07 Convertible Preferred Stock with respect to
the payment of dividends and to the distribution of assets upon liquidation,
dissolution or winding up, and pari passu with the Common Stock.
Section 2. Dividends.
So long as any shares of the Series B Convertible Redeemable Preferred
Stock are outstanding, no dividend shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common Stock or upon any
other stock ranking junior to, or on a parity with, the Series B Convertible
Redeemable Preferred Stock as to dividends or upon liquidation, dissolution or
winding up, unless, in the case of Preferred Stock, the same dividend is
declared, paid or set aside for payment on all outstanding shares of the Series
B Convertible Redeemable Preferred Stock or in the case of Common Stock, ten
times such dividend per share is declared, paid or set aside for payment on each
outstanding share of the Series B Preferred Stock.
Section 3. General, Class and Series Voting Rights.
Except as otherwise provided by law, each share of the Series B
Convertible Redeemable Preferred Stock shall have the same voting rights as ten
(10) shares of Common Stock and the holders of the Series B Convertible
Redeemable Preferred Stock and the Common Stock shall vote together as one class
on all matters.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Series B Convertible Redeemable
Preferred Stock shall have been converted into Common Stock or shall have been
redeemed or sufficient funds shall have been deposited in trust to effect such
redemption.
Section 4. Redemption.
(A) The shares of Series B Convertible Redeemable Preferred Stock are
not redeemable prior to March 31, 2000. At any time on or after such date
through June 30, 2000, the shares of Series B Convertible Redeemable
Preferred Stock are redeemable, in
<PAGE>
whole or in part, at the option of the "Special Director" of the
corporation, at the redemption price per share of $.10, if the "Trigger
Conditions" have not been met.
<PAGE>
(B) For purposes of this paragraph, the "Trigger Condition" shall mean
that:
(a) the closing bid prices of the Common Stock of the corporation
as reported by Nasdaq (or otherwise as set forth below) is greater
than $2.00 per share during a period of any ten (10) consecutive
trading days and
(b) either
(i) the corporation's net revenues for any fiscal quarter through
the fiscal quarter ended March 31, 2000 are $1 million or more (as
computed by the corporation's regular independent public accountants);
or
(ii) the corporation has received net receipts of not less than
$2.5 million from the sale of its Common Stock from the date hereof
through March 31, 2000.
For the purpose of any computation under the foregoing paragraph,
the closing price per share of Common Stock on any date shall be the
reported last sale price, regular way, or, in case no such reported
sale takes place on such day, the average of the reported closing bid
and asked prices, regular way, in either case as reported on the New
York Stock Exchange Composite Tape or, if the Common Stock is not
listed or admitted to trading on the New York Stock Exchange at such
time, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or, if not listed or
admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if the Common Stock is not quoted on the Nasdaq
National Market, the average of the closing bid prices on such day in
the over-the-counter market as reported by Nasdaq or, if bid prices
for the Common Stock on each such day shall not have been reported
through Nasdaq, the average of the bid prices for such date as
furnished by any New York Stock Exchange member firm regularly making
a market in the Common Stock selected from time to time by the Board
of Directors of the corporation for such purpose or, if no such
quotations are available, the fair market value of the Common Stock as
determined by a New York Stock Exchange member firm regularly making a
market in the Common Stock selected from time to time by the Board of
Directors of the corporation for such purpose.
(C) For purposes of this paragraph, the "Special Director" mean
James Fyfe or his successor as director of the corporation if such
successor has been approved by Fyfe. So long as any shares of the
Class B Preferred Stock are outstanding, through June 30, 2000, the
corporation shall nominate to the Board of Directors Fyfe or, if Fyfe
so determines, Fyfe's designee.
(D) In the event the corporation shall elect to redeem the shares
of Series B Convertible Redeemable Preferred Stock following the
Trigger Condition, the
<PAGE>
corporation shall give notice to the holders of record of shares of
the Series B Convertible Redeemable Preferred Stock being so redeemed,
not less than 30 nor more than 60 days prior to such redemption, by
first class mail, postage prepaid, at their addresses as shown on the
stock registry books of the corporation, that said shares are being
redeemed, provided that without limiting the obligation of the
corporation hereunder to give the notice provided in this Section
5(D), the failure of the corporation to give such notice shall not
invalidate any corporate action by the corporation. Each such notice
shall state: (i) the redemption date; (ii) that all of the shares of
Series B Convertible Redeemable Preferred Stock are to be redeemed;
(iii) that the redemption price is $.10 per share; (iv) the place or
places where certificates for such shares are to be surrendered for
payment of the redemption price; and (v) that such holder does not
have the right to convert such shares into Common Stock.
(E) Notice having been mailed as aforesaid, from and after the
applicable redemption date (unless default shall be made by the
corporation in providing money for the payment of the redemption
price), said shares shall no longer be deemed to be outstanding, and
all rights of the holders thereof as stockholders of the corporation
(except the right to receive from the corporation the redemption
price) shall cease. Upon surrender of the certificates for any shares
so redeemed (properly endorsed or assigned for transfer, if the Board
of Directors of the corporation shall so require and the notice shall
so state), such shares shall be redeemed by the corporation at the
redemption price aforesaid.
(F) Any shares of Series B Convertible Redeemable Preferred Stock
which shall at any time have been redeemed shall, after such
redemption, have the status of authorized but unissued shares of
Preferred Stock, without designation as to series, until such shares
are once more designated as part of a particular series by the Board
of Directors of the corporation.
Section 5. Conversion.
(A) The holder of any share of Series B Convertible Redeemable
Preferred Stock shall have the right, at such holder's option (but not
if such share is called for redemption), exercisable on or after
September 30, 2000, to convert such share into ten (10) fully paid and
non-assessable shares of Common Stock (the "Conversion Rate"). The
Conversion Rate shall be subject to adjustment as set forth below.
(B) In order to exercise the conversion privilege, the holder of
shares of Series B Convertible Redeemable Preferred Stock shall
surrender the certificates representing such shares, accompanied by
transfer instruments satisfactory to the corporation and sufficient to
transfer the Series B Convertible Redeemable Preferred Stock being
converted to the corporation free of any adverse interest, at any of
the offices or agencies maintained for such purpose by the corporation
("Conversion Agent") and shall give written notice to the corporation
at such Conversion Agent that the holder elects to convert such
shares. Such notice shall also state the names, together with
addresses, in
<PAGE>
which the certificates for shares of Common Stock which shall be
issuable on such conversion shall be issued. As promptly as
practicable after the surrender of such shares of Series B Convertible
Redeemable Preferred Stock as aforesaid, the corporation shall issue
and shall deliver at such Conversion Agent to such holder, or on his
written order, a certificate for the number of full shares of Common
Stock issuable upon the conversion of such shares in accordance with
the provisions hereof. Balance certificates will be issued for the
remaining shares of Series B Convertible Redeemable Preferred Stock in
any case in which fewer than all of the shares of Series B Convertible
Redeemable Preferred Stock represented by a certificate are converted.
Each conversion shall be deemed to have been effected immediately
prior to the close of business on the date on which shares of Series B
Convertible Redeemable Preferred Stock shall have been so surrendered
and such notice received by the corporation as aforesaid, and the
persons in whose names any certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become
the holders of record of the Common Stock represented thereby at such
time, unless the stock transfer books of the corporation shall be
closed on the date on which shares of Series B Convertible Redeemable
Preferred Stock are so surrendered for conversion, in which event such
conversion shall be deemed to have been effected immediately prior to
the close of business on the next succeeding day on which such stock
transfer books are open, and such persons shall be deemed to have
become such holders of record of the Common Stock at the close of
business on such later day. In either circumstance, such conversion
shall be at the Conversion Rate in effect on the date upon which such
share shall have been surrendered and such notice received by the
corporation.
(C) In the case of any share of Series B Convertible Redeemable
Preferred Stock which is converted after any record date with respect
to the payment of a dividend on the Series B Convertible Redeemable
Preferred Stock and on or prior to the Dividend Payment Date related
to such record date, the dividend due on such Dividend Payment Date
shall be payable on such Dividend Payment Date to the holder of record
of such share as of such preceding record date notwithstanding such
conversion.
(D) No fractional shares or scrip representing fractions of
shares of Common Stock shall be issued upon conversion of any shares
of Series B Preferred Stock. Instead of any fractional interest in a
share of Common Stock which would otherwise be deliverable upon the
conversion of a share of Series B Convertible Redeemable Preferred
Stock, the corporation shall pay to the holder of such share of Series
B Convertible Redeemable Preferred Stock an amount in cash (computed
to the nearest cent, with one-half cent being rounded upward) equal to
such fraction multiplied by the reported closing price (as defined
above) of the Common Stock at the close of business on the day on
which such share or shares of Series B Convertible Redeemable
Preferred Stock are surrendered for conversion in the manner set forth
above, or if such date is not a trading date, on the next succeeding
trading date. If more than one certificate representing shares of
Series B Convertible Redeemable Preferred Stock shall be surrendered
for conversion at one time by the same holder, the number of full
shares issuable upon conversion thereof shall be computed on the basis
of the aggregate number
<PAGE>
of shares of Series B Convertible Redeemable Preferred Stock
represented by such certificates, or the specified portions thereof to
be converted, so surrendered.
(E) The Conversion Rate shall be adjusted from time to time as
follows:
(i) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock and the
Series B Convertible Redeemable Preferred Stock is not similarly
subdivided, the Conversion Rate in effect at the opening of business
on the day following the day upon which such subdivision becomes
effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a
smaller number of shares of Common Stock and the Series B Convertible
Redeemable Preferred Stock is not similarly subdivided, the Conversion
Rate in effect at the opening of business on the day following the day
upon which such combination becomes effective shall be proportionately
decreased, such reduction or increase, as the case may be, to become
effective immediately after the opening of business on the day
following the day upon which such subdivision or combination becomes
effective.
(ii) Whenever the Conversion Rate is adjusted as herein provided,
(x) the corporation shall promptly file with any Conversion Agent a
certificate of a firm of independent public accountants setting forth
the Conversion Rate after such adjustment and setting forth a brief
statement of the facts requiring such adjustment, and the manner of
computing the same, which certificate shall be conclusive evidence of
the correctness of such adjustment, and (y) a notice stating that the
Conversion Rate has been adjusted and setting forth the adjusted
Conversion Rate shall forthwith be given by the corporation to any
Conversion Agent and mailed by the corporation to each holder of
shares of Series B Convertible Redeemable Preferred Stock at their
last address as the same appears on the books of the corporation.
(F) In case of any consolidation of the corporation with, or
merger of the corporation into, any other entity (other than a merger
or consolidation in which the corporation is the continuing
corporation) or any sale or conveyance to another corporation of the
property of the corporation as an entirety or substantially as an
entirety, or in the case of a statutory exchange of securities with
another corporation, or any reclassification of shares, the Conversion
Rate shall not be adjusted but each holder of a share of Series B
Convertible Redeemable Preferred Stock then outstanding shall have the
right thereafter to convert such share only into the kind and amount
of securities, cash and other property which such holder would have
owned or have been entitled to receive immediately after such
consolidation, merger, sale, conveyance, exchange or reclassification
had such share of Series B Convertible Redeemable Preferred Stock been
converted immediately prior to such consolidation, merger, sale,
conveyance, exchange or reclassification. Provision shall be made in
any such consolidation, merger, sale, conveyance, exchange or
reclassification for adjustments in the Conversion Rate which shall be
as nearly equivalent as may be practicable to the adjustments provided
for
<PAGE>
in Section (E). The above provisions shall similarly apply to
successive consolidations, mergers, sales, conveyances, exchange or
reclassification.
For purposes of this Section 5, "Common Stock" includes any stock of
any class of the corporation which has no preference in respect of dividends or
of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the corporation and which is not subject to
redemption by the corporation. However, subject to the provisions of paragraph
(F) above, shares issuable on conversion of shares of Series B Convertible
Redeemable Preferred Stock shall include only shares of the class designated as
Common Stock of the corporation on the date of the initial issuance of Series B
Convertible Redeemable Preferred Stock by the corporation, or shares of any
class or classes resulting from any reclassification or reclassifications
thereof and which have no preference in respect of dividends or of amounts
payable in the event of any voluntary or involuntary liquidation, dissolution or
winding up of the corporation and which are not subject to redemption by the
corporation.
In case:
(i) the corporation shall declare a stocks split, stock dividend
(or any other distribution) on its Common Stock that would cause an
adjustment to the Conversion Rate of the Series B Convertible
Redeemable Preferred Stock pursuant to the terms of subparagraph (i)
of Paragraph (E) above; or
(ii) of any reclassification of the Common Stock of the
corporation (other than a subdivision or combination of its
outstanding shares of Common Stock), or of any consolidation, merger
or share exchange to which the corporation is a party and for which
approval of any stockholders of the corporation is required, or of the
sale or conveyance, of the property of the corporation as an entirety
or substantially as an entirety; or
(iii) of the voluntary or involuntary dissolution, liquidation or
winding up of the corporation;
then the corporation shall cause to be filed with any Conversion Agent, and
shall cause to be mailed to all holders of shares of Series B Convertible
Redeemable Preferred Stock at each such holder's last address as the same
appears on the books of the corporation, at least 20 days (or 10 days in any
case specified in clause (i) above) prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights or
warrants are to be determined, or (y) the date on which such reclassification,
consolidation, merger, share exchange, sale, conveyance, dissolution,
liquidation or winding up is expected to become effective, and the date as of
which it is expected that holders of Common Stock of record shall be entitled to
exchange their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, share exchange,
sale, conveyance, dissolution, liquidation or winding up. Neither the
<PAGE>
failure to give such notice nor any defect therein shall affect the legality or
validity of the proceedings described in clauses (i) through (iii) above.
The corporation will pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares of
Common Stock on conversions of shares of Series B Convertible Redeemable
Preferred Stock pursuant hereto; provided, however, that the corporation shall
not be required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock in a name other than
that of the holder of the shares of Series B Convertible Redeemable Preferred
Stock to be converted and no such issue or delivery shall be made unless and
until the person requesting such issue or delivery has paid to the corporation
the amount of any such tax or has established, to the satisfaction of the
corporation, that such tax has been paid.
The corporation covenants that all shares of Common Stock which may be
delivered upon conversions of shares of Series B Convertible Redeemable
Preferred Stock will upon delivery be duly and validly issued and fully paid and
non-assessable, free of all liens and charges and not subject to any pre-emptive
rights. The corporation further covenants that, if necessary, it shall reduce
the par value of the Common Stock so that all shares of Common Stock delivered
upon conversion of shares of Series B Convertible Redeemable Preferred Stock are
fully paid and non-assessable.
The corporation covenants that it will at all times reserve and keep
available, free from pre-emptive rights, out of its authorized but unissued
shares of Common Stock or its issued shares of Common; Stock held in its
treasury, or both, for the purpose of effecting conversions of shares of Series
B Preferred Stock, the full number of shares of Common Stock deliverable upon
the conversion of all outstanding shares of Series B Convertible Redeemable
Preferred Stock not theretofore converted. For purposes of this reservation of
Common Stock, the number of shares of Common Stock which shall be deliverable
upon the conversion of all outstanding shares of Series B Convertible Redeemable
Preferred Stock shall be computed as if at the time of computation all
outstanding shares of Series B Convertible Redeemable Preferred Stock were held
by a single holder. The issuance of shares of Common Stock upon conversion of
shares of Series B Convertible Redeemable Preferred Stock is authorized in all
respects.
Section 6. Liquidation.
In the event of any voluntary or involuntary dissolution, liquidation
or winding up of the corporation (for the purposes of this Section 6, a
"Liquidation"), after any distribution of assets is made to the holders of the
Series A Preferred Stock and any other class or series of stock that ranks prior
to the Series B Convertible Redeemable Preferred Stock in respect of
distributions upon the Liquidation of the corporation, the holder of each share
of Series B Convertible Redeemable Preferred Stock then outstanding shall be
entitled to be paid out of the assets of the corporation available for
distribution to its stockholders, an amount on a pari passu basis equal to ten
times the amount per share distributed to the holders of the Common Stock.
<PAGE>
The voluntary sale, conveyance, lease, exchange or transfer of the
property of the corporation as an entirety or substantially as an entirety, or
the merger or consolidation of the corporation into or with any other
corporation, or the merger of any other corporation into the corporation, or any
purchase or redemption of some or all of the shares of any class or series of
stock of the corporation, shall not be deemed to be a Liquidation of the
corporation for the purposes of the Section 6 (unless in connection therewith
the Liquidation of the corporation is specifically approved).
The holder of any shares of Series B Convertible Redeemable Preferred
Stock shall not be entitled to receive any payment owed for such shares under
this Section 6 until such holder shall cause to be delivered to the corporation
(i) the certificate or certificates representing such shares of Series B
Convertible Redeemable Preferred Stock and (ii) transfer instrument or
instruments satisfactory to the corporation and sufficient to transfer such
shares of Series B Convertible Redeemable Preferred Stock to the corporation
free of any adverse interest. As in the case of the redemption price, no
interest shall accrue on any payment upon Liquidation after the due date
thereof.
After payment of the full amount of the liquidating distribution to
which they are entitled, the holders of shares of the Series B Convertible
Redeemable Preferred Stock will not be entitled to any further participation in
any distribution of assets by the corporation.
<PAGE>
Section 7. Payments.
The corporation may provide funds for any payment of the redemption
price for any shares of Series B Convertible Redeemable Preferred Stock or any
amount distributable with respect to any Series B Convertible Redeemable
Preferred Stock under Section 6 hereof by depositing such funds with a bank or
trust company selected by the corporation having a net worth of at least
$50,000,000 and organized under the laws of the United States or any state
thereof, in trust for the benefit of the holder of such shares of Series B
Convertible Redeemable Preferred Stock under arrangements providing irrevocably
for payment upon satisfaction of any conditions to such payment by the holder of
such shares of Series B Convertible Redeemable Preferred Stock which shall
reasonably be required by the corporation. The corporation shall be entitled to
make any deposit of funds contemplated by this section 7 under arrangements
designated to permit such funds to generate interest or other income for the
corporation, and the corporation shall be entitled to receive all interest and
other income earned by any funds while they shall be deposited as contemplated
by this section 7, provided that the corporation shall maintain on deposit funds
sufficient to satisfy all payments which the deposit arrangement shall have been
established to satisfy if the conditions precedent to the disbursement of any
funds deposited by the corporation pursuant to this Section 7 shall not have
been satisfied within two years after the establishment of the trust for such
funds, then (i) such funds shall be returned to the corporation upon its
request; (ii) after such return, such funds shall be free of any trust which
shall have been impressed upon them; (iii) the person entitled to the payment
for which been originally intended shall have the right to look only to the
corporation for such payment, subject to applicable escheat laws; and (iv) the
trustee which shall have held such funds shall be relieved of any responsibility
for such of such funds to the corporation.
Any payment which may be owed for the payment of the redemption price
for any shares of Series B Convertible Redeemable Preferred Stock pursuant to
Section 4 or the payment of any amount distributable with respect to the shares
of Series B Convertible Redeemable Preferred Stock under Section 6 shall be
deemed to have been "paid or properly provided for" upon the earlier to occur
of: (i) the date upon which funds sufficient to make such payment shall be
deposited in a manner contemplated by the preceding paragraph or (ii) the date
upon which a check payable to the person entitled to receive such payment shall
be delivered to such person or mailed to such person at the address of such
person then appearing on the books of the corporation.
Section 8. Status of Reacquired Shares.
Shares of Series B Convertible Redeemable Preferred Stock issued and
reacquired by the corporation shall have the status of authorized and unissued
shares of Preferred Stock, undesignated as to series, subject to later issuance.
Section 9. Preemptive Rights.
Holders of shares of Series B Convertible Redeemable Preferred Stock
are not entitled to any preemptive or subscription rights in respect of any
securities of the corporation.
<PAGE>
Section 10. Legal Holidays.
In any case where any Dividend Payment Date, redemption date or the
last date on which a holder of Series B Convertible Redeemable Preferred Stock
has the right to convert such holder's shares of Series B Convertible Redeemable
Preferred Stock shall not be a Business Day (as defined below), then
(notwithstanding any other provision of this Certificate of Designation of the
Series B Preferred Stock) payment of a dividend due or a redemption price or
conversion of the shares of Series B Convertible Redeemable Preferred Stock need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on the Dividend Payment Date or
redemption date or the last day for conversion, provided that, for purposes of
computing such payment, no interest shall accrue for the period from and after
such Dividend Payment Date or redemption date, as the case may be. As used in
this Section 10, "Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in the City of New
York or the State of New Jersey are authorized or obligated by law or executive
order to close.
FURTHER RESOLVED, that the statements contained in the foregoing
resolutions creating and designating the said Series B issue of Preferred Stock
and fixing the number, voting rights, powers, preferences and relative,
optional, participating, and other special rights and the qualifications,
limitations, restrictions, and other distinguishing characteristics thereof
shall, upon the effective date of said series, be deemed to be included in and
be a part of the Certificate of Incorporation of the corporation pursuant to the
provisions of Sections 104 and 151 of the General Corporation Law of the State
of Delaware.
FURTHER RESOLVED, that the effective time and date of the series
herein certified shall be _________________ __, 1998.
IN WITNESS WHEREOF, CORNICHE GROUP INCORPORATED has caused this
certificate to be signed by its President, this ___ day of May, 1998.
CORNICHE GROUP INCORPORATED
By:______________________________
, President
<PAGE>
Exhibit D
CORNICHE GROUP INCORPORATED
1998 EMPLOYEES STOCK OPTION PLAN
I. Purpose of Plan
The Purpose of this Plan is to enable Corniche Group Incorporated (the
"Corporation") to compete successfully in attracting, motivating and retaining
employees with outstanding abilities by making it possible for them to purchase
shares of the Corporation's Common Stock on terms which will give them a direct
and continuing interest in the future success of the Corporation's business.
II. Definitions
"Board" means the Board of Directors of the Corporation.
"Code" means the United States Internal Revenue Code, as amended.
"Effective Date" means the date the Plan is approved by the
shareholders of the Corporation.
"Employee" means a person, including an officer or an employee member
of the Board, who is regularly employed on a salary basis by the Corporation or
its subsidiary companies.
"Incentive Stock Option" means an option granted under this Plan which
the Option Committee intends, at the time it is granted, to be an incentive
stock option within the meaning of Section 422(a) of the Code.
"Optionee" means a person to whom an Incentive Stock Option has been
granted under this Plan which has not expired or been fully exercised or
surrendered.
"Plan" means the Corporation's 1998 Employees Stock Option Plan.
"Share" means a share of common stock of the Corporation.
III. Limits on Options
The total number of Shares with respect to which Incentive Stock
Options may be granted under this Plan shall not exceed in the aggregate 300,000
Shares. The number of Shares previously optioned and not theretofore delivered
and the option prices therefor shall likewise be appropriately adjusted whenever
the number of issued Shares is increased or reduced by any
<PAGE>
procedure after the date or dates on which such Shares were optioned. Shares
covered by Incentive Stock Options which have expired or which have been
surrendered or forfeited may again be optioned under this Plan.
No Incentive Stock Option shall be granted to any Employee who
immediately after such option is granted, owns capital stock of the Corporation
possessing more than 10% of the total combined voting power or value of all
classes of capital stock of the Corporation unless the option price at the time
such Incentive Stock Option is granted is at least 110 percent of the fair
market value of the Shares subject to the Incentive Stock Option and such
Incentive Stock Option is not exercisable by its terms after the expiration of 5
years from the date of its grant.
The aggregate fair market value (determined as of the date of grant)
of each Incentive Stock Option granted to an Employee with respect to which such
option is exercisable for the first time by such Employee during any calendar
year shall not exceed $100,000.
IV. Granting of Options
The Option Committee (as defined below) is authorized to grant options
pursuant to this Plan to selected Employees beginning on the Effective Date. The
number of Shares, if any, optioned in each year, the Employees to whom Incentive
Stock Options are granted, the number of Shares optioned to each Employee
selected and the term of the Incentive Stock Option shall be wholly within the
discretion of the Option Committee, subject to terms and conditions set forth in
this Plan.
V. Terms of Stock Options
Subject to Section III hereof, the terms of Incentive Stock Options
granted this Plan shall be as follows:
A. The option exercise price shall be fixed by the Option Committee
but shall in no event be less than 100% of the fair market value of
the Shares subject to option on the date the Incentive Stock Option is
granted.
B. Incentive Stock Options shall not be transferable other than by
will or by the laws of descent and distribution. No Incentive Stock
Option shall be exercisable by any person other than the Optionee
during such Optionee's lifetime.
C. Each Incentive Stock Option shall expire and all rights thereunder
shall end at the expiration of such period (which shall not be more
than ten years) after the date on which it was granted as shall be
fixed by the Option Committee, subject to all cases to earlier
expiration as provided in subsections D and E of this Section 5 in the
event of termination of employment or death.
<PAGE>
D. During the lifetime of an Optionee his Incentive Stock Option shall
be exercisable only by him and only while continuously employed by the
Corporation, or within 30 days of termination of employment for any
reason or one year after termination of employment if the Optionee is
disabled within the meaning of Section 22(e)(3) of the Code (but not
later than the end of the period fixed by the Option Committee in
accordance with the provisions of subsection (c) of this Section 5),
but only if and to the extent the Incentive Stock Option was
exercisable by him on the last day of such employment and only if he
has not engaged in any conduct that directly or indirectly adversely
affects the Corporation.
E. If an Optionee dies within a period during which his Incentive
Stock Option could have been exercised by him, his Incentive Stock
Option may be exercised within one year after his death (but not later
than the end of the period fixed by the Option Committee in accordance
with the provisions of subsection (c) of this Section 5) by those
entitled under his will or the laws of descent and distribution, but
only if and to the extent such Incentive Stock Option was exercisable
by him immediately prior to his death.
F. Subject to the foregoing terms and to such additional terms
regarding the exercise of the Incentive Stock Options as the Option
Committee may fix at the time of grant, Incentive Stock Options may be
exercised in whole at one time or in part from time to time.
G. No Incentive Stock Option granted hereunder may be exercised prior
to the expiration of one year from the date of grant.
H. Incentive Stock Options granted pursuant to this Plan shall be
evidenced by an agreement in writing setting forth the material terms
and conditions of the grant, including, but not limited to, the number
Shares subject to option.
VI. Recapitalization and Reorganization of the Corporation
A. The aggregate number of Shares subject to option under this Plan
will be appropriately adjusted if the number of issued Shares of the Corporation
is increased or reduced by change in par value, combination, split-up,
reclassification, distribution of a dividend payable in stock, or the like after
the Effective Date.
B. In the event that the Corporation is succeeded by another
corporation in reorganization, merger, consolidation, acquisition of property or
stock, separation or liquidation, the successor corporation shall assume the
obligations regarding the outstanding options granted under this Plan or shall
substitute new options for them, with such modification by the successor
corporation as may be necessary continue their status or the status of the
substituted Incentive Stock Options as incentive stock options for purposes of
the Code.
<PAGE>
VII. Delivery of Payment for Shares
No Shares shall be delivered upon the exercise of an Incentive Stock
Option until the option price has been paid in full, and if required by the
Option Committee, no Shares will be delivered upon the exercise of an Incentive
Stock Option until the Optionee has given the Corporation (a) a satisfactory
written statement that he is purchasing the Shares as an investment and not with
a view to the sale or distribution of any of such Shares, and (b) a written
agreement not to sell any Shares received upon the exercise of the Incentive
Stock Option or any other Shares of the Corporation that he may then own or
thereafter acquire except either (i) in compliance with the Securities Act of
1933, as amended (provided that the Corporation shall be under no obligation to
register either the Plan, or any securities obtained by the Optionee pursuant
thereto, with the Securities and Exchange Commission), or (ii) with the prior
written approval of the Corporation. Payment for Shares received pursuant to the
exercise of an option may be made either in cash or certified check, or Shares,
or any combination thereof at the election of the Optionee. If payment is made
in Shares at the election of the Optionee, the value of the Shares received by
the Corporation shall be their fair market value.
VIII. Transfer of Shares Upon Exercise of Options
In the event that the Shares are registered under the Securities Act
of 1933, as amended, the Optionee may not sell more than 50% of the Shares
acquired upon exercise of an Incentive Stock Option within the first year
following such exercise, and shall be permitted to sell all of such Shares
thereafter. The certificate(s) issued reflecting such Shares shall bear a legend
substantially as follows:
No more than 50% of the shares represented by this
certificate may be sold within one year following the
date of original issue thereof. All of such shares may
be sold thereafter.
IX. Continuation of Employment
Neither this Plan nor any Incentive Stock Option granted hereunder
shall confer upon any Employee any right to continue in the employ of the
Corporation or limit in any respect the right of the Corporation to terminate
his employment at any time.
X. Administration
This Plan shall be administered by a committee ("Option Committee") of
two (2) or more of Non-Employee Directors, as that term is defined in Rule
16b-3(b)(3)(i) promulgated under the Securities Exchange Act of 1934, as
amended, who will have sole discretion in deciding the timing, pricing and
amount of the grant or award. In addition, the Option Committee shall interpret
the Plan and make all other determinations necessary or advisable for its
administration, including such rules and regulations and procedures as it deems
applicable. In the event of a disagreement as to the interpretation of this Plan
or any amendment hereto or any rule, regulation or procedure hereunder or as to
any right or obligation arising from or related to this
<PAGE>
Plan, the decision of the Option Committee shall be final and binding upon all
persons in interest, including the Corporation and its shareholders.
<PAGE>
XI. Reservation of Shares
Shares delivered upon the exercise of an option shall, in the
discretion of the Option Committee, be either Shares heretofore or hereafter
authorized and then unissued, or previously issued shares heretofore or
hereafter acquired through purchase in the open market or otherwise, or some of
each. The Corporation shall be under no obligation to reserve or to retain in
its treasury any particular number of Shares at any time, and no particular
Shares, whether unissued or held as treasury Shares, shall be identified as
those optioned under this Plan.
XII. Amendment of Plan
The Board without further action by the shareholders may amend this
Plan from time to time as it deems desirable and shall make any amendments which
may be required so that options intended to be incentive stock options (within
the meaning of Section 422(a) of the Code) shall at all times continue to be
incentive stock options for purpose of the Code; provided that no such amendment
shall increase the maximum number of Shares for which Incentive Stock Options
may be granted, reduce the minimum option price, extend the option period with
respect to any Incentive Stock Option, permit the granting of Incentive Stock
Options to anyone other than as provided in the Plan, or allow administration of
the Plan in a manner violative of Rule 16b-3.
XIII. Termination of the Plan
This Plan shall terminate ten (10) years from the Effective Date. The
Board may, in its discretion, terminate this Plan at any time prior to such
date, but such termination shall not deprive Optionees of their rights under
their options.
XIV. Effective Date
This Plan shall become effective upon its adoption by the shareholders
of Corporation, by a majority of the votes cast at a meeting duly held.
<PAGE>
Exhibit 99.1
CORNICHE GROUP INCORPORATED.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS, MAY ___, 1998
The undersigned hereby appoints James Fyfe as attorney and proxy, with
power of substitution, to vote on behalf of the undersigned at the Corniche
Group Incorporated 1998 Annual Meeting of Stockholders to be held on May ___,
1998 and at any adjournments or postponements thereof (the "Meeting"), upon the
following matters and upon any other business that may properly come before the
Meeting, as set forth in the related Notice of 1998 Annual Meeting of
Stockholders and Proxy Statement, both of which have been received by the
undersigned.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned stockholder. If this proxy is executed but no
direction is made, this proxy will be voted FOR the board's nominees for
director and FOR each matter presented.
PLEASE INDICATE YOUR VOTE FOR THE ELECTION OF DIRECTORS ON THE OTHER
SIDE. The nominees are: James Fyfe, Joel San Antonio, Robert Hutchins, Ronald
Glime, and Glen Aber.
(CONTINUED, AND TO BE DATED AND SIGNED, ON THE OTHER SIDE)
<PAGE>
PLEASE MARK BOXES [ ] IN BLUE OR BLACK INK
1. Election of 5 directors.
For all nominees [ ] Against all nominees [ ] Exception* [ ]
* To withhold authority for individual nominees, print nominee's name on the
line below and check Exception Box. ____________________________________
2. Approval of the proposed reduction of the par value of the Corporation's
Common Stock from $.10 to $.001 per share.
For [ ] Against [ ] Abstain [ ]
3. Approval of the proposed transaction whereby (a) a new series of Series B
Preferred Stock, $.01 par value per share, will be created, (b) 825,000 shares
of Series B Convertible Redeemable Preferred Stock will be issued to certain
individuals, including 710,000 shares to Joel San Antonio, and (c) Mr. San
Antonio will obtain control of the Corporation, with the intent to cause it to
enter into certain segments of the insurance business.
For [ ] Against [ ] Abstain [ ]
4. Approval of the 1998 Corniche Employees Stock Option Plan.
For [ ] Against [ ] Abstain [ ]
5. Approval of the Corniche Independent Directors Compensation Plan.
For [ ] Against [ ] Abstain [ ]
If you have noted an address change or comments on either side of this card,
mark here: [ ]
Dated: _________________________, 1998
_____________________________________
Please sign this proxy and return it promptly whether or not you expect to
attend the Meeting. You may nevertheless vote in person if you attend.
Please sign exactly as your name appears hereon. Give full title if an Attorney,
Executor, Administrator, Trustee, Guardian, etc.
For an account in the name of two or more persons, each should sign, or if one
signs, he or she should attach evidence of authority.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY USING THE ENCLOSED ENVELOPE.
