SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 25, 1999
(Date of earliest event reported)
DCAP Group, Inc.
(Exact name of Registrant as specified in charter)
Delaware 0-1665 36-2476480
(State or other Commissiuon File No. (IRS Employer
jurisdiction Identification Number)
incorporation)
90 Merrick Avenue, East Meadow, New York 11554
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 794-6300
EXTECH Corporation
(Former Name, if Changed Since Last Report)
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Item 1. Changes in Control of Registrant.
See Item 2 below.
Item 2. Acquisition or Disposition of Assets.
On February 25, 1999, pursuant to an Agreement, dated as of
May 8, 1998, by and among DCAP Group, Inc. (formerly EXTECH Corporation) (the
"Company"), and Morton L. Certilman, Jay M. Haft, Kevin Lang and Abraham
Weinzimer, as amended (the "DCAP Agreement"), the Company acquired from Messrs.
Lang and Weinzimer all of the outstanding stock of Dealers Choice Automotive
Planning Inc. ("DCAP") as well as interests in other related companies
(collectively, the "DCAP Shares") in consideration for the issuance to each of
Messrs. Lang and Weinzimer of 1,650,000 Common Shares of the Company (an
aggregate of 3,300,000 Common Shares). DCAP and such other related companies are
referred to collectively as the "DCAP Companies."
The DCAP Companies are engaged primarily in placing various
types of insurance with insurance underwriters on behalf of their customers. The
categories of insurance placed include automobile, motorcycle, boat, life,
business and homeowner's insurance. In addition, the DCAP Companies offer income
tax return preparation services and automobile club services for roadside
emergencies. The DCAP Companies also provide services with regard to obtaining
insurance premium financing from a third party, and intend to provide similar
services with regard to personal and automobile loans. The DCAP Companies also
intend to provide direct insurance premium financing services and mortgage
brokerage services to their clients. There are 56 "DCAP" offices in the New York
metropolitan area. Five are wholly-owned by the Company. Twenty-three are owned
partially by the Company (directly or beneficially, generally ranging between
50% and 67%) and partially by other persons who generally operate the location.
Twenty-eight are franchises, in which the Company has no equity interest; the
franchisor, DCAP Management Corp., however, is wholly-owned by the Company.
At the closing of the DCAP Agreement, the following additional
Common Shares of the Company were issued by the Company:
(i) 475,000 Common Shares to each of Messrs. Lang and
Weinzimer (an aggregate of 950,000 Common Shares)
(the "950,000 Additional Shares") at a purchase price
of $.25 per share, paid as follows:
(a) an amount in cash equal to the par value of
the 950,000 Additional Shares ($4,750 for
each or an aggregate of $9,500); and
(b) the balance by the delivery by each of
Messrs. Lang and Weinzimer of a promissory
note in the principal amount of $114,000 (an
aggregate of $228,000) (collectively, the
"Additional Shares Notes"). The Additional
Shares Notes provide for, among other
things, the following:
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(I) interest at the rate of 6% per
annum;
(II) payment of principal and interest in
six equal annual installments
commencing April 15, 2001 and
continuing through April 15, 2006,
subject to acceleration to the
extent that Mr. Lang or Mr.
Weinzimer receives any proceeds from
the sale or other disposition of any
Common Shares; and
(III) security for the payment of all
amounts due under the Additional
Shares Notes by a pledge by each of
Messrs. Lang and Weinzimer to the
Company of 570,000 Common Shares of
the Company, pursuant to pledge
agreements that were entered into at
the closing of the DCAP Agreement.
(ii) 208,500 Common Shares to each of Messrs. Certilman
and Haft or their retirement trusts (an aggregate of
417,000 Common Shares) at a purchase price of $.25
per share, paid in cash; and
(iii) 17,500 Common Shares to each of Brian Ziegler and
Andrea Ziegler, the son-in-law and daughter of Mr.
Certilman (an aggregate of 35,000 Common Shares), at
a purchase price of $.25 per share, paid in cash. Mr.
Ziegler is also Secretary of the Company. Mr.
Certilman disclaims beneficial ownership of the
Common Shares owned by Mr. and Mrs. Ziegler.
At the closing of the DCAP Agreement, each of Messrs. Haft,
Lang and Weinzimer and Mr. Certilman's retirement trust also purchased 450,000
Common Shares of the Company (1,800,000 Common Shares in the aggregate) (the
"Sterling Foster Shares"), beneficially owned by Sterling Foster Holding Corp.
("Sterling Foster") and held by Mr. Certilman as voting trustee pursuant to a
Voting Trust Agreement with Sterling Foster, at a purchase price of $.25 per
share. Messrs. Certilman and Haft paid for their Sterling Foster Shares in cash.
Messrs. Lang and Weinzimer also paid for their Sterling Foster Shares in cash,
using the proceeds of a loan from the Company (discussed below) for such
purpose. Upon such purchase, the Voting Trust Agreement was terminated.
Pursuant to the DCAP Agreement, at the closing, the Company
loaned $112,500 to each of Messrs. Lang and Weinzimer (an aggregate of $225,000)
(the "Closing Loans"). The proceeds of the Closing Loans were used by Messrs.
Lang and Weinzimer solely for the purpose of purchasing their Sterling Foster
Shares. Each of the Closing Loans is evidenced by a promissory note (the
"Closing Loan Notes") that provides for, among other things, the following:
(i) interest at the rate of 6% per annum;
(ii) payment of principal and interest in six equal annual
installments commencing April 15, 2001 and continuing
through April 15, 2006, subject to acceleration to
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the extent that Mr. Lang or Mr. Weinzimer receives
any proceeds from the sale or other disposition of
any Common Shares;
(iii) non-recourse against Messrs. Lang and Weinzimer,
i.e., Messrs. Lang and Weinzimer will not be
personally liable for the payment of the Closing Loan
Notes; instead, in the event of a default, the
Company's sole remedy will be pursuant to a pledge by
Messrs. Lang and Weinzimer of their Sterling Foster
Shares;
(iv) the right of each of Messrs. Lang and Weinzimer to
satisfy the amounts due under his respective Closing
Loan Note by delivering Common Shares valued at the
greater of (A) $.25 per share or (B) the average
market price of the Common Shares for the 20 trading
days immediately preceding the date of delivery of
the shares; and
(v) security for the payment of all amounts due under the
Closing Loan Notes by a pledge by each of Messrs.
Lang and Weinzimer to the Company of the Sterling
Foster Shares acquired by him, pursuant to pledge
agreements that were entered into at the closing of
the DCAP Agreement.
At the closing of the DCAP Agreement, Leon Lapidus resigned as
a director of the Company, the size of the Board of Directors was expanded to
four and Messrs. Lang and Weinzimer were appointed as directors. Messrs.
Certilman and Haft continued as directors of the Company.
At the closing of the DCAP Agreement, each of Messrs.
Certilman, Haft, Lang and Weinzimer entered into an Employment Agreement with
the Company pursuant to which they serve as Chairman, Vice Chairman, President
and Executive Vice President of the Company, respectively.
The Employment Agreements entered into by Messrs. Certilman,
Haft, Lang and Weinzimer are identical in all respects, except as discussed
below.
The term of each Employment Agreement is five years commencing
February 25, 1999 (the "Initial Term"), with an automatic three year renewal
term (the "Extended Term") unless, at least 90 days prior to the expiration of
the Initial Term, the Company, by vote of 75% of all of the members of its Board
of Directors (including, for purposes of determining the number of members of
the Board, the particular employee, if a member) (as provided for in the
Company's By-Laws) notifies the employee of its desire not to extend the term of
the Employment Agreement. In the event the Company makes such election, the
employee generally shall be entitled to receive, as termination payments, his
then annual base salary for a period of two additional years (the "Severance
Amount").
During the term of the Employment Agreement, Messrs. Lang and
Weinzimer are required to expend all of their working time for the Company.
Messrs. Certilman and Haft are to perform such part-time services as are
reasonably necessary for them to fulfill their responsibilities as Chairman and
Vice Chairman, respectively.
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During the employment period, Messrs. Lang and Weinzimer each
will be entitled to receive a salary of $250,000 per annum, while Messrs.
Certilman and Haft are to receive annual salaries of $125,000 and $22,500,
respectively. Each employee will also be entitled to such additional
compensation as may be determined by the Board of Directors of the Company in
its sole discretion.
In the event that the Company's Pre-Tax Net Income (as such
term is defined in the Employment Agreements) for any fiscal year of the
Employment Agreement of Mr. Lang or Mr. Weinzimer (but commencing only with the
fiscal year ending December 31, 2000 and continuing only through the fiscal year
ending December 31, 2005) is at least $100,000, he will be entitled to receive a
bonus in the amount of $37,500 for each such year. No bonus will be payable for
a particular fiscal year if no amounts are then payable by Mr. Lang or Mr.
Weinzimer to the Company pursuant to his Additional Shares Note. Furthermore,
the amount of any bonus payable may never exceed the amount payable by Mr. Lang
or Mr. Weinzimer pursuant to his Additional Shares Note, and the Company will be
entitled to offset against any such bonus any amount so payable.
Pursuant to the terms of the Employment Agreements, an
employee's employment terminates automatically on his death and, at the
Company's option, if the employee becomes disabled. In addition, an employee's
employment may be terminated at any time for "cause." Pursuant to the terms of
the Employment Agreements and the Company's By-Laws, the Company may terminate
an employee's employment based upon a claim of "cause" only if a majority of all
of the members of its Board of Directors (including, for purposes of determining
the number of members of the Board, the particular employee, if a member) shall
have approved the action. As provided for in the Employment Agreements and the
Company's By-Laws, if the Company desires to terminate an employee's employment
not based upon a claim of "cause," then 75% of all of the members of the Board
of Directors (including, for purposes of determining the number of members, the
particular employee, if a member) must approve the action.
In the event of termination of an employee's employment
without "cause," the employee will be entitled to receive, as liquidated
damages, an amount equal to all compensation that he would have been entitled to
receive for the remainder of the term, including the Extended Term, as if his
employment had not terminated; however, if the termination notice is given (i)
prior to 90 days before the expiration of the Initial Term, or (ii) subsequent
to such time, but after the date the Company has given timely notice of its
desire not to extend the Initial Term, the terminated employee shall be entitled
to receive the Severance Amount.
For a period of two years after the expiration or termination
of the Employment Agreement, without the prior written consent of the Company,
the terminated employee is restricted, within a radius of five miles of any
office or franchise of the Company, from, among other things, directly or
indirectly, engaging or participating in a business which is similar to or
competitive with the business activities of the Company. The restrictive
covenants, however, do not apply if the Employment Agreement is terminated based
on a disability of the employee and will cease to apply if:
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(i) the Company defaults in any obligation to pay any
post-termination amounts that are payable pursuant to
the provisions of the Employment Agreement and such
default continues for a period of 20 days following
receipt by the Company of written notice thereof; or
(ii) if all of the following conditions exist: (a) the
term of the Employment Agreement is extended for the
Extended Term; (b) prior to the expiration of
the Extended Term, the employee is not offered a
further two-year extension, with the same base annual
salary and substantially the same terms as
provided for in the Employment Agreement; (c) the
employee's employment is not terminated for "cause"
during the Extended Term and he does not
voluntarily terminate his employment; and (d) the
employee's employment ends on the last day of the
Extended Term.
At the closing of the DCAP Agreement, each of Messrs.
Certilman and Haft was granted options to purchase up to 225,000 Common Shares
of the Company and each of Messrs. Lang and Weinzimer was granted options to
purchase up to 200,000 Common Shares of the Company. Such options were granted
upon the following terms:
(i) the exercise price of such options was $2.69 per
share (110% of the fair market value of the Common
Shares on the date of the grant);
(ii) the options will expire five years from the date of
grant; and
(iii) the options will vest to the extent of one-half
thereof on the first anniversary of the date of grant
and one-half on the second anniversary.
For each of the twelve-month periods of the Initial Term, the
Company will be obligated, upon the written request of each of Messrs. Lang and
Weinzimer, to lend to him up to $20,000. The right of Messrs. Lang and Weinzimer
to obtain such $20,000 annual loan is assignable by each to the other. Each such
loan is to be evidenced by a promissory note in the principal amount of the loan
and is to provide for, among other things, the following:
(i) interest at the prime rate (as published in the Wall
Street Journal); and
(ii) payment of principal and interest in four equal
annual installments, commencing one year from the
date of each loan (but in no event after February 25,
2006), subject to acceleration to the extent that the
borrower receives any proceeds from the sale or other
disposition of any Common Shares.
The repayment of all amounts due under each such note is to be
secured by the pledge by the borrower, pursuant to a pledge agreement, of five
Common Shares of the Company for each one dollar loaned.
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Pursuant to the DCAP Agreement, while any loan made to either
Mr. Lang or Mr. Weinzimer pursuant to his Employment Agreement is outstanding,
he will be obligated to sell, as soon as legally permissible, the maximum number
of Common Shares that he is permitted by law to sell, and to use the proceeds
thereof to satisfy his obligations under his respective notes. Until the
foregoing notes, the Additional Shares Notes and the Closing Notes have been
satisfied in full, neither Mr. Lang nor Mr. Weinzimer may sell or otherwise
dispose of any of his Common Shares for less than $.25 per share (subject to
adjustment for stock splits and the like) without the prior written consent of
the Company.
Pursuant to the DCAP Agreement, each of Messrs. Certilman,
Haft, Lang and Weinzimer has agreed that, during the eight year period following
the closing of the DCAP Agreement, (i) he will vote his respective shares of
stock of the Company in favor of each of the others as a director of the Company
provided that the particular person in whose favor the vote would be remains in
the employ of the Company, (ii) in the event Mr. Certilman or Mr. Haft dies or
otherwise ceases to serve as a director of the Company, Messrs. Lang and
Weinzimer will vote their respective shares of stock of the Company in favor of
the designee of the survivor of Mr. Certilman or Mr. Haft (or, in the case of a
reason other than death, the one remaining as a director), (iii) in the event
Mr. Lang or Mr. Weinzimer dies or otherwise ceases to serve as a director of the
Company, Messrs. Certilman and Haft will vote their respective shares of stock
of the Company in favor of the designee of the survivor of Mr. Lang or Mr.
Weinzimer (or, in the case of a reason other than death, the one remaining as a
director) and (iv) he will not vote his shares to (a) increase the size of the
Board of Directors of the Company or (b) amend the Certificate of Incorporation
or By-Laws of the Company, in each case without the written approval of the
others. In the event of the death or other cessation of directorship of any of
Messrs. Certilman, Haft, Lang or Weinzimer during such period, the Company has
agreed that, unless the Board vacancy is otherwise filled as provided for above,
it will promptly call a special meeting of stockholders to fill such vacancy.
On February 25, 1999, immediately following the closing of the
DCAP Agreement, pursuant to a Subscription Agreement dated as of October 2,
1998, as amended (the "Eagle Subscription Agreement"), between the Company and
Eagle Insurance Company ("Eagle"), the Company issued to Eagle 1,486,893 Common
Shares for an aggregate purchase price of approximately $1,000,000, or $.67 per
share (the "Eagle Issuance").
Eagle is a New Jersey insurance company wholly-owned by The
Robert Plan Corporation ("The Robert Plan"), one of the largest insurers of
assigned-risk drivers in the United States. Pursuant to separate agency
agreements between certain DCAP Companies and certain insurance company
subsidiaries of The Robert Plan, such DCAP Companies have been appointed agents
of the insurance companies with regard to the offering of automobile and other
insurance products.
At the closing of the Eagle Subscription Agreement, the size
of the Board of Directors of the Company was further increased to five and
Robert M. Wallach, Eagle's Vice President and the President and Chief Executive
Officer of The Robert Plan, was appointed as a member of the Board of Directors.
The Company has agreed that, during the five year period following the closing,
provided that Eagle remains the beneficial owner of at least 1,000,000 Common
Shares (subject to
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adjustment for stock splits and the like), the Company shall continue to
nominate Mr. Wallach as a director.
The following table sets forth certain information regarding
the beneficial ownership of the outstanding Common Shares of the Company
immediately following the issuance of the Common Shares pursuant to the DCAP
Agreement, the purchase of the Sterling Foster Shares, and the Eagle Issuance.
Number of
Name and Address Common Shares
of Beneficially
Beneficial Owner Owned Percentage of Class
Kevin Lang 2,575,000(1)(2) 21.9%
2545 Hempstead Turnpike (3)
East Meadow, New York
Abraham Weinzimer 2,575,000(1)(2) 21.9%
2545 Hempstead Turnpike (3)
East Meadow, New York
Jay M. Haft 1,563,893(2)(3) 13.3%
1001 Brickell Bay Drive (4)
Miami, Florida
Eagle Insurance Company(5) 1,486,893 12.6%
c/o The Robert Plan
Corporation
999 Stewart Avenue
Bethpage, New York
Morton L. Certilman 1,470,393(2)(3) 12.5%
The Financial Center (6)
at Mitchel Field
90 Merrick Avenue
East Meadow, New York
Robert M. Wallach -0- (7) -
c/o The Robert Plan
Corporation
999 Stewart Avenue
Bethpage, New York
All executive officers 9,751,179(1)(2) 82.8%
and directors as a group (3)(4)
(6 persons) (5)(6)
(7)(8)
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(1) Of the shares beneficially owned by each of Messrs. Lang and Weinzimer,
1,020,000 shares are pledged to the Company as security for the payment
of certain promissory notes, as discussed above.
(2) Reference is made to the discussion above of a certain agreement as to
voting among Messrs. Lang, Weinzimer, Certilman and Haft.
(3) Based upon Schedule 13D filed by Messrs. Lang, Weinzimer, Certilman and
Haft under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with respect to their respective equity interests in
the Company. In view of the voting agreement referenced in footnote (2)
hereof, Messrs. Lang, Weinzimer, Certilman and Haft may be deemed a
group. Accordingly, the group of Messrs. Lang, Weinzimer, Certilman and
Haft beneficially owns 8,217,286 Common Shares. Such amount represents
approximately 69.8% of the outstanding Common Shares of the Company.
However, each of Messrs. Lang, Weinzimer, Certilman and Haft
independently makes his own decisions with respect to the acquisition
and disposition of the Common Shares directly owned by him, as well as
with respect to the voting of Common Shares on matters not covered by
the voting agreement, and neither Mr. Lang, Mr. Weinzimer, Mr.
Certilman nor Mr. Haft has any economic interest in the Common Shares
directly owned by any of the others.
(4) Includes 15,380 shares held in a retirement trust for the benefit of
Mr. Haft.
(5) Based upon Schedule 13D filed by Eagle under the Exchange Act. Eagle is
a wholly-owned subsidiary of The Robert Plan. The directors of Eagle
are William Wallach, Frances Wallach, Robert M. Wallach, Lawrence S.
Isaacs, Roy DiVittorio, Philbert Nezamoodeen, John D. Reiersen, and
Jasper J. Jackson, and the executive officers of Eagle are John D.
Reiersen and Philbert Nezamoodeen. The directors of The Robert Plan are
William Wallach, Robert M. Wallach, Carl R. Hollander, Jasper J.
Jackson, and Howard Smith. The executive officers of The Robert Plan
are William Wallach, Robert M. Wallach, Jasper J. Jackson, Philbert
Nezamoodeen, Hylan T. Hubbard III, John D. Reiersen and Roy DiVittorio.
(6) Includes 902,452 shares held in a retirement trust for the benefit of
Mr. Certilman.
(7) Excludes shares owned by Eagle, of which Mr. Wallach, a director of the
Company, is a Vice President. Eagle is a wholly-owned subsidiary of The
Robert Plan, of which Mr. Wallach is President and Chief Executive
Officer.
(8) Includes 5,000 shares held in a retirement trust for the benefit of an
executive officer and 37,500 shares held by such executive officer's
wife. Such executive officer disclaims beneficial ownership of the
shares owned by his wife.
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Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
(i) Combined Balance Sheet of the DCAP Companies
as of December 31, 1998(1).
(ii) Combined Statements of Operations of the
DCAP Companies for the fiscal years ended
December 31, 1998 and 1997(1).
(iii) Combined Statements of Shareholders' Deficit
of the DCAP Companies for the fiscal years
ended December 31, 1998 and 1997(1).
(iv) Combined Statements of Cash Flows of the
DCAP Companies for the fiscal years ended
December 31, 1998 and 1997(1).
(b) Pro Forma Financial Information.
(i) Pro Forma Consolidated Balance Sheet of the
Company as of December 31, 1998(1).
(ii) Pro Forma Consolidated Statement of
Operations of the Company for the fiscal
year ended December 31, 1998(1).
(c) Exhibits.
2.1 Agreement dated as of May 8, 1998 by and
among the Company, Morton L. Certilman, Jay
M. Haft, Kevin Lang and Abraham Weinzimer
(including Schedules A and B and exhibits
thereto), as amended(2).
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(1) To be filed by amendment.
(2) Included as Appendix A to the Company's definitive Proxy Statement dated
February 9, 1999 (File No. 0-1665) and incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
DCAP GROUP, INC.
Dated: March 12, 1999 By: /s/ Morton L. Certilman
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Morton L. Certilman
Chairman of the Board
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