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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 6)*
INCOMNET, INC.
- --------------------------------------------------------------------------------
(Name of Issuer)
COMMON STOCK
- --------------------------------------------------------------------------------
(Title of Class of Securities)
453365207
----------------------------------------------
(CUSIP Number)
John P. Casey, 10220 River Road, Suite 115, Potomac, MD 20854 (301) 983-5000
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
July 15, 1998
- --------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition that is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following
box [ ].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d- 7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
<TABLE>
<S> <C>
- --------------------------- -------------------------
CUSIP NO. 453365207 PAGE 2 OF 5 PAGES
- --------------------------- -------------------------
- -------------------------------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
JOHN P. CASEY - SS# ###-##-####
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
00
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ]
- -------------------------------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States
- -------------------------------------------------------------------------------------------------------
7 SOLE VOTING POWER
5,485,104*
--------------------------------------------------------------------------------
NUMBER OF 8 SHARED VOTING POWER
SHARES
BENEFICIALLY 102,000 (children's trust; 1/3 voting trustee)
OWNED BY EACH
REPORTING
PERSON WITH
--------------------------------------------------------------------------------
9 SOLE DISPOSITIVE POWER
5,485,104*
--------------------------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
102,000 (children's trust; 1/3 voting trustee)
- -------------------------------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
5,587,104*
- -------------------------------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X]
*
- -------------------------------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
27.94% (See Item 5)*
- -------------------------------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Does not include shares of common stock issuable on the conversion of 725.473
shares of Series A Convertible Preferred Stock of Incomnet and 872.738 shares of
Series B Convertible Preferred Stock of Incomnet (collectively, the "Preferred
Shares") which Mr. Casey has an option (the "Option") to purchase, exercisable
at any time prior to October 14, 1998. Although the Preferred Shares are
convertible at any time, and the current owners of the Preferred Shares
attempted to convert them in June 1998, Incomnet does not currently have
sufficient authorized but unissued shares of common stock to effect the
conversion of the Preferred Shares into common stock and uncertainties exist as
to the number of shares of common stock into which the Preferred Shares are
convertible. Thus, there is no assurance as to whether or when the conversion of
the Preferred Shares can actually be effected. See Items 4 and 5.
<PAGE> 3
This Statement is the sixth Amendment to the Statement on Schedule 13D filed on
April 7, 1998 (as previously amended, the "Statement") with the Securities and
Exchange Commission by Mr. John P. Casey in connection with his beneficial
ownership of shares (the "Shares") of common stock of Incomnet, Inc. ("Incomnet"
or the "Issuer"). All capitalized terms used and not defined in this Amendment
No. 6 have the meanings given to them in the Statement.
Item 2. Identity and Background
By virtue of the voting arrangements in the Option Agreement described in
Item 6, Mr. Casey may be deemed to be a member of a group with the Sellers (as
defined below). Reference is made to the Sellers' Statement on Schedule 13D
filed on June 19, 1998 for information on the identity and background of the
Sellers. Mr. Casey disclaims the existence of any group of which he is a member
other than as a result of the voting arrangements referred to above.
Item 3. Source and Amount of Funds or Other Consideration.
On July 15, 1998, Mr. Casey purchased the Option from Robert Cohen,
Stefanie Rubin, Allyson Cohen, Jeffrey Cohen, Alan Cohen, Lenore Katz, Broadway
Partners and Meryl Cohen, individually and as custodian for Gabrielle Cohen,
Jaclyn Cohen, Erica Cohen and Nicole Cohen (collectively, the "Sellers") to
purchase all of the Preferred Shares owned by the Sellers. Mr. Casey will pay
$300,000 using funds from the Credit Facility referenced in Amendment No. 5 to
Mr. Casey's Statement on Schedule 13D for the Option, of which $150,000 was paid
on July 15, 1998 and the balance of $150,000 is payable on August 14, 1998.
Item 4. Purpose of Transaction.
On July 15, 1998, Mr. Casey purchased the Option from the Sellers. The
background of his decision to purchase the Option and his purposes in doing so
are described below.
In June 1998, the Sellers delivered to Incomnet a notice of conversion of
the Preferred Shares into common stock and tendered the Preferred Shares for
conversion. Based on the average conversion prices in effect at the time the
conversion notices were delivered, Mr. Casey believes that the Preferred Shares
might have been converted into approximately 27% of the post-conversion
outstanding shares of common stock. Because Incomnet had insufficient authorized
but unissued common stock to honor the conversion, it could not deliver the
common stock issuable on the conversion to the Sellers. Pursuant to the terms of
the Preferred Shares applicable if Incomnet has not delivered common stock
certificates within three days of the conversion notice, the Sellers withdrew
their Preferred Shares.
After the attempted conversion of Preferred Shares by the Sellers,
Incomnet announced that it would seek shareholder approval of a six-for-one
reverse stock split in which each shareholder of Incomnet would receive one
share of common stock for each six shares held before the reverse stock split
was effected. The effect of the reverse stock split would be to reduce the
issued and outstanding common stock from approximately 20 million shares to
approximately 3.33 million shares, thereby leaving approximately 16.67 million
authorized but unissued shares, some of which could be issued on conversion of
the Preferred Shares and on the exercise of various outstanding options and
warrants and the To-Be-Issued Common. If the Preferred Shares were thereafter
converted at the conversion price (approximately $.19 per share of common stock)
which Mr. Casey believes to have been in effect at the date of the conversion
notices, as adjusted for the reverse stock split, the Sellers would have
acquired approximately 27% of the post-conversion outstanding common stock, and
his own holdings would have been reduced from approximately 28% to approximately
18%.
Mr. Casey purchased the Option to give himself the opportunity (should he
decide to exercise the Option) to remove a potential concentrated block of
common stock and preserve the voting power of his own common stock and his
ability to influence the future direction of Incomnet.
Although Incomnet has the right to redeem the Preferred Shares at any time
that the market price of the common stock is below $2 per share, Mr. Casey
believes that the Company's current financial condition might well preclude the
Company from legally doing so even though such course might be in the best
interests of the holders of common stock. If Mr. Casey exercises the Option
(which he may or may not do), he currently intends to request that Incomnet file
with the Securities and Exchange Commission a registration statement pursuant to
which he would offer the securities received on the exercise of the Option to
all of the holders of Incomnet common stock of record as of August 1, 1998 pro
rata according to their holdings, after reserving for himself his pro rata
portion of such securities based on his ownership as of August 1, 1998. Mr.
Casey would offer the securities for an aggregate offering price equal to his
cost (including expenses) of purchasing and offering the securities, less the
cost attributable to the pro rata portion of the securities he retains. He
believes that such an offering would effectively disperse a large block of stock
and further would permit all of the holders of Incomnet common stock, including
himself, to participate in the economic benefits of the Preferred Stock on a pro
rata basis.
<PAGE> 4
Item 5. Interest in Securities of the Issuer.
(a) Mr. Casey is the beneficial owner of 5,587,104 Shares. Mr. Casey
may also be deemed to be the beneficial owner of the common
stock issuable on the conversion of the Preferred Shares by
reason of his right to acquire the Preferred Shares on the
exercise of the Option. If Mr. Casey were to exercise the Option
and convert the Preferred Shares (assuming Incomnet had taken
action to make available sufficient authorized shares of Common
Stock to effect the conversion), Mr. Casey believes he would own
approximately 44% of the common stock outstanding after giving
effect to the conversion and to the issue of the To-Be-Issued
Common to holders of Series A and Series B Stock who did not
rescind their conversions. This percentage assumes (which has
not been determined) that Mr. Casey would be able to convert at
the price per share (approximately $.19 per share of Common)
which Mr. Casey believes to have been in effect when the Sellers
attempted to convert in June, 1998.
(b) Mr. Casey has sole power to vote, direct the vote of, dispose
of, and direct the disposition of 5,485,104 of the Shares
described in (a) above. Mr. Casey has shared power to vote,
direct the vote of, dispose of, and direct the disposition of,
102,000 of the Shares described in (a) above.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
The following is a summary of certain terms of the Option Agreement
referred to below, a copy of which is filed as an exhibit to this Amendment to
Schedule 13D and is incorporated herein by reference. This summary is qualified
in its entirety by reference to the full text of the Option Agreement.
Mr. Casey and the Sellers have entered into an Option Agreement dated
July 15, 1998 (the "Option Agreement"), pursuant to which the Sellers have
granted Mr. Casey the Option to purchase all of the Preferred Shares of Incomnet
currently owned by them and any shares of common stock of Incomnet received by
them on conversion of the Preferred Shares (collectively, the "Option Shares").
The price for the Option is $300,000 (the "Option Price"), of which $150,000 was
paid on July 9, 1998 and the balance is to be paid on August 15, 1998. The
Option is exercisable by Mr. Casey commencing 2:00 p.m. (Pacific Time) on July
15, 1998 and terminating at 11:59 p.m. (Pacific Time) on October 14, 1998 (the
"Option Term").
The purchase price for the Option Shares is $2,300,000, less the Option
Price, with an adjustment for any dividends that accrue on the Preferred Stock
from July 15, 1998 to the delivery of the purchase price. If Mr. Casey elects to
exercise the Option, then at the closing of the purchase of the Option Shares,
the Sellers are to assign and transfer to Mr. Casey all of their rights,
entitlements, claims and causes of action against all persons, including
Incomnet, in respect of the Option Shares, including any claims or causes of
action arising from Incomnet's failure to honor the Sellers' attempted
conversion. Mr. Casey's obligation to purchase the Option Shares is subject to
various conditions, including the absence of proceedings to prevent or interfere
with the transactions contemplated by the Option Agreement and the receipt of
all required consents, including governmental consents, if any, required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.
The Sellers have agreed with Mr. Casey that, among other things, they
(i) will not sell, transfer, pledge or otherwise encumber any of the Option
Shares, (ii) will not take any action to convert the Preferred Shares without
Mr. Casey's consent, (iii) will make all filings required to consummate sale of
the Option Shares and (iv) take all reasonable actions to preserve their rights
as holders of the Preferred Shares and underlying common stock. During the
Option Term, the Sellers are entitled to vote their Preferred Shares, provided
they give Mr. Casey five business days prior notice specifying how they intend
to vote. If Mr. Casey exercises the Option during that period, the Sellers agree
to vote as directed by Mr. Casey and to deliver an irrevocable proxy whereby Mr.
Casey shall be entitled to vote such shares. Mr. Casey has agreed that for nine
months from the date of the Option he will vote the shares of common stock he
owns as directed by the Sellers (if any directions are given) on any proposal
regarding an increase in the authorized shares of Incomnet's common stock or a
reverse stock split that will enable Incomnet to honor the conversion of the
Preferred Shares.
Item 7. Material to be Filed as Exhibits.
Option Agreement dated July 15, 1998 between John P. Casey and Robert
Cohen, Stefanie Rubin, Allyson Cohen, Jeffrey Cohen, Alan Cohen, Lenore Katz,
Broadway Partners and Meryl Cohen, individually and as custodian for Gabrielle
Cohen, Jaclyn Cohen, Erica Cohen and Nicole Cohen
<PAGE> 5
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
/s/ JOHN P. CASEY
Date: July 15, 1998 ------------------------------------------
John P. Casey
<PAGE> 1
EXHIBIT 99
OPTION AGREEMENT
AMONG
JOHN P. CASEY, ROBERT COHEN, STEFANIE RUBIN,
ALLYSON COHEN, JEFFREY COHEN, ALAN COHEN,
LENORE KATZ, BROADWAY PARTNERS AND
MERYL COHEN, INDIVIDUALLY AND AS CUSTODIAN
FOR GABRIELLE COHEN, JACLYN COHEN, ERICA COHEN
AND NICOLE COHEN
DATED JULY 15, 1998
<PAGE> 2
OPTION AGREEMENT
This Option Agreement ("Agreement") is made as of July 15, 1998 by John P.
Casey, an individual resident in Maryland ("Buyer"), Robert Cohen, an individual
resident in New York, Stefanie Rubin, an individual resident in New York,
Allyson Cohen, an individual resident in New York, Jeffrey Cohen, an individual
resident in New York, Alan Cohen, an individual resident in New York, Lenore
Katz, an individual resident in Florida, Broadway Partners, a general
partnership, and Meryl Cohen, an individual resident in New York and custodian
for Gabrielle Cohen, Jaclyn Cohen, Erica Cohen and Nicole Cohen (collectively,
the "Sellers").
RECITALS
Sellers desire to grant, and Buyer desires to acquire, an option to
purchase all of Sellers' Series A and Series B Preferred stock set forth on
Schedule A hereto ("Preferred Stock") of Incomnet, Inc., a California
corporation (the "Company"), for the consideration and on the terms set forth in
this Agreement.
Now therefore, the parties, intending to be legally bound, agree as
follows:
1. PURCHASE AND SALE OF OPTION; CLOSING.
1.1 The Option.
Subject to the terms and conditions of this Agreement, Sellers
hereby grant and transfer to Buyer and Buyer hereby acquires from Sellers an
irrevocable option to purchase during the Option Term (as defined below) (the
"Option") the aggregate number of shares of Preferred Stock as set forth in
Schedule A, with each Seller being obligated to deliver to Buyer, upon exercise
of the Option, the number of shares of Preferred Stock set forth opposite such
Seller's name on Schedule A to this Agreement, together with an Assignment (as
defined below) and any and all Common Stock of the Company received by Sellers
in respect of any conversion of the Preferred Stock at the Purchase Price (as
defined below).
1.2 Term of the Option.
The term during which the Option may be exercised ("Option Term")
commenced at 2:00 p.m. (Pacific Time) on July 15, 1998 and shall terminate at
11:59 p.m. (Pacific Time) on October 14, 1998.
<PAGE> 3
1.3 Option Price.
The purchase price for the Option will be $300,000 (the "Option
Price") payable in two installments. The first installment shall be $150,000,
paid on July 15, 1998, the receipt of which is hereby acknowledged, and the
balance of $150,000 shall be delivered on August 15, 1998. If Buyer fails to pay
the second installment under this Agreement, this Agreement shall automatically
terminate and Sellers shall be entitled to keep the first installment and no
party shall have any further obligations under the terms of this Agreement other
than the continuing covenant under Section 5.2 of this Agreement and Buyer
continues to be obligated to pay the second installment. The Option
Price shall be paid by check made payable to Camhy Karlinsky & Stein LLP (the
"Camhy Firm"). Sellers shall cause the Camhy Firm to disburse the funds
representing the Option Price to the Sellers in proportion to the number of
shares of Preferred Stock owned by Sellers. Buyer shall have no responsibility
for such disbursement and, upon receipt of Buyer's checks representing the
Option Price by the Camhy Firm, Buyer shall be deemed to have performed Buyer's
obligation to deliver the Option Price. The Option Price shall be credited in
full against the Purchase Price as described below. If Buyer does not exercise
the Option during the Option Term, then this Agreement shall automatically
terminate and Sellers shall be entitled to retain all funds representing the
Option Price and no party shall have any obligation to the other pursuant to
this Agreement other than the continuing covenant set forth in Section 5.2 of
this Agreement.
1.4 Exercise of Option.
At any time during the Option Term, Buyer may exercise the Option,
in whole only, by notifying Sellers in writing of Buyer's intention to exercise
the Option (the "Exercise Notice"). The Exercise Notice shall provide that, upon
satisfaction of all conditions set forth in Section 6 hereof, Buyer shall
purchase the Preferred Stock set forth in Schedule A (or the underlying
Common Stock) for a total purchase price of $2,300,000, less an amount equal to
the Option Price (or portion thereof) paid through the date of the Exercise
Closing (as defined below) plus an additional amount owed to reflect the unpaid
dividends and penalties that accrue on the Preferred Stock from July 9, 1998 to
and until the Exercise Closing (the "Purchase Price"). If the Company shall pay
to Sellers accrued dividends or penalties in respect of the Preferred Stock
during the Option Term for the period prior to July 9, 1998, such payments shall
be credited against the Purchase Price.
1.5 Closing of Exercise of Option.
The closing for the exercise of the Option and purchase of the
Preferred Stock (or underlying Common Stock) shall take place at the offices of
Buyer's counsel at 601 South Figueroa Street, Los Angeles, California 90017, at
such time as is mutually agreed upon by the parties, but in any event not later
than three business days after satisfaction of the conditions set forth in
Section 6 of this Agreement (the "Exercise Closing"). At the Exercise Closing,
Buyer shall deliver by wire transfer or certified
2
<PAGE> 4
check, the Purchase Price and Sellers shall deliver the stock certificates
representing the Preferred Stock, (or in the event of a conversion, the Common
Stock received in respect of the Preferred Stock) set forth opposite their names
on Schedule A. Sellers shall immediately undertake and use their best efforts to
obtain certificates evidencing their shares of Preferred Stock. Sellers shall
also deliver at the Exercise Closing such opinions of their counsel required by
the Company pursuant to the Certificate of Determination and Stock Purchase
Agreements signed by Sellers in connection with the purchase of the Preferred
Stock. At the Exercise Closing, Sellers shall all execute an assignment in form
and substance reasonably satisfactory to Buyer and his counsel whereby Sellers
assign and transfer to Buyer all of Sellers' assignable rights, entitlements,
claims and causes of action against all persons, including the Company, whenever
accrued, in respect of the Preferred Stock and the Common Stock of the Company
into which the Preferred Stock is convertible and specifically including any
claim or cause of action arising from or relating to the Company's failure to
honor Sellers' attempted conversion of the Preferred Stock on June 10 and 11,
1998 (the "Assignment").
2. REPRESENTATIONS AND WARRANTIES OF SELLERS
Each of the Sellers represents and warrants to Buyer as follows with
respect to such Seller:
2.1 Authority, No Conflict.
This Agreement constitutes the legal, valid and binding obligations
of such Seller, enforceable against such Seller in accordance with its terms.
Such Seller has the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and to perform the obligations
under this Agreement.
Neither the execution and delivery of this Agreement nor the
consummation and performance of any of the transactions contemplated by this
Agreement will:
(i) to the actual knowledge of such Seller without any duty of
inquiry, directly or indirectly contravene, conflict with, or result in the
violation of any provision of the organizational documents of the Company;
(ii) contravene, conflict with or result in the violation of or give
any governmental body or any other person the right to challenge the
contemplated transaction or to exercise any remedy or obtain any relief under
any order to which such Seller or, to the actual knowledge of such Seller
without any duty of inquiry, the Company or any of the assets owned or used by
the Company, may be subject; or
(iii) contravene, conflict with or result in a violation or breach
of any agreement or any provision of any agreement to which such Seller is a
party or give any person the right to declare a default or exercise any remedy
under, or accelerate the
3
<PAGE> 5
maturity or performance of or to cancel, terminate or modify any agreement to
which such Seller is a party.
2.2 Ownership of Preferred Stock; Legends and Restrictions on
Transfer.
Such Seller is the sole, true, lawful, record and beneficial owner
of the Preferred Stock listed opposite such Seller's name on Schedule A, free
and clear of all encumbrances and without restrictions on voting rights or
rights of disposition other than pursuant to this Agreement. Such Seller's
shares of Preferred Stock are such Seller's sole and separate property, and the
execution of a spousal consent to the transactions contemplated by this
Agreement is not required. There are no legends or encumbrances on any Preferred
Stock other than a securities legend that is substantially identical to the
securities legend set forth in Section 4.1 of the Stock Purchase Agreement dated
July 29, 1997 under which Stefanie Rubin purchased 134 shares of the Preferred
Stock. Except for this Agreement, such Seller has not entered into any contract
relating to the issuance, sale, or transfer of any equity securities or
securities of the Company. At the Exercise Closing, Buyer will convey good and
valid title to such Seller's Preferred Stock or underlying Common Stock being
purchased free and clear of any and all claims, liens, charges, encumbrances and
security interests.
3. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
3.1 Authority.
This Agreement constitutes the legal, valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms. Buyer has the
absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and to perform his obligations under this Agreement.
3.2 Investment Representation.
Buyer is a sophisticated investor. If Buyer exercises the Option,
Buyer will acquire the Preferred Stock (or underlying Common Stock) for his own
account for investment and will not engage in a distribution thereof, except
transfers exempt from registration requirements of the Securities Act of 1993,
as amended, or pursuant to an effective registration statement.
3.3 Review of Public Filings.
Buyer has had an opportunity to review the public filings of the
Company and to the extent that there may be any omission or misstatement in such
filings made by the Company, Buyer may not use the fact of such misstatement or
omission as the basis for any recission of the Option.
4
<PAGE> 6
4. COVENANTS OF SELLERS.
4.1 No Sales, Transfers, Pledges or Encumbrances.
During the Option Term, none of the Sellers shall sell, transfer,
pledge or otherwise encumber any of the Preferred Stock or Common Stock issuable
on conversion of the Preferred Stock other than pursuant to this Agreement and
none of the Sellers shall take any actions to convert the Preferred Stock into
Common stock of the Company without the prior written consent of Buyer. Sellers
agree to take all reasonable actions to preserve their rights as holders of the
Preferred Stock (and underlying Common Stock), provided that such actions are
not otherwise inconsistent with the express terms of this Agreement.
4.2 Voting of Preferred During Option Term.
During the Option Term, Sellers shall be entitled to vote their
shares of Preferred Stock (and any Common Stock underlying the Preferred Stock),
provided that they give Buyer written notice at least five business days prior
to the date that they intend to vote such Preferred Stock (the "Voting Notice
Period"). Such notice must specify the Sellers' intention as to how they intend
to vote their respective Preferred Stock (or underlying Common Stock). If Buyer
delivers an Exercise Notice during the Voting Notice Period, upon receipt of
such Exercise Notice Sellers shall, without further action hereunder become
obligated to vote their shares of Preferred Stock (and any Common Stock received
upon conversion of such Preferred Stock) that they are entitled to vote in a
manner as directed by Buyer and Sellers shall deliver an irrevocable proxy to
Buyer whereby Buyer shall be entitled to vote all of Sellers' Preferred Stock.
4.3 Required Filings.
As promptly as practicable after the date of the Exercise Notice,
Sellers will make, and will cause each of their affiliates to make, all filings,
if any, required by legal requirements to be made by them to consummate the sale
of the Preferred Stock set forth on Schedule A (or underlying Common Stock).
4.4 Legend.
Sellers agree to use their best efforts to immediately cause a
legend to be placed on each certificate evidencing Preferred Stock which legend
reflects the existence of this Agreement (the "Option Legend") and to promptly
provide to Buyer copies of all such Preferred Stock certificates bearing the
Option Legend.
5
<PAGE> 7
5. COVENANTS OF BUYER.
5.1 Required Filings.
As promptly as practicable after the date of Exercise Notice, Buyer
will make all required filings, if any, to be made by him to consummate the
purchase of the Preferred Stock set forth on Schedule A, including all filings
under the HSR Act.
5.2 Covenant of Buyer Regarding Authorized Stock of the Company.
During the period from July 15, 1998 through April 14, 1999, Buyer
agrees to vote the shares of Common Stock currently owned by Buyer as directed
by Sellers in connection with any proposal by the Company to increase in the
authorized shares of the Company's Common Stock or in favor of a reverse stock
split that will enable the Company to honor the conversion of the Preferred
Stock.
6. CONDITIONS TO PURCHASE OF SHARES.
Buyer's obligation to purchase the Preferred Stock or the Common Stock
following an Exercise Notice shall be conditioned upon (i) there being no
proceedings involving a challenge or seeking damages or relief in connection
with this Agreement or the transactions contemplated hereby or that might have
the effect of preventing, delaying, making illegal or otherwise interfering with
any of the transactions contemplated by this Agreement; (ii) receipt of an
opinion of counsel addressed to the Company confirming the validity of an
exemption from securities registration relating to the transfer from Sellers to
Buyer; (iii) Sellers' ability to deliver stock certificates representing the
Preferred Stock free and clear of all liens and encumbrances; (iv) delivery by
Sellers of an Assignment in form and substance reasonably acceptable to Buyer
and his counsel; and (v) receipt of all required consents, if any, including
governmental consents required under the HSR Act.
7. GENERAL PROVISIONS.
7.1 Expenses.
Each party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution and performance of this
Agreement and the transactions contemplated hereby, including all fees and
expenses of agents, representatives, counsel and accountants.
6
<PAGE> 8
7.2 Notices.
All notices, consents, waivers and other communications pursuant to
or in connection with this Agreement shall be in writing and will be deemed to
have been duly given when (i) delivered by hand (with written confirmation of
receipt); (ii) sent by telecopier (with confirmation received), or (iii)
received by the addressee if sent by a nationally recognized overnight delivery
service (receipt requested); in each case to the appropriate address and
telecopier number set forth below, or such other addresses and telecopier
numbers as a party may designate by notice to the other parties.
SELLERS:
Robert Cohen
1500 Hempstead Turnpike
East Meadow, New York 11554
Facsimile: (516) 390-2220
Stefanie Rubin
111 Deer Run
Roslyn Heights, New York 11577-1969
Facsimile: (516) 390-2220
Allyson Cohen
1500 Hempstead Turnpike
East Meadow, New York 11554
Facsimile: (516) 390-2220
Jeffrey Cohen
1500 Hempstead Turnpike
East Meadow, New York 11554
Facsimile: (516) 390-2220
Alan Cohen
1500 Hempstead Turnpike
East Meadow, New York 11554
Facsimile: (516) 390-2220
Meryl Cohen
(individually and as custodian for
Gabrielle Cohen, Jaclyn Cohen,
Erica Cohen and Nicole Cohen)
3 Surrey Lane
Old Westbury, New York 11568
Facsimile: (516) 390-2220
7
<PAGE> 9
Lenore Katz
1350 99th Street
Bay Harbor, Florida 33154
Facsimile: (516) 390-2220
Broadway Partners
Jeffrey Cohen, Partner
1500 Hempstead Turnpike
East Meadow, New York 11554
Facsimile: (516) 390-2220
Copy (which shall not constitute notice) to:
Robert S. Matlin, Esq.
Camhy Karlinsky & Stein LLP
1740 Broadway, 16th Floor
New York, New York 10019
Facsimile: (212) 977-8389
BUYER:
Jack P. Casey
c/o Meridian
10220 River Road, Suite 115
Potomac, Maryland 20854
Facsimile No.: (301) 983-9012
7.3 Further Assurances.
The parties agree to furnish upon request to each other such further
information, to execute and deliver to each other such other documents, and to
do such acts and things, all as the other party may reasonably request for the
purpose of carrying out the intent of this Agreement and the documents and
transactions contemplated by this Agreement.
7.4 Entire Agreement and Modification.
This Agreement constitutes a complete and exclusive statement of the
terms of the contractual relationships of the parties with respect to the
subject matter. This Agreement may not be amended except by written agreement
executed by the party to be charged with the amendment. The parties may not
assign any of their rights under this Agreement without the prior written
consent of the other party or parties, except that this restriction shall not be
deemed to prevent Buyer from selling, assigning, or otherwise transferring any
of the Preferred Stock or Common Stock underlying such Preferred Stock, provided
that Buyer has complied with his investment representations under
8
<PAGE> 10
Section 3.2 of this Agreement. Subject to the preceding sentence, this Agreement
will apply to and be binding in all respects upon, and inure to the benefit of
the successors and permitted assigns of the parties. Nothing expressed or
referred to in this Agreement will be construed to give any person other than
the parties to this Agreement any legal or equitable right, remedy or claim
under or with respect to this Agreement or any provision of this Agreement. This
Agreement and all of its provisions and conditions are for the sole and
exclusive benefit of the parties and their successors and assigns.
7.5 Severability.
If any provision of this Agreement is held invalid or unenforceable
by any court of competent jurisdiction, the other provisions of this Agreement
will remain in full force and effect. Any provision of this Agreement held
invalid and unenforceable only in part or degree will remain and full force and
effect to the extent not held invalid or unenforceable.
7.6 Counterparts.
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
7.7 Termination.
Notwithstanding any other provisions of this Agreement, in the event
that the Company asserts, by not later than 11:59 p.m. (Pacific Time) on July
17, 1998 (the "July 17 Time"), the position that the grant of the Option to
Buyer or Buyer's exercise of the Option would trigger any type of shareholder
rights plan (or so called "poison pill") that the Company might purport to adopt
or to have adopted and either Buyer chooses (in his sole discretion) not to
contest such assertion or is unsuccessful in challenging such assertion, then
upon notice by Buyer to Sellers on or before the July 17 Time, this Agreement
shall terminate and Sellers shall immediately return to Buyer such portion of
the Option Price paid to Sellers as of the date of such notice.
7.8 Headings.
Section and other headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first above written.
BUYER:
/s/ John P Casey
--------------------------------------------
John P. Casey
SELLERS:
/s/ Robert Cohen
--------------------------------------------
Robert Cohen
/s/ Stefanie Rubin
--------------------------------------------
Stefanie Rubin
/s/ Allyson Cohen
--------------------------------------------
Allyson Cohen
/s/ Jeffrey Cohen
--------------------------------------------
Jeffrey Cohen
/s/ Alan Cohen
--------------------------------------------
Alan Cohen
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<PAGE> 12
/s/ Lenore Katz
--------------------------------------------
Lenore Katz
BROADWAY PARTNERS
By /s/ Jeffrey Cohen
---------------------------------------
Jeffrey Cohen, Partner
/s/ Meryl Cohen
--------------------------------------------
Meryl Cohen
/s/ Meryl Cohen
--------------------------------------------
Meryl Cohen as custodian for Gabrielle
Cohen
/s/ Meryl Cohen
--------------------------------------------
Meryl Cohen as custodian for Jaclyn Cohen
/s/ Meryl Cohen
--------------------------------------------
Meryl Cohen as custodian for Erica Cohen
/s/ Meryl Cohen
--------------------------------------------
Meryl Cohen as custodian for Nicole Cohen
11
<PAGE> 13
SCHEDULE A
<TABLE>
<CAPTION>
Number of Shares of
Name of Seller Preferred Stock
- -------------- -----------------------
<S> <C> <C>
Robert Cohen Series A 416.373
Series B 100.738
Stefanie Rubin Series A 5.0
Series B 172.0
Allyson Cohen Series B 100.0
Jeffrey Cohen Series B 100.0
Alan Cohen Series B 100.0
Meryl Cohen Series B 100.0
Gabrielle Cohen Series A 50.0
Jaclyn Cohen Series A 50.0
Erica Cohen Series A 50.0
Nicole Cohen Series A 50.0
Lenore Katz Series A 104.1
Broadway Partners Series B 200.0
---------
TOTAL 1,598.211
</TABLE>
12
