SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
F O R M 10 - Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
------------------------------
For Quarter Ended June 30, 1996 Commission file number 0-17821
The Care Group, Inc.
- - - -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2962027
- - - ----------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Hollow Lane, Lake Success, New York, N.Y. 11042
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 516-869-8383
------------
N/A
- - - -----------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed from last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 5, 1996, the registrant had 8,579,053 shares of common stock,
$.001 par value per share, outstanding.
Page 1 of 16 pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
----
3-7 Financial Information
8-9 Notes to Consolidated Financial Statements
10-13 Management's Discussion and Analysis of Financial Condition and
Results of Operations
14-15 Other Information
Page 2 of 16 pages
<PAGE>
THE CARE GROUP, INC.
AND
SUBSIDIARIES
THREE MONTHS AND SIX MONTHS ENDED
JUNE 30, 1996
PART I
FINANCIAL INFORMATION
Page 3 of 16 pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(In thousands, except per share data) (Unaudited) (Audited)
- - - ------------------------------------- --------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ - $ 561
Marketable securities 37 508
Accounts receivable, net of allowances
of $6,376 at June 30, 1996 and $3,564 at
December 31, 1995 10,856 14,927
Inventories 1,144 1,763
Recoverable income taxes 3,107 108
Prepaid expenses and other current assets 157 685
--------- ---------
Total Current Assets 15,301 18,552
--------- ---------
PROPERTY AND EQUIPMENT - at cost 3,087 3,000
LESS - Accumulated depreciation 1,527 1,253
--------- ---------
Net property and equipment 1,560 1,747
--------- ---------
RENTAL EQUIPMENT - at cost 2,862 2,416
LESS - Accumulated depreciation 802 620
--------- ---------
Net rental equipment 2,060 1,796
--------- ---------
INTANGIBLES - Net 11,390 14,185
--------- ---------
OTHER ASSETS 835 730
--------- ---------
TOTAL ASSETS $ 31,146 $ 37,010
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank $ 6,500 $ -
Current portion of long-term debt 635 1,845
Accounts payable 2,088 1,302
Accrued expenses 690 950
--------- ---------
Total Current Liabilities 9,913 4,097
NOTE PAYABLE TO BANK - 6,800
LONG-TERM DEBT, excluding current portion 2,855 1,400
DEFERRED INCOME TAXES 260 322
--------- ---------
TOTAL LIABILITIES 13,028 12,619
--------- ---------
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK , 333,332 shares at $3 per share - 1,000
--------- ---------
STOCKHOLDERS' EQUITY
Preferred Stock, $.001 par value per share, 1,000
shares authorized; no shares issued and outstanding - -
Common Stock, $.001 par value per share, 20,000 shares authorized;
8,638 shares issued and outstanding at June 30, 1996 and
December 31, 1995 9 9
Additional Paid-In-Capital 19,400 19,886
Retained (Deficit) Earnings (1,150) 4,604
--------- ---------
18,259 24,499
Common Stock held in treasury, at cost - (40 and 247
shares at June 30, 1996 and December 31, 1995,
respectively) (141) (1,108)
--------- ---------
Total Stockholders' Equity 18,118 23,391
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 31,146 $ 37,010
========= =========
</TABLE>
See notes to consolidated financial statements.
Page 4 of 16 pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
For The Six Months Ended
June 30, 1996
(In thousands, except per share data) 1996 1995
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Net Revenues $ 19,188 $ 24,486
Cost of Revenues 9,782 10,390
----------- -----------
Gross Profit 9,406 14,096
----------- -----------
Operating expenses:
Selling, general and administrative expenses 7,688 8,039
Provision for doubtful accounts 6,969 4,877
Write-off of intangible and certain other assets 2,975 -
----------- -----------
Total operating expenses 17,632 12,916
----------- -----------
Operating (loss) income (8,226) 1,180
Interest expense - net (325) (262)
----------- -----------
(Loss) income before (benefit from) provision
for income taxes (8,551) 918
(Benefit from) provision for income taxes (2,797) 449
----------- -----------
Net (loss) income $ (5,754) $ 469
=========== ===========
Net (loss) income per common and
common equivalent shares $ (.68) $ .06
=========== ===========
Weighted average common and
common equivalent shares outstanding 8,463 8,402
=========== ===========
</TABLE>
See notes to the consolidated financial statements.
Page 5 of 16 pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
<TABLE>
<CAPTION>
For The Three Months Ended
June 30,
1996 1995
(In thousands, except per share data) (Unaudited) (Unaudited)
- - - ------------------------------------- ------------ -------------
<S> <C> <C>
Net revenues $ 9,545 $ 11,899
Cost of revenues 5,481 5,079
------------ -------------
Gross profit 4,064 6,820
------------ -------------
Operating expenses:
Provision for doubtful accounts 5,946 2,244
Selling, general and administrative expenses 3,694 3,832
Write-off of intangible and certain other assets 2,975 -
------------ -------------
Total operating expenses 12,615 6,076
------------
Operating (loss) income (8,551) 744
Interest expense - net (167) (134)
(Loss) income before (benefit from) provision
for income taxes (8,718) 610
(Benefit from) provision for income taxes (2,903) 282
------------
Net (loss) income $ (5,815) $ 328
============ =============
Net (loss) income per common and
common equivalent shares $ (.70) $ .04
============ =============
Weighted average common and
common equivalent shares outstanding 8,311 8,414
============ =============
</TABLE>
See notes to the consolidated financial statements.
Page 6 of 16 pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
For The Six Months Ended June 30,
(In thousands) ---------------------------------
1996 1995
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $(5,754) $ 469
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 1,015 677
Provision for doubtful accounts 6,969 4,877
Provision for obsolete inventory and equipment 559 --
Write-off of intangible and certain other assets 2,654 --
Deferred income tax (benefit) expense (62) 178
Unrealized gain on marketable securities (36) (32)
Loss (gain) on sale of marketable securities 38 (29)
Changes in assets and liabilities;
Marketable securities 469 153
Accounts receivable (2,898) (5,118)
Inventories 219 (87)
Recoverable income taxes (2,999) --
Prepaid expenses and other current assets 207 167
Other assets (35) (83)
Accounts payable 786 (653)
Accrued expenses (260) 39
Income taxes payable -- (264)
Net purchases of rental equipment (446) (111)
------------- -------------
Net cash provided by operating activities 426 183
------------- -------------
INVESTING ACTIVITIES:
Purchases of property and equipment (217) (535)
Payments for intangible assets acquired (112) (335)
Organization costs (14) --
Restrictive covenant -- (66)
Investment in certified home health agency (70) (200)
------------- -------------
Net cash used in investing activities (413) (1,136)
------------- -------------
FINANCING ACTIVITIES:
Proceeds from bank loan 150 750
Repayments of bank loan (450) --
Proceeds from long-term debt 1,008 --
Repayment of long-term debt (763) (149)
Proceeds from exercise of stock options -- 553
Purchases of treasury stock (1,119) (847)
Sale of treasury stock 600 676
------------- -------------
Net cash (used in) provided by financing activities (574) 983
------------- -------------
(DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (561) 30
CASH AND CASH EQUIVALENTS, beginning of period 561 577
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ -- $ 607
============= =============
Supplemental disclosure of cash flow information:
Interest Paid $ 315 $ 279
============= =============
Taxes Paid $ 157 $ 642
============= =============
</TABLE>
See notes to consolidated financial statements.
Page 7 of 16 pages
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Rental Equipment
Rental equipment consists of medical equipment rented to patients for use in
their homes and is stated at cost. Depreciation is provided using the
straight-line method over the estimated useful lives of the equipment, which
range from six to seven years.
(b) Reclassifications
Certain amounts in the 1995 consolidated financial statements have been
reclassified to conform to the presentation in the 1996 consolidated financial
statements.
NOTE 3 - BANK LOAN
At June 30, 1996, The Care Group, Inc. (the "Company") was in default of
certain financial covenants specified in the amended credit agreement (the
"Credit Facility") with a bank and received a waiver (through September 30,
1996) from the bank for these covenants for the fiscal quarter ended June 30,
1996. On August 7, 1996, the Company received a waiver of certain specified
financial covenants (through September 30, 1996) from the bank. In addition,
the bank required the Company to reduce its loan to $5.5 million by August 14,
1996 and not to borrow any more funds through September 30, 1996, at which
time the bank will renegotiate the terms of the Company's loan agreement.
Management can make no assurance that the Company and the bank will negotiate
on terms that are favorable or the same as the existing terms or that the loan
will be continued at all. Accordingly, the Company has reclassed the bank debt
to current liabilities.
NOTE 4 - COMMITMENTS
On September 22, 1994, the Company entered into a stock acquisition agreement
to acquire all of the outstanding common stock of a certified home health
agency. The purchase price, as amended in February 1995, is for $700,000 plus
net operating expenses paid by the Company prior to such acquisition. The
Company has made deposit payments of approximately $75,000 and $63,000 in
fiscal 1995 and 1994, respectively, and has paid approximately $70,000 and
$396,000 in net operating expenses of the certified home health agency during
1996 (through June 30, 1996) and fiscal 1995, respectively. These amounts are
included in "Other Assets" at June 30, 1996. The remaining purchase price is
payable one-half at closing, as defined, and one-half within one year from the
closing date, with interest at 8 percent per annum. Pursuant to the terms of
the agreement, as amended, the acquisition is subject to certain
contingencies. If the acquisition is not approved, a portion of the purchase
price paid in advance ($63,000) and amounts paid to fund the operations of the
certified home health agency are refundable.
Page 8 of 16 pages
<PAGE>
NOTE 5 - LITIGATION
On June 5, 1996, the Company signed a final settlement agreement in connection
with the acquisition of Advanced Care Associates, Inc., Advanced Care CPM,
Inc. and Millwo Inc. ("Advanced Care"). The settlement involved the
substitution of the $3,000,000 in notes payable to the previous owners of
Advanced Care with a cash payment to the United States Government of $550,000
at the signing of the agreement and a new note payable to the United States
Government for $2,780,000 payable in eighteen equal quarterly payments
commencing 90 days after the signing of the agreement together with interest
at nine percent. Additionally, each of the former owners were, among other
things, required to transfer their shares of common stock of the Company to
the United States Government along with the put option. The United States
Government exercised the put option requiring the Company to buy 333,332
shares at $3.00 per share. The amount owed to the United States Government by
the Company in connection with the United States Government's exercise of the
put option is included in long-term debt.
The Company is a party to other litigation arising in the normal course of its
operations. It is the opinion of management of the Company that it has
meritorious defenses against all outstanding claims and that the outcome of
such litigation will not have a significant adverse effect on the Company's
financial position or results of operations. Further, management intends to
vigorously defend all such litigation.
NOTE 6 - NON-CASH EXPENSES
In June 1996, the Company recorded a non-cash charge of $8,842,000. This
charge consisted of three components:
o The Company reevaluated its accounts receivable and identified
certain accounts that will be given to outside collection agencies
for follow-up. As a result, the reserve for doubtful accounts was
increased by $4,500,000 and the Company implemented a direct
write-off of $800,000 of bad debts.
o During the second quarter of 1996, the Company moved its home
medical equipment central office from Pennsylvania to Texas. As part
of this move, the Company evaluated certain inventory and equipment
on hand and decided to sell or otherwise dispose of all slow moving
items. The net result was that the Company established a reserve for
obsolete inventory and equipment of $559,000.
o The Company examined its goodwill, intangibles and certain
other assets and wrote-off $2,975,000. This write-off was primarily
related to the goodwill from its acquisition of businesses in 1992
and 1994 in Los Angeles, California and Atlanta, Georgia,
respectively. The Company believes the patient base related to these
acquisitions are no longer contributing to these offices and since
neither office is currently profitable, the related goodwill has been
written off.
NOTE 7 - SUBSEQUENT EVENT
On August 1, 1996, the Board of Directors approved a private placement of a
maximum of 100 units at $50,000 per unit (the "Private Placement") and
approved the appointment of two new Directors. On August 14, 1996, the Company
closed on 42 units of this private placement for a gross amount of $2,100,000
less a placement fee of approximately $130,000. Each unit consists of 40,000
shares of Common Stock and warrants to purchase another 40,000 shares of
Common Stock at a conversion price of $2.50 per share. The remaining 58 units
will be offered upon receiving shareholder approval at the annual meeting of
shareholders, which meeting should take place on or about October 1, 1996.
Page 9 of 16 pages
<PAGE>
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This Quarterly Report contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below in "Factors Affecting the Company's
Business".
The Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three and six months ended June 30, 1996, and as of June
30, 1996 should be read in conjunction with the Management's Discussion and
Analysis of Financial Condition and Results of Operations for the year ended
December 31, 1995, included in the Company's Annual Report on Form 10-K.
RESULTS OF OPERATIONS
---------------------
FOR SIX MONTHS ENDED JUNE 30, 1996
Net revenues from operations for the six months ended June 30, 1996 decreased
to $19,188,000 as compared to $24,486,000 for the comparable period last year.
The decrease of $5,298,000 or 22 percent is attributable to the increased
effects of Managed Care in our Dallas and New York City locations and the
decrease in business in our New York City location.
The business in our New York and Dallas offices was reduced this period as
compared to the same period a year ago by approximately 35 percent. This
decrease was attributable to several factors. One, our referral sources in
both of these markets are primarily physicians and they reported less patient
volume for the same period. Secondly, with the growth of Managed Care, some of
our physicians are not able to refer patients because of the restrictions on
their patient's health plans. Managed Care has not only had the effect of
reducing our rates on a per therapy basis, but, more importantly, it has
changed referral patterns and has made it more difficult to obtain qualified
referrals from our physician base. The Company is aggressively pursuing
contracts with health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), hospital discharge planners and other case management
entities. If and when entered into, these contracts will enable the Company to
receive referrals directly from these entities as well as receive referrals
from its physician base.
The cost of revenues for the six months ended June 30, 1996, after removing
the charge of $559,000 for the inventory and equipment reserve in June of
1996, as a percentage of net revenues was 48 percent as compared to 42 percent
for the comparable period last year. The increase in costs of revenues as a
percentage of net revenues is primarily due to more of the Company's revenue
being generated from Managed Care or negotiated rates, which are lower than
the rates during the same period last year.
The Company's selling, general and administrative (SG&A) expenses were
$7,688,000 or 40 percent of net revenues for the six months ended June 30,
1996 as compared to $8,039,000 or 33 percent of net revenues for the same
period last year. Even though SG&A decreased $351,000 for the six months due
to cost reduction efforts made by the Company, it increased as a percent of
net revenues 7 percent due to the decrease in net revenues as mentioned above.
The charge of $8,283,000 in June of 1996 is comprised of the write-down of
goodwill and certain other assets of $2,975,000 and an increase of accounts
receivable reserves and write-offs of accounts receivable of $5,308,000.
Please see Note 6 (Non-Cash Expenses) for a full explanation of this second
quarter charge.
The net loss for the six months ended June 30, 1996 was $5,754,000 ($.68 per
share) as compared with a profit of $469,000 ($.06 per share) for the same
period in 1995. Excluding the above-mentioned charge of $8,842,000,pretax
income would have been $291,000 for the six months ended June 30, 1996
compared to $918,000 for the same period last year. This decrease is primarily
attributable to the effects of Managed Care on all operations.
Page 10 of 16 pages
<PAGE>
Results of Operations
---------------------
For Three Months Ended June 30, 1996
------------------------------------
Net revenues for the three months ended June 30, 1996 decreased to $9,545,000
as compared to $11,899,000 for the comparable period last year. The decrease
of $2,354,000 or 20 percent is primarily attributable to the increasing effect
of Managed Care in our Dallas and New York City locations and the decrease in
business in our New York City location.
The business in our New York and Dallas offices was reduced this quarter as
compared to the same period a year ago by approximately 35 percent. This
decrease was attributable to several factors. One, our referral sources in
both of these markets are primarily physicians and they reported less patient
volume for the same period. Secondly, with the growth of Managed Care, some of
our physicians are not able to refer patients because of the restrictions on
their patient's health plans. Managed Care has not only had the effect of
reducing our rates on a per therapy basis, but, more importantly, it has
changed referral patterns and has made it more difficult to obtain qualified
referrals from our physician base. The Company is aggressively pursuing
contracts with health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), hospital discharge planners and other case management
entities. If and when entered into, these contracts will enable the Company to
receive referrals directly from these entities as well as receive referrals
from its physician base.
Cost of revenues for the three months ended June 30, 1996, after removing the
charge of $559,000 for the inventory and equipment reserve, as a percentage of
net revenues was 52 percent as compared to 43 percent for the same period in
1995. The increase in cost of revenues as a percentage of net revenues is
primarily due to more of the Company's revenue being generated from managed
care or negotiated rates, which are lower than the rates, during the same
period last year.
The Company's selling, general and administrative (SG&A) expenses were
$3,694,000 or 39 percent of net revenues for the quarter ended June 30, 1996
as compared to $3,832,000 or 32 percent of net revenues for the same period
last year. Even though SG&A decreased $138,000 for the quarter due to cost
reduction efforts made by the Company, it increased as a percentage of net
revenues 7 percent due to the decrease in net revenue as mentioned above. The
charge of $8,283,000 in June of 1996, is comprised of the write-down of
goodwill and certain other assets of $2,975,000 and an increase of accounts
receivable reserves and write-offs of accounts receivable of $5,308,000.
Please see Note 6 (Non-Cash Expenses) for a full explanation of this second
quarter charge.
The net loss for the three months ended June 30, 1996 was $5,815,000 ($.70 per
share) as compared with a profit of $328,000 ($.04 per share) for the same
period in 1995. Excluding the above-mentioned charge of $8,842,000, pretax
income would have been $124,000 for the three months ended June 30, 1996
compared to $610,000 for the same period last year. This decrease is primarily
attributable to the effects of Managed Care on all operations.
Page 11 of 16 pages
<PAGE>
Financial Condition and Liquidity
---------------------------------
Current assets have decreased to $15,301,000 at June 30, 1996 from $18,552,000
at December 31, 1995. The decrease of $3,251,000 in current assets is due
primarily to the Company's decrease in accounts receivable. The decrease in
accounts receivable is primarily due to a charge in the second quarter of
$5,308,000 relating to an increase in the allowance for doubtful accounts and
direct write-off of certain accounts receivable. The above-mentioned charge
was the result of the previously announced restructuring to decentralize the
Company's billing and collection functions. As a result of the
decentralization, accounts have been identified that should be given to
collection agencies for pursuit of payment.
At June 30, 1996, working capital was $5,388,000 as compared to $14,455,000 at
December 31, 1995. The decrease of $9,067,000 is due primarily to the reclass
of note payable to bank of $6,500,000 to a current liability. The Company had
a term revolving credit agreement with its bank which provided for borrowings
up to $8,000,000, expiring November 1998. The Company was able to borrow up to
70 percent of eligible receivables, as defined pursuant to the term of the
revolving credit agreement. Interest is charged at prime (8.25 percent at June
30, 1996) plus one quarter percent. The outstanding balance under this
arrangement at June 30, 1996 was $6,500,000. At June 30, 1996, The Care Group,
Inc. (the "Company") was in default of certain financial covenants specified
in the amended credit agreement (the "Credit Facility") with a bank and
received a waiver (through September 30, 1996) from the bank for these
covenants for the fiscal quarter ended June 30, 1996. On August 7, 1996, the
Company received a waiver of certain specified financial covenants (through
September 30, 1996) from the bank. In addition, the bank required the Company
to reduce its loan to $5.5 million by August 14, 1996 and not to borrow any
more funds through September 30, 1996, at which time the bank will renegotiate
the terms of the Company's loan agreement. Management can make no assurance
that the Company and the bank will negotiate on terms that are favorable or
the same as the existing terms or that the loan will be continued at all.
Accordingly, the Company has reclassed the bank debt to current liabilities.
The average days sales in outstanding receivables decreased from 121 days at
June 30, 1995 to 103 days at June 30, 1996 based upon net sales and net
accounts receivable during the respective quarters. The reduction in days
sales in accounts receivable was due to the write-down in accounts receivable
explained above. Delays resulting from increased third-party payor scrutiny of
invoices, refusal to pay or an increased proportion of Medicare and Medicaid
patients could, in the future, have a material adverse effect on the Company's
liquidity and general financial condition, as well as the fact that the
Company is restricted from using its line of credit to fund growth in accounts
receivable.
During June 1996, the Company raised $600,000 for 600,000 shares of its common
stock in a Private Placement. On June 19, 1996, the Company signed a final
settlement agreement with the Federal Government (see Note 5 - Litigation)
whereby it paid the Government $550,000 on June 5, 1996 and it agreed to make
eighteen quarterly payments that total $2,780,000 plus interest at 9 percent.
Management believes, with the additional $5,000,000 Private Placement
described in Note 7 of the financial statements plus the cash generated from
operations, that there is sufficient capital to satisfy the capital
requirements associated with the Company's future growth plans and to finance
working capital requirements for the foreseeable future, as well as repay the
bank $1,000,000 by August 14, 1996. There can be no assurance that the
$2,900,000 balance of the Private Placement will be successfully completed.
Without these capital infusions, the Company will be in default of the Credit
Facility covenants and there can be no assurance that the Company will be able
to meet its cash requirements. There is also no assurance that the Company
will be able to renegotiate the existing $5,500,000 loan on terms satisfactory
to the bank and the Company. The Company will not have enough capital to
satisfy the bank if it was to require full payment of the $5,500,000.
Page 12 of 16 pages
<PAGE>
FACTORS AFFECTING THE COMPANY'S BUSINESS
The Company's future business, financial condition and results of operations
are dependent on the Company's ability to successfully provide comprehensive
home health care and infusion services to its customers and to successfully
collect for such services. Inherent in this process are a number of factors
that the Company must carefully manage in order to be successful. Some of
these factors are: remaining in compliance will all applicable government
regulations so the Company does not lose any of its licenses and certificates;
complying with the terms of all loan agreements, including a $2,780,000 note
to the U.S. Government in settlement of a lawsuit and the Credit Facility with
a bank, so that no lender will have the right to declare the amounts
outstanding under such agreements immediately due and payable; obtaining
additional external financing to meet its working capital requirements if
necessary; obtaining permission from the Department of Health for the Private
Placement so that the Company does not lose its New York State license or
incur a fine; competing with other home health care and infusion companies,
many of which are larger in size and possess greater financial resources than
the Company; competing for Managed Care contracts; obtaining reimbursement
from third-party payors; obtaining approval of an agreement to acquire all of
the stock of a certified home health care agency operating in Nassau County,
New York by the New York State Public Health Council; and maintaining adequate
liability insurance. The failure to manage such factors successfully could
have a material adverse effect on the Company's business, financial condition
and results of operations.
Page 13 of 16 pages
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
See Note 5 to the consolidated financial statements contained in this Report
on Form 10-Q and Note 17 and Item 3 - "Legal Proceedings" to the Company's
Report on Form 10-K for the year ended December 31, 1995 with respect to the
legal proceeding involving the Company's subsidiary Advanced Care Associates,
Inc.
Item 2. Change in Securities
N/A
Item 3. Defaults Upon Senior Securities
N/A
Item 4. Submission of Matters to a Vote of Security Holders
N/A
Item 5. Other Information
With respect to the Company's bank loan, see Note 3 to the
financial statements.
Item 6. Exhibits and Reports on From 8-K
a. Exhibits
--------
10.1 Employment agreement dated as of January 1, 1996 between the
Company and Ann Mittasch.
10.2 Employment agreement dated as of January 1, 1996 between the
Company and Randolph Mittasch.
10.3 Employment agreement dated as of January 1, 1996 between the
Company and Pat Celli.
10.4 Amendment to Revolving Credit Agreement dated as of
June 5, 1996 between the Company and the Chase Manhattan
Bank, National Association.
10.5 Waiver of specified defaults under the Revolving Credit
Facility dated as of August 7, 1996 and amended August 13,
1996 between the Company and the Chase Manhattan Bank,
National Association.
10.6 Subscription Agreement dated as of May 28, 1996 between the
Company and Caribou Bridge Fund LLC.
10.7 Subscription Agreement dated as of May 28, 1996 between the
Company and Carlo Trentini.
10.8 Subscription Agreement dated as of June 14, 1996 between the
Company and Barbara Weiss Bianco.
Page 14 of 16 pages
<PAGE>
Exhibits (continued)
--------------------
10.9 Subscription Agreement dated as of June 19, 1996 between the
Company and Asset Value Fund Limited Partnership.
10.10 Settlement Agreement dated as of June 5, 1996 between the
Company and Advanced Care Associates, Inc., Robert Wolk
and Harriet Wolk, Robert Miller and Anne Miller, and the
United States Department of Health and Human Services.
27 Financial Data Schedules.
b. Reports on Form 8-K
----------------------
None
Page 15 of 16 pages
<PAGE>
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 thereunto duly authorized.
The Care Group, Inc.
------------------------------
(Registrant)
Dated: August 14, 1996
/s/ Ann T. Mittasch
------------------------------
Ann T. Mittasch
President and Chairman
Dated: August 14, 1996
/s/ Pat H. Celli
------------------------------
Pat H. Celli
Chief Financial Officer
(Principal Financial Officer)
Page 16 of 16 pages
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of January, 1996, by and between
THE CARE GROUP, INC., a Delaware corporation (the "Corporation") having an
office at One Hollow Lane, Lake Success, New York 11042, and ANN T. MITTASCH,
an individual residing at 6 Pheasant Run, Old Westbury, New York (the
"Executive").
WITNESSETH
----------
WHEREAS, the Corporation desires to continue to employ the Executive
to perform executive and other services for the Corporation, and the Executive
desires to accept such employment, all on the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual obligations set forth
herein, the Corporation and the Executive agree as follows:
1. TERM: The term of this Agreement shall be five (5) years,
commencing on January 1, 1996 and ending December 31, 2000, subject to earlier
termination as provided herein.
2. EMPLOYMENT: The Corporation hereby employs the Executive for the
term of this Agreement to serve as Chairman and President of the Corporation,
and the Executive hereby accepts such employment, on the terms and conditions
set forth in this Agreement.
3. SERVICES:
(a) The Executive shall continue to perform such duties of an
executive nature for the Corporation and its subsidiaries as she shall have
performed
1
<PAGE>
heretofore, or as may be assigned to her from time to time by the Board of
Directors of the Corporation but consistent with the duties and
responsibilities of persons holding the same such positions at other publicly
traded companies. The Executive shall (i) be in charge of the business of the
Corporation; (ii) ensure that the resolutions and directions of the Board of
Directors are carried into effect, unless such responsibility is specifically
delegated by the Board of Directors to some other person; and (iii) in
general, discharge all duties incident to the office of President and
Chairman, again as shall be consistent with the duties and responsibilities of
persons holding the same such positions at other publicly traded companies.
The Executive shall serve the Corporation and its subsidiaries faithfully and
to the best of her ability and shall devote her full business time and efforts
to the business and affairs of the Corporation and its subsidiaries, subject
to absences for vacation and illness as provided in this Agreement. The
Executive shall be subject at all times to the direction and control of the
Board of Directors. The Executive shall give the Board periodic reports and
keep it informed on a current basis concerning the business affairs of the
Corporation and its subsidiaries.
(b) During the term of this Agreement, the Executive agrees to
serve, if elected, as a member of the Board of Directors of the Corporation or
any of its subsidiaries, as a member of any committee of the Board of
Directors of the Corporation or any of its subsidiaries, and/or as an officer
of any subsidiary of the Corporation. The Executive shall not receive any
additional compensation for such positions.
2
<PAGE>
4. UNAUTHORIZED DISCLOSURE; NON-COMPETITION:
(a) During the term of this Agreement and continuing forever
thereafter, the Executive shall not, directly or indirectly without the prior
written consent of the Corporation's Board of Directors (i) disclose through
any means whatsoever any Confidential Information (as hereinafter defined) to
any person, other than an authorized officer, director, employee, consultant,
adviser, agent, or affiliate of the Corporation or any of its subsidiaries,
nor (ii) use any Confidential Information for any purpose except insofar as
such use is consistent with both the scope of the Executive's duties to the
Corporation and/or its subsidiaries and the terms and conditions of this
Agreement. "Confidential Information" shall include all information, whether
or not reduced to written or other tangible form, relating to the business of
the Corporation or its subsidiaries that is not generally known in the
industry. "Confidential Information" shall include, but not be limited to,
trade secrets, marketing information, patient lists, employee lists, customer
lists, information concerning business relationships between the Corporation
(including its subsidiaries) and its patients and vendors, any medical,
personal or other information relating to the Corporation's (or its
subsidiaries') patients, and the Corporation's (or its subsidiaries') policies
and procedures for caring for its patients. "Confidential Information" shall
not include information (x) which is in the public domain other than by
disclosure by Executive in violation of this Agreement, or (y) which is known
to Executive as a result of her own efforts prior to her affiliation with the
Corporation as an officer, director, employee, stockholder or independent
contractor. The Executive may
3
<PAGE>
respond to proper subpoenas issued by governmental agencies without the
Corporation's prior written consent, but with prior notice to the Corporation.
(b) During the term of this Agreement the Executive will not
directly or indirectly, alone or together with or through one or more persons,
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
independent contractor, agent, director or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of
(collectively "Compete In"), any business (a "Competitive Operation") which
competes with or is in the same business as any business or operation
conducted by the Corporation or by any group, division or subsidiary of the
Corporation including home care and pharmaceutical/infusion services. During
the twenty-four month period beginning upon termination of this Agreement, the
Executive shall not Compete In any Competitive Operation (determined as of the
time of termination of this Agreement) within a one-hundred mile radius of
each office of the Corporation and/or any of its groups, divisions or
subsidiaries. Ownership of ten percent (10%) or less of the voting stock of
any corporation shall not by itself constitute a violation hereof.
5. COMPENSATION:
(a) As compensation for all of the services to be performed by
the Executive in any capacity hereunder, including services as an officer,
director or member of any committee of the Corporation and/or its subsidiaries
and any additional duties assigned to her hereunder by the Board of Directors,
the Corporation agrees to
4
<PAGE>
pay to the Executive:
(i) As base salary for each of the five (5) years of this Agreement, the
annual sum of $250,000.00 or such greater amount as shall be approved by
the Corporation's Board of Directors from time to time, payable in
accordance with the Corporation's normal and customary payroll practices;
(ii) A bonus, payable within 120 days following the end of each of the
Corporation's fiscal years, in an amount equal to five percent (5%) of
the Corporation's Net After Tax Income, computed on and payable for all
such net income in excess of $800,000.00 per fiscal year, computed at the
end of each of the Corporation's fiscal years occurring during the term
of this Agreement and the fiscal year ending immediately following
December 31, 2000 (prorated for any partial year of this Agreement) which
sum the Executive, at her option, shall be permitted to receive from the
Corporation in cash or an equivalent amount of the Corporation's common
stock or any combination of both;
(iii) Such incentive compensation as shall be calculated and paid in
accordance with the terms set forth on Exhibit "A" attached hereto.
(b) The Executive shall be entitled to participate in or receive
benefits under all of the Corporation's employee benefit plans and
arrangements, including, without limitation, any pension plan, profit sharing
plan, savings plan, stock option plan, life insurance (subject to the terms
and conditions set forth below), health-and-accident plan or arrangement made
available by the Corporation in the future to its executives and key
management employees, subject to and on a basis consistent with the terms,
conditions and overall administration of such plan and arrangements. Nothing
herein shall require the Corporation at any time to create or continue any
such plan, program or arrangement provided, however, that in the event the
Corporation shall diminish, modify, amend, alter or eliminate any such plan
or plans which causes a diminution of benefits to Executive, then, and such
event, the Corporation shall pay
5
<PAGE>
to the Executive, upon the occurrence of such event, a sum of money equal to
the present value of the difference between the value of said benefit on the
date hereof and the value of said benefit after occurrence of such event,
computed as if same had continue through the balance of the five (5) year term
of this Agreement. Nothing paid to the Executive under any plan or arrangement
shall be deemed to be in lieu of compensation to the Executive hereunder.
(c) The Corporation shall purchase, pay for and maintain a split
dollar life insurance policy insuring the Executive in an amount and under
terms not less favorable to Executive than in effect on the date of execution
by Executive of this Agreement. The Executive shall have no incidence of
ownership in the policy. The policy ownership and beneficiary is split as
follows: The Corporation shall be the owner and beneficiary of the sum of its
contributions either upon death or surrender. The Mittasch Insurance Trust
shall be the owner and beneficiary of the balance of the proceeds.
(d) Commencing January 1, 1996, the Executive shall be entitled
to the number of paid vacation days in each calendar year determined by the
Board of Directors from time to time for the Corporation's senior executive
officers, but not less than four (4) weeks in any calendar year (prorated in
any calendar year during which the Executive is employed hereunder for less
than the entire such year in accordance with the number of days in such
calendar year during which she is so employed). The Executive shall also be
entitled to all paid holidays given by the Corporation to its senior executive
officers, and as many sick days as shall be necessary.
6
<PAGE>
(e) The Corporation shall award and the Executive shall receive
options to purchase shares of the Corporation's common stock at the exercise
purchase price of Two ($2.00) Dollars per share of stock within 120 days
following the end of each of the Corporation's fiscal years based upon the
Corporation's income and in amounts set forth below:
Number of Share Options Audited Net Income Per Share
----------------------- ----------------------------
none $ 0.00 to $0.14
50,000 $ 0.15
50,000 plus an additional $ 0.16 and over
5,000 share options per
penny of income over $ 0.15
Executive shall have the right to exercise said options within ten (10) years
after the date of grant of each of same, regardless of whether Executive shall
still then be employed.
6. EXPENSES:
(a) The Corporation shall reimburse the Executive for any
out-of-pocket expenses reasonably incurred by the Executive in the
performance of her duties to the Corporation upon receipt of appropriate
vouchers therefore, in accordance with the Corporations current practices, as
such practices may be changed from time to time by the Board of Directors.
(b) The Corporation recognizes the Executive's business need for
an automobile for business purposes. The Corporation, therefore, shall lease
an automobile for the Executive's use and, through December 31, 2000,
regardless of
7
<PAGE>
whether Executive is then or continued throughout the entire period to be
employed by the Corporation, shall bear and pay for the cost of all related
lease payments, maintenance, repairs, gas, insurance and other costs
attributable to the use, operation and care of the said automobile. The
automobile leased by the Corporation for the Executive may also be used by
other officers of the Corporation for business purposes. The Executive may
select the automobile to be leased by the Corporation for her business use,
provided that the lease payments for such automobile shall not exceed eighteen
thousand dollars ($18,000.00) per year. On January 1, 2001, or on such earlier
date as Executive's employment with the Corporation shall have terminated for
any reason whatsoever, the Corporation shall take whatever action shall be
necessary and required, and assume and pay all costs, including but not
limited to, any lease buy-out/termination payments, so that the Corporation
effects an outright transfer of title and ownership to Executive of the
automobile then utilized by Executive.
7. TERMINATION:
(a) The Corporation shall have the right, at its sole option, to
terminate this Agreement "for cause" at any time, without further payment to
the Executive other than compensation earned under subparagraph 5(a)(i) and
(ii) prior to the date of termination, by notice to the Executive (or her
personal representative, as the case may be) specifying the reason for such
termination, and the Executive shall not be entitled to any incentive
compensation for the periods ending on the date of such termination. For
purposes of this Agreement, "cause" shall be limited to and shall mean solely
(i) failure to substantially and materially perform her duties hereunder,
8
<PAGE>
other than any such failure resulting from the Executive's incapacity due to
physical or mental illness; (ii) the Executive's gross misconduct materially
injurious to the Corporation; (iii) the material breach by the Executive of
any material terms of this Agreement; or (iv) the Executive's conviction of a
felony. Notwithstanding the foregoing, Corporation agrees that prior to
declaration by the Corporation that Executive has engaged in or failed to
engage in any conduct which would give rise to a right on the part of the
Corporation to terminate this Agreement "for cause" hereunder, the Corporation
shall first give written notice to Executive particularizing each act or
failure to act upon which it will rely and Executive shall then have ten (10)
calendar days in which to cure same provided that if Executive so cures, the
Corporation shall thereafter take no further action on account thereof.
Moreover, any action taken by the Executive in bona fide good faith and in
furtherance of her duties under this Agreement shall not be deemed "cause".
(b) The Corporation shall have the right to terminate
Executive's employment following the end of the twelfth complete month of
disability rendering Executive unable to perform all or substantially all of
her duties and responsibilities hereunder provided that during said twelve
(12) months of disability, the Corporation shall pay to Executive and
Executive shall receive all salary, incentive compensation, bonus, stock
options and benefits to which she otherwise would have been entitled had she
not been disabled. The Corporation shall have the right to an independent
medical examination of Executive following notice to it by Executive that she
is so disabled in order to confirm the said disability. Any dispute thereof
shall be subject
9
<PAGE>
to arbitration as provided for in this Agreement.
(c) This Agreement shall terminate automatically upon the death
of the Executive. In such event, the Corporation shall pay the estate of the
Executive, in addition to any amounts to which the Executive's estate would
otherwise be entitled under the Corporation's retirement plans and group life
insurance policy, within 30 days after the date of termination, all
compensation earned under paragraph 5 through the date of termination,
provided that the incentive compensation shall be payable within 120 days
after termination as set forth on Exhibit A. The estate of the Executive shall
arrange for the immediate return of the automobile leased for the Executive by
the Corporation.
(d) The Executive shall have the right, at her sole option, to
terminate this Agreement, upon 30 days' prior notice, if the Corporation
materially breached any material provision of this Agreement. Upon such
termination, the Executive shall be entitled to receive all compensation
earned under paragraph 5 through the date of termination plus, in addition
thereto and as severance, all unpaid salary, compensation, incentive
compensation and benefits from date of termination by Executive through
December 31, 2000, without any obligation on the part of Executive to mitigate
her damages nor without any right of offset against said sum by the
Corporation. In addition, the Corporation shall transfer to Executive the
title and ownership of the automobile leased by it for Executive's use and
shall pay to leasor all sums of money required to pay off the said lease so
that title and ownership of same is transferred to Executive free and clear
and without any liens or encumbrances. Following such
10
<PAGE>
transfer, Executive shall assume responsibility for all costs of operation
attributable to said automobile.
8. INDEMNIFICATION: The Corporation, to the fullest extent
permissible by applicable corporate law shall indemnify, hold harmless and
defend Executive against any and all claims, causes of action and lawsuits of
any and all types and nature arising out or relating to Executive's
performance of her duties and responsibilities for the Corporation under this
Agreement or otherwise, wheresoever brought or commenced, and in whatever
forum brought or commenced. The Corporation's Board of Directors shall take
whatever action shall be necessary or required, whether by Resolution or
otherwise, to effect the intent of this provision.
9. RETURN BY EXECUTIVE OF CORPORATION PROPERTY:
In the event of the Executive's termination of this Agreement for any
reason, the Executive shall, on or prior to such termination, return to the
Corporation all papers, documents, computer disks, employee lists and all
other property belonging to the Corporation and/or any of its subsidiaries or
relating to the business of the Corporation and/or any of its subsidiaries
that shall then be in Executive's possession or under Executive's control.
10. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT:
(a) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this
11
<PAGE>
Agreement in substance in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. Failure of the Corporation to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement by
the Corporation. As used in this Agreement "Corporation" shall mean the
Corporation and any successor to its business and/or assets as aforesaid which
executes and delivers the agreement provided for in this paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement is personal to the Executive and cannot be
assigned nor may the duties of the Executive be delegated, except as expressly
permitted by the Board of Directors.
(c) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or permitted legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
11. NOTICE:
For purposes of this Agreement, notices and all other
communications required or permitted under this Agreement shall be in writing
and shall be deemed given when delivered personally or twenty-four hours after
sending by FedEx or other overnight courier if sent to the Corporation at its
principal office or to the Executive at her address set forth on the first
page of this Agreement, provided that all notices to the Corporation shall be
directed to the attention of the Chief Executive Officer of the Corporation
with a copy to the Secretary of the Corporation, or to such other
12
<PAGE>
address as either party may have furnished to the other by like notice.
12. EQUITABLE REMEDIES: Each party agrees that violation of the terms
of this Agreement would cause irreparable damage to the other party for which
the remedies at law would be inadequate, and each party shall be entitled,
either in any court of law or equity, to preliminary, permanent and other
injunctive and equitable relief against any breach of the terms of this
Agreement, and such punitive and compensatory damages as shall be awarded. The
foregoing shall not be construed to limit any relief at law, including, but
not limited to damages, to which either party may be entitled by reason of any
breach of the terms of this Agreement.
13. SAVINGS CLAUSE; VALIDITY:
(a) If any of the restrictions set forth in Section 4 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby adversely be affected. It is intended that such
restrictions shall be severable and shall apply separately and distinctly to
every jurisdiction where applicable with the same force and effect as though
said covenants were separately expressed with respect to each of such
jurisdictions. The parties hereto declare that if any of the time, area or
other restrictions or limitations contained in Section 4 is deemed to be
unreasonable by a court of competent jurisdiction, then the parties agree and
submit to the reduction of said time and/or area limitations and modification
of such other restrictions to such period or area or other restrictions as
said court shall deem reasonable in light on and in furtherance of the intent
of this Agreement.
13
<PAGE>
(b) Notwithstanding any other provisions of this Agreement, the
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
14. ARBITRATION: All disputes, differences and controversies
(collectively in this paragraph referred to as "Disputes") arising out of or
in any way related to this Agreement may, at the written request of the
Corporation (or any of its subsidiaries) or Executive, be submitted to and
heard and decided by the American Arbitration Association ("AAA"), in Nassau
County, New York to be heard and decided in accordance with the terms and
conditions of this Agreement and the then rules of the AAA ("AAA Rules") by a
panel of three (3) arbitrators (unless AAA Rules, as the case may be, shall
require a different number of arbitrators) chosen in accordance with the
applicable AAA Rules. The decision of the arbitrators shall be final and
binding upon the parties, and an order may be entered upon the award of the
arbitrators in any court of competent jurisdiction.
15. MISCELLANEOUS:
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by such officer as may be specifically
designated by the Board of Directors of the Corporation.
(b) No waiver by any party hereto at any time of any breach by
any other party hereto of, or compliance with any condition or provision of
this Agreement
14
<PAGE>
to be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time.
(c) This Agreement supersedes all prior agreements between the
parties, written or oral, and cannot be amended or modified except by a
writing signed by both parties.
(d) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of New York.
(e) The covenants set forth in paragraphs 4, 7, 8, 9 and 10 of
this Agreement shall survive the termination or expiration of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
THE CARE GROUP, INC.
By: /s/ Gilda G. Schechter
---------------------------------
Gilda G. Schechter,
Executive Vice-President
EXECUTIVE
/s/ Ann T. Mittasch
------------------------------------
Ann T. Mittasch
15
<PAGE>
EXHIBIT A
INCENTIVE COMPENSATION
1. INCENTIVE COMPENSATION: The Corporation shall pay the Executive
incentive compensation as provided below.
(a) FULL YEARS: The Corporation shall pay to the Executive
within 120 days after the end of each "Full Period" (as defined below) an
incentive payment equal to five percent (5%) of the "Pre-Tax Net Income" of
the Corporation for the Period (as defined below).
(b) PARTIAL YEAR: The Corporation shall pay to the Executive
within 120 days after the end of the "Final Period" (as defined below) an
incentive payment equal to five percent (5%) of the "Pre-Tax Net Income" of
the Corporation for the Period (as defined below) calculated on a consolidated
basis and including the Corporation's subsidiaries) for the Period.
2. FINANCIAL REPORTING; PAYMENT OF INCENTIVE COMPENSATION: Promptly
after the end of each Period the Corporation shall determine the Pre-Tax Net
Income of the Corporation based on the Corporations unaudited financial
statements (or, if audited financial statements are prepared in the ordinary
course of business, based on such statements). A copy of such statements shall
be delivered to the Executive as soon as they are available, together with a
statement showing the computation of the incentive payment due for such
Period, accompanied by payment of such amount. Each statement shall be final,
conclusive and binding on the executive unless the Executive gives notice to
the Corporation within 15 days after receipt of such statements, stating in
reasonable detail (i) the executive's specific objections to the computation
of Pre-Tax Net Income or the incentive payment; (ii) the detailed adjustments
the Executive believes are required to satisfy such objections; and (iii) the
amount of Pre-Tax Net Income or incentive payment the executive believes to be
correct, taking into account such adjustments. If the parties cannot agree
upon the amount of the adjustment, if any, of the disputed item, it shall be
conclusively determined by Geschwind & Davidson or such other national
accounting firm as is regularly retained by the Corporation.
3. DEFINITIONS:
(a) A "Full Period" shall mean each period of twelve (12) months
of employment under the Employment Agreement beginning January 1 and ending on
the next December 31. The "Final Period" shall mean the period beginning on
the last January 1 during the executive's employment under the Employment
Agreement and ending on the day employment ceases. Each Full Period and the
Final Period are sometimes referred to as a Period.
(b) "Pre-Tax Net Income" shall mean the net income of the
Corporation (calculated on a consolidated basis and including the
Corporation's subsidiaries), before deduction of federal, state and city taxes
based on net income, determined by the Corporation's accountants in accordance
with generally accepted accounting principles, provided that pre-tax net
losses in any year, if any, shall be carried forward (but not backward) to
future years as a setoff against Pre-Tax Net Income of such future years.
16
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made as of the 1st day of January, 1 996, by and between
THE CARE GROUP, INC., a Delaware corporation (the "Corporation") having an
office at One Hollow Lane, Lake Success, New York 11042, and RANDOLPH J.
MlTTASCH, an individual residing at 6 Pheasant Run, Old Westbury, New York
(the "Executive").
WITNESSETH
----------
WHEREAS, the Corporation desires to continue to employ the Executive
to perform executive and other services for the Corporation, and the Executive
desires to accept such employment, all on the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual obligations set forth
herein, the Corporation and the Executive agree as follows:
1. TERM: The term of this Agreement shall be five (5) years,
commencing on January 1, 1996 and ending December 31, 2000, subject to earlier
termination as provided herein.
2. EMPLOYMENT: The Corporation hereby employs the Executive for the
term of this Agreement to serve as Secretary and Treasurer of the Corporation,
and the Executive hereby accepts such employment, on the terms and conditions
set forth in this Agreement.
3. SERVICES:
(a) The Executive shall continue to perform such duties of an
executive nature for the Corporation and its subsidiaries as he shall have
performed heretofore, or as may be assigned to him from time to time by the
President and Board
1
<PAGE>
of Directors of the Corporation. The Executive shall serve the Corporation and
its subsidiaries faithfully and to the best of his ability and shall devote
his full business time and efforts to the business and affairs of the
Corporation and its subsidiaries, subject to absences for vacation and illness
as provided in this Agreement. The Executive shall be subject at all times to
the direction and control of the President and Board of Directors.
(b) During the term of this Agreement, the Executive agrees to
serve, if elected, as a member of the Board of Directors of the Corporation or
any of its subsidiaries, as a member of any committee of the Board of
Directors of the Corporation or any of its subsidiaries, and/or as an officer
of any subsidiary of the Corporation. The Executive shall not receive any
additional compensation for such positions.
4. UNAUTHORIZED DISCLOSURE; NON-COMPETITION:
(a) During the term of this Agreement and continuing forever
thereafter, the Executive shall not, directly or indirectly without the prior
written consent of the Corporation's Board of Directors (i) disclose through
any means whatsoever any Confidential Information (as hereinafter defined) to
any person, other than an authorized officer, director, employee, consultant,
adviser, agent, or affiliate of the Corporation or any of its subsidiaries,
nor (ii) use any Confidential Information for any purpose except insofar as
such use is consistent with both the scope of the Executive's duties to the
Corporation and/or its subsidiaries and the terms and conditions of this
Agreement. "Confidential Information" shall include all information,
2
<PAGE>
whether or not reduced to written or other tangible form, relating to the
business of the Corporation or its subsidiaries that is not generally known in
the industry. "Confidential Information" shall include, but not be limited to,
trade secrets, marketing information, patient lists, employee lists, customer
lists, information concerning business relationships between the Corporation
(including its subsidiaries) and its patients and vendors, any medical,
personal or other information relating to the Corporation's (or its
subsidiaries') patients, and the Corporation's (or its subsidiaries') policies
and procedures for caring for its patients. "Confidential Information" shall
not include information (x) which is in the public domain other than by
disclosure by Executive or (y) which is known to Executive as a result of his
own efforts prior to his affiliation with the Corporation as an officer,
director, employee, stockholder or independent contractor. The Executive may
respond to proper subpoenas issued by governmental agencies without the
Corporation's prior written consent, but with prior notice to the Corporation.
(b) During the term of this Agreement the Executive will not
directly or indirectly, alone or together with or through one or more persons,
own, manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
independent contractor, agent, director or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of
(collectively "Compete In"), any business (a "Competitive Operation") which
competes with or is in the same business as any business or operation
conducted by the Corporation or by any group, division or subsidiary of the
3
<PAGE>
Corporation including home care and pharmaceutical/infusion services. During
the twenty-four month period beginning upon termination of this Agreement, the
Executive shall not Compete In any Competitive Operation (determined as of the
time of termination of this Agreement) within a fifty mile radius of each
office of the Corporation and/or any of its groups, divisions or subsidiaries.
5. COMPENSATION:
(a) As compensation for all of the services to be performed by
the Executive in any capacity hereunder, including services as an officer of
the Corporation and/or its subsidiaries and any additional duties assigned to
him hereunder by the President and Board of Directors, the Corporation agrees
to pay to the Executive, as base salary, the annual sum of set forth below for
the respective period or such greater amount as shall be approved by the
Corporation's President from time to time, payable in accordance with the
Corporation's normal and customary payroll practices:
PERIOD ANNUAL BASE SALARY
------ ------------------
January 1, 1996 to December 31, 1996 $ 90,000.00
January 1, 1997 to December 31, 1997 $ 100,000.00
January 1, 1998 to December 31, 1998 $ 110,000.00
January 1, 1999 to December 31, 1999 $ 120,000.00
January 1, 2000 to December 31, 2000 $ 130,000.00
(b) The Corporation shall purchase, pay for and maintain a whole
life insurance policy in the face policy amount of $150,000.00 insuring the
Executive who
4
<PAGE>
shall own said policy including any cash value and cash surrender value
thereof and be entitled to name the beneficiary(s) thereof.
(c) The Executive shall be entitled to participate in or receive
benefits under all of the Corporation's employee benefit plans and
arrangements, including, without limitation, any pension plan, profit sharing
plan, savings plan, stock option plan, life insurance, health-and-accident
plan or arrangement made available by the Corporation in the future to its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plan and
arrangements. Nothing herein shall require the Corporation at any time to
create or continue any such plan, program or arrangement. Nothing paid to the
Executive under any plan or arrangement shall be deemed to be in lieu of
compensation to the Executive hereunder.
(d) The Executive shall be entitled to the number of paid
vacation days in each calendar year determined by the Board of Directors from
time to time for the Corporation's senior executive officers, but not less
than three (3) weeks per year during each of the first three (3) years of this
Agreement and four (4) weeks per year during the last two (2) years of the
Agreement (prorated in any calendar year during which the Executive is
employed hereunder for less than the entire such year in accordance with the
number of days in such calendar year during which he is so employed). The
Executive shall also be entitled to all paid holidays given by the Corporation
to its senior executive officers, and such paid sick days as shall not exceed
the number of days from date of sickness until the Executive is entitled to
5
<PAGE>
receive any benefits under any short term and/or long term disability policy
maintained by the Corporation, if any, but in no event shall the Executive be
entitled to more than twenty-five (25) such paid sick leave days during any
one (1) consecutive twelve month period.
(e) The Corporation shall award and the Executive shall receive
options to purchase shares of the Corporations common stock at the exercise
purchase price of Two Dollars ($2.00) per share of stock within 120 days
following the end of each of the Corporation's fiscal years based upon the
Corporation's income and in amounts set forth below:
Number of Share Options Audited Net Income Per Share
- - - ----------------------- ----------------------------
none $ 0.00 to $ 0.14 cents
25,000 $ 0.15 cents
2,5000 for each additional cent
in excess of $ 0.15 cents
Executive shall have the right to exercise said options within two (2) years
after the date of grant of each of same, regardless of whether Executive shall
still then be employed provided, however, that in the event of the death of
the Executive, all options which the Executive has earned and/or accrued or to
which he may be entitle to exercise to date thereof shall lapse and
immediately become non-exercisable and forfeited with no rights with respect
thereto, concerning or arising out of said options surviving the Executive's
death whether on the part of the Executive's personal or permitted legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
6
<PAGE>
6. EXPENSES:
(a) The Corporation shall reimburse the Executive for any
out-of-pocket expenses reasonably incurred by the Executive in the performance
of his duties to the Corporation upon receipt of appropriate vouchers
therefore, in accordance with the Corporations current practices, as such
practices may be changed from time to time by the President of the
Corporation.
(b) The Corporation recognizes the Executive's business need for
an automobile for business purposes. The Corporation, therefore, shall lease
an automobile for the Executive's use, and shall bear the cost of all related
lease payments, maintenance, repairs, gas, insurance and other costs
attributable to the use, operation and care of the said automobile. The
automobile leased by the Corporation for the Executive may also be used by
other officers of the Corporation for business purposes. The Executive may
select the automobile to be leased by the Corporation for his business use,
provided that the lease payments for such automobile shall not exceed ten
thousand dollars ($10,000.00) per year.
7. TERMINATION:
(a) The Corporation shall have the right, at its sole option, to
terminate this Agreement "for cause" at any time, without further payment to
the Executive other than compensation earned under subparagraph 5(a)(i) prior
to the date of termination, by notice to the Executive (or his personal
representative, as the case may be) specifying the reason for such
termination. In the event of termination hereunder, the Corporation shall pay
to Executive a sum equal to six (6) months
7
<PAGE>
premiums attributable to the health, medical and hospitalization insurance
coverages to which he was entitled and in which he participated immediately
prior to the said termination. In addition, Executive shall be permitted to
retain possession and use of the automobile leased for him by the Corporation
for a period of six (6) months following such termination and the Corporation
agrees to continue to make all lease payments attributable to said automobile
during this six (6) month period. At the end of such six (6) month period
Executive shall have the option to have title and ownership thereto
transferred by the Corporation to him and, thereafter Executive shall assume
personal responsibility for the balance of the lease payments and related
expenses attributable thereto. In such event, the Corporation shall take
whatever action and execute any and all documents which may be required in
order to effect such transfer of title and ownership to Executive and such
right shall be limited to and subject to the consent of the leasor. For
purposes of this Agreement, "cause" shall be limited to and shall mean solely
(i) failure to substantially and materially perform his duties hereunder,
other than any such failure resulting from the Executive's incapacity due to
physical or mental illness; (ii) the Executive's gross misconduct materially
injurious to the Corporation; (iii) the material breach by the Executive of
any material terms of this Agreement; or (iv) the Executive's conviction of a
felony. Notwithstanding the foregoing, any action taken by the Executive in
bona fide good faith and in furtherance of his duties under this Agreement
shall not be deemed "cause".
8
<PAGE>
(b) This Agreement shall terminate automatically upon the death
of the Executive. In such event, the Corporation shall pay the estate of the
Executive, in addition to any amounts to which the Executive's estate would
otherwise be entitled under the Corporation's retirement plans and group life
insurance policy, within 30 days after the date of termination, all
compensation earned under paragraph 5 through the date of termination. The
estate of the Executive shall arrange for the immediate return of the
automobile leased for the Executive by the Corporation.
(c) The Executive shall have the right, at his sole option, to
terminate this Agreement, upon 30 days' prior notice, if the Corporation
materially breached any material provision of this Agreement. Upon such
termination, the Executive shall be entitled to receive all compensation
earned under paragraph 5 through the date of termination. In addition, and in
such event, Executive shall be permitted to retain possession and use of the
automobile leased for him by the Corporation for a period of six (6) months
following such termination and the Corporation agrees to continue to make all
lease payments attributable to said automobile during this six (6) month
period. At the end of such six (6) month period Executive shall have the
option to have title and ownership thereto transferred by the Corporation to
him and, thereafter Executive shall assume personal responsibility for the
balance of the lease payments and related expenses attributable thereto. In
such event, the Corporation shall take whatever action and execute any and all
documents which may be required in order to effect such transfer of title and
ownership to Executive and such right shall be limited to and subject to the
consent of the leasor.
9
<PAGE>
8. RETURN BY EXECUTIVE OF CORPORATION PROPERTY:
In the event of the Executive's termination of this Agreement for any
reason, the Executive shall, on or prior to such termination, return to the
Corporation all papers, documents, computer disks, employee lists and all
other property belonging to the Corporation and/or any of its subsidiaries or
relating to the business of the Corporation and/or any of its subsidiaries
that shall then be in Executive's possession or under Executive's control.
9. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT:
(a) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in substance in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement by the Corporation. As used in this Agreement "Corporation"
shall mean the Corporation and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
paragraph 9 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement is personal to the Executive and cannot be
assigned nor may the duties of the Executive be delegated, except as expressly
10
<PAGE>
permitted by the President of the Corporation.
(c) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or permitted legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
10. NOTICE:
For purposes of this Agreement, notices and all other communications
required or permitted under this Agreement shall be in writing and shall be
deemed given when delivered personally or twenty-four hours after sending by
FedEx or other overnight courier if sent to the Corporation at its principal
office or to the Executive at his address set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to
the attention of the Chief Executive Officer of the Corporation with a copy to
the Secretary of the Corporation, or to such other address as either party may
have furnished to the other by like notice.
11. EQUITABLE REMEDIES:
Each party agrees that violation of the terms of this Agreement would
cause irreparable damage to the other party for which the remedies at law
would be inadequate, and each party shall be entitled, either in any court of
law or equity, to preliminary, permanent and other injunctive and equitable
relief against any breach of the terms of this Agreement, and such punitive
and compensatory damages as shall be awarded. The foregoing shall not be
construed to limit any relief at law, including, but not limited to damages,
to which either party may be entitled by reason of any breach of the terms of
this Agreement.
11
<PAGE>
12. SAVINGS CLAUSE; VALIDITY:
(a) If any of the restrictions set forth in Section 4 should,
for any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby adversely be affected. It is intended that
such restrictions shall be severable and shall apply separately and distinctly
to every jurisdiction where applicable with the same force and effect as
though said covenants were separately expressed with respect to each of such
jurisdictions. The parties hereto declare that if any of the time, area or
other restrictions or limitations contained in Section 4 is deemed to be
unreasonable by a court of competent jurisdiction, then the parties agree and
submit to the reduction of said time and/or area limitations and modification
of such other restrictions to such period or area or other restrictions as
said court shall deem reasonable in light on and in furtherance of the intent
of this Agreement.
(b) Notwithstanding any other provisions of this Agreement, the
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
13. ARBITRATION: All disputes, differences and controversies
(collectively in this paragraph referred to as "Disputes") arising out of or
in any way related to this Agreement may, at the written request of the
Corporation (or any of its subsidiaries) or Executive, be submitted to and
heard and decided by the American Arbitration Association ("AAA"), in Nassau
County, New York to be heard and decided in
12
<PAGE>
accordance with the terms and conditions of this Agreement and the then rules
of the AAA ("AAA Rules") by a panel of three (3) arbitrators (unless AAA
Rules, as the case may be, shall require a different number of arbitrators)
chosen in accordance with the applicable AAA Rules. The decision of the
arbitrators shall be final and binding upon the parties, and an order may be
entered upon the award of the arbitrators in any court of competent
jurisdiction.
14. MISCELLANEOUS:
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by such officer as may be specifically
designated by the President and the Board of Directors of the Corporation.
(b) No waiver by any party hereto at any time of any breach by
any other party hereto of, or compliance with any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
(c) No undertaking by the Corporation to the executive in this
Agreement which shall be a matter for discussion and/or approval by the Board
of Directors of the Corporation shall be enforceable or effective until the
said Board shall have considered said matter and authorized and approved such
undertaking in accordance with the By-Laws of the Corporation and the rules of
the said Board.
(d) This Agreement supersedes all prior agreements between the
parties, written or oral, and cannot be amended or modified except by a
writing signed
13
<PAGE>
by both parties.
(e) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of New York.
(f) The covenants set forth in paragraphs 4, 7, 8, 11, 13 and
14 of this Agreement shall survive the termination or expiration of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
THE CARE GROUP, INC.
By: /s/ Ann T. Mittasch
-----------------------------------
Ann T. Mittasch, President
EXECUTIVE
/s/ Randolph J. Mittasch
--------------------------------------
Randolph J. Mittasch
14
EMPLOYMENT AGREEMENT
---------------------
AGREEMENT made as of the 1st day of January, 1996, by and between THE
CARE GROUP, INC., a Delaware corporation (the "Corporation") having an office
at One Hollow Lane, Lake Success, New York 11042, and PAT H. CELLI, an
individual residing at 481 Benito Street, East Meadow, New York (the
"Executive").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, the Corporation desires to continue to employ the Executive to
perform executive and other services for the Corporation, and the Executive
desires to accept such employment, all on the terms and conditions of this
Agreement;
NOW, THEREFORE, in consideration of the mutual obligations set forth
herein, the Corporation and the Executive agree as follows:
1. Term: The term of this Agreement shall be five (5) years, commencing
on January 1, 1996 and ending December 31, 2000, subject to earlier
termination as provided herein.
2. Employment: The Corporation hereby employs the Executive for the term
of this Agreement to serve as Chief Financial Officer of the Corporation, and
the Executive hereby accepts such employment, on the terms and conditions set
forth in this Agreement.
3. Services:
The Executive shall continue to perform such duties of an executive
nature for the Corporation and its subsidiaries as he shall have performed
heretofore, or as may
<PAGE>
be assigned to him from time to time by the President and Board of
Directors of the Corporation. The Executive shall serve the Corporation and
its subsidiaries faithfully and to the best of his ability and shall devote
his full business time and efforts to the business and affairs of the
Corporation and its subsidiaries, subject to absences for vacation and illness
as provided in this Agreement. The Executive shall be subject at all times to
the direction and control of the President and Board of Directors.
4. Unauthorized Disclosure; Non-Competition:
(a) During the term of this Agreement and continuing forever thereafter,
the Executive shall not, directly or indirectly without the prior written
consent of the Corporation's Board of Directors (i) disclose through any means
whatsoever any Confidential Information (as hereinafter defined) to any
person, other than an authorized officer, director, employee, consultant,
adviser, agent, or affiliate of the Corporation or any of its subsidiaries,
nor (ii) use any Confidential Information for any purpose except insofar as
such use is consistent with both the scope of the Executive's duties to the
Corporation and/or its subsidiaries and the terms and conditions of this
Agreement. "Confidential Information" shall include all information, whether
or not reduced to written or other tangible form, relating to the business of
the Corporation or its subsidiaries that is not generally known in the
industry. "Confidential Information" shall include, but not be limited to,
trade secrets, marketing information, patient lists, employee lists, customer
lists, information concerning business relationships between the Corporation
(including its subsidiaries) and its patients and vendors, any medical,
personal or other information relating to the
2
<PAGE>
Corporation's (or its subsidiaries') patients, and the Corporation's (or its
subsidiaries') policies and procedures for caring for its patients.
"Confidential Information" shall not include information (x) which is in the
public domain other than by disclosure by Executive or (y) which is known to
Executive as a result of his own efforts prior to his affiliation with the
Corporation as an officer, director, employee, stockholder or independent
contractor. The Executive may respond to proper subpoenas issued by
governmental agencies without the Corporation's prior written consent, but
with prior notice to the Corporation.
(b) During the term of this Agreement the Executive will not directly
or indirectly, alone or together with or through one or more persons, own,
manage, operate, control or participate in the ownership, management,
operation or control of, or be connected as an officer, employee, partner,
independent contractor, agent, director or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of
(collectively "Compete In"), any business (a "Competitive Operation") which
competes with or is in the same business as any business or operation
conducted by the Corporation or by any group, division or subsidiary of the
Corporation including home care and pharmaceutical/infusion services. During
the twenty-four month period beginning upon termination of this Agreement, the
Executive shall not Compete In any Competitive Operation (determined as of the
time of termination of this Agreement) within a fifty mile radius of each
office of the Corporation and/or any of its groups, divisions or subsidiaries.
3
<PAGE>
5. Compensation:
(a) As compensation for all of the services to be performed by the
Executive in any capacity hereunder, including services as an officer of the
Corporation and/or its subsidiaries and any additional duties assigned to him
hereunder by the President and Board of Directors, the Corporation agrees to
pay to the Executive, as base salary, the annual sum of set forth below for
the respective period or such greater amount as shall be approved by the
Corporation's President from time to time, payable in accordance with the
Corporation's normal and customary payroll practices:
Period Annual Base Salary
------ ------------------
January 1, 1996 to December 31, 1996 $ 130,000.00
January 1, 1997 to December 31, 1997 $ 143,000.00
January 1, 1998 to December 31, 1998 $ 157,300.00
January 1, 1999 to December 31, 1999 $ 173,030.00
January 1, 2000 to December 31, 2000 $ 190,333.00
(b) The Executive shall be entitled to participate in or receive
benefits under all of the Corporation's employee benefit plans and
arrangements, including, without limitation, any pension plan, profit sharing
plan, savings plan, stock option plan, life insurance, health-and-accident
plan or arrangement made available by the Corporation in the future to its
executives and key management employees, subject to and on a basis consistent
with the terms, conditions and overall administration of such plan and
arrangements. Nothing herein shall require the Corporation at any time
4
<PAGE>
to create or continue any such plan, program or arrangement. Nothing paid to
the Executive under any plan or arrangement shall be deemed to be in lieu of
compensation to the Executive hereunder.
(c) The Executive shall be entitled to the number of paid vacation
days in each calendar year determined by the Board of Directors from time to
time for the Corporation's senior executive officers, but not less than three
(3) weeks per year during each of the first three (3) years of this Agreement
and four (4) weeks per year during the last two (2) years of the Agreement
(prorated in any calendar year during which the Executive is employed
hereunder for less than the entire such year in accordance with the number of
days in such calendar year during which he is so employed). The Executive
shall also be entitled to all paid holidays given by the Corporation to its
senior executive officers, and such paid sick days as shall not exceed the
number of days from date of sickness until the Executive is entitled to
receive any benefits under any short term and/or long term disability policy
maintained by the Corporation, if any, but in no event shall the Executive be
entitled to more than twenty-five (25) such paid sick leave days during any
one (1) consecutive twelve month period.
(d) The Corporation shall award and the Executive shall receive
options to purchase shares of the Corporations common stock at the exercise
purchase price of Two Dollars ($2.00) per share of stock within 120 days
following the end of each of the Corporation's fiscal years based upon the
Corporation's income and in amounts set forth below:
5
<PAGE>
Number of Share Options Audited Net Income Per Share
- - - ----------------------- ----------------------------
none $ 0.00 to $ 0.14 cents
25,000 $ 0.15 cents
2,500 for each additional cent
in excess of $ 0.15 cents
Executive shall have the right to exercise said options within two (2) years
after the date of grant of each of same, regardless of whether Executive shall
still then be employed provided, however, that in the event of the death of
the Executive, all options which the Executive has earned and/or accrued or to
which he may be entitle to exercise to date thereof shall lapse and
immediately become non-exercisable and forfeited with no rights with respect
thereto, concerning or arising out of said options surviving the Executive's
death whether on the part of the Executive's personal or permitted legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
6. EXPENSES:
(a) The Corporation shall reimburse the Executive for any out-of-
pocket expenses reasonably incurred by the Executive in the performance of his
duties to the Corporation upon receipt of appropriate vouchers therefore, in
accordance with the Corporations current practices, as such practices may be
changed from time to time by the President of the Corporation.
(b) The Corporation recognizes the Executive's business need for an
automobile for business purposes. The Corporation, therefore, shall lease an
automobile for the Executive's use, and shall bear the cost of all related
lease
6
<PAGE>
payments, maintenance, repairs, gas, insurance and other costs attributable to
the use, operation and care of the said automobile. The automobile leased by
the Corporation for the Executive may also be used by other officers of the
Corporation for business purposes. The Executive may select the automobile to
be leased by the Corporation for his business use, provided that the lease
payments for such automobile shall not exceed ten thousand dollars
($10,000.00) per year.
7. TERMINATION:
(a) The Corporation shall have the right, at its sole option, to
terminate this Agreement "for cause" at any time, without further payment to
the Executive - other than compensation earned under subparagraph 5(a)(i)
prior to the date of termination, by notice to the Executive (or his personal
representative, as the case may be) specifying the reason for such
termination, and the Executive shall not be entitled to any incentive
compensation for the periods ending on the date of such termination. For
purposes of this Agreement, "cause" shall be limited to and shall mean solely
(i) failure to substantially and materially perform his duties hereunder,
other than any such failure resulting from the Executive's incapacity due to
physical or mental illness; (ii) the Executive's gross misconduct materially
injurious to the Corporation; (iii) the material breach by the Executive of
any material terms of this Agreement; or (iv) the Executive's conviction of a
felony. Notwithstanding the foregoing, any action taken by the Executive in
bona fide good faith and in furtherance of his duties under this Agreement
shall not be deemed "cause".
7
<PAGE>
(b) This Agreement shall terminate automatically upon the death of the
Executive. in such event, the Corporation shall pay the estate of the
Executive, in addition to any amounts to which the Executive's estate would
otherwise be entitled under the Corporation's retirement plans and group life
insurance policy, within 30 days after the date of termination, all
compensation earned under paragraph 5 through the date of termination. The
estate of the Executive shall arrange for the immediate return of the
automobile leased for the Executive by the Corporation.
(c) The Executive shall have the right, at his sole option, to
terminate this Agreement, upon 30 days' prior notice, if the Corporation
materially breached any material provision of this Agreement. Upon such
termination, the Executive shall be entitled to receive all compensation
earned under paragraph 5 through the date of termination but shall immediately
return to the Corporation the automobile leased for his use.
8. RETURN BY EXECUTIVE OF CORPORATION PROPERTY:
In the event of the Executive's termination of this Agreement for any
reason, the Executive shall, on or prior to such termination, return to the
Corporation all papers, documents, computer disks, employee lists and all
other property belonging to the Corporation and/or any of its subsidiaries or
relating to the business of the Corporation and/or any of its subsidiaries
that shall then be in Executive's possession or under Executive's control.
8
<PAGE>
9. SUCCESSORS; BINDING AGREEMENT; ASSIGNMENT:
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in substance in the same manner and
to the same extent that the Corporation would be required to perform it if no
such succession had taken place. Failure of the Corporation to obtain such
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement by the Corporation. As used in this Agreement "Corporation"
shall mean the Corporation and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this
paragraph 9 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
(b) This Agreement is personal to the Executive and cannot be assigned
nor may the duties of the Executive be delegated, except as expressly
permitted by the President of the Corporation.
(c) This Agreement shall inure to the benefit of and be enforceable by
the Executive's personal or permitted legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
10. NOTICE:
For purposes of this Agreement, notices and all other communications
required or permitted under this Agreement shall be in writing and shall be
deemed given when
9
<PAGE>
delivered personally or twenty-four hours after sending by FedEx or other
overnight courier if sent to the Corporation at its principal office or to the
Executive at his address set forth on the first page of this Agreement,
provided that all notices to the Corporation shall be directed to the
attention of the Chief Executive Officer of the Corporation with a copy to the
Secretary of the Corporation, or to such other address as either party may
have furnished to the other by like notice.
11. EQUITABLE REMEDIES:
Each party agrees that violation of the terms of this Agreement would
cause irreparable damage to the other party for which the remedies at law
would be - inadequate, and each party shall be entitled, either in any court
of law or equity, to preliminary, permanent and other injunctive and equitable
relief against any breach of the terms of this Agreement, and such punitive
and compensatory damages as shall be awarded. The foregoing shall not be
construed to limit any relief at law, including, but not limited to damages,
to which either party may be entitled by reason of any breach of the terms of
this Agreement.
12. SAVINGS CLAUSE; VALIDITY:
(a) If any of the restrictions set forth in Section 4 should, for
any reason whatsoever, be declared invalid by a court of competent
jurisdiction, the validity or enforceability of the remainder of such
restrictions shall not thereby adversely be affected. It is intended that such
restrictions shall be severable and shall apply separately and distinctly to
every jurisdiction where applicable with the same force and effect as though
said covenants were separately expressed with respect to
10
<PAGE>
each of such jurisdictions. The parties hereto declare that if any of the
time, area or other restrictions or limitations contained in Section 4 is
deemed to be unreasonable by a court of competent jurisdiction, then the
parties agree and submit to the reduction of said time and/or area limitations
and modification of such other restrictions to such period or area or other
restrictions as said court shall deem reasonable in light on and in
furtherance of the intent of this Agreement.
(b) Notwithstanding any other provisions of this Agreement, the
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
13. ARBITRATION: All disputes, differences and controversies
(collectively in this paragraph referred to as "Disputes") arising out of or
in any way related to this Agreement may, at the written request of the
Corporation (or any of its subsidiaries) or Executive, be submitted to and
heard and decided by the American Arbitration Association ("AAA"), in Nassau
County, New York to be heard and decided in accordance with the terms and
conditions of this Agreement and the then rules of the AAA ("AAA Rules") by a
panel of three (3) arbitrators (unless AAA Rules, as the case may be, shall
require a different number of arbitrators) chosen in accordance with the
applicable AAA Rules. The decision of the arbitrators shall be final and
binding upon the parties, and an order may be entered upon the award of the
arbitrators in any court of competent jurisdiction.
11
<PAGE>
14. MISCELLANEOUS:
(a) No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and by such officer as may be specifically
designated by the President and the Board of Directors of the Corporation.
(b) No waiver by any party hereto at any time of any breach by any
other party hereto of, or compliance with any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
(c) No undertaking by the Corporation to the Executive in this
Agreement which shall be a matter for discussion and/or approval by the Board
of Directors of the Corporation shall be enforceable or effective until the
said Board shall have considered said matter and authorized and approved such
undertaking in accordance with the By-Laws of the Corporation and the rules of
the said Board.
(d) This Agreement supersedes all prior agreements between the
parties, written or oral, and cannot be amended or modified except by a
writing signed by both parties.
(e) The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of New York.
(e) The covenants set forth in paragraphs 4, 7, 8, 11, 13 and 14 of
this Agreement shall survive the termination or expiration of this Agreement.
12
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the date first above written, subject to appropriate Board
approval where required.
THE CARE GROUP, INC.
By: /s/ Ann T. Mittasch
-----------------------------------
Ann T. Mittasch, President
EXECUTIVE
/s/ Pat H. Celli
--------------------------------------
Pat H. Celli
13
AMENDMENT TO REVOLVING CREDIT AGREEMENT
---------------------------------------
This Amendment to Revolving Credit Agreement (this "Amendment") is made
as of this 5th day of June, 1996 by and between:
THE CARE GROUP, INC., a corporation organized under the laws of the State
of Delaware (the "Borrower"); and
THE CHASE MANHATTAN BANK, NATIONAL ASSOCIATION, a national banking
association organized under the laws of the United States of America (the
"Bank").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS:
(A) The Borrower and the Bank are parties to a Revolving Credit Agreement
dated as of February 14, 1994 (as amended through the date hereof, the
"Agreement");
(B) The Borrower has requested the Bank to permit the United States
government to have a second lien upon and security interest in the assets of
the Borrower and its affiliates and the Bank is willing to permit such liens
subject to the Borrower executing this Amendment.
(C) Any capitalized terms not defined herein shall have the meanings
ascribed thereto in the Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE 1. Amendments to Revolving Credit Agreement.
----------------------------------------
This Amendment shall be deemed to be an amendment to the Agreement and
shall not be construed in any way as a replacement or substituting therefore.
All of the terms and provisions of this Amendment are hereby incorporated by
reference into the Agreement as if such terms and provisions were set forth in
full herein.
Section 1.1. The cover page of the Agreement is hereby amended by
deleting the reference to "$12,000,000" therefrom and substituting in its
place "$8,000,000."
Section 1.2. The definition of Borrowing Base contained in Section 1.01
of the Agreement is hereby amended by inserting the following provision at the
end thereof:
"The Bank may, in its reasonable discretion based upon the results of any
collateral audit conducted by the Bank, upon 30 days' prior written notice
to the Borrower, change the percentages included in
<PAGE>
clauses (i) and (ii) from time to time by written notice to the
Borrower."
Section 1.3. The definition of Commitment contained in Section 1.01 of
the Agreement is hereby amended by deleting the reference to $12,000,000
therefrom and substituting "$8,000,000" in its place.
Section 1.4. The definition of the term "Eligible Receivables" contained
in Section 1.01 of the Agreement is hereby amended by inserting the following
provision at the end thereof."
"Eligible Receivables shall exclude all accounts receivables payable
by state or federal agencies under Medicaid or Medicare programs and such
other accounts receivables as are determined by the Bank to be
ineligible. Standards of eligibility may be fixed and revised from time
to time by the Bank in its reasonable discretion based upon the results
of any collateral audit conducted by the Bank upon 30 days' prior
written notice to the Borrower.
Section 1.5. The definition of the term "Eligible Inventory" contained in
Section 1.01 of the Agreement is hereby amended by inserting the following
provision at the end thereof:
"Eligible Inventory shall exclude those items of inventory
determined by the Bank to be ineligible. Standards of eligibility
may be fixed and revised from time to time by the Bank in its
reasonable discretion based upon the results of any collateral
audit conducted by the Bank upon 30 days' prior written notice to
the Borrower."
Section 1.6. Section 2.05 of the Agreement is hereby amended by deleting
the first sentence thereof and substituting the following in its place:
"All loans made by the Bank under this Agreement shall be evidenced
by, and repaid with interest in accordance with, a single promissory note
of the Borrower in substantially the form of Exhibit A hereto duly
completed, in the principal amount of Eight Million dollars ($8,000,000)
payable to the Bank, and maturing as to principal on the Termination Date
(such note, together with any Note issued in substitution or replacement
therefore, being hereinafter referred to as the "Note")."
In addition, Exhibit A to the Agreement is hereby deleted and Exhibit A-l
hereto is substituted in its place. On the date hereof, the Note in the form
attached hereto as Exhibit A-1 shall be substituted for and shall replace the
Borrower's existing $12,000,000 promissory note (the
2
<PAGE>
"Existing Note") and all amounts outstanding under the Existing Note shall be
deemed to be outstanding under the new Note.
Section 1.7. Section 6.01 of the Agreement is hereby amended by inserting
a new sub-paragraph "(k)" thereto which provides as follows:
"(k) Debt incurred in connection with that certain Settlement
Agreement to be executed among the Borrower, the United States,
Advanced Care Associates, Inc., Robert Wolk, Harriet Wolk, Robert
Miller, Anne Miller, Christopher Piacentile and Piper & Marbury,
L.L.P., in substantially the form of the draft of such agreement
provided to the Bank on or before June 5, 1996.
Section 1.8. Section 6.02(l) of the Agreement is hereby amended by
inserting the following phrase at the end thereof: "or its Subsidiaries."
Section 1.9. Article 6 of the Agreement is hereby further amended by
inserting a new Section 6.11 at the end thereof which provides as follows:
Section 6.11 Settlement Agreement. Amend, supplement or modify
that certain Settlement Agreement to be executed by and among the
Borrower, the United States, Advanced Care Associates, Inc., Robert
Wolk, Harriet Wolk, Robert Miller, Anne Miller, Christopher Piacentile
and Piper & Marbury, L.L.P. without the prior written consent of the
Bank or enter into a Settlement Agreement containing terms which differ
substantially from the draft of such agreement provided to the Bank on
or before June 5, 1996.
ARTICLE 2. Representations and Warranties.
------------------------------
The Borrower hereby represents and warrants to the Bank that:
Section 2.1. Subject to Section 2.5 of this Amendment, each and every one
of the representations and warranties set forth in the Agreement is true as of
the date hereof with respect to the Borrower with the same effect as though
made on the date hereof, and is hereby incorporated herein in full by
reference as if fully restated herein in its entirety.
Section 2.2. No Default or Event of Default, as defined in the Agreement
now exists.
Section 2.3. The Borrower is not in default with respect to any
agreement to which it is a party or by which it is bound.
Section 2.4. No representation, warranty or statement by the Borrower
contained herein or in any other document to be furnished by the Borrower in
connection herewith contains, or at the time of delivery shall contain, any
untrue statement of material fact, or omits
3
<PAGE>
or at the time of delivery shall omit to state a material fact necessary to
make such representation, warranty or statement not misleading.
Section 2.5. There is no claim, litigation, investigation or proceeding
pending or threatened against or otherwise materially affecting the Borrower's
business except as previously disclosed to the Bank (in connection with U.S.
v. Wolk, Advanced Care Associates, Inc.., et al.,) and except in the ordinary
course of the Borrower's business which do not, in the aggregate, affect
materially and adversely the financial condition, operations, properties or
business of the Borrower.
Section 2.6. The Security Agreements continue to be in full force and
effect and secure all payment and other obligations of the Borrower under the
Agreement. The Borrower has not located assets in any new locations since the
execution and delivery of the Security Agreements.
ARTICLE 3. Miscellaneous.
-------------
This Amendment shall be governed by and construed in accordance with the
laws of the State of New York.
IN WITNESS WHEREOF, each of the undersigned has executed or caused to be
duly executed this Waiver as of the date first above written.
THE CARE GROUP, INC.
By: /S/ PAT CELLI
--------------------------
Name: Pat Celli
Title: Chief Financial Officer
THE CHASE MANHATTAN BANK, NATIONAL
ASSOCIATION
By: /S/ EMELIA TEIGE
---------------------------
Name: Emelia Teige
Title: Vice President
4
<PAGE>
EXHIBIT A-l
-----------
REVOLVING CREDIT NOTE
$8,000,000 June 5, 1996
Nassau County, New York
THE CARE GROUP, INC., a corporation organized under the laws of Delaware
(the "Borrower"), for value received, hereby promises to pay to the order of
THE CHASE MANHATTAN BANK, N.A., a national banking association (the "Bank") at
the Bank's office at 395 North Service Road, Melville, New York 11747, on or
before November 16, 1998, the principal sum of EIGHT MILLION DOLLARS
($8,000,000), or, if less, the amount loaned by the Bank to the Borrower
pursuant to the Credit Agreement referred to below, in the lawful money of the
United States of America and in immediately available funds, on the date(s)
and in the manner provided in said Credit Agreement. The Borrower also
promises to pay interest on the unpaid principal balance hereof, for the
period such balance is outstanding, at said office, in like money, at the rate
of interest as provided in the Credit Agreement described below, on the
date(s) and in the manner provided in said Credit Agreement.
The holder of this Revolving Credit Note shall record the date and amount
of each Loan made by the Bank, and the date and amount of each payment or
prepayment of principal of or interest on any Loan, on the schedule attached
hereto or on such computer, magnetic disk, tape or other such electronic data
storage and retrieval system deemed adequate for such purpose by the Bank, in
its sole and absolute discretion, which record shall constitute prima facie
evidence of the accuracy of the information so recorded (although if such
information is determined to be incorrect, the Bank will correct such
information), but no failure so to record or any error in so recording shall
affect the obligation of the Borrower to repay any such Loans, with Interest
thereon, as provided in the Credit Agreement or herein.
This is the Note referred to in that certain Credit Agreement dated as of
February 14, 1994 between the Borrower and the Bank as amended by an Amendment
and Waiver to Revolving Credit Agreement dated the date hereof (as such
agreement may be further amended from time to time, the "Credit Agreement")
and evidences the Loans made by the Bank thereunder. All terms not defined
herein shall have the meanings given to them in the Credit Agreement.
The Credit Agreement provides for the acceleration of the maturity of
principal upon the occurrence of certain Events of Default and for prepayments
on the terms and conditions specified therein. The Borrower waives
presentment, notice of dishonor, protest and any other notice or formality
with respect to this Note.
The terms of this Note may not be changed orally, but only by an
instrument duly executed by the Borrower and the Bank.
5
<PAGE>
This Note is issued in substitution for and replacement of the Borrower's
$12,000,000 promissory note dated November 16, 1995 (the "Old Note") and all
amounts outstanding under the Old Note are as of the date hereof deemed to be
outstanding hereunder.
This Note shall be governed by, and interpreted and construed in
accordance with, the laws of the State of New York.
THE CARE GROUP, INC.
By: /S/ PAT CELLI
------------------------
Name: Pat Celli
Title: Chief Financial Officer
6
EXECUTION COPY
[CHASE LETTERHEAD]
August 7, 1996
Mr. Patrick Celli
The Care Group, Inc.
One Hollow Lane
Lake Success, New York 11042
Re: Waiver of Specified Defaults Under
The Revolving Credit Agreement
Dear Pat:
The Care Group, Inc. (the "Borrower") has requested that The Chase
Manhattan Bank (the "Bank") issue a waiver of specified defaults under the
Revolving Credit Agreement, dated as of February 14, 1994, as amended (the
"Agreement"). All capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to them in the Agreement.
As it has been explained by the Borrower to the Bank, this waiver is being
requested in connection with the Borrower's proposed private placement to be
agented by the Royce Investment Group. We understand that the private
placement will close in several stages and involve up to 100 "units" of common
stock and warrants and is expected to raise $5,000,000 in the aggregate (such
transaction being the "Proposed Transaction"). We understand that the first
phase of the Proposed Transaction is scheduled to close by August 13 and is
expected to raise $2,100,000 and that the remainder of the Proposed
Transaction is expected to close by September 30, 1996.
Specifically, the Borrower, pursuant to the waiver request attached as
Exhibit A (the "Waiver Request"), has requested that the Bank waive during the
period from December 31, 1995 to September 30, 1996 the following Defaults
(such Defaults being the "Specified Defaults"):
(a) Section 6.01 in connection with the issuance of the two convertible
debentures in the total principal amount of $500,000 on July 10, 1996
as further described in the Waiver Request;
(b) Section 7.02(a) (pertaining to Minimum Consolidated Working Capital);
(c) Section 7.02(e) (pertaining to Interest Coverage Ratio);
(d) Section 7.02(g) (pertaining to Minimum Cash Flow Coverage Ratio); and
(e) Sections 2.01(b) and 8.01(a)(B) in connection with the failure,
prior to the date hereof, of the Borrower to prepay the Loans so as
to be in compliance with the Borrowing Base.
<PAGE>
2
The Bank agrees to the waiver of the Specified Defaults from December 31,
1995 to September 30, 1996 provided that:
(1) by August 31, 1996, $1,000,000 shall be applied by the Borrower
against the outstandings of the Bank under the Agreement;
(2) concurrent with such payment, the Commitment of the Bank under the
Agreement shall be permanently reduced by $2,500,000 so that the
Commitment will be $5,500,000;
(3) during the period from the date hereof to September 30, 1996, the
financial condition, results of operations, business, properties
and prospects of the Borrower and its consolidated Subsidiaries
will be no less favorable than described on the pro forma financial
statements attached as Exhibit B;
(4) from the date hereof to September 30, 1996, the Borrower shall
remain at all times in compliance with Sections 2.01(b) and
8.01(a)(B) of the Agreement pertaining to the Borrowing Base;
(5) on August 30 and September 16 of 1996 the Borrower shall provide
the Bank a letter, in form and substance satisfactory to the Bank,
indicating that it is in compliance with the foregoing conditions
(3) and (4); and
(6) the Company shall pay on or before August 13, 1996 outstanding fees
to the Bank's counsel, Messrs. Rivkin, Radler & Kremer, PC in the
amount of $12,247.26.
During the period from the date hereof to September 30, 1996, the Borrower
agrees to (i) take such steps as may be necessary to cure the Specified
Defaults (other than with respect to Section 6.01) or (ii) renegotiate with
the Bank the applicable provisions of the Agreement giving rise to the
Specified Defaults on terms consistent with the Bank's credit policies for
credits such as the Borrower.
The Bank reserves--and does not waive--all rights and remedies with
respect to any (x) Specified Defaults in the event the foregoing conditions
are not satisfied and (y) Defaults which are not Specified Defaults.
If the terms of the Bank's waiver are acceptable to the Borrower, please
indicate your acceptance by signing below. Also, by signing below, the
Borrower represents and warrants that the Company is in full compliance with
all applicable laws, including, without limitation, federal and state
securities laws, in connection with the Proposed Transaction.
<PAGE>
3
This waiver shall be effective when each party to this waiver and the
attached consent shall have received an executed counterpart of this waiver
and an executed consent by telecopy. This waiver is subject to the provisions
of Section 9.01 covering amendments and waivers of the Agreement.
This waiver may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same waiver. One or more counterparts of this document
may be delivered via telecopier, with the intention that they shall have the
same effect as an original, executed counterpart hereof.
Very truly yours,
THE CHASE MANHATTAN BANK
By: /s/ Emelia K. Teige
------------------------------
Title: Vice President
Agreed
THE CARE GROUP, INC.
By: /s/ Pat Celli
-------------------------------
Title: Chief Financial Officer
<PAGE>
4
CONSENT
Each of the undersigned, as Guarantor under the Guarantee dated February
14, 1994 (the "Guarantee") in favor of the Bank party to the Credit Agreement
referred to in the foregoing letter waiver, hereby consents to said letter
waiver and hereby confirms and agrees that notwithstanding the effectiveness
of said letter waiver, the Guarantee and the documents executed by each of the
undersigned in connection therewith is, and shall continue to be, in full
force and effect and is hereby confirmed and ratified in all respects.
THE CARE GROUP OF NEW YORK, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
CARE LINE OF NEW YORK, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
THE CARE GROUP OF GEORGIA, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
<PAGE>
5
CARE LINE OF GEORGIA, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
THE CARE GROUP OF TEXAS, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
CARE LINE OF HOUSTON, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
CARE LINE OF DALLAS, INC.
By: /s/ Ann Mittasch
--------------------------------
Name: Ann Mittasch
Title: President
<PAGE>
EXECUTION COPY
[CHASE LETTERHEAD]
August 13, 1996
Mr. Patrick Celli
The Care Group, Inc.
One Hollow Lane
Lake Success, New York 11042
Re: Amendment to Waiver of Specified Defaults Under
the Revolving Credit Agreement
--------------------------------------------------
Dear Pat:
We refer to the Waiver, dated August 7, 1996, from The Chase Manhattan
Bank (the "Bank") in favor of The Care Group, Inc. (the "Borrower") (such
document being the "Waiver"). All capitalized terms used herein and not
otherwise defined herein shall have the meanings assigned to them in the
Waiver.
We hereby amend the Waiver so that, on paragraphs (1) and (6) of page two
of the Waiver, the date shall be changed from "August 13, 1996" to "August 14,
1996."
This amendment to the Waiver shall be effective when each party to this
amendment and the attached consent shall have received an executed counterpart
of this amendment and an executed consent by telecopy. This amendment is
subject to the provisions of Section 9.01 covering amendments and waivers of
the Agreement.
<PAGE>
2
This amendment may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same amendment. One or more counterparts of this
document may be delivered via telecopier, with the intention that they shall
have the same effect as an original, executed counterpart hereof.
Very truly yours,
THE CHASE MANHATTAN BANK
By: Emelia K. Teige
-----------------------------
Title: Vice President
Agreed
THE CARE GROUP, INC.
By: Ann Mittasch
-------------------------------
Title: President
<PAGE>
3
This amendment may be executed in any number of counterparts and by any
combination of the parties hereto in separate counterparts, each of which
counterparts shall be an original and all of which taken together shall
constitute one and the same amendment. One or more counterparts of this
document may be delivered via telecopier, with the intention that they shall
have the same effect as an original, executed counterpart hereof.
Very truly yours,
THE CHASE MANHATTAN BANK
By: /s/ Emelia K. Teige
-----------------------------
Title: Vice President
Agreed
THE CARE GROUP, INC.
By: Ann Mittasch
-------------------------------
Title: President
<PAGE>
4
CONSENT
Each of the undersigned, as Guarantor under the Guarantee dated February
14, 1994 (the "Guarantee") in favor of the Bank party to the foregoing letter
waiver, hereby consents to said letter amendment and hereby confirms and
agrees that notwithstanding the effectiveness of said letter amendment, the
Guarantee and the documents executed by each of the undersigned in connection
therewith is, and shall continue to be, in full force and effect and is hereby
confirmed and ratified in all respects.
THE CARE GROUP OF NEW YORK, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
CARE LINE OF NEW YORK, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
THE CARE GROUP OF GEORGIA, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
<PAGE>
5
CARE LINE OF GEORGIA, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
THE CARE GROUP OF TEXAS, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
CARE LINE OF HOUSTON, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
CARE LINE OF DALLAS, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
<PAGE>
6
THE CARE GROUP OF LOS ANGELES, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
MAIL ORDER MEDS, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
ADVANCED CARE ASSOCIATES, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
MILLWO MANAGEMENT, INC.
By: /s/ Ann Mittasch
-----------------------------
Name: ANN MITTASCH
Title: PRESIDENT
SUBSCRIPTION AGREEMENT
Agreement made the 28th day of May, 1996, by and between The Care
Group, Inc., a Delaware corporation (the "Company"), and Caribou Bridge Fund
LLC (the "Purchaser"), an individual or organization residing at or having a
principal office at [address], New York.
1. Subscription.
The Purchaser, intending to be legally bound, hereby irrevocably
subscribes to purchase from the Company 50,000 shares of the Company's $.001
par value Common Stock (the "Purchased Stock or "Purchased Shares") at a
purchase price of $1.00 per share, for a total of $50,000 (the "Purchase
Price").
2. Sale. The Company hereby agrees to issue and sell to the
Purchaser the Purchased Stock, which shall be validly issued, fully paid and
nonassessable. After the execution hereof and the Company's receipt of the
Purchase Price,will properly deliver one or more certificates evidencing the
same to the Purchaser as the Purchaser reasonably requests.
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to own, lease, license and use its properties and assets and to carry out its
business in which it is engaged as described in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "10-K") and the
other Disclosure Documents (as defined in paragraph 3(f) below), copies of
which have been delivered to the Purchaser. The Company is duly qualified to
transact the business in which it is engaged as described in the 10-K and is
and will be in good standing as a foreign corporation in every jurisdiction in
which its ownership, leasing, licensing or use of property or assets or the
conduct of its business make such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Company.
(b) The Company has all requisite power and authority to (i)
execute, deliver and perform its obligation under this Agreement and (ii) to
issue and sell the Purchased Stock. All necessary corporate proceedings of the
Company have been duly authorized by the Company and, when executed and
delivered by the Company, will
<PAGE>
constitute the legal, valid and binding of the Company, enforceable against
the Company in accordance with its terms.
(c) No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing with, any federal,
state, local foreign or other governmental authority, or any court or other
tribunal, or any self-regulatory organization, is required by the Company for
the execution, delivery or performance by the Company of this Agreement or the
issuance and sale of the Purchased Stock, except for the consent of NASDAQ
(National Association of Securities Dealers Automated Quotation System).
(d) No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company
is a party or to which any of its properties or assets (including, without
limitation, any properties to which the Company holds a license from another
party) are subject (the "Material Contracts") is required for the issuance and
sale of the Purchased Stock.
(e) The issuance and sale of the Purchased Stock will not
violate or result in a material breach of, conflict with (with or without the
giving of notice or the passage of time or both) or entitle any party to
terminate or call a default under any Material Contract or violate or result
in a breach of any term of the articles of incorporation or by-laws of, or
conflict with any law, rule, regulation, contract, order, judgment or decree
binding upon the Company or to which any of its operations, businesses,
properties or assets (including, without limitation, any properties to which
the Company holds a license from another party) are subject.
(f) This offering is being made by the Company in reliance on
section 506 of Regulation D ("Regulation D") promulgated under the Act. The
Company has delivered to the Purchaser the following documents with respect to
the Company: the 10-K, the Company's Quarterly Report on Form 10-Q and the
proxy statement relating to the Company's Annual Stockholders Meeting to be
held July 8, 1996.
(g) The Disclosure Documents do not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
4. Representations, Warranties and Agreements of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants and agrees with,
the Company as follows:
<PAGE>
(a) The Purchaser is an "Accredited Investor" as that term is
defined in Section (a) of Regulation D. The Purchaser is not affiliated with a
member of the National Association of Securities Dealers, Inc.
(b) The Purchaser is duly authorized to execute this Agreement
and this Agreement constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms.
(c) The Purchaser has been advised by the Company that none of
the shares of Purchased Stock have been registered under the Act, that the
Purchased Stock will be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act and Regulation D promulgated thereunder
relating to transactions by an issuer not involving any public offering and
under similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any federal or
state agency or self-regulatory organization where an exemption is being
relied upon, and that the Company's reliance thereon is based in part upon the
representations made by the Purchaser in this Agreement. The Purchaser
acknowledges that the Purchaser has been informed by the Company of, or is
otherwise familiar with, the nature of the limitations imposed by the Act and
the rules and regulations thereunder on the transfer of securities. In
particular, the Purchaser agrees that no sale, assignment or transfer, of any
of the Purchased Stock shall be valid or effective, and the Company shall not
be required to give effect to such a sale, assignment or transfer, unless (i)
the sale, assignment or transfer of the Purchased Stock is registered under
the Act, it being understood that the Purchased Stock is not currently
registered for sale, or (ii) the Purchased Stock is sold, assigned or
transferred in accordance with all the requirements and limitations of Rule
144 under the Act, it being understood that Rule 144 is not available at the
present time for the Purchased Stock, or (iii) such sale, assignment or
transfer is otherwise exempt under the Act. The Purchaser further understands
that an opinion of counsel reasonably satisfactory to the Company and other
documents may be required to transfer the Purchased Stock. The Purchaser
acknowledges that the Purchased Stock shall be subject to a stop transfer
order and the certificate or certificates evidencing the Purchased Stock shall
bear the following legend or a substantially similar legend and other legends
as may be required by state blue sky laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the Act"),
or any state securities laws and neither such securities nor any
intrerest therein may be offered, sold, pledged, assigned or
otherwise transferred unless (1) a registration statement with
respect thereto is effective under the Act and any applicable state
securities laws or (2) the Company receives an opinion of counsel to
the holder of such securities, which opinion is reasonably
satisfactory to the Company, that such securities may be offered,
<PAGE>
sold, pledged, assigned or transferred in the manner contemplated
without an effective registration statement under the Act or
applicable state securities laws."
(d) The Purchaser will acquire the Purchased Stock for the
Purchaser's own account for investment purposes only and not with a view to
the resale or distribution thereof or the granting of any participation
therein, and has no present intention of reselling or distributing to others
any of such interest or granting any participation therein.
(e) The Purchaser has been given the opportunity to investigate
and ask questions regarding the Disclosure Documents and has formed its own
opinion regarding its investment in the Purchased Stock.
5. Registration Rights. Beginning ninety days after the date hereof,
the holders of the Common Stock being offered in the Private Placement
(collectively, "Private Placement Shares") shall have the right and option, by
written notice to the Company of the holders of at least 50,000 Private
Placement Shares, to require the Company on one occasion only to include the
Private Placement Shares in a registration statement under the Act of Form
S-3, if available, or on Form S-1 if Form S-3 shall not be available (the
"Purchaser's Registration Statement"). In connection with the Purchaser's
Registration Statement:
(a) As promptly as practicable after the date of delivery of
such written notice, the Company will use all reasonable efforts to include in
such registration all the Purchased Shares. It is anticipated that the
Purchaser's Registration Statement shall include the Purchased Shares and all
or a portion of the other Private Placement Shares being offered to other
investors in the Private Placement.
(b) The Company shall use its reasonable efforts to cause the
Purchaser's Registration Statement to become effective as soon as practicable
after filing and remain effective (and the prospectus which shall be a part
thereof to remain current) for a minimum of nine months. If the Purchaser
elects to include his Purchased Shares in the Purchaser's Registration
Statement, the Purchaser (i) will, if requested by counsel to the Company,
enter into an appropriate agreement, in form satisfactory to counsel to the
Company, that he will comply with the prospectus delivery requirements of the
Act and the applicable anti-stabilization, manipulation and similar provisions
of the Securities Exchange Act of 1934, and (ii) agrees not to effect sales
after notice from the Company to suspend sales for such period as reasonably
requested by the Company (the "suspension
<PAGE>
period") to permit the Company to correct or update the Purchaser's
Registration Statement or the accompanying prospectus if required by
applicable law or regulation (and the Company will use all reasonable efforts
to correct or update the Purchaser's Registration Statement as promptly as
practicable); provided, however, that the Company agrees to use all reasonable
efforts to cause the Purchaser's Registration Statement to remain effective,
beyond the nine month period, for an additional period equal to the suspension
period.
(c) The Purchaser shall provide to the Company, for inclusion
in the Purchaser's Registration Statement, such information regarding the
Purchaser and his intended manner of sale under the Purchaser's Registration
Statement as the Company shall reasonably request.
(d) All costs with respect to the preparation and filing of the
registration under federal and state securities laws, and any required filings
with the NASD, shall be borne by the Company, except that the Company shall
not be responsible for bearing the cost of Purchaser's counsel or any
commissions payable by Purchaser upon sale of his Purchased Shares.
(e) The Purchaser acknowledges and agrees that the Company need
not effect a registration statement under this Agreement, if in the written
opinion of counsel for the Company, the Purchaser may sell without
registration under the Act all the Purchased Shares for which he requested
registration under the provisions of the Act and in the manner and in the
quantity in which the Purchased Shares were proposed to be sold.
5. Transferability. Neither this Agreement, nor any interest of the
Company or the Purchaser herein, shall be assignable or transferable in whole
or in part except by operation of law (and except with respect to the
transferability of the Purchased Shares, as set forth herein).
6. Miscellaneous.
(a) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice
or other communication required or permitted to be given hereunder shall be in
writing
<PAGE>
and shall be mailed by certified mail, return receipt requested, or by Federal
Express, Express Mail or similar overnight or courier service or delivered (in
person or by telecopy, telex or similar telecommunications equipment) against
receipt by the party to whom it is to be given:
(i) if to the Company, at
The Care Group, Inc.
1 Hollow Lane
Lake Success, New York 11042; and
(ii) if to the Purchaser, to the address se t forth on
Exhibit A hereto; or (iii) in either case. tpo such other address as the party
shall have furnished in writing in accordance with the provisions of this
Section 6(b). Notice to the estate of any party shall be sufficient if
addresssed to the party as provided in this Section 6(b). Any notice of other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means provided by this Section 6(b) shall be deemed given at the time of
receipt thereof.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties thereto, the successors and assigns of the Company, and
the permitted successors, assigns, heirs and personal representatives of the
Purchaser.
(d) The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of law. Any action arising out of, resulting
from or in any way relating to this Agreement or any alleged breach hereof or
default hereunder or of the warranties and representations contained herein
may be brought in any state or federal court of competent jurisdiction located
in the state, county and city of New York.
The parties have executed this Agreement as of the day and year
set forth above.
<PAGE>
The Care Group, Inc.
/s/Ann T. Mittasch
------------------------------
Ann T. Mittasch, President
THE PURCHASER
/s/ Vicki Barone
------------------------------
Vicki Barone, Vice President
Caribou Capital Group
Custodian for Administrator
Caribou Bridge Fund LLC
SUBSCRIPTION AGREEMENT
Agreement made the 28th day of May, 1996, by and between The Care
Group, Inc., a Delaware corporation (the "Company"), and Carlo Trentini (the
"Purchaser"), an individual or organization residing at or having a principal
office at the address set forth on Exhibit A attached hereto.
1. The Private Placement and Subscription.
(a) This subscription constitutes a portion of a private placement (the
"Private Placement") by the Company to sell up to 1,500,000 shares of its
Common Stock, par value $.001 per share (the "Common Stock"), pursuant to
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act"). Each share of Common Stock offered pursuant to this Subscription
Agreement shall be offered by the Company for $1.00, and all such funds shall
constitute net proceeds to the Company. The Company may offer and sell the
other shares of Common Stock included in the Private Placement to other
investors at different times and/or at different prices (for example, and
without limiting the Company's rights, the Company may sell up to
approximately 500,000 shares of Common Stock in this Private Placement to
certain other investors through a placement agent for a per share purchase
price of $1.125, where the Company will receive net proceeds of $1.00 and the
placement agent will receive a placement agent fee of $.125). The Company
reserves the right to increase or decrease the total number of shares of
Common Stock included in the Private Placement and to engage in other types of
offerings.
(b) The Purchaser, intending to be legally bound, hereby irrevocably
subscribes to purchase from the Company 350,000 shares of the Common Stock, or
such fewer number of shares of Common Stock as the Company shall determine
(the "Purchased Stock" or "Purchased Shares"), at a purchase price of $1.00
per share, for a total of $350,000 (the "Purchase Price"). The Purchaser shall
deliver the full Purchase Price to the Company, in the form of a certified
check, wired money or other immediately available Federal funds, to the
Company no later than May 31, 1996.
2. Sale. The Company hereby agrees to issue and sell to the
Purchaser the Purchased Stock, which shall be validly issued, fully paid and
nonassessable. After the execution hereof and the Company's receipt of the
Purchase Price,will properly deliver one or more certificates evidencing the
same to the Purchaser as the Purchaser reasonably requests.
<PAGE>
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to own, lease, license and use its properties and assets and to carry out its
business in which it is engaged as described in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "10-K") and the
other Disclosure Documents (as defined in paragraph 3(f) below), copies of
which have been delivered to the Purchaser. The Company is duly qualified to
transact the business in which it is engaged as described in the 10-K and is
and will be in good standing as a foreign corporation in every jurisdiction in
which its ownership, leasing, licensing or use of property or assets or the
conduct of its business make such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Company.
(b) The Company has all requisite power and authority to (i)
execute, deliver and perform its obligation under this Agreement and (ii) to
issue and sell the Purchased Stock. All necessary corporate proceedings of the
Company have been duly authorized by the Company and, when executed and
delivered by the Company, will constitute the legal, valid and binding of the
Company, enforceable against the Company in accordance with its terms.
(c) No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing with, any federal,
state, local foreign or other governmental authority, or any court or other
tribunal, or any self-regulatory organization, is required by the Company for
the execution, delivery or performance by the Company of this Agreement or the
issuance and sale of the Purchased Stock, except for the consent of NASDAQ
(National Association of Securities Dealers Automated Quotation System).
(d) No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company
is a party or to which any of its properties or assets (including, without
limitation, any properties to which the Company holds a license from another
party) are subject (the "Material Contracts") is required for the issuance and
sale of the Purchased Stock.
(e) The issuance and sale of the Purchased Stock will not
violate or result in a material breach of, conflict with (with or without the
giving of notice or the passage of time or both) or entitle any party to
terminate or call a default under any Material Contract or violate or result
in a breach of any term of the articles of incorporation or by-laws of, or
conflict with any law, rule, regulation, contract, order,
<PAGE>
judgment or decree binding upon the Company or to which any of its operations,
businesses, properties or assets (including, without limitation, any
properties to which the Company holds a license from another party) are
subject.
(f) This offering is being made by the Company in reliance on
section 506 of Regulation D ("Regulation D") promulgated under the Act. The
Company has delivered to the Purchaser the following documents with respect to
the Company: the 10-K, the Company's Quarterly Report on Form 10-Q and the
proxy statement relating to the Company's Annual Stockholders Meeting to be
held July 8, 1996.
(g) The Disclosure Documents do not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
4. Representations, Warranties and Agreements of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants and agrees with,
the Company as follows:
(a) The Purchaser is an "Accredited Investor" as that term is
defined in Section (a) of Regulation D. The Purchaser is not affiliated with a
member of the National Association of Securities Dealers, Inc.
(b) The Purchaser is duly authorized to execute this Agreement
and this Agreement constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms.
(c) The Purchaser has been advised by the Company that none of
the shares of Purchased Stock have been registered under the Act, that the
Purchased Stock will be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act and Regulation D promulgated thereunder
relating to transactions by an issuer not involving any public offering and
under similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any federal or
state agency or self-regulatory organization where an exemption is being
relied upon, and that the Company's reliance thereon is based in part upon the
representations made by the Purchaser in this Agreement. The Purchaser
acknowledges that the Purchaser has been informed by the Company of, or is
otherwise familiar with, the nature of the limitations imposed by the Act and
the rules and regulations thereunder on the transfer of securities. In
particular, the Purchaser agrees that no sale, assignment or transfer, of any
of the Purchased Stock shall be valid or effective, and the Company shall not
be required to give effect to such a sale, assignment or transfer, unless (i)
the sale, assignment or
<PAGE>
transfer of the Purchased Stock is registered under the Act, it being
understood that the Purchased Stock is not currently registered for sale, or
(ii) the Purchased Stock is sold, assigned or transferred in accordance with
all the requirements and limitations of Rule 144 under the Act, it being
understood that Rule 144 is not available at the present time for the
Purchased Stock, or (iii) such sale, assignment or transfer is otherwise
exempt under the Act. The Purchaser further understands that an opinion of
counsel reasonably satisfactory to the Company and other documents may be
required to transfer the Purchased Stock. The Purchaser acknowledges that the
Purchased Stock shall be subject to a stop transfer order and the certificate
or certificates evidencing the Purchased Stock shall bear the following legend
or a substantially similar legend and other legends as may be required by
state blue sky laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the Act"),
or any state securities laws and neither such securities nor any
intrerest therein may be offered, sold, pledged, assigned or
otherwise transferred unless (1) a registration statement with
respect thereto is effective under the Act and any applicable state
securities laws or (2) the Company receives an opinion of counsel to
the holder of such securities, which opinion is reasonably
satisfactory to the Company, that such securities may be offered,
sold, pledged, assigned or transferred in the manner contemplated
without an effective registration statement under the Act or
applicable state securities laws."
(d) The Purchaser will acquire the Purchased Stock for the
Purchaser's own account for investment purposes only and not with a view to
the resale or distribution thereof or the granting of any participation
therein, and has no present intention of reselling or distributing to others
any of such interest or granting any participation therein.
(e) The Purchaser has been given the opportunity to investigate
and ask questions regarding the Disclosure Documents and has formed its own
opinion regarding its investment in the Purchased Stock.
(f) If the Purchaser is a member of the National Association of
Securities Dealers, Inc. ("NASD") or a person associated with a member of the
NASD, then the Purchaser shall, in connection with the transactions
contemplated by this Agreement, comply with the rules and regulations of the
NASD, including but not limited to the NASD Corporate Financing Rule, if
applicable.
<PAGE>
5. Registration Rights. Beginning seventy-five days after the date
hereof, the holders of the Common Stock being offered in the Private Placement
(collectively, "Private Placement Shares") shall have the right and option, by
written notice to the Company of the holders of at least 50,000 Private
Placement Shares, to require the Company on one occasion only to include the
Private Placement Shares in a registration statement under the Act of Form
S-3, if available, or on Form S-1 if Form S-3 shall not be available (the
"Purchaser's Registration Statement"). In connection with the Purchaser's
Registration Statement:
(a) As promptly as practicable after the date of delivery of
such written notice, the Company will use all reasonable efforts to include in
such registration all the Purchased Shares. It is anticipated that the
Purchaser's Registration Statement shall include the Purchased Shares and all
or a portion of the other Private Placement Shares being offered to other
investors in the Private Placement.
(b) The Company shall use its reasonable efforts to cause the
Purchaser's Registration Statement to become effective as soon as practicable
after filing and remain effective (and the prospectus which shall be a part
thereof to remain current) for a minimum of nine months. If the Purchaser
elects to include his Purchased Shares in the Purchaser's Registration
Statement, the Purchaser (i) will, if requested by counsel to the Company,
enter into an appropriate agreement, in form satisfactory to counsel to the
Company, that he will comply with the prospectus delivery requirements of the
Act and the applicable anti-stabilization, manipulation and similar provisions
of the Securities Exchange Act of 1934, and (ii) agrees not to effect sales
after notice from the Company to suspend sales for such period as reasonably
requested by the Company (the "suspension period") to permit the Company to
correct or update the Purchaser's Registration Statement or the accompanying
prospectus if required by applicable law or regulation (and the Company will
use all reasonable efforts to correct or update the Purchaser's Registration
Statement as promptly as practicable); provided, however, that the Company
agrees to use all reasonable efforts to cause the Purchaser's Registration
Statement to remain effective, beyond the nine month period, for an additional
period equal to the suspension period.
(c) The Purchaser shall provide to the Company, for inclusion in
the Purchaser's Registration Statement, such information regarding the
Purchaser and his intended manner of sale under the Purchaser's Registration
Statement as the Company shall reasonably request.
(d) All costs with respect to the preparation and filing of the
registration under federal and state securities laws, and any required filings
with the NASD, shall be borne by the Company, except that the Company shall
not be responsible
<PAGE>
for bearing the cost of Purchaser's counsel or any commissions payable by
Purchaser upon sale of his Purchased Shares.
(e) The Purchaser acknowledges and agrees that the Company need
not effect a registration statement under this Agreement, if in the written
opinion of counsel for the Company, the Purchaser may sell without
registration under the Act all the Purchased Shares for which he requested
registration under the provisions of the Act and in the manner and in the
quantity in which the Purchased Shares were proposed to be sold.
5. Transferability. Neither this Agreement, nor any interest of the
Company or the Purchaser herein, shall be assignable or transferable in whole
or in part except by operation of law (and except with respect to the
transferability of the Purchased Shares, as set forth herein).
6. Miscellaneous.
(a) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or by
Federal Express, Express Mail or similar overnight or courier service or
delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt by the party to whom it is to be given:
(i) if to the Company, at
The Care Group, Inc.
1 Hollow Lane
Lake Success, New York 11042; and
(ii) if to the Purchaser, to the address se t forth on
Exhibit A hereto; or (iii) in either case. tpo such other address as the party
shall have furnished in writing in accordance with the provisions of this
Section 6(b). Notice to the estate of any party shall be sufficient if
addresssed to the party as provided in this Section 6(b). Any notice of other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means provided by this Section 6(b) shall be deemed given at the time of
receipt thereof.
<PAGE>
(c) This Agreement shall be binding upon and inure to the
benefit of the parties thereto, the successors and assigns of the Company, and
the permitted successors, assigns, heirs and personal representatives of the
Purchaser.
(d) The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of law. Any action arising out of, resulting
from or in any way relating to this Agreement or any alleged breach hereof or
default hereunder or of the warranties and representations contained herein
may be brought in any state or federal court of competent jurisdiction located
in the state, county and city of New York.
The parties have executed this Agreement as of the
day and year set forth above.
The Care Group, Inc.
/s/Ann T. Mittasch
------------------------------
Ann T. Mittasch, President
THE PURCHASER
/s/Carlo Trentini
------------------------------
<PAGE>
STATEMENT OF EQUITY OWNER OF PURCHASER
The undersigned states that he [she] qualifies as an accredited investor
by being (i) a natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his or her purchase exceeds $1,000,000
or (ii) a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year. The Purchaser's address is:
Via Torricelli 37A, CH-6900 Lugano, Switzerland.
-------------------------------------
Dated: May , 1996
SUBSCRIPTION AGREEMENT
Agreement made the 14th day of June, 1996, by and between The Care
Group, Inc., a Delaware corporation (the "Company"), and Barbara Weiss Bianco
(the "Purchaser"), an individual or organization residing at or having a
principal office at the address set forth on Exhibit A attached hereto.
1. The Private Placement and Subscription.
(a) This subscription constitutes a portion of a private placement (the
"Private Placement") by the Company to sell up to 1,500,000 shares of its
Common Stock, par value $.001 per share (the "Common Stock"), pursuant to
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act"). Each share of Common Stock offered pursuant to this Subscription
Agreement shall be offered by the Company for $1.00, and all such funds shall
constitute net proceeds to the Company. The Company may offer and sell the
other shares of Common Stock included in the Private Placement to other
investors at different times and/or at different prices (for example, and
without limiting the Company's rights, the Company may sell up to
approximately 500,000 shares of Common Stock in this Private Placement to
certain other investors through a placement agent for a per share purchase
price of $1.125, where the Company will receive net proceeds of $1.00 and the
placement agent will receive a placement agent fee of $.125). The Company
reserves the right to increase or decrease the total number of shares of
Common Stock included in the Private Placement and to engage in other types of
offerings. The shares of Common Stock offered pursuant to this Subscription
Agreement are being offered directly by the Company, and no placement agent is
being used.
(b) The Purchaser, intending to be legally bound, hereby irrevocably
subscribes to purchase from the Company 50,000 shares of the Common Stock, or
such fewer number of shares of Common Stock as the Company shall determine
(the "Purchased Stock" or "Purchased Shares"), at a purchase price of $1.00
per share, for a total of $50,000 (the "Purchase Price"). The Purchaser shall
deliver the full Purchase Price to the Company, in the form of a certified
check, wired money or other immediately available Federal funds, to the
Company no later than June 19, 1996. The Company, in its sole and absolute
discretion, shall have the right to reduce the number of shares of Common
Stock that the Purchaser shall be entitled to purchase from the number of
shares subscribed for hereunder by sending to the Purchaser, no later than
July 20, 1996 (i) a written notice stating the reduced number of shares of
Common Stock that the Purchaser shall have purchased hereunder, and (ii) a
check for such portion of the Purchase Price that represents the number of
shares that the Company shall have eliminated from the Purchaser's
subscription ($1.00 per eliminated share). The Purchaser shall remain legally
obligated to purchase all such reduced number of shares of Common Stock..
(Thus, by
<PAGE>
way of example, if the Purchaser initially subscribes for 100,000 shares and
sends the Company a check for $100,000, and the Company reduces the number to
80,000, then the Company shall send to the Purchaser a check for $20,000, and
the Purchaser shall remain legally obligated to purchase the remaining 80,000
shares, and such 80,000 shares shall be deemed "Purchased Shares" or
"Purchased Stock" hereunder.). In addition, the Company reserves the right to
reject the Purchaser's subscription in whole or in part.
2. Sale. The Company hereby agrees to issue and sell to the
Purchaser the Purchased Shares, subject to the Company's right to reduce the
number of Purchased Shares which the Company shall be entitled to sell to the
Purchaser or to reject the Purchaser's subscription, as set forth in Section
1(b). The Purchased Shares, upon issuance and sale by the Company to the
Purchaser, shall be validly issued, fully paid and nonassessable. After the
execution hereof and the Company's receipt of the Purchase Price, but no later
than July 20, 1996, the Company will promptly deliver one or more certificates
(as the Purchaser reasonably requests) evidencing the number of shares of
Common Stock purchased by the Purchaser hereunder (subject to the Company's
right to reduce the Purchaser's subscription as set forth above).
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to own, lease, license and use its properties and assets and to carry out its
business in which it is engaged as described in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "10-K") and the
other Disclosure Documents (as defined in paragraph 3(f) below), copies of
which have been delivered to the Purchaser. The Company is duly qualified to
transact the business in which it is engaged as described in the 10-K and is
and will be in good standing as a foreign corporation in every jurisdiction in
which its ownership, leasing, licensing or use of property or assets or the
conduct of its business make such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Company.
(b) The Company has all requisite power and authority to (i)
execute, deliver and perform its obligation under this Agreement and (ii) to
issue and sell the Purchased Stock. All necessary corporate proceedings of the
Company have been duly authorized by the Company and, when executed and
delivered by the Company, will constitute the legal, valid and binding of the
Company, enforceable against the Company in accordance with its terms.
<PAGE>
(c) No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing with, any federal,
state, local foreign or other governmental authority, or any court or other
tribunal, or any self-regulatory organization, is required by the Company for
the execution, delivery or performance by the Company of this Agreement or the
issuance and sale of the Purchased Stock, except for the consent of NASDAQ
(National Association of Securities Dealers Automated Quotation System).
(d) No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company
is a party or to which any of its properties or assets (including, without
limitation, any properties to which the Company holds a license from another
party) are subject (the "Material Contracts") is required for the issuance and
sale of the Purchased Stock.
(e) The issuance and sale of the Purchased Stock will not
violate or result in a material breach of, conflict with (with or without the
giving of notice or the passage of time or both) or entitle any party to
terminate or call a default under any Material Contract or violate or result
in a breach of any term of the articles of incorporation or by-laws of, or
conflict with any law, rule, regulation, contract, order, judgment or decree
binding upon the Company or to which any of its operations, businesses,
properties or assets (including, without limitation, any properties to which
the Company holds a license from another party) are subject.
(f) This offering is being made by the Company in reliance on
Section 506 of Regulation D ("Regulation D") promulgated under the Act. The
Company has delivered to the Purchaser the following documents with respect to
the Company: the 10-K, the Company's Quarterly Report on Form 10-Q, the proxy
statement relating to the Company's Annual Stockholders Meeting to be held
July 8, 1996 and the statement of investment considerations dated June 10,
1996 entitled "The Care Group, Inc. Investment Considerations" (collectively,
the "Disclosure Documents").
(g) The Disclosure Documents do not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
4. Representations, Warranties and Agreements of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants and agrees with,
the Company as follows:
<PAGE>
(a) The Purchaser is an "Accredited Investor" as that term is
defined in Section (a) of Regulation D. The Purchaser is affiliated with a
member of the National Association of Securities Dealers, Inc.
(b) The Purchaser is duly authorized to execute this Agreement
and this Agreement constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms. The
transactions contemplated by this Agreement do not violate any law, rule or
regulation to which the Purchaser is subject or by which the Purchaser is
bound, and the Purchaser is not required to receive the prior consent of any
governmental, regulatory or other agency in connection with any of the
transactions contemplated hereunder.
(c) The Purchaser has been advised by the Company that none of
the shares of Purchased Stock have been registered under the Act, that the
Purchased Stock will be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act and Regulation D promulgated thereunder
relating to transactions by an issuer not involving any public offering and
under similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any federal or
state agency or self-regulatory organization where an exemption is being
relied upon, and that the Company's reliance thereon is based in part upon the
representations made by the Purchaser in this Agreement. The Purchaser
acknowledges that the Purchaser has been informed by the Company of, or is
otherwise familiar with, the nature of the limitations imposed by the Act and
the rules and regulations thereunder on the transfer of securities. In
particular, the Purchaser agrees that no sale, assignment or transfer, of any
of the Purchased Stock shall be valid or effective, and the Company shall not
be required to give effect to such a sale, assignment or transfer, unless (i)
the sale, assignment or transfer of the Purchased Stock is registered under
the Act, it being understood that the Purchased Stock is not currently
registered for sale, or (ii) the Purchased Stock is sold, assigned or
transferred in accordance with all the requirements and limitations of Rule
144 under the Act, it being understood that Rule 144 is not available at the
present time for the Purchased Stock, or (iii) such sale, assignment or
transfer is otherwise exempt under the Act. The Purchaser further understands
that an opinion of counsel reasonably satisfactory to the Company and other
documents may be required to transfer the Purchased Stock. The Purchaser
acknowledges that the Purchased Stock shall be subject to a stop transfer
order and the certificate or certificates evidencing the Purchased Stock shall
bear the following legend or a substantially similar legend and other legends
as may be required by state blue sky laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the Act"),
or any state securities laws and neither such securities nor any
intrerest therein may be offered, sold, pledged, assigned or
otherwise transferred unless (1) a registration statement with
<PAGE>
respect thereto is effective under the Act and any applicable state
securities laws or (2) the Company receives an opinion of counsel to
the holder of such securities, which opinion is reasonably
satisfactory to the Company, that such securities may be offered,
sold, pledged, assigned or transferred in the manner contemplated
without an effective registration statement under the Act or
applicable state securities laws."
(d) The Purchaser will acquire the Purchased Stock for the
Purchaser's own account for investment purposes only and not with a view to
the resale or distribution thereof or the granting of any participation
therein, and has no present intention of reselling or distributing to others
any of such interest or granting any participation therein.
(e) The Purchaser has been given the opportunity to investigate
and ask questions regarding the Disclosure Documents and has formed its own
opinion regarding its investment in the Purchased Stock.
(f) If the Purchaser is a member of the National Association of
Securities Dealers, Inc. ("NASD") or a person associated with a member of the
NASD, then the Purchaser shall, in connection with the transactions
contemplated by this Agreement, comply with the rules and regulations of the
NASD, including but not limited to the NASD Corporate Financing Rule, if
applicable.
5. Registration Rights. Beginning seventy-five days after the date
hereof, the holders of the Common Stock being offered in the Private Placement
(collectively, "Private Placement Shares") shall have the right and option, by
written notice to the Company of the holders of at least 50,000 Private
Placement Shares, to require the Company on one occasion only to include the
Private Placement Shares in a registration statement under the Act of Form
S-3, if available, or on Form S-1 if Form S-3 shall not be available (the
"Purchaser's Registration Statement"). In connection with the Purchaser's
Registration Statement:
(a) As promptly as practicable after the date of delivery of
such written notice, the Company will use all reasonable efforts to include in
such registration all the Purchased Shares. It is anticipated that the
Purchaser's Registration Statement shall include the Purchased Shares and all
or a portion of the other Private Placement Shares being offered to other
investors in the Private Placement.
<PAGE>
(b) The Company shall use its reasonable efforts to cause the
Purchaser's Registration Statement to become effective as soon as practicable
after filing and remain effective (and the prospectus which shall be a part
thereof to remain current) for a minimum of nine months. If the Purchaser
elects to include his Purchased Shares in the Purchaser's Registration
Statement, the Purchaser (i) will, if requested by counsel to the Company,
enter into an appropriate agreement, in form satisfactory to counsel to the
Company, that he will comply with the prospectus delivery requirements of the
Act and the applicable anti-stabilization, manipulation and similar provisions
of the Securities Exchange Act of 1934, and (ii) agrees not to effect sales
after notice from the Company to suspend sales for such period as reasonably
requested by the Company (the "suspension period") to permit the Company to
correct or update the Purchaser's Registration Statement or the accompanying
prospectus if required by applicable law or regulation (and the Company will
use all reasonable efforts to correct or update the Purchaser's Registration
Statement as promptly as practicable); provided, however, that the Company
agrees to use all reasonable efforts to cause the Purchaser's Registration
Statement to remain effective, beyond the nine month period, for an additional
period equal to the suspension period.
(c) The Purchaser shall provide to the Company, for inclusion in
the Purchaser's Registration Statement, such information regarding the
Purchaser and his intended manner of sale under the Purchaser's Registration
Statement as the Company shall reasonably request.
(d) All costs with respect to the preparation and filing of the
registration under federal and state securities laws, and any required filings
with the NASD, shall be borne by the Company, except that the Company shall
not be responsible for bearing the cost of Purchaser's counsel or any
commissions payable by Purchaser upon sale of his Purchased Shares.
(e) The Purchaser acknowledges and agrees that the Company need
not effect a registration statement under this Agreement, if in the written
opinion of counsel for the Company, the Purchaser may sell without
registration under the Act all the Purchased Shares for which he requested
registration under the provisions of the Act and in the manner and in the
quantity in which the Purchased Shares were proposed to be sold.
5. Transferability. Neither this Agreement, nor any interest of the
Company or the Purchaser herein, shall be assignable or transferable in whole
or in part except by operation of law (and except with respect to the
transferability of the Purchased Shares, as set forth herein).
<PAGE>
6. Miscellaneous.
(a) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or by
Federal Express, Express Mail or similar overnight or courier service or
delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt by the party to whom it is to be given:
(i) if to the Company, at
The Care Group, Inc.
1 Hollow Lane
Lake Success, New York 11042; and
(ii) if to the Purchaser, to the address se t forth on
Exhibit A hereto; or (iii) in either case. tpo such other address as the party
shall have furnished in writing in accordance with the provisions of this
Section 6(b). Notice to the estate of any party shall be sufficient if
addresssed to the party as provided in this Section 6(b). Any notice of other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means provided by this Section 6(b) shall be deemed given at the time of
receipt thereof.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties thereto, the successors and assigns of the Company, and
the permitted successors, assigns, heirs and personal representatives of the
Purchaser.
(d) The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of law. Any action arising out of, resulting
from or in any way relating to this Agreement or any alleged breach hereof or
default hereunder or of the warranties and representations contained herein
may be brought in any state or federal court of competent jurisdiction located
in the state, county and city of New York.
The parties have executed this Agreement as of the day and year
set forth above.
The Care Group, Inc.
/s/Ann T. Mittasch
------------------------------
Ann T. Mittasch, President
THE PURCHASER
/s/Barbara Weiss Bianco
------------------------------
EXHIBIT A
STATEMENT OF EQUITY OWNER OR PURCHASER
The undersigned states that he [she] qualifies as an accredited investor
by being (i) a natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of his or her purchase exceeds $1,000,000
or (ii) a natural person who had an individual income in excess of $200,000 in
each of the two most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year; or (iii) [provide other
basis for being an "accredited investor" within the meaning of Regulation D]:
- - - -----------------------------------------------------------------------------
- - - -------------------------------. The Purchaser's address is: Whitehaven, Rte
25A, Old Brookville, NY 11545.
/s/ Barbra Weiss Bianco
----------------------------------------
[Signature of Purchaser]
Dated: June 14, 1996
SUBSCRIPTION AGREEMENT
Agreement made the 19th day of June, 1996, by and between The Care
Group, Inc., a Delaware corporation (the "Company"), and Asset Value Fund LP
(the "Purchaser"), an individual or organization residing at or having a
principal office at the address set forth on Exhibit A attached hereto.
1. The Private Placement and Subscription.
(a) This subscription constitutes a portion of a private placement (the
"Private Placement") by the Company to sell up to 1,500,000 shares of its
Common Stock, par value $.001 per share (the "Common Stock"), pursuant to
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Act"). Each share of Common Stock offered pursuant to this Subscription
Agreement shall be offered by the Company for $1.00, and all such funds shall
constitute net proceeds to the Company. The Company may offer and sell the
other shares of Common Stock included in the Private Placement to other
investors at different times and/or at different prices (for example, and
without limiting the Company's rights, the Company may sell up to
approximately 500,000 shares of Common Stock in this Private Placement to
certain other investors through a placement agent for a per share purchase
price of $1.125, where the Company will receive net proceeds of $1.00 and the
placement agent will receive a placement agent fee of $.125). The Company
reserves the right to increase or decrease the total number of shares of
Common Stock included in the Private Placement and to engage in other types of
offerings. The shares of Common Stock offered pursuant to this Subscription
Agreement are being offered directly by the Company, and no placement agent is
being used.
(b) The Purchaser, intending to be legally bound, hereby irrevocably
subscribes to purchase from the Company 150,000 shares of the Common Stock, or
such fewer number of shares of Common Stock as the Company shall determine
(the "Purchased Stock" or "Purchased Shares"), at a purchase price of $1.00
per share, for a total of $150,000 (the "Purchase Price"). The Purchaser shall
deliver the full Purchase Price to the Company, in the form of a certified
check, wired money or other immediately available Federal funds, to the
Company no later than June 19, 1996. The Company, in its sole and absolute
discretion, shall have the right to reduce the number of shares of Common
Stock that the Purchaser shall be entitled to purchase from the number of
shares subscribed for hereunder by sending to the Purchaser, no later than
July 20, 1996 (i) a written notice stating the reduced number of shares of
Common Stock that the Purchaser shall have purchased hereunder, and (ii) a
check for such portion of the Purchase Price that represents the number of
shares that the Company shall have eliminated from the Purchaser's
subscription ($1.00 per eliminated share). The Purchaser shall remain legally
obligated to purchase all such reduced number of shares of Common Stock.
(Thus, by
<PAGE>
way of example, if the Purchaser initially subscribes for 100,000 shares and
sends the Company a check for $100,000, and the Company reduces the number to
80,000, then the Company shall send to the Purchaser a check for $20,000, and
the Purchaser shall remain legally obligated to purchase the remaining 80,000
shares, and such 80,000 shares shall be deemed "Purchased Shares" or
"Purchased Stock" hereunder.). In addition, the Company reserves the right to
reject the Purchaser's subscription in whole or in part.
2. Sale. The Company hereby agrees to issue and sell to the
Purchaser the Purchased Shares, subject to the Company's right to reduce the
number of Purchased Shares which the Company shall be entitled to sell to the
Purchaser or to reject the Purchaser's subscription, as set forth in Section
1(b). The Purchased Shares, upon issuance and sale by the Company to the
Purchaser, shall be validly issued, fully paid and nonassessable. After the
execution hereof and the Company's receipt of the Purchase Price, but no later
than July 20, 1996, the Company will promptly deliver one or more certificates
(as the Purchaser reasonably requests) evidencing the number of shares of
Common Stock purchased by the Purchaser hereunder (subject to the Company's
right to reduce the Purchaser's subscription as set forth above).
3. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with, the Purchaser as follows:
(a) The Company is duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to own, lease, license and use its properties and assets and to carry out its
business in which it is engaged as described in the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 (the "10-K") and the
other Disclosure Documents (as defined in paragraph 3(f) below), copies of
which have been delivered to the Purchaser. The Company is duly qualified to
transact the business in which it is engaged as described in the 10-K and is
and will be in good standing as a foreign corporation in every jurisdiction in
which its ownership, leasing, licensing or use of property or assets or the
conduct of its business make such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
Company.
(b) The Company has all requisite power and authority to (i)
execute, deliver and perform its obligation under this Agreement and (ii) to
issue and sell the Purchased Stock. All necessary corporate proceedings of the
Company have been duly authorized by the Company and, when executed and
delivered by the Company, will constitute the legal, valid and binding of the
Company, enforceable against the Company in accordance with its terms.
<PAGE>
(c) No consent, authorization, approval, order, license,
certificate or permit of or from, or declaration or filing with, any federal,
state, local foreign or other governmental authority, or any court or other
tribunal, or any self-regulatory organization, is required by the Company for
the execution, delivery or performance by the Company of this Agreement or the
issuance and sale of the Purchased Stock, except for the consent of NASDAQ
(National Association of Securities Dealers Automated Quotation System).
(d) No consent of any party to any contract, agreement,
instrument, lease, license, arrangement or understanding to which the Company
is a party or to which any of its properties or assets (including, without
limitation, any properties to which the Company holds a license from another
party) are subject (the "Material Contracts") is required for the issuance and
sale of the Purchased Stock.
(e) The issuance and sale of the Purchased Stock will not
violate or result in a material breach of, conflict with (with or without the
giving of notice or the passage of time or both) or entitle any party to
terminate or call a default under any Material Contract or violate or result
in a breach of any term of the articles of incorporation or by-laws of, or
conflict with any law, rule, regulation, contract, order, judgment or decree
binding upon the Company or to which any of its operations, businesses,
properties or assets (including, without limitation, any properties to which
the Company holds a license from another party) are subject.
(f) This offering is being made by the Company in reliance on
section 506 of Regulation D ("Regulation D") promulgated under the Act. The
Company has delivered to the Purchaser the following documents with respect to
the Company: the 10-K, the Company's Quarterly Report on Form 10-Q, the proxy
statement relating to the Company's Annual Stockholders Meeting to be held
July 8, 1996 and the statement of investment considerations dated June 10,
1996 entitled "The Care Group, Inc. Investment Considerations" (collectively,
the "Disclosure Documents").
(g) The Disclosure Documents do not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
4. Representations, Warranties and Agreements of the Purchaser. The
Purchaser hereby represents and warrants to, and covenants and agrees with,
the Company as follows:
<PAGE>
(a) The Purchaser is an "Accredited Investor" as that term is
defined in Section (a) of Regulation D. The Purchaser is [is not] affiliated
with a member of the National Association of Securities Dealers, Inc.
(b) The Purchaser is duly authorized to execute this Agreement
and this Agreement constitutes the legal, valid and binding obligation of the
Purchaser enforceable against the Purchaser in accordance with its terms. The
transactions contemplated by this Agreement do not violate any law, rule or
regulation to which the Purchaser is subject or by which the Purchaser is
bound, and the Purchaser is not required to receive the prior consent of any
governmental, regulatory or other agency in connection with any of the
transactions contemplated hereunder.
(c) The Purchaser has been advised by the Company that none of
the shares of Purchased Stock have been registered under the Act, that the
Purchased Stock will be issued on the basis of the statutory exemption
provided by Section 4(2) of the Act and Regulation D promulgated thereunder
relating to transactions by an issuer not involving any public offering and
under similar exemptions under certain state securities laws, that this
transaction has not been reviewed by, passed on or submitted to any federal or
state agency or self-regulatory organization where an exemption is being
relied upon, and that the Company's reliance thereon is based in part upon the
representations made by the Purchaser in this Agreement. The Purchaser
acknowledges that the Purchaser has been informed by the Company of, or is
otherwise familiar with, the nature of the limitations imposed by the Act and
the rules and regulations thereunder on the transfer of securities. In
particular, the Purchaser agrees that no sale, assignment or transfer, of any
of the Purchased Stock shall be valid or effective, and the Company shall not
be required to give effect to such a sale, assignment or transfer, unless (i)
the sale, assignment or transfer of the Purchased Stock is registered under
the Act, it being understood that the Purchased Stock is not currently
registered for sale, or (ii) the Purchased Stock is sold, assigned or
transferred in accordance with all the requirements and limitations of Rule
144 under the Act, it being understood that Rule 144 is not available at the
present time for the Purchased Stock, or (iii) such sale, assignment or
transfer is otherwise exempt under the Act. The Purchaser further understands
that an opinion of counsel reasonably satisfactory to the Company and other
documents may be required to transfer the Purchased Stock. The Purchaser
acknowledges that the Purchased Stock shall be subject to a stop transfer
order and the certificate or certificates evidencing the Purchased Stock shall
bear the following legend or a substantially similar legend and other legends
as may be required by state blue sky laws:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the Act"),
or any state securities laws and neither such securities nor any
intrerest therein may be offered, sold, pledged, assigned or
otherwise transferred unless (1) a registration statement with
<PAGE>
respect thereto is effective under the Act and any applicable state
securities laws or (2) the Company receives an opinion of counsel to
the holder of such securities, which opinion is reasonably
satisfactory to the Company, that such securities may be offered,
sold, pledged, assigned or transferred in the manner contemplated
without an effective registration statement under the Act or
applicable state securities laws."
(d) The Purchaser will acquire the Purchased Stock for the
Purchaser's own account for investment purposes only and not with a view to
the resale or distribution thereof or the granting of any participation
therein, and has no present intention of reselling or distributing to others
any of such interest or granting any participation therein.
(e) The Purchaser has been given the opportunity to investigate
and ask questions regarding the Disclosure Documents and has formed its own
opinion regarding its investment in the Purchased Stock.
(f) If the Purchaser is a member of the National Association of
Securities Dealers, Inc. ("NASD") or a person associated with a member of the
NASD, then the Purchaser shall, in connection with the transactions
contemplated by this Agreement, comply with the rules and regulations of the
NASD, including but not limited to the NASD Corporate Financing Rule, if
applicable.
5. Registration Rights. Beginning seventy-five days after the date
hereof, the holders of the Common Stock being offered in the Private Placement
(collectively, "Private Placement Shares") shall have the right and option, by
written notice to the Company of the holders of at least 50,000 Private
Placement Shares, to require the Company on one occasion only to include the
Private Placement Shares in a registration statement under the Act of Form
S-3, if available, or on Form S-1 if Form S-3 shall not be available (the
"Purchaser's Registration Statement"). In connection with the Purchaser's
Registration Statement:
(a) As promptly as practicable after the date of delivery of
such written notice, the Company will use all reasonable efforts to include in
such registration all the Purchased Shares. It is anticipated that the
Purchaser's Registration Statement shall include the Purchased Shares and all
or a portion of the other Private Placement Shares being offered to other
investors in the Private Placement.
<PAGE>
(b) The Company shall use its reasonable efforts to cause the
Purchaser's Registration Statement to become effective as soon as practicable
after filing and remain effective (and the prospectus which shall be a part
thereof to remain current) for a minimum of nine months. If the Purchaser
elects to include his Purchased Shares in the Purchaser's Registration
Statement, the Purchaser (i) will, if requested by counsel to the Company,
enter into an appropriate agreement, in form satisfactory to counsel to the
Company, that he will comply with the prospectus delivery requirements of the
Act and the applicable anti-stabilization, manipulation and similar provisions
of the Securities Exchange Act of 1934, and (ii) agrees not to effect sales
after notice from the Company to suspend sales for such period as reasonably
requested by the Company (the "suspension period") to permit the Company to
correct or update the Purchaser's Registration Statement or the accompanying
prospectus if required by applicable law or regulation (and the Company will
use all reasonable efforts to correct or update the Purchaser's Registration
Statement as promptly as practicable); provided, however, that the Company
agrees to use all reasonable efforts to cause the Purchaser's Registration
Statement to remain effective, beyond the nine month period, for an additional
period equal to the suspension period.
(c) The Purchaser shall provide to the Company, for inclusion in
the Purchaser's Registration Statement, such information regarding the
Purchaser and his intended manner of sale under the Purchaser's Registration
Statement as the Company shall reasonably request.
(d) All costs with respect to the preparation and filing of the
registration under federal and state securities laws, and any required filings
with the NASD, shall be borne by the Company, except that the Company shall
not be responsible for bearing the cost of Purchaser's counsel or any
commissions payable by Purchaser upon sale of his Purchased Shares.
(e) The Purchaser acknowledges and agrees that the Company need
not effect a registration statement under this Agreement, if in the written
opinion of counsel for the Company, the Purchaser may sell without
registration under the Act all the Purchased Shares for which he requested
registration under the provisions of the Act and in the manner and in the
quantity in which the Purchased Shares were proposed to be sold.
5. Transferability. Neither this Agreement, nor any interest of the
Company or the Purchaser herein, shall be assignable or transferable in whole
or in part except by operation of law (and except with respect to the
transferability of the Purchased Shares, as set forth herein).
<PAGE>
6. Miscellaneous.
(a) This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof, supersedes all existing
agreements among them concerning such subject matter, and may be modified only
by a written instrument duly executed by the party to be charged.
(b) Except as otherwise specifically provided herein, any notice
or other communication required or permitted to be given hereunder shall be in
writing and shall be mailed by certified mail, return receipt requested, or by
Federal Express, Express Mail or similar overnight or courier service or
delivered (in person or by telecopy, telex or similar telecommunications
equipment) against receipt by the party to whom it is to be given:
(i) if to the Company, at
The Care Group, Inc.
1 Hollow Lane
Lake Success, New York 11042; and
(ii) if to the Purchaser, to the address se t forth on
Exhibit A hereto; or (iii) in either case. tpo such other address as the party
shall have furnished in writing in accordance with the provisions of this
Section 6(b). Notice to the estate of any party shall be sufficient if
addresssed to the party as provided in this Section 6(b). Any notice of other
communication given by certified mail shall be deemed given at the time of
certification thereof, except for a notice changing a party address which
shall be deemed given at the time of receipt thereof. Any notice given by
other means provided by this Section 6(b) shall be deemed given at the time of
receipt thereof.
(c) This Agreement shall be binding upon and inure to the
benefit of the parties thereto, the successors and assigns of the Company, and
the permitted successors, assigns, heirs and personal representatives of the
Purchaser.
(d) The headings of this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation
of this Agreement.
(e) This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
(f) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of law. Any action arising out of, resulting
from or in any way relating to this Agreement or any alleged breach hereof or
default hereunder or of the warranties and representations contained herein
may be brought in any state or federal court of competent jurisdiction located
in the state, county and city of New York.
The parties have executed this Agreement as of the day and year
set forth above.
The Care Group, Inc.
/s/Ann T. Mittasch
------------------------------
Ann T. Mittasch, President
ASSET VALUE FUND LIMITED
PARTNERSHIP
THE PURCHASER
By: ASSET VALUE MANAGEMENT, INC.
GENERAL PARTNER
/s/ John W. Galuchie, Jr.
------------------------------
By: John W. Galuchie, Jr.
Treasurer & Secretary
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF PENNSYLVANIA
- - - ----------------------------------)
UNITED STATES OF AMERICA, )
ex rel., CHRISTOPHER PIACENTILE, )
)
Plaintiff, )
)
V. ) CIVIL ACTION NO. 93-CV-5773
)
ROBERT P. WOLK, ADVANCED CARE )
ASSOCIATES, INC., ROBERT MILLER, )
HARRIET WOLK AND ANNE MILLER )
)
Defendants. )
- - - ----------------------------------)
SETTLEMENT AGREEMENT
---------------------
This Settlement Agreement ("Agreement") is entered into between and among
the United States of America, acting through the United States Attorney for
the Eastern District of Pennsylvania, and the Office of the Inspector General
of the United States Department of Health and Human Services ("HHS/OIG")
(collectively, the "United States"), and Advanced Care Associates, Inc.
("Advanced Care"), Robert Wolk and Harriet Wolk (collectively "Wolk"), Robert
Miller and Anne Miller (collectively "Miller"), (hereinafter collectively the
"Defendants") and the Care Group, Inc. as guarantor set forth below
("Guarantor"), Christopher Piacentile, as the relator ("Relator"), and Piper &
Marbury, L.L.P., as counsel for the Relator.
<PAGE>
PREAMBLE
--------
WHEREAS, from 1989 through May 1994 Advanced Care contracted with the
Department of Health and Human Services ("HHS") to furnish services to
Medicare beneficiaries in the Medicare Part B Program as a health care
provider and has submitted claims for reimbursement of durable medical
equipment (including lymphedema pumps and appliances, TENS units and CPM
devices) to Medicare carriers in various States, including Pennsylvania and
Southern California.
WHEREAS, from 1989 through May 1994 Robert Wolk and Robert Miller were
owners of Advanced Care Associates;
WHEREAS, during all or part of the period from 1989 through May 1994
Harriet Wolk was the office manager at Advanced Care.
WHEREAS, during all or part of the period from 1989 through May 1994 Anne
Miller was an administrative assistant employed by Advanced Care.
WHEREAS, on November 1, 1993 the Relator filed a complaint in the United
States District Court for the Eastern District of Pennsylvania on behalf of
the United States, captioned United States of America, ex. rel. Christopher
Piacentile V. Robert P. Wolk Advanced Care Associates, Inc., Robert Roe,
Sandra Doe, and Sheri Smith, Civil Action No. 93-5773 (the "Qui Tam
Action"), alleging that the Defendants violated the civil False Claims Act 31
U.S.C. Section 3729(a);
<PAGE>
WHEREAS, on May 24, 1994, the United States, pursuant to 31 U.S.C. Section
3730 (b)(4) elected to intervene in the Qui Tam Action;
WHEREAS, the United States filed an amended complaint on September 29,
1994, captioned United States of America, ex. rel., Christopher Piacentile v.
Robert Wolk, Advanced Care Associates, Inc., and Robert Miller, Civil Action
No. 93-5773
WHEREAS, the United States filed a second amended complaint in this
matter, under seal on March 20, 1995, captioned United States of America ex.
rel., Christopher Piacentile V. Robert P. Wolk, Advanced Care Associates,
Inc., Robert Miller, Harriet Wolk and Anne Miller, Civil Action No. 93-5773
(hereinafter referred to as the "Civil Action") against Advanced Care, Wolk
and Miller (collectively the "Defendants").
WHEREAS, on November 20, 1995 pursuant to a stipulation the second
amended complaint was unsealed;
WHEREAS, the second amended complaint, attached hereto, alleged that the
Defendants submitted false claims for payment in violation of the False Claims
Act and common law;
WHEREAS, in May 1994 The Care Group, Inc. purchased 100% of the stock of
Advanced Care Associates, Inc., subsequent to the alleged conduct set forth in
the complaint;
WHEREAS, the Defendants specifically deny all claims made by the United
States and the Relator in the complaints;
WHEREAS, the Defendants, the United States and Relator, in order to avoid
the expense and burden of further litigation,
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<PAGE>
mutually desire to reach a final compromise and settlement of this civil
action insofar as it relates to the allegations raised in the second amended
complaint without trial or adjudication of any issue of fact or law and
without the Settlement Agreement constituting evidence of or an admission of
fact or law with respect to any issue;
WHEREAS, the defendant Advanced Care is represented by Harvey Z.
Werblowsky, Esq. of McDermott, Will and Emery, in this matter, and is entering
into this Settlement Agreement after reviewing this Agreement and after
consultation with counsel;
WHEREAS, the Defendants Robert Wolk and Harriet Wolk are represented by
Joel Slomsky, Esq. in this matter, and are entering into this Settlement
Agreement after reviewing this Agreement and after consultation with counsel;
WHEREAS, the Defendants Robert Miller and Anne Miller are represented by
Harry Silver, Esq. of Ober, Kaler, Grimes & Shriver, in this matter, and are
entering into this Settlement Agreement after reviewing this Agreement and
after consultation with counsel;
WHEREAS, the Guarantor, The Care Group is represented by Harvey Z.
Werblowsky, Esq. of McDermott, Will and Emery, in this matter, and is entering
into this Settlement Agreement after reviewing this Agreement and after
consultation with counsel; and
WHEREAS, the Relator, Christopher Piacentile, is represented by Robert
Meister, Esq. of Piper & Marbury, L.L.P., in this matter, and is entering into
this Settlement Agreement
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<PAGE>
after reviewing this Agreement and after consultation with counsel.
TERMS AND CONDITIONS
--------------------
NOW, THEREFORE, in reliance on the representations contained herein and
in consideration of the mutual promises, covenants and obligations in this
Agreement, and for good and valuable consideration, receipt of which is hereby
acknowledged, and with full authority to enter into this Settlement Agreement
and to be bound thereby, the Parties agree as follows:
PAYMENTS
--------
1. a. Advanced Care agrees to pay to the United States the sum of Three
Million Three Hundred Thirty Thousand Dollars and No Cents ($3,330,000.00)
(which includes $1.0 million attributable to the exercise of the "Put" by
the United States as described in paragraph 2) and this sum shall constitute a
debt immediately due and owing to the United States on the date of execution
of this Agreement. The Relator shall receive fifteen percent (15%) of each
payment described in this paragraph pursuant to 31 U.S.C. Section 3730 (d) (1).
Payments shall be made by Advanced Care to the United States as follows:
b. Five Hundred Fifty Thousand Dollars and No Cents ($550,000.00) not
later than ten days after execution of this Agreement, by electronic fund
transfer pursuant to instructions provided by the Office of the United States
Attorney for the Eastern District of Pennsylvania. The United States will pay
to the Relator his share (15%) of the payment that is
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<PAGE>
received from Advanced Care pursuant to the terms of this subparagraph by
delivering a check to the order of Piper and Marbury, L.L.P., as attorneys for
Christopher Piacentile, delivered to Piper & Marbury, L.L.P., 53 Wall Street
New York, New York, 1005-2899, Attention: Robert A. Meister
c. The remaining principal balance, Two Million Seven Hundred and Eighty
Thousand Dollars and No Cents ($2,780,000.00), plus interest, in eighteen (18)
equal quarterly payments, the first payment due and payable ninety (90) days
after the execution of this Agreement and the succeeding quarterly payments
due and payable at three month intervals thereafter until all payments have
been made. Interest shall accrue on the unpaid principal balance at the rate
of nine percent (9%) compounded quarterly from the date of the execution of
this Agreement until the outstanding balance has been paid in full. Payment of
each quarterly payment in the amount of $189,532.60, which includes interest,
shall be made to the United States by electronic fund transfer pursuant to
instructions provided by the Office of the United States Attorney for the
Eastern District of Pennsylvania. The principal and interest included in each
payment is shown on Schedule 1.c. The United States shall pay to the Relator
his share (15%) of the each payment received by the United States pursuant to
this paragraph by delivering a check to the order of Piper and Marbury,
L.L.P., as attorneys for Christopher Piacentile, delivered to Piper &
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<PAGE>
Marbury, L.L.P., 53 Wall Street, New York, N.Y., 10005-2899, Attn: Robert
A. Meister.
d. The United States will make appropriate notifications to the Internal
Revenue Service of all amounts paid to the Relator.
e. Advanced Care agrees to enter into a Consent Judgment in the amount
described in paragraph 1. a. of this Agreement, in the form of the Consent
Judgment attached hereto as Exhibit A and The Care Group agrees to enter into
the Guaranty in the form attached hereto as Exhibit B. The terms of the
Consent Judgment and the Guaranty are incorporated herein by reference as if
fully set forth.
2. The Care Group directs Wolk and Miller to execute on its behalf and
hereby consents to the assignment of Wolk and Miller of the "Put" as defined
in Paragraphs 3b and 4b of the Agreement.
NOTWITHSTANDING, any rights and obligations which Wolk and Miller and The
Care Group had with respect to each other, the U.S. Government shall exercise
the "Put" upon assignment of the Assigned Stock (as hereinafter defined in
paragraphs 3 and 4 of this Agreement) to it from Wolk and Miller and
simultaneously with the execution of this Agreement, and require The Care
Group to redeem the Assigned Stock for the price set forth in the "Put" at
Three Dollars ($3.00) per share, for a total consideration of $1.0 million.
The $1.0 million is payable to the United States as set forth in paragraph 1.
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<PAGE>
No limitations with respect to exercising the "Put" by Wolk and Miller
shall be applicable to the U.S. Government.
3. a. Wolk agrees to pay Six Hundred Thousand Dollars and no cents
($600,000). This sum shall constitute a debt immediately due and owing to the
United States upon execution of the Agreement. The payment of the sum of Six
Hundred Thousand Dollars and no cents ($600,000) shall be paid to the United
States within three days after execution of this Agreement by electronic fund
transfer pursuant to instructions provided by the Office of the United States
Attorney for the Eastern District of Pennsylvania. The United States will pay
to the Relator his share (15%) of the payment that is received from Robert and
Harriet Wolk pursuant to the terms of this subparagraph by delivering a check
to the order of Piper and Marbury, L.L.P., as attorneys for Christopher
Piacentile, delivered to Piper & Marbury, L.L.P., 53 Wall Street New York, New
York, 1005-2899, Attention: Robert A. Meister.
b. Wolk, upon execution of this Agreement by him, and at the direction
of and on behalf of The Care Group, as set forth in paragraph 2, shall assign
over to the United States the 166,666 shares of common stock held by him in
The Care Group (herein referred to as the "Assigned Stock") together with his
right to require The Care Group to purchase and redeem said stock pursuant to
the terms and provisions of the underlying agreements and transactions in
which he received the said shares (herein referred to as the "Put"). Wolk
shall execute such Stock Powers
-8-
<PAGE>
Assigned Stock and that his interest therein have not been heretofore
assigned, liened or otherwise mortgaged, uncumbered or pledged for any purpose
whatsoever.
c. The United States will make notification to the Internal Revenue
Service of the payment to the Relator through a Form 1099 or other appropriate
form.
4. a. Miller agrees to pay to the United States the sum of One Hundred
Thousand Dollars and no cents ($100,000.00), and this sum shall constitute a
debt immediately due and owing to the United States on the date of execution
of this Agreement. The Relator shall receive fifteen percent (15%) of each
payment described in this paragraph (c) below, pursuant to 31 U.S.C. Section
3730 (d)(1).
b. Miller, upon execution of this Agreement by him, and at the direction
of and on behalf of The Care Group, as set forth in paragraph 2, shall assign
over to the United States the 166,666 shares of common stock held by him in
the Care Group (herein referred to as the "Assigned Stock") together with his
right to require the Care Group to purchase and redeem said stock pursuant to
the terms and provisions of the underlying agreements and transactions in
which he received the said shares (herein referred to as the "Put"). Miller
shall execute such Stock Powers and other and related documents as shall be
required by the United States in order to effect a complete divestiture by him
of all interest he has in the said Assigned Stock and transfer thereof to the
United States. Miller warrants and
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<PAGE>
pursuant to the terms and provisions of the underlying agreements and
transactions in which he received the said shares (herein referred to as the
"Put"). Miller shall execute such Stock Powers and other and related documents
as shall be required by the United States in order to effect a complete
divestiture by him of all interest he has in the said Assigned Stock and to
transfer such interest thereof to the United States. Miller warrants and
represents to the United States that, subject to the terms and provisions of
the underlying agreements and transactions in which he received the Assigned
Stock, he has full and absolute title to the Assigned Stock and that his
interest therein has not been heretofore assigned, liened or otherwise
mortgaged, encumbered or pledged for any purpose whatsoever.
c. Payments shall be made by Miller to the United States and the
Relator, as follows:
(1) Beginning twelve months after the execution of this Agreement
Miller shall pay to the United States monthly, in thirty six monthly payments,
Two Thousand Five Hundred Twenty Four Dollars and twenty eight cents ($2524.28),
inclusive of interest calculated at nine percent (9%) compounded monthly from
the date of the execution of this Agreement. The principal and interest
included in each payment are shown in schedule 4.c(1). All payments shall be
made to the United States by electronic fund transfer pursuant to instructions
provided by the Office of the United States Attorney for the Eastern District
of Pennsylvania. The United States will pay to the Relator his
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<PAGE>
share (15%) of the payment that is received from Miller pursuant to the
terms of this subparagraph by delivering a check to the order of Piper and
Marbury, L.L.P., as attorneys for Christopher Piacentile, delivered to Piper &
Marbury, L.L.P., 53 Wall Street New York, New York, 1005-2899, Attention:
Robert A. Meister.
(2) Thirty Thousand Dollars and No Cents ($30,000.00) plus interest
at nine percent (9%) compounded monthly shall be paid to the United States
forty eight (48) months after the execution of the Agreement, which is the same
date that the last monthly payment required by paragraph 4.c(1) is due to the
United States. The total of this payment including interest is Thirty Nine
Thousand Two Hundred Fifty Nine Dollars and thirty-six cents ($39,259.36). The
United States will pay to the Relator his share (15%) of the payment that is
received from Miller pursuant to the terms of this paragraph by check payable
to the order of Piper & Marbury, L.L.P., as attorneys for Christopher
Piacentile and delivered to Piper & Marbury, L.L.P., 53 Wall Street, New York,
New York 10005-2899, Attention: Robert Meister.
d. The United States will make appropriate notifications to the Internal
Revenue Service of the amounts paid to the Relator.
e. Miller agrees to enter into a Consent Judgment in the amount
described in paragraph 4.a. of this Agreement plus interest, in the form of the
Consent Judgment attached hereto as
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<PAGE>
Exhibit C. The terms of the Consent Judgment are incorporated herein by
reference as if fully set forth.
PREPAYMENT
----------
5. Each of any of the Defendants or The Care Group as the Guarantor may
pay all or any part of the unpaid balance of the settlement amount at any time
prior to the due date of that part of the unpaid balance without incurring any
prepayment premium or penalty.
LATE PAYMENTS: DECLARATION OF DEFAULT
-------------------------------------
ACCELERATION OF PAYMENTS
------------------------
6. a. A five (5) day grace period will be allowed for late payments,
however, without interest. All late payments made from day 6 through day 15
will be subject to a 6% interest payment. In the event a payment owed by any
of the Defendants is not made within the fifteen day period, this may be
considered an Event of Default as described herein. Interest on amounts due
and owing, but not paid within the fifteen day grace period, shall accrue at
the rate of eighteen percent (18%) per annum compounded daily from the date of
the expiration of the fifteen day grace period until the amount outstanding is
paid in full. Upon occurrence of an Event of Default, the United States shall
send by certified mail, return receipt requested, a notice of said default
addressed to the proper defendant at the addresses below with a copy sent to
that defendants' attorney identified in this document. If Advanced Care has
defaulted, the United States
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<PAGE>
shall also send by certified mail, return receipt requested, a notice of
said default addressed to The Care Group. If that defendant or The Care Group
on behalf of Advanced Care cures the default within five business days after
receipt of notice of Event of Default (including payment of all additional
interest and late charges due), then no other action will be taken by the
United States regarding that Event of Default. If the defendant or The Care
Group does not cure such Event of Default within five business days after
receipt of such notice, the United States may, at its option, declare the debt
to be in default, and the full remaining unpaid balance (including all unpaid
principal and unpaid interest due and owing as of the date of payment on
unpaid principal) of the debt shall be accelerated and shall become
immediately due and payable by the defendant and in the case of Advanced Care,
by Advanced Care and The Care Group jointly and severally.
b. If the due date of any of the payments required by this Settlement
Agreement falls on a Saturday, Sunday or national holiday, the payment shall
be due on the next business day following the due date.
NOTIFICATION
------------
Defendants Addresses
--------------------
7. a. Defendants shall be notified at the following addresses:
Robert Wolk and Harriet Wolk
5100 S. Convent Lane #502
Philadelphia, PA 19114
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<PAGE>
Robert and Anne Miller
320 Dundee Drive
Blue Bell, PA 19422
Advanced Care Associates
c/o The Care Group
1 Hollow Lane
Lake Success, NY
b. Guarantor shall be notified at the following address:
The Care Group
1 Hollow Lane
Lake Success, NY
c. The United States shall be notified at the following addresses:
United States Attorney's Office
615 Chestnut Street, Suite 1250
Philadelphia, Pennsylvania 19106
Attn: Susan Dein Bricklin
Assistant United States Attorney
U.S. Department of Justice
Civil Division
Commercial Litigation Branch
P.O. Box 261
Ben Franklin Station
Washington, DC 20044
Attn: Michael F. Hertz, Esq.
Case No. 46-62-2010
c. If any defendant wishes to designate a different address for notice,
or a different attorney representing them in this matter, they must do so
notifying the United States Attorney's Office, Eastern District of
Pennsylvania, Attention: Susan Dein Bricklin, Assistant United States
Attorney, by certified mail, return receipt requested, consistent with this
paragraph.
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<PAGE>
EXCLUSION FROM PROGRAMS
-----------------------
8. a. The United States agrees to release and refrain from instituting or
maintaining any administrative claim or action seeking exclusion from the
Medicare program or state health programs (as defined in 42 U.S.C. Section
1320a-7(h)) against Advanced Care (specifically excluding Wolk and Miller) and
the Guarantor under 42 U.S.C. Section 1320a-7a (Civil Monetary Penalties Law) or
42 U.S.C. Section 1320a-7(b) (permissive exclusion) for the conduct described in
the Civil Action, except that in the event of default by Advanced Care on its
obligations under this Agreement, and a failure to cure as specified in this
agreement, the United States may at any time and at its option, without
hearing, exclude Advanced Care from participation in the Title XVIII
(Medicare) program and all State health care programs pursuant to 42 U.S.C.
Sections 320a-7a(a), and l320a-7(b) until such time as the default has been
fully cured, at which time Advanced Care will be reinstated to said programs,
if otherwise eligible. Nothing in the paragraph will prevent Advanced Care
from challenging the fact of default. To the extent that Advanced Care has
defaulted under this Settlement Agreement, it agrees not to contest such
exclusion either administratively or in any state or federal court. Nothing in
the agreement shall prevent the United States from excluding Advanced Care,
consistent with its normal procedures and the legal rights of Advanced Care,
for actions taken by Advanced Care that are not covered by this Settlement
Agreement or by the complaint attached hereto.
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<PAGE>
b. Robert Wolk, Harriet Wolk, Robert Miller and Anne Miller each agree
that, effective upon the signing of this Agreement, they shall, individually
and/or jointly,
i) be barred for life from conducting any business involving claims
to or payment from the Medicare, Medicaid, and all other State health care
programs, and
ii) not associate with, do any business with, or participate in the
Medicare and Medicaid programs in any way, directly or indirectly, including
on a consulting basis, except as specified below. The above conditions are
deemed to be exclusions and the exclusion shall be effectuated in accordance
with the provisions contained in 42 U.S.C. Section l320a-7(d) & (e). Notice and
effect of the exclusion will be provided in accordance with 42 U.S.C. Section
1320a-7(d) &(e) and regulations at 42 C.F.R. 1001.2004-.2006. If Robert Wolk,
Harriet Wolk, Robert Miller, Anne Miller submit claims or cause to be
submitted claims in violation of the conditions contained in Paragraphs
8(b)(i) and (ii) of this Settlement Agreement, except for claims submitted for
medical care or equipment for themselves or their beneficiaries, which they
are entitled to receive when they or their beneficiaries personally become
eligible to receive benefits under the Medicare program, they may be subject
to criminal prosecution, as well as a civil monetary penalty under the
authority contained in 42 U.S.C. Section 1320(a)-7(a).
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<PAGE>
C. Robert Wolk, Harriet Wolk, Robert Miller and Anne Miller each agree not
to contest these exclusions either administratively or in any State or Federal
court.
OFFSET RIGHTS UPON DEFAULT
--------------------------
9. In the event of default under this Agreement by Advanced Care the
United States may satisfy any part of the remaining unpaid balance (principal
and interest) by offset of monies payable to Advanced Care Associates, Inc.,
or The Care Group by any Department, Agency or agent of the United States,
pursuant to 42 U.S.C. Sections 1320a - 7a(f), or any other statute or law.
SECURITY
--------
10. a. As security for payment of its obligations, The Care Group, and
all of its subsidiaries, will grant the United States a second lien on all
personal property, including all accounts receivable and equipment, now owned
or hereinafter acquired by The Care Group or any of its subsidiaries.
The Care Group warrants that it has marketable title to the property
identified herein, subject only to recorded encumbrances. The Care Group
represents that the accounts receivable of The Care Group have a net book
value as of December 31, 1995 of not less that $14,927,000.00, which is set
forth in the audited financial statements as of December 31, 1995. The Care
Group represents that the property and equipment of The Care Group have a net
book value as of December 31, 1995 of not less than $3,543,000.00, which is
set forth in the audited financial
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<PAGE>
statements as of December 31, 1995. The Care Group will grant the United
States these respective security interests by executing and delivering to the
United States a Security Agreement and appropriate Uniform Commercial Code
documents attached to this Settlement Agreement as Exhibits D-1 and D-2, and
any other documents necessary to evidence the security interests identified in
9a(1) above, within five (5) business days following the full execution by all
Parties of this Settlement Agreement. In addition, The Care Group will furnish
to the United States an Inter-Creditor Agreement with Chase Bank in connection
with the security identified above in subparagraphs 2 and 3, attached hereto
as Exhibit E. Should any of the above documents subsequently be deemed not
legally sufficient by the United States to perfect the security interests of
the United States The Care Group agrees to cooperate with the United States in
executing all necessary documents determined by the United States to be
legally sufficient. The United States reserves the right to seek specific
performance from The Care Group. The Care Group also agrees to perform all
acts reasonably requested by the United States to perfect its security
interest. Failure to perform such acts will be deemed an Event of Default.
b. As security for payment of their obligations, Robert Miller and Anne
Miller will grant the United States:
(1) A mortgage on the property located at 320 Dundee Drive, Blue
Bell, Pa. 19422 (the "residential property"). This mortgage shall be
subordinate to an existing
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<PAGE>
first mortgage in favor of PHHS Mortgage Co. having an outstanding principal
balance as of September 30, 1995 not greater than $291,238.00, and an existing
$50,000.00 line of credit from Premier Bank. The appraised valuation of the
residential property was $326,000.00 on August 31, 1994.
(2) A mortgage on the property located at R.D. 8, Box 74, Swedesboro,
N.J., 08085 (the "business property"). This mortgage shall be subordinate to a
first mortgage in favor of Premiere Bank having an outstanding principal
balance as of the date hereof September 30, 1995 not greater than $196,500.00,
and an existing second mortgage in favor or Robert Gawley and Joseph DeSantis
having an outstanding balance as of September 30, 1995 not greater than
$150,448.00 In addition, a lien on all accounts receivable, fixtures and
equipment of Miller's South Auction, Inc. (hereinafter "business"). Miller
warrants that they have marketable title to the property identified herein,
subject only to recorded encumbrances. The appraised valuation of the business
was $600,000.00 on September 21, 1994.
Defendants Miller will grant the United States these mortgages and liens
by delivering to the United States the mortgages attached to this Settlement
Agreement as Exhibits F and G, and a Security Agreement and appropriate
Uniform Commercial Code Documents attached as exhibits H & I) within five (5)
business days following the full execution by all Parties of this Settlement
Agreement. Should these mortgages security agreements
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<PAGE>
and UCC documents subsequently be deemed not legally sufficient by the
United States to perfect the mortgage, Miller agrees to cooperate with the
United States in executing all necessary documents determined by the United
States to be legally sufficient, or the United States may declare the
Settlement Agreement to be in default. Miller also agrees to perform all acts
reasonably requested by the United States to perfect its security interest, or
the United States may declare this Settlement Agreement to be in default.
Failure to perform such acts will be deemed an Event of Default.
RELEASE
-------
11. This Agreement does not release any of the Defendants from liability
with respect to any claims that the United States may have under the Internal
Revenue Code, Title 26 of the United States Code, nor does anything in this
Agreement constitute an agreement by the United States concerning the
characterization of the amounts paid hereunder for purposes of any proceeding
under Title 26 of the United States Code, nor does it release any of the
Defendants from liability for the delivery of deficient and defective products
or for any express or implied warranties.
12. Each of the Defendants waives all rights to any Medicare payments, or
amounts payable through any other government program, for any of the equipment
or services alleged in the second amended complaint attached hereto, the
claims for which are deemed by the United States to be in violation of Title
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<PAGE>
XVIII of the Social Security Act. None of the Defendants may seek payment
from the government for said equipment or services which could have been paid
at a reduced reimbursement rate, had Advanced Care properly billed the
government for such claims initially.
13. The Relator hereby waives, releases and discharges the United States,
and any current or former officers, employees or agents of the United States
from any civil or administrative claims, including claims under the False
Claims Act, 31 U.S.C. Section 3729, et seq., and for any costs or attorney's
fees which the Relator may have, which claims arise out of, or are related to,
the subject matter of the Relator's complaint in the qui tam litigation and any
other circumstances and events concerning Advanced Care or any current or
former officer, employee, or shareholder thereof. Excluded from this provision
are any claims based upon such obligations as are created by this Settlement
Agreement.
14. Simultaneously, upon presentation of a release from Piper and
Marbury, L.L.P., in favor of Advanced Care Associates and The Care Group,
Inc., Advanced Care agrees to pay Relator's attorney's fees in the amount of
$25,000 upon execution of this Agreement by check payable to the order of
Piper & Marbury L.L.P., as attorneys for Christopher Piacentile, and delivered
to Piper & Marbury L.L.P., 53 Wall Street, New York, New York 10005-2899,
Attention: Robert Meister.
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<PAGE>
15. a. The United States releases Advanced Care, its parents,
subsidiaries, affiliates and divisions, current and each of their former
directors, officers, employees and agents, and Wolk and Miller, and the
successors, assigns and heirs of each of the foregoing, from any
administrative and/or monetary claim the United States has or may have under
the False Claims Act, 31 U.S.C. Section 3729 et sea., the Program Fraud Civil
Remedies Act, 31 U.S.C. Sections 3801-3812, the Civil Monetary Penalties Law, 42
U.S.C. Sections 1320a-7a and the common law for the acts alleged in the Second
Amended Complaint.
b. Advanced Care, The Care Group, Miller and the United States are
voluntarily entering into a Consent Judgment with regard to the civil claims
set forth in the Second Amended Complaint.
c. The parties recognize that the claims asserted by the United States
and the Relator are disputed by the Defendants. The parties acknowledge this
Settlement Agreement and any payments made by the Defendants pursuant to this
Settlement Agreement shall not be construed as an admission of liability or
guilt with respect to any issue. It is hereby agreed that this Settlement
Agreement shall not be admissible in a court of law as evidence of any
admission of law or fact, except, if necessary, to enforce the terms of the
Settlement Agreement.
NONDISCHARGEABILITY IN BANKRUPTCY
---------------------------------
16. It is recognized that, for purposes of the Bankruptcy Act, 11 U.S.C.
Section 501, et seq., the amounts due
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<PAGE>
are not dischargeable, and Advanced Care, Robert Wolk, Harriet Wolk,
Robert Miller and Anne Miller each agrees that they will not raise, argue or
otherwise claim in any bankruptcy proceeding that the debt described in this
Settlement Agreement is dischargeable. References: 11 U.S.C. Section 523(a)(2)
(assessment); 11 U.S.C. Section 523(a)(7) (penalty)
ADMINISTRATIVE CLAIMS, EXCLUSION
--------------------------------
17. a. Except as set forth in Paragraph 8 the United States agrees to
release and refrain from instituting or maintaining any administrative claim
or action seeking exclusion from the Medicare program or state health programs
(as defined in 42 U.S.C. Section l320a-7(h)) against Advanced Care under 42
U.S.C. Section l320a-7a (Civil Monetary Penalties Law) or 42 U.S.C. Section
l320a-7(b) (permissive exclusion) for the conduct described in the Preamble to
this Settlement Agreement or in the Civil Action. This subparagraph does not
apply to Robert Wolk, Harriet Wolk, Robert Miller and/or Anne Miller.
b. Robert Wolk, Harriet Wolk, Robert Miller and Anne Miller each agree
that they shall be barred for life from conducting any business involving
claims to or payment from the Medicare program, as described in paragraph 8.b.
above, except for claims submitted for medical care or equipment for
themselves or their beneficiaries, which they are entitled to receive when
they or their beneficiaries personally become eligible to receive benefits
under the Medicare program.
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<PAGE>
WAIVER OF DEFENSES
------------------
18. Each of the Defendants agrees that it will waive and will not assert
any defense which may be based in whole or part on the Double Jeopardy Clause
of the Constitution or the holding or principles set forth in United States v.
Halper, 490 U.S. 435 (1989).
UNALLOWABLE COSTS
-----------------
19. It is agreed that all costs (as defined in the Federal Acquisition
Regulations 31.205.47 and in Titles XVIII and XIX of the Social Security Act,
42 U.S.C. Sections 1395 et seq. and Sections 1396 et seq. and the regulations
promulgated thereunder), expenses and attorney's fees incurred by or on behalf
of any of the Defendants and the Guarantor in connection with (1) the matters
covered by this Agreement; 2) the Government's audit and investigation of the
matters covered by this Agreement; (3) any Defendants' or Guarantor's (including
any subsidiaries') investigation, defense, and corrective actions, including
those compliance actions identified herein; (4) the negotiations and performance
of this Agreement; and (5) the payments made to the United States provided for
in this Agreement, shall be unallowable costs for Government accounting and
reimbursement purposes. These amounts shall be separately accounted for by The
Care Group and its subsidiaries, and will not be charged to any federal
Government contract or program.
- 24 -
<PAGE>
COMPLIANCE PROGRAM
------------------
20. Except as provided in subparagraph (e) of this paragraph, for a
period of three years after the execution of this Settlement Agreement, which
date shall be determined as the latest date of signature of the Settlement
Agreement ("Time Period"), Advanced Care Associates, Inc. and The Care Group
agree to pursue the following course of action to promote full and accurate
compliance with all published Medicare and Medicaid regulations and published
program requirements by Advanced Care Associates, Inc. and The Care Group or
any organization controlled by them who (1) furnish items or services billed
to Medicare or Medicaid by Advanced Care Associates, Inc., or The Care Group
or (2) prepare or submit new claims to Medicare or Medicaid in the name of
Advanced Care Associates or The Care Group, or in an organization controlled
by either:
a. With 30 days of the execution of the Settlement Agreement retain an
independent review organization, such as a law firm or an accounting firm, to
review on an annual basis the Medicare and Medicaid billing practices of
Advanced Care Associates, Inc., and The Care Group, and to the extent that
deficiencies in accuracy or internal controls relating to billings are
identified, shall advise the retaining company and its officers/personnel/staff
on methods to improve billing procedures;
b. To provide HHS/OIG with a copy of any report or the findings of the
independent review organization within 30
- 25 -
<PAGE>
days of its receipt and a second report indicating the companies' corrections
of any deficiencies with respect to Medicare and Medicaid billings 30 days
after receipt of the original report;
c. Implement written policies and distribute said policies to all
employees within 90 days of the effective date of the Settlement Agreement,
including employees involved in preparing or submitting Medicare and Medicaid
bills, advising employees of Advanced Care Associates, Inc., and The Care
Group of the companies' commitment to accurate billing consistent with
published Medicare and published Medicaid regulations and procedures;
d. Provide at least three hours of training each year to managers and
employees involved in the submission of claims to the Medicare and Medicaid
programs and annually certify to the HHS/OIG that such training has been
provided. Such training shall include:
(1) the proper billing standards and procedures for the submission
of accurate claims/bills for services and items to the Medicare and Medicaid
programs;
(2) the personal obligation of each manager and employee to insure
that billings and submission of claims to the Medicare and Medicaid programs
are accurate; and
(3) the legal sanctions for improper billings to the Medicare and
Medicaid programs; and
e. If, during the Time Period either Advanced Care Associates, or
The Care Group cease to submit/cause to be submitted new claims to the
Medicare and Medicaid programs, the
- 26 -
<PAGE>
compliance provisions referenced above shall no longer apply to that entity.
EFFECTIVE AND BINDING AGREEMENT
-------------------------------
21. This Agreement shall be binding upon the parties, their successors,
assigns, and heirs.
22. This Agreement shall become final and binding only upon signing by
each respective party hereto.
23. This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which shall constitute one and the same
agreement.
24. This Agreement is effective on June 5, l996.
25. This Settlement Agreement and the attached documents (Exhibits A
through I) represents the entire agreement between and among the United
States, The Care Group, on behalf of Advanced Care, Robert Wolk, Harriet Wolk,
Robert Miller, Anne Miller and the Relator, except that the Relator has
executed an additional release which is not part of this Agreement. Except
with respect to the payments required by paragraphs 1 and 4 any subsequent
modification to this Settlement Agreement must be in writing and must be
signed and executed by the parties to this Agreement. With respect to
paragraphs 1 and 4 the modification shall be signed by the parties affected by
such modification.
26. Each of the signatories to this Agreement represents that it has the
full power and authority (without further approvals or consents) to enter into
this Agreement and perform the obligations set forth herein.
-27-
<PAGE>
validity or enforceability of the remaining provisions of this Agreement.
RETENTION OF JURISDICTION
-------------------------
28. The Court shall retain jurisdiction over this matter for the purpose
of enforcing the terms of this Settlement Agreement.
29. Other than as provided in paragraph 28 this case shall be dismissed
by the Court.
THE UNITED STATES OF AMERICA
By: /S/ LEWIS MORRIS Dated: 5/22/96
---------------------------- -------
LEWIS MORRIS
Assistant Inspector General
for Litigation Coordination
U.S. Dept. of Health and Human
Services
By: /S/ MARLENE F. GIBBONS Dated: 6/5/96
---------------------------- ------
MARLENE F. GIBBONS
Trial Attorney
Department of Justice
Civil Division
Commercial Litigation Branch
Washington, D.C.
By: /S/ MICHAEL R. STILES Dated: 6/19/96
---------------------------- -------
MICHAEL R. STILES
Acting United States Attorney
United States Attorney's Office
By: /S/ SUSAN DEIN BRICKLIN Dated: 6/5/96
---------------------------- ------
SUSAN DEIN BRICKLIN
Assistant United States Attorney
Senior Litigation Counsel
United States Attorney's Office
- 28 -
<PAGE>
ADVANCED CARE ASSOCIATES, INC.
By: /S/ ANN MITTASCH Dated: 6/5/96
----------------------------- ------
ANN MITTASCH
President
THE CARE GROUP, Inc., as to the paragraphs applicable to it, or its
subsidiaries, in this Agreement.
By: /S/ ANN MITTASCH Dated: 6/5/96
----------------------------- -------
ANN MITTASCH
President
- 29 -
<PAGE>
CHRISTOPHER PIACENTILE
/S/ CHRISTOPHER PIACENTILE Dated: June 5, 1996
-------------------------- ------------
By: /S/ Dated: June 5, 1996
-------------------------- ------------
Attorney
PIPER & MARBURY, L.L.P.
By: /S/ Dated: June 5, 1996
-------------------------- ------------
Partner
- 30 -
<PAGE>
ROBERT WOLK
/S/ ROBERT WOLK Dated: 6/10/96
------------------------- -------
HARRIET WOLK
/S/ HARRIET WOLK Dated: 6/10/96
------------------------- -------
- 31 -
<PAGE>
ROBERT MILLER
/S/ ROBERT MILLER Dated: 6/5/96
------------------------- ------
ANNE MILLER, Individually and on behalf of Miller's
South Auction, Inc.
/S/ ANNE MILLER Dated: 6/5/96
------------------------- ------
- 32 -
<PAGE>
SCHEDULE 4.C.(1)
<TABLE>
<CAPTION>
PAYMENT
NO. DUE DATE PAYMENT PRINCIPAL INTEREST BALANCE
- - - --------- ---------- ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C>
5-Jun-97 79,380.69
1 5-Jun-97 2,524.28 1,928.92 595.36 77,451.77
2 6-Jul-97 2,524.28 1,943.39 580.89 75,508.38
3 5-Aug-97 2,524.28 1,957.97 566.31 73,660.41
4 5-Sep-97 2,524.28 1,972.65 551.63 71,577.76
5 6-Oct-97 2,524.28 1,987.45 536.83 69,590.31
6 5-Nov-97 2,524.28 2,002.35 521.93 67,587.96
7 5-Dec-97 2,524.28 2,017.37 506.91 65,570.59
8 5-Jan-98 2,524.28 2,032.50 491.78 63,538.09
9 5-Feb-98 2,524.28 2,047.74 476.54 61,490.35
10 5-Mar-98 2,524.28 2,063.10 461.18 59,427.26
11 5-Apr-98 2,524.28 2,078.58 445.70 57,348.67
12 5-May-98 2,524.28 2,094.16 430.12 55,254.51
13 5-Jun-98 2,524.28 2,109.87 414.41 53,144.64
14 5-Jul-98 2,524.28 2,125.70 398.58 51,018.94
15 5-Aug-98 2,524.28 2,141.64 382.64 48,877.30
16 6-Sep-98 2,524.28 2,157.70 366.58 46,719.60
17 5-Oct-98 2,524.28 2,173.88 350.40 44,545.72
18 5-Nov-98 2,524.28 2,190.19 334.09 42,355.53
19 5-Dec-98 2,524.28 2,206.61 317.67 40,148.92
20 5-Jan-99 2,524.28 2,223.16 301.12 37,925.76
21 5-Feb-99 2,524.28 2,239.84 284.44 35,685.92
22 5-Mar-99 2,524.28 2,256.64 267.64 33,429.28
23 5-Apr-99 2,524.28 2,273.56 250.72 31,155.72
24 5-May-99 2,524.28 2,290.61 233.67 28,865.11
25 5-Jun-99 2,524.28 2,307.79 216.49 26,557.32
26 6-Jul-99 2,524.28 2,325.10 199.18 24,232.22
27 5-Aug-99 2,524.28 2,342.54 181.74 21,889.68
28 5-Sep-99 2,524.28 2,360.11 164.17 19,529.57
29 5-Oct-99 2,524.28 2,377.81 146.47 17,151.76
30 5-Nov-99 2,524.28 2,395.64 128.64 14,756.12
31 5-Dec-99 2,524.28 2,413.61 110.67 12,342.51
32 5-Jan-00 2,524.28 2,431.71 92.57 9,910.80
33 5-Feb-00 2,524.28 2,449.95 74.33 7,460.85
34 6-Mar-00 2,524.28 2,468.32 55.96 4,992.53
35 5-Apr-00 2,524.28 2,486.84 37.44 2,805.69
36 5-May-00 2,524.48 2,505.69 18.79 0.00
Totals 90,874.28 79,380.69 11,493.59
</TABLE>
<PAGE>
SCHEDULE 1.C
<TABLE>
<CAPTION>
PAYMENT
NO. DUE DATE PAYMENT PRINCIPAL INTEREST BALANCE
- - - --------- ---------- -------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
5-Jun-96 2,780,000.00
1 4-Sep-96 189,532.60 126,982.60 62,550.00 2,653,017.40
2 4-Dec-96 189,532.60 129,839.71 59,692.89 2,523,177.69
3 4-Mar-97 189,532.60 132,761.10 56,711.50 2,390,416.59
4 4-Jun-97 189,532.60 136,748.23 63,784.37 2,254,668.36
5 4-Sep-97 189,532.60 138,802.56 50,730.04 2,115,865.80
6 4-Dec-97 189,532.60 141,925.62 47,606.98 1,973,940.18
7 4-Mar-98 189,532.60 145,118.95 44,413.65 1,828,821.23
8 4-Jun-98 189,532.60 148,384.12 41,148.48 1,680,437.11
9 4-Sep-98 189,532.60 151,722.77 37,809.83 1,628,714.34
10 4-Dec-98 189,532.60 155,136.53 34,396.07 1,373,677.81
11 4-Mar-99 189,532.60 158,627.10 30,905.50 1,214,950.71
12 4-Jun-99 189,532.60 162,196.21 27,336.39 1,052,754.50
13 4-Sep-99 189,532.60 165,845.62 23,686.98 886,908.88
14 4-Dec-99 189,532.60 169,577.16 19,966.45 717,331.73
15 4-Mar-00 189,532.60 173,392.64 16,139.96 543,939.09
16 4-Jun-00 189,532.60 177,293.97 12,238.63 366,645.12
17 4-Sep-00 189,532.60 181,283.08 8,249.52 185,362.04
18 4-Dec-00 189,532.69 185,362.04 4,170.65 0.00
Totals 3,411,586.89 2,780,000.00 631,586.89
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 37
<RECEIVABLES> 17,232
<ALLOWANCES> 6,376
<INVENTORY> 1,144
<CURRENT-ASSETS> 15,301
<PP&E> 5,949
<DEPRECIATION> 2,329
<TOTAL-ASSETS> 31,146
<CURRENT-LIABILITIES> 9,913
<BONDS> 0
0
0
<COMMON> 9
<OTHER-SE> 18,109
<TOTAL-LIABILITY-AND-EQUITY> 31,146
<SALES> 9,545
<TOTAL-REVENUES> 9,545
<CGS> 5,481
<TOTAL-COSTS> 5,481
<OTHER-EXPENSES> 6,669
<LOSS-PROVISION> 5,946
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> (8,718)
<INCOME-TAX> (2,903)
<INCOME-CONTINUING> (5,815)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,815)
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.00
</TABLE>
