SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
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For Quarter Ended September 30, 1996 Commission file number 0-17821
THE CARE GROUP, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 11-2962027
- ------------------------------- ------------------------------------
(State of other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 HOLLOW LANE, LAKE SUCCESS, NEW YORK, 11042
---------------------------------------------------
(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 November 1, 1996, the registrant had 10,277,053 shares of common
stock, $.001 par value per share, outstanding.
PAGE 1 OF 19 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
----
3-7 FINANCIAL INFORMATION
8-9 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10-17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
18 OTHER INFORMATION
19 SIGNATURE PAGE
PAGE 2 OF 19 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
THREE MONTHS & NINE MONTHS ENDED SEPTEMBER 30, 1996
PART I - FINANCIAL INFORMATION
PAGE 3 OF 19 PAGES
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNAUDITED)
- ------------------------------------- ----------- -----------
<S> <C> <C>
NET REVENUES $ 28,810 $ 35,850
COST OF REVENUES 14,372 15,665
----------- -----------
GROSS PROFIT 14,438 20,185
----------- -----------
OPERATING EXPENSES:
Selling, general and administrative expenses 11,212 11,392
Provision for doubtful accounts 8,539 7,144
Write-off of intangible and certain other assets 2,975 -
----------- -----------
Total operating expenses 22,726 18,536
OPERATING(LOSS) INCOME (8,288) 1,649
----------- -----------
NET INTEREST EXPENSE (525) (451)
----------- -----------
INCOME (LOSS) BEFORE ( BENEFIT FROM)
PROVISION FOR INCOME TAXES (8,813) 1,198
(BENEFIT FROM) PROVISION
FOR INCOME TAXES (2,797) 581
----------- -----------
NET (LOSS) INCOME $ (6,016) $ 617
=========== ===========
NET (LOSS) INCOME PER COMMON
SHARES IN 1996 AND COMMON AND
COMMON EQUIVALENT SHARES IN 1995 $ (.69) $ .07
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING IN 1996 AND COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING IN 1995 8,702 8,424
=========== ===========
</TABLE>
See notes to Consolidated Financial Statement
PAGE 5 OF 19 PAGES
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
SEPTEMBER 30,
1996 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED) (UNAUDITED)
- ------------------------------------- ----------- -----------
<S> <C> <C>
NET REVENUES $ 9,622 $ 11,365
COST OF REVENUES 4,590 5,275
----------- -----------
GROSS PROFIT 5,032 6,090
----------- -----------
OPERATING EXPENSES:
Selling, general and administrative expenses 3,524 3,386
Provision for doubtful accounts 1,750 2,267
----------- -----------
Total operating expenses 5,094 5,653
OPERATING (LOSS) INCOME (62) 437
----------- -----------
NET INTEREST EXPENSE (200) (157)
----------- -----------
INCOME (LOSS) BEFORE (BENEFIT FROM)
PROVISION FOR INCOME TAXES (262) 280
PROVISION FOR INCOME TAXES - 133
----------- -----------
NET (LOSS) INCOME $ (262) $ 147
=========== ===========
NET (LOSS) INCOME PER COMMON
SHARES IN 1996 AND COMMON AND
COMMON EQUIVALENT SHARES IN 1995 $ (.03) $ .02
=========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING IN 1996 AND COMMON
AND COMMON EQUIVALENT SHARES
OUTSTANDING IN 1995 9,446 8,450
=========== ===========
</TABLE>
See notes to Consolidated Financial Statement
PAGE 6 OF 19 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
On September 30, 1996, The Care Group, Inc. (the "Company") received an amended
waiver of certain specified financial covenants (through October 31, 1996) from
the bank. The prior waiver required the Company to reduce the outstanding loan
balance to $5.5 million and not to borrow any additional funds through October
31, 1996, at which time the bank would renegotiate the terms of the Company's
loan agreement. On November 6, 1996, the Bank amended the waiver through
November 29, 1996 and renegotiated the agreement whereby the Company was
required to reduce the outstanding loan balance by $350,000, the interest rate
was changed from prime plus 1/4 to prime plus 1 percent and the loan became
payable in full on December 31, 1996. 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. Pursuant to the terms of the Agreement, as amended in February 1995,
the acquisition is subject to the approval of the Public Health Council of the
New York State Department of Health. 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 $90,000 and $396,000 in net operating expenses of the certified
home health agency during 1996 (through September 30, 1996) and fiscal 1995,
respectively, such amounts are included in other assets at September 30, 1996.
On October 28, 1996 the Company received approval of the acquisition from New
York State Department of Health. The acquisition price is to be paid in two
installments. Approximately $331,000, including interest, is due by the end of
November 1996 and the balance of $281,000 plus interest at 8 percent is due in
one year.
PAGE 8 OF 19 PAGES
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NOTE 5 - LITIGATION
The Company is also involved in legal proceeding arising in the ordinary course
of business. Management believes that any liability that may result upon the
resolution of these claims and lawsuits will not, in the aggregate, have a
material adverse effect on the consolidated financial condition of the Company
or its results of operations, although there can be no assurance to this
effect.
NOTE 6 - SALE OF COMMON STOCK & WARRANTS
On August 1, 1996, the Board of Directors approved a private placement of 42
units, and an additional 58 units requiring stockholder approval, for a total
of 100 units at $50,000 per unit (the "Private Placement") and approved the
appointment of two new Directors. 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. 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. No stockholder approval was required
for the sale of 42 Units. On October 4, 1996 the stockholders approved the sale
of the additional 58 units. In November 1996, the Company sold the additional
58 Units for gross proceeds of $2,900,000 less placement fee of approximately
$174,000.
On October 4, 1996, the shareholders approved the following items:
1. The election of two (2) Class III directors, John Pappajohn and Pat H.
Celli of the Company for a period of three years;
2. The ratification of the selection of Deloitte & Touche LLP as
independent public accountants for the Company for the fiscal year
ending December 31, 1996;
3. An amendment of the Company's Certificate of Incorporation to increase
the total number of shares of Common Stock authorized from 20,000,000 to
30,000,000 and the total number of shares of Preferred Stock authorized
from 1,000,000 to 2,000,000;
4. The private placement (the "Private Placement") of the sale of 58 Units
of the company's securities for a purchase price equal to $50,000 per
Unit.
5. The 1996 Stock Option Plan.
NOTE 7- NON-CASH EXPENSES
During the second quarter, 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.
PAGE 9 OF 19 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 and in other filings made by the
Company with the Securities and Exchange Commission.
The Management's Discussion and Analysis of Financial Condition and Results of
Operations as of September 30, 1996 and for the three and nine months ended
September 30, 1996, should be read in conjunction with the Management's
Discussion and Analysis of Financial Condition and Results of Operations as of
December 31, 1995 and for the year ended December 31, 1995, included in the
Company's Annual Report on Form 10-K.
RESULTS OF OPERATIONS
FOR NINE MONTHS ENDED SEPTEMBER 30, 1996
Net revenues from operations for the nine months ended September 30, 1996
decreased to $28,810,000 as compared to $35,850,000 for the comparable period
last year. The decrease of $7,040,000 or 20 percent is primarily attributable
to the increased effects of managed care in most of our facilities and the
decrease in business in our New York City and Dallas locations.
The business in our New York office was reduced this period as compared to the
same period a year ago by over 35 percent. This decrease was attributable to
several factors. One, our referral sources in this market 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. A similar
reduction took place in our Dallas office. The Company is pursuing contracts
with health maintenance organizations ("HMOs"), preferred provider
organizations ("PPOs"), hospital discharge planners and other case management
entities. If successfully negotiated, these contracts will enable the Company
to receive referrals directly from these entities as well as from its physician
base.
The cost of revenues for the nine months ended September 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 44
percent for the comparable period last year. The increase in cost of revenues
as a percentage of net revenues is primarily due to the increasing levels of
managed care.
The Company's selling, general and administrative (SG&A) expenses were
$11,212,000 or 39 percent of net revenues for the nine months ended September
30, 1996 as compared to $11,392,000 or 32 percent of net revenues for the same
period last year. SG&A expenses increased as a percentage of net revenues due
primarily to the decrease in net revenues as mentioned above. The charge of
$8,842,000 in June of 1996 is comprised of the write-down of goodwill and
certain other assets of $2,975,000, an increase of accounts receivable reserves
and write-offs of accounts receivable of $5,308,000, and the establishment of a
reserve on inventory and equipment of $559,000. Please see Note 7 (Non-Cash
Expenses) for a full explanation of the second quarter change.
The net loss for the nine months ended September 30, 1996 was $6,016,000 ($.69
per share) as compared with net income of $617,000 ($.07 per share) for the
same period in 1995. Excluding the above-mentioned charge of $8,842,000, pretax
income would have been $42,000 for the nine months ended September 30, 1996
compared to $1,198,000 for the same period last year. This decrease is
attributable to the effect of increased levels of managed care on all
operations of the Company.
PAGE 10 OF 19 PAGES
<PAGE>
RESULTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1996
Net revenues for the three months ended September 30, 1996 decreased to
$9,622,000 as compared to $11,365,000 for the comparable period last year. The
decrease of $1,743,000 or 15 percent is principally 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 office was reduced this quarter as compared to the
same period a year ago by over 35 percent. This decrease was attributable to
several factors. One, our referral sources in this market 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
pursuing contracts with health maintenance organizations ("HMOs"), preferred
provider organizations ("PPOs"), hospital discharge planners and other case
management entities. If successfully negotiated, 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 September 30, 1996, as a percentage
of net revenues was 48 percent as compared to 46 percent for the same period in
1995. The increase in cost of revenues as a percentage of net revenues is due
to more of the Company's revenue base being generated from managed care or
negotiated rates, which are lower than the rates realized, during the same
period last year.
The Company's operating expenses were $5,094,000 or 53 percent of net revenues
for the quarter ended September 30, 1996 as compared to $5,653,000 or 50
percent of net revenues for the same period last year. The decrease of $559,000
was due to the decrease in the provision for doubtful accounts partially offset
by an increase in other expenses.
The net loss for the three months ended September 30, 1996 was
$262,000 ($.03 per share) as compared with net income of $147,000 ($.02 per
share) for the same period in 1995. The decrease in net income is primarily
attributable to the decrease in sales and the effects of managed care.
PAGE 11 OF 19 PAGES
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
Current assets have decreased to $16,541,000 at September 30, 1996 from
$18,552,000 at December 31, 1995. The decrease of $2,011,000 in current assets
is due primarily to the Company's decrease in accounts receivable. The decrease
in accounts receivable is due to a charge in the second quarter of $5,308,000
of which $3,161,000 was an increase in the allowance for doubtful accounts and
$2,147,000 was a direct write-off of certain accounts receivable. See Note 7
for details. This charge more than offset other increases in accounts
receivable.
At September 30, 1996, working capital was $6,432,000 as compared to $7,655,000
at December 31, 1995. At September 30, 1996 the Company had a term revolving
credit agreement with its bank which provided for borrowings of up to
$5,500,000, expiring October 31, 1996. On November 6, 1996, the Company and its
current bank renegotiated the current credit agreement requiring the immediate
pay down of the loan by $350,000 and the repayment of the remaining loan
balance ($5,150,000) by December 31, 1996. Accordingly, the Company has
reclassified the bank debt to current liabilities. Management is currently
negotiating with another financial institution for a credit facility to replace
the current agreement after December 31, 1996. No assurance can be given that
the Company will obtain replacement facilities at all or on future terms that
are favorable or the same as the existing terms. The remaining decrease is
attributable to the decrease in accounts receivable, discussed above, and the
increase in account payable, offset by a $3,000,000 increase in recoverable
income taxes.
The average days sales in outstanding receivables decreased from 137 days at
December 31, 1995 to 112 days at September 30, 1996 based upon the decrease in
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 currently restricted from
using its line of credit to fund growth in accounts receivable.
During August 1996, the Company raised net proceeds of $1,970,000 for 1,680,000
shares of its common stock in the first stage of a Private Placement. In
November 1996, the balance of the private placement money was raised for the
proceeds of $2,700,000 for 2,320,000 shares.
PAGE 12 OF 19 PAGES
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
None. For events occurring subsequent to the quarterly period
ending September 30, 1996, see Note 6 to the financial statements.
ITEM 5. OTHER INFORMATION
On November 5, 1996 the Company closed on 53 Units of the Private
Placement for a gross amount of $2,650,000 less a placement fee of
approximately $160,000 and on November 12, 1996 the Company closed
on the final 5 Units of the Private Placement for a gross amount of
$250,000 less a placement fee of approximately $15,000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No.
3(i) Certificate of Incorporation of the Company, as amended.
3(ii) Bylaws of the Company, filed in the Company's Registration Statement
on Form S-18 or post-effective amendments thereto, which exhibit is
incorporated herein by reference (Registration No. 33-27840-NY)
4.1 Form of specimen stock certificate, filed in the Company's
Registration Statement on Form S-18 or post-effective amendments
thereto, which exhibit is incorporated herein by reference
(Registration No. 33-27840-NY)
4.2 Form of underwriter's Warrant certificate, filed as an exhibit to
the Company's Registration Statement on Form S-1 or post-effective
amendments there, which exhibit is incorporated herein by reference
(Registration No. 33-42528)
4.3 Form of Stock Purchase Warrant Certificate, filed as an exhibit to
the Company's Report on Form 8-K, filed August 14, 1996, which
exhibit is incorporated herein by reference.
4.4 Form of Subscription Agreement, filed as an exhibit to the company's
Report on form 8-K, filed August 14, 1996, which exhibit is
incorporated herein by reference.
4.5 Form of unit Purchase Option issued to Royce Investment Group, Inc.
in the Private Placement.
10.1 Agency Agreement dated as of August 14, 1996 between the Company and
Royce Investment Group, Inc.
27. Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on August 14, 1996, reporting
other events under Item 5, which report included Selected Financial
Data for the three month and six month periods ending June 30, 1996
and June 30, 1995.
PAGE 18 OF 19 PAGES
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Care Group, Inc.
-------------------------
(Registrant)
Dated: November 12, 1996 /s/ Richard G. Jung
----------------- -------------------------
Richard G. Jung
President &
Chief Executive Officer
Dated: November 12, 1996 /s/ Pat H. Celli
----------------- -------------------------
Pat H. Celli
Chief Financial Officer
(Principal Financial Officer)
PAGE 19 OF 19 PAGES
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Care Group, Inc.
-------------------------
(Registrant)
Dated: November 12, 1996
----------------- -------------------------
Richard G. Jung
President &
Chief Executive Officer
Dated: November 12, 1996
----------------- -------------------------
Pat H. Celli
Chief Financial Officer
(Principal Financial Officer)
PAGE 19 OF 19 PAGES
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THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
---------------------------
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) SEPTEMBER 30, DECEMBER 31,
- ------------------------------------- 1996 1995
(UNAUDITED) (AUDITED)
------------- ------------
ASSETS
- ------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 193 $ 561
Marketable securities 33 508
Accounts receivable, net of allowances
of $4,943 at September 30, 1996 and $3,564 at
December 31, 1995 11,737 14,927
Inventories 1,144 1,763
Recoverable income taxes 3,121 108
Prepaid expenses and other current assets 313 685
------------- ------------
Total Current Assets 16,541 18,552
------------- ------------
PROPERTY AND EQUIPMENT - at cost 3,113 3,000
LESS - Accumulated depreciation 1,608 1,253
------------- ------------
Net property and equipment 1,505 1,747
------------- ------------
RENTAL EQUIPMENT - at cost 2,934 2,416
LESS - Accumulated depreciation 906 620
------------- ------------
Net rental equipment 2,028 1,796
------------- ------------
INTANGIBLES - Net 11,266 14,185
------------- ------------
OTHER ASSETS 1,000 730
------------- ------------
TOTAL ASSETS $ 32,340 $ 37,010
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Note payable to bank $ 5,500 $ 6,800
Current portion of long-term debt 1,746 1,845
Accounts payable 2,211 1,302
Accrued expenses 652 950
------------- ------------
Total Current Liabilities 10,109 10,897
LONG-TERM DEBT, excluding current portion 2,128 1,400
DEFERRED INCOME TAXES 384 322
------------- ------------
TOTAL LIABILITIES 12,621 1,722
------------- ------------
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; 10,318 shares
and 8,638 shares issued and outstanding at September 30, 1996 at December 31, 1995,
respectively 10 9
Additional Paid-In Capital 21,262 19,886
(Accumulated Deficit) Retained Earnings (1,412) 4,604
------------- ------------
19,719 24,499
Common Stock held in treasury, at cost - (40 and 247 shares at September 30,
1996 and December 31, 1995, respectively) (141) (1,108)
------------- ------------
Total Stockholders' Equity 19,996 23,391
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 32,340 $ 37,010
============= ============
</TABLE>
See notes to consolidated financial statements.
PAGE 4 OF 19 PAGES
<PAGE>
THE CARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
(IN THOUSANDS) ---------------------------------------
- -------------- 1996 1995
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income $ (6,016) $ 617
Adjustments to reconcile net (loss) income to net cash
provided by operating activities:
Depreciation and amortization 1,412 950
Provision for doubtful accounts 8,539 792
Provision for obsolete inventory and equipment 559 -
Write-off of intangible and certain other assets 2,654 -
Deferred income tax expense 62 141
Unrealized gain on marketable securities (32) (77)
Loss (gain) on sale of marketable securities 38 (71)
Changes in assets and liabilities:
Marketable securities 469 88
Accounts receivable (5,349) (1,018)
Inventories 219 (124)
Recoverable income taxes (3,121) -
Prepaid expenses and other current assets 105 (292)
Other assets (180) 79
Accounts payable 909 (178)
Accrued expenses (298) (367)
Income taxes payable - (264)
Net purchases of rental equipment (507) (71)
----------- -----------
Net cash provided by operating activities (537) 205
----------- -----------
INVESTING ACTIVITIES:
Purchases of property and equipment (288) (982)
Payments for intangible assets acquired (112) (473)
Organization costs (14) -
Restrictive covenant - (71)
Investment in licensed home health agency - (100)
Investment in certified home health agency (90) (413)
----------- -----------
Net cash used in investing activities (504) (2,039)
----------- -----------
FINANCING ACTIVITIES:
Proceeds from bank loan 150 1,200
Repayments of bank loan (1,450) -
Proceeds from long-term debt 1,553 367
Repayment of long-term debt (924) (425)
Sale of common stock 1,863 -
Proceeds from exercise of stock options - 553
Purchases of treasury stock (1,119) (847)
Sale of treasury stock 600 676
----------- -----------
Net cash provided by financing activities 673 1,524
----------- -----------
(DECREASE) IN CASH AND CASH
EQUIVALENTS (368) (310)
CASH AND CASH EQUIVALENTS, beginning of period 561 577
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 193 $ 267
=========== ===========
Supplemental disclosure of cash flow information:
Interest Paid $ 515 $ 478
=========== ===========
Taxes Paid $ 157 $ 927
=========== ===========
</TABLE>
See notes to consolidated financial statements.
PAGE 7 OF 19 PAGES
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CERTAIN FACTORS AFFECTING OPERATIONS AND MARKET PRICE
OF SECURITIES.
The Company's future business, financial condition and results of operations,
and the market price for its securities are dependent on the Company's ability
to successfully manage, among other things the following business
considerations. No assurance can be given that the Company will be able to
manage such considerations successfully. The failure to manage such
considerations successfully could have a material adverse effect on the
Company's business, financial conditions, and results of operations, and on the
market price of its securities.
Government Regulations and Lawsuit Settlement. The Company and the health care
industry generally are subject to extensive and frequently changing state and
federal regulation governing he dispensing, distributing and compounding of
prescription products, the provision of home health care services and home
infusion services, the licensing of branch offices, the certification of home
health agencies and the licensing of professionals. In addition, state and
federal fraud and abuse laws prohibit, among other things, the payment for
remuneration for patient or business referrals. Laws and regulations are
enacted and amended for the regulating the health care industry, and any
changes in the laws or regulations or new interpretations or existing laws or
regulations could have an adverse effect on the Company's methods and cost of
doing business. Further, failure by the Company to comply with applicable laws
could adversely affect the Company's ability to continue to provide, or receive
reimbursement for, its services from Medicare, Medicaid and other third party
payors and also could subject the Company and its officers to civil and
criminal penalties. There can be no assurance that the Company will not
encounter regulatory impediments that could adversely affect its ability to
open new branch offices and to expand the services currently provided at its
existing branch offices.
In May 1994, the Company acquired all of the stock of Advanced Care Associates,
Inc., Advanced Care CPM, Inc. and Millwo Inc. (collectively, "Advanced Care")
for an aggregate consideration of $5,268,000 (including expenses), of which
$3,000,000 was payable in the form of promissory notes (the "Notes"). The
Company also issued to the former owners of Advanced Care 333,332 shares of its
common stock along with an option (the "Put Option") to sell these shares back
to the Company at a price of $3.00 per share.
In September 1994, Advanced Care and its former owners were served with a civil
lawsuit by the US Government alleging improper Medicare billing and
reimbursement practices during the period prior to the acquisition of Advanced
Care by the Company. Effective June 5, 1996, Advanced Care entered into an
agreement with the US Government in settlement of the lawsuit (the
"Settlement"). The Settlement required Advanced Care to make a $550,000 payment
to the US Government no later than June 15, 1996, which payment was made. In
addition, Advanced Care issued to the US Government a $2,780,000 note, at 9%
interest payable quarterly over four and one-half years (the "Government
Note"). In connection with the Settlement, each of the former owners, among
other things, transferred their shares of common stock of the Company to the US
Government along with the Put Option. The US Government exercised the Put
Option on June 5, 1996. The amount owed to the US Government by the Company
with respect to the exercise of the Put Option is included in the Government
Note.
In connection with the Settlement, Advanced Care canceled the Notes and certain
employment agreements which were issued to the former owners of Advanced Care.
As security for payment of Advanced Care's obligations to the US Government,
the Company agreed to grant the US Government a second lien on all personal
property of the Company and its subsidiaries.
PAGE 13 OF 19 PAGES
<PAGE>
The terms of the Settlement also required Advanced Care and the Company to
implement a program to assure compliance with all Medicare and Medicaid
regulations. There can be no assurance that the Company will be able to comply
with the terms of the Government Note in the future.
In the event that the Company defaults under the Government Note the US
Government may, among other things, offset all of the Company's
Medicare/Medicaid receivables, which historically have equaled approximately
$2,000,000 per year and may exclude Advanced Care from participation in the
Medicare program or state healthcare programs. Such offsets and exclusion could
have a material adverse effect on the Company.
Security Interest in Assets; History of Noncompliance With Financial Covenants
under the Company's Credit Facility. As of September 30, 1996, the Company was
obligated to The Chase Manhattan Bank ("Chase") for a principal amount of
$5,500,000 pursuant to a credit facility (the "Credit Facility"). The amount
available under the Credit Facility was reduced from $12,000,000 to $8,000,000
pursuant to an Amendment, accounts receivable that are payable by state or
federal agencies under Medicaid or Medicare programs (collectively,
"Medicaid/Medicare Receivables") are excluded from the definition of eligible
receivables. Prior to the Amendment, Medicaid/Medicare Receivable were included
in the definition of eligible receivables. In addition, under the Amendment,
Chase has greater discretion in determining whether any of the Company's
receivables qualify as eligible receivables.
The Credit Facility includes certain financial covenants. The failure of the
Company to comply with these covenants entitles Chase to declare the aggregate
amount outstanding under the Credit Facility to be immediately due and payable.
The company is currently in compliance with these covenants, but has been out
to compliance with certain of these covenants at the end of several quarters in
the past, which noncompliance has necessitated the receipt of waiver from
Chase. Pursuant to a waiver received on November 6, 1996 Chase declared the
Credit Facility due in full on December 31, 1996. There can be no assurance
that the Company will remain in compliance with its financial covenants in the
future, or that, if it is not in compliance, Chase will grant waivers or
otherwise refrain from declaring a default under the Credit Facility.
On September 27, 1996 the Company entered into a letter agreement with Key Bank
of New York ("Key Bank") which outlined terms whereby Key Bank will enter into
a credit facility (the "Key Bank Facility") with the Company in the aggregate
principal amount of up to $9,000,000. There can be no assurance that the
Company will obtain the Key Bank Facility before the Credit Facility becomes
due, if at all. In such event, there can be no assurance that the Company will
be able to obtain a substitute credit facility or other additional external
financing favorable to the Company, or at all, or that the Company will be able
to repay the Credit Facility in full on December 31, 1996. The inability of the
Company to obtain an additional financing or to repay the Credit Facility would
have a material adverse effect on the Company's business, financial condition
and results of operations.
In connection with the Credit Facility, all of the personal property of the
Company and its subsidiaries was pledged to Chase. In connection with the
Settlement, the US Government received a second lien on all of the personal
property of the Company and its subsidiaries. If the Company were to default on
any of its obligations under the Credit Facility or the Settlement, Chase and
the US Government could foreclose on the pledged assets. Such a foreclosure
would materially and adversely affect the Company. The Credit Facility also
places certain restrictions on the Company's ability to incur indebtedness,
dispose of significant assets and other matters.
PAGE 14 OF 19 PAGES
<PAGE>
Charge Against Earnings; Anticipated Losses. The Company recorded non-cash
charges to earnings relating to write-offs of intangibles, certain other assets
and accounts receivable for the second quarter ended June 30, 1996 aggregating
approximately $8,800,000. The net result of such charges were a net loss for
the quarter of approximately $5,800,000 or $.70 per share, and for the six
months ended June 30, 1996, of approximately $5,750,000 or $.68 per share. The
Company also anticipates a loss for the year ending December 31, 1996. There
can be no assurance that the Company will not continue to experience losses in
the future.
Competition. The home health care and infusion businesses are highly
competitive. Certain of the Company's competitors are national service
providers, and many others are regional or local in scope. Many of the
company's competitors and potential competitors are larger in size and posses
significantly greater financial resources that the Company. There can be no
assurance that the Company will be able to compete successfully with its
competitors. (See "Certain Factors - Reimbursement by Third Party Payors;
Possible Effects of Managed Care")
Reimbursement by Third-Party Payors; Effects of Managed Care. The
Company is primarily reimbursed for its services by insurance companies,
managed care companies, Medicare/Medicaid programs or other third-party payors.
The Company typically receives payment between ninety (90) and one hundred
fifty (150) days after rendering an invoice, although such period can be
longer. The size and nature of claims related to services provided by the
Company result in a large number of such claims being reviewed by third-party
payors prior to payments, and the third-party payors may attempt to deny
reimbursement of such claims. Accordingly, because these factors may delay or
deny payments to the Company for its services, the Company's cash flow
historically has been insufficient to meet its accounts payable. The company
has in the past been required to borrow funds to meet its ongoing obligations
and may be required to do so in the future. The Waiver of the Credit Facility
eliminates the Company's ability to borrow additional funds. Unless the Company
can renegotiate the Credit Facility or obtain other funds, the Company will be
unable to fund future growth. See "Certain Factors-Security Interests in
Assets; History of Noncompliance with Financial Covenants Under the Company's
Credit Facility".
In addition, the Company's business, including but not limited to the size of
the Company's client/patient population, revenues and profit margins, will be
adversely affected by the cost containment measures and review procedures
imposed by managed care. Certain managed care companies have also awarded
contracts to providers on a national basis. Often the Company has not been
large enough to compete for these contracts. This factor has contributed to the
decline in the Company's revenues over the past year. There can be no assurance
that the trend of declining revenues will not continue. See "Certain Factors
Competition."
Health Care Reform. Political, economic and regulatory influences are likely to
lead to fundamental change in the health care industry in the United States.
Numerous proposals for comprehensive reform of the nation's health care system
have been introduced in Congress. Many approaches have been considered,
including mandated basic health care benefits, controls on health care spending
through limitations on the growth of private health insurance premiums and
Medicare and Medicaid spending, the creation of large insurance purchasing
groups and fundamental changes to health care delivery systems. In addition,
some of the states in which the Company operates are considering various health
care reform proposals. The company anticipates that Congress and state
legislatures will continue to review and assess alternative health care
delivery systems and payment methodologies, and that public debate of these
issues will continue in the future.
PAGE 15 OF 19 PAGES
<PAGE>
Due to uncertainties regarding the ultimate features of reform initiatives and
their enactment and implementation, the Company cannot predict which, if any,
reforms will be adopted, when they may be adopted, or what impact they may have
on the Company. In addition, the cost and service considerations which have
generated proposals for health care reform have also resulted in, and are
expected to continue to result in, strategic realignments and combinations in
the health care industry which may, over time, have a significant impact on the
Company's strategic direction and results of operations. The actual
announcement of reform proposals and the investment communities' reaction to
such proposals, announcements by competitors and payors of their strategies to
respond to reform initiatives and general industry conditions have produced and
may continue to produce volatility in the trading and market price of the
Company's Common Stock and for securities of health care companies generally.
Ability to Attract Key Management and Dependence on Health Care Professionals.
The Company's future success will depend in large part on its ability to
attract and retain senior management personnel and branch-level management. In
addition, the Company is highly dependent on its staff of professional nurses
and its other health care professionals and paraprofessionals. Competition for
qualified management personnel and health care professionals and
paraprofessionals is strong. The inability to attract, retain or motivate
management and sufficient numbers of qualified health care professionals and
paraprofessionals could adversely affect the Company's business and prospects.
Although the Company has been generally able to meet its staffing requirements
for professional nurses and other health care staff, the Company has
experienced occasional staffing shortages at certain of its offices and an
increase in competition, or a decline in its ability to meet its staffing
needs, in the future could have a material adverse effect on the Company's
profitability and on the Company's ability to maintain or increase its patient
base at certain or all of its branch offices.
Liability and Insurance. The Company's services subject it to liability risk.
Malpractice claims may be asserted against the Company if its services are
alleged to have resulted in patient injury or other adverse effects. The
Company has from time to time been subject to such suites in the ordinary
course of its business. There can be no assurance that future claims will not
be made or that such claims, if made, will not materially and adversely affect
the Company's business or financial condition. The Company currently maintains
liability insurance in the amount of $8 million per occurrence and $9 million
in the aggregate. There can be no assurance that the coverage limits of the
Company's insurance policies will be adequate. In addition, while the Company
has been able to obtain liability insurance in the past, such insurance varies
in cost, is difficult to obtain and may not be available in the future on
acceptable terms or at all. A successful claim against the Company in excess of
the Company's insurance coverage could have a material adverse effect upon the
company's business. Claims against the company, regardless of their merits or
eventual outcome, also may have a material adverse effect upon the Company's
reputation and business.
Volatility of Stock Price. There has been significant volatility in the market
price of the common stock of the Company and in the market prices of health
care company securities in general. The Company believes factors such as
legislative and regulatory developments and quarterly variations in financial
results have caused the market price of its common stock to fluctuate
substantially. In addition, the stock market has experienced volatility that
has affected the market prices of many health care service companies and that
often has been unrelated to the operating performance of such companies. These
market fluctuations may adversely affect the price of the common stock.
PAGE 16 OF 19 PAGES
<PAGE>
No Dividends. The Company has not paid any dividends since inception and does
not anticipate the payment of dividends in the foreseeable future.
Possible Issuances of Preferred Stock; Restrictions on Changes in Control. The
Company is authorized to issue up to 2,000,000 shares of preferred stock, $.001
par value per share (the "Preferred Stock"). The Preferred Stock may be issued
in one or more series, the terms of which may be determined at the time of
issuance by the board of Directors, without further action by the stockholders
and may include voting rights, preferences as to dividends and liquidation,
conversion and redemption rights. The future issuance of any shares of
Preferred Stock could adversely affect the rights of the holders of the Common
Stock, and therefore reduce the value of the Common Stock.
The Company's Certificate of Incorporation provides that no person or group
may, after May 15, 1989, acquire beneficial ownership of 10% or more of any
class of equity securities of the company without the prior written consent of
all state health regulatory agencies or state health commissions governing the
Company's activities that require such consent. The provision does not apply to
(i) persons who beneficially owned more than 10% of any class of the Company's
equity securities prior to May 15, 1989, or (ii) securities held by registered
broker-dealers solely for bona fide market making purposes. The Certificate of
Incorporation also provides for a staggered board such that the Board of
Directors is divided into three classes. The term of office for the Class II
directors will expire at the 1997 Annual Meeting of Stockholders. At each such
election, directors will be chosen for a three year term. Each of the foregoing
requirements and provisions may have the effect of making takeover of the
Company more difficult and may help to insure continued control by present
management.
Shares Eligible for Future Sale. Sales of substantial amounts of Common Stock
in the public market in the future could adversely affect the prevailing market
price of the Company's Common Stock and may have a material and adverse effect
on the Company's ability to raise the capital necessary to fund its future
operations. Additional shares of Common Stock, including shares issuable upon
exercise of options and warrants, will also become eligible for sale in the
public market form time to time in the future. Furthermore, certain holders of
Common Stock have the right to cause the company to register their shares under
the Securities Act for sale in the public markets.
PAGE 17 OF 19 PAGES
<PAGE>
Exhibit 3(i)
Certificate of Incorporation
of Registrant, as Amended
<PAGE>
EXHIBIT 3(i)
[State of Delaware Office of Secretary of State]
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF
DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF CERTIFICATE OF INCORPORATION OF THE CARE GROUP, INC. FILED
IN THIS OFFICE ON THE THIRD DAY OF FEBRUARY, A.D. 1989, AT 9 O'CLOCK
A.M.
* * * * * * * * *
[SEAL] _________________________________________
Michael Harkins, Secretary of State
911895213 AUTHENTICATION: *3102292
DATE: 07/08/1991
<PAGE>
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
The undersigned, being of legal age, in order to form a corporation
under and pursuant to the laws of the State of Delaware, do hereby set forth as
follows:
FIRST: The name of the corporation is
THE CARE GROUP, INC.
SECOND: The address of the initial registered and principal office of
this corporation in this state is c/o United Corporate Services, Inc., 410
South State Street, in the City of Dover, County of Kent, State of Delaware
19901 and the name of the registered agent at said address is United Corporate
Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the corporation laws
of the State of Delaware.
FOURTH: The corporation shall be authorized to issue the following
shares:
Class Number of Shares Par Value
----- ---------------- ---------
COMMON 3,000 NONE
FIFTH: The name and address of the incorporator are as follows:
NAME ADDRESS
- ---- -------
Ray A. Barr 9 East 40th Street
New York, New York 10016
SIXTH: The following provisions are inserted for the management of
the business and for the conduct of the affairs of the corporation, and for
further definition,
<PAGE>
limitation and regulation of the powers of the corporation and of its directors
and stockholders:
(1) The number of directors of the corporation shall be such as from
time to time shall be fixed by or in the manner provided in the by-laws.
Election of directors need not be by ballot unless the by-laws so provide.
(2) The Board of Directors shall have power without the assent or
vote of the stockholders:
(a) To make, alter, amend, change, add to or repeal the
By-Laws of the corporation; to fix and vary the amount to be reserved
for any proper purpose; to authorize and cause to be executed
mortgages and liens upon all or any part of the property of the
corporation; to determine the use and disposition of any surplus or
net profits; and to fix the times for the declaration and payment of
dividends.
(b) To determine from time to time whether, and to what
times and places, and under what conditions the accounts and books of
the corporation (other than the stock ledger) or any of them, shall
be open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or
at any meeting of the stockholders called for the purpose of considering
any such act or contract, and any contract or act that shall be approved
or be ratified by the vote of the holders of a majority of the stock of
the corporation which is represented in person or by proxy at such
meeting and entitled to vote thereat (provided that a lawful quorum of
2
<PAGE>
stockholders be there represented in person or by proxy) shall be as
valid and as binding upon the corporation and upon all the stockholders
as though it had been approved or ratified by every stockholder of the
corporation, whether or not the contract or act would otherwise be open
to legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the corporation; subject, nevertheless, to the
provisions of the statutes of Delaware, of this certificate, and to any
by-laws from time to time made by the stockholders; provided, however,
that no by-laws so made shall invalidate any prior act of the directors
which would have been valid if such by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except with respect to (1) a breach of the director's duty of loyalty to the
corporation or its stockholders, (2) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of
the corporation's directors to the corporation or its stockholders to the
fullest extent permitted by section 102(b)(7) of the Delaware General
Corporation Law, as amended from time to time. The corporation shall indemnify
to the fullest extent permitted by Sections 102(b)(7) and 145 of the Delaware
3
<PAGE>
General Corporation Law, as amended from time to time, each person that such
Sections grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a
summary way of this corporation or of any creditor or stockholder thereof or
on the application of any receiver or receivers appointed for this corporation
under the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this corporation under the provisions of Section 279 Title 8 of
the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this corporation, as
the case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths (3/4) in value of the creditors
or class of creditors, and/or of the stockholders or class of stockholders of
this corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or
on all the stockholders or class of stockholders, of this corporation, as the
case may be, and also on this corporation.
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or
4
<PAGE>
hereafter prescribed by law, and all rights and powers conferred herein on
stockholders, directors and officers are subject to this reserved power.
IN WITNESS WHEREOF, the undersigned hereby executes this document and
affirms that the facts set forth herein are true under the penalties of
perjury this second day of February, 1989.
-----------------------------------------
Ray A. Barr, Incorporator
5
<PAGE>
[State of Delaware Office of Secretary of State]
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF CERTIFICATE OF CHANGE
OF ADDRESS OF REGISTERED AGENT AS IT APPLIES TO "THE CARE GROUP, INC." AS
RECEIVED AND FILED IN THIS OFFICE ON THE SIXTH DAY OF MARCH, A.D. 1989, AT 8:30
O'CLOCK A.M.
* * * * * * * * *
[SEAL] _________________________________________
Michael Harkins, Secretary of State
911895213 AUTHENTICATION: *3102288
DATE: 07/08/1991
<PAGE>
REGISTERED OFFICE AND REGISTERED AGENT
OF
UNITED CORPORATE SERVICES, INC.
Pursuant to Section 134 of Title 8 of the Delaware Code
To: DEPARTMENT OF STATE
Division of Corporations
Townsend Building
Dover, Delaware 19901
Pursuant to the provisions of Section 134 of Title 8 of the
Delaware Code, the undersigned Agent for service of process, in order to change
the address of the registered office of the corporation for which it is
registered agent, hereby certifies that:
1. The name of the registered agent is UNITED
CORPORATE SERVICES, INC.
2. The address of the old registered office was:
410 South State Street
County of Kent
Dover, Delaware 19901
3. The address to which the registered office is to be
changed is:
15 East North Street
County of Kent
Dover, Delaware 19901
4. The names of the corporations represented by said
agent are set forth on the list annexed to this certificate and made a part
hereof reference.
5. The new address will be effective upon filing of
this document.
IN WITNESS WHEREOF, said agent has caused this certificate
to be signed on its behalf by its President and Secretary this 6th day of
March, A.D. 1989.
UNITED CORPORATE SERVICES, INC.
---------------------------------------
Ray A. Barr, President
ATTEST
- ------------------------
<PAGE>
[State of Delaware Office of Secretary of State]
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT BEFORE PAYMENT FOR STOCK OF THE CARE GROUP, INC. FILED IN THIS OFFICE
ON THE TWENTY-THIRD DAY OF MARCH, A.D. 1989, AT 9 O'CLOCK A.M.
* * * * * * * * *
-----------------------------------------
[SEAL] Michael Harkins, Secretary of State
911895213 AUTHENTICATION: *3102283
DATE: 07/08/1991
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
The undersigned, being a majority of the directors of The
Care Group, Inc., a Delaware corporation (the "Corporation"), hereby certify
and set forth:
1. The name of the corporation is THE CARE GROUP, INC.
The name under which the Corporation was formed is THE CARE GROUP, INC.
2. The Certificate of Incorporation was filed in the
office of the Secretary of State of the State of Delaware on February 3, 1989.
3. Paragraph FOURTH of the Certificate of
Incorporation is hereby amended in its entirety to read:
"FOURTH: The Corporation shall be authorized to issue the
following shares:
CLASS Number of Shares Par Value
- ----- ---------------- ---------
Common 15,000,000 $.001
Preferred 1,000,000 $.001
The Preferred Stock is to be issued in one or more series as
determined by the Corporation's Board of Directors in which
the designations, powers, preferences, justifications,
limitations, restrictions and relative, optional, conversion
and other special rights of the shares of Preferred Stock
contained in each such series shall be as fixed by the Board
of Directors of the
<PAGE>
Corporation (authority to do so being hereby expressly
granted) and stated and expressed in a resolution or
resolutions for the issuance of the shares of Preferred Stock
contained in such series."
4. The Corporation has not received any payment for any of its stock, and
this amendment to the Certificate of Incorporation of the Corporation has been
duly adopted in accordance with the provisions of Section 241 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed this Certificate this
22nd day of March, 1989.
Sworn to before me this 22nd day of
March, 1989 ----------------------------------
Ann T. Mittasch, Director
- ----------------------------------
Notary Public
Sworn to before me this 22nd day of
March, 1989 ----------------------------------
Gilda G. Schechter, Director
- ----------------------------------
Notary Public
2
<PAGE>
[State of Delaware Office of Secretary of State]
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT BEFORE PAYMENT FOR STOCK OF THE CARE GROUP, INC. FILED IN THIS OFFICE
ON THE FOURTH DAY OF MAY, A.D. 2989, AT 9 O'CLOCK A.M.
* * * * * * * * *
[SEAL] _________________________________________
Michael Harkins, Secretary of State
911895213 AUTHENTICATION: *3102281
DATE: 07/08/1991
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
The undersigned, being the Executive Vice President of The Care Group,
Inc., a Delaware corporation (the "Corporation"), hereby certifies and sets
forth:
1. The name of the corporation is THE CARE GROUP, INC. The name under
which the Corporation was formed is THE CARE GROUP, INC.
2. The Certificate of Incorporation was filed in the office of the
Secretary of State of the State of Delaware on February 3, 1989.
3. Paragraph (2)(a) of Article SIXTH of the Certificate of Incorporation
is hereby amended in its entirety to read as follows:
"(a) To make, alter, amend, change, add to or repeal the
By-Laws of the corporation; to fix and vary the amount of
capital stock of the Corporation to be reserved for any
proper purpose; to authorize and cause to be executed
mortgages and liens upon all or any part of the property of
the corporation; to determine the use and disposition of any
surplus or net profits; and to fix the times for the
declaration and payment of dividends.
4. A new ARTICLE TENTH is hereby added to the Certificate of
Incorporation which shall read in its entirety as follows:
"No person or group as defined in Rule 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act), may, after May 15, 1989, acquire beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of 10% or
more of any class of equity securities of the Corporation
without the prior written consent of all state health
regulatory agencies or state health commissions governing the
Corporation's activities that require such
- 1 -
<PAGE>
consent, including the New York State Department of Health
and the District of Columbia State Health Planning and
Development Agency. The requirements of this Article TENTH
apply to neither (i) persons who beneficially owned (as
defined in rule 13d-3 under the Exchange Act) more than 10%
of any class of the Corporation's equity securities prior to
May 15, 1989, nor (ii) securities held by broker-dealers
registered under Section 15 of the Exchange Act solely for
bona fide market making purposes."
This amendment to the Certificate of Incorporation of the Corporation
has been duly adopted in accordance with the provisions of Section 241 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
3rd day of May, 1989.
/s/ Gilda G. Schecter
-----------------------
Gilda G. Schechter
Executive Vice President
ATTEST:
/s/ Randolph J. Mittasch
- ----------------------------------
Randolph J. Mittasch, Secretary
- 2 -
<PAGE>
[State of Delaware Office of Secretary of State]
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF
DELAWARE DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF CORRECTION OF THE CARE GROUP, INC. FILED
IN THIS OFFICE ON THE TWELFTH DAY OF DULY, A.D. 1989, AT 9 O'CLOCK
A.M.
* * * * * * * * * *
[SEAL] /s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
751189306 AUTHENTICATION: *3102621
DATE: 07/08/1991
<PAGE>
CERTIFICATE OF CORRECTION
OF
CERTIFICATE OF AMENDMENT
OF
THE CARE GROUP, INC.
The undersigned, being the President of The Care Group, Inc. a
Delaware corporation (the "Corporation"), hereby certifies and sets forth:
1. The name of the corporation is THE CARE GROUP, INC. the name under
which the Corporation was formed is THE CARE GROUP, INC.
2. On May 4, 1984, the Corporation filed an amendment (the
"Amendment") to its Certificate of Incorporation which is inaccurate in the
following two respects:
(a) The phrase "Rule 13(d)(3)" that appears in ARTICLE TENTH
of the Certificate of Incorporation, which Article is set forth in paragraph 4
of the Amendment, should read "Section 13(d)(3)." Accordingly, paragraph 4 of
the Amendment, as corrected, reads in its entirety as follows:
A new ARTICLE TENTH is hereby added to the Certificate of
Incorporation which shall read in its entirety as follows:
"No person or group as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), may, after May 15, 1989, acquire beneficial ownership
(as defined in Rule 13d-3 under the Exchange Act) of 10% or
more of any class of equity securities of the Corporation
without the prior written consent of all state health
regulatory agencies or state health commissions governing the
Corporation's activities that require such consent, including
the New York State Department of Health Planning and
- 1 -
<PAGE>
Development Agency. The requirements of this Article TENTH
apply to neither (i) persons who beneficially owned as
defined in Rule 13d-3 under the Exchange Act) more than 10%
of any class of the Corporation's equity securities prior to
May 15, 1989, nor (ii) securities held by broker-dealers
registered under Section 15 of the Exchange Act solely for
bona fide market making purposes."
(b) The Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware, not Section 241 as the Amendment's adoption clause currently states.
Accordingly, the Amendment's adoption clause, as corrected, reads in its
entirety as follows:
This amendment to the Certificate of Incorporation
of the Corporation has been duly adopted in
accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware."
This Certificate of Correction was duly adopted in accordance
with the provisions of Section 103(f) of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate this 11th day of July, 1989.
/s/ Ann T. Mittasch
--------------------------
Ann T. Mittasch, President
ATTEST:
/s/ Randolph J. Mittasch
- --------------------------
Randolph J. Mittasch,
Secretary
- 2 -
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-----------------------------------
I, MICHAEL HARKINS, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
OWNERSHIP OF THE CARE GROUP, INC., A CORPORATION ORGANIZED AND EXISTING UNDER
THE LAWS OF THE STATE OF DELAWARE, MERGING WINDSOR INTERNATIONAL AGENCIES,
INC. A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF NEW
YORK, PURSUANT TO SECTION 253 OF THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE FIRST DAY OF JULY, A.D.
1991, AT 9 O'CLOCK A.M.
AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CORPORATION SHALL
BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE.
* * * * * * * * * *
[SEAL] /s/ Michael Harkins
-----------------------------------
Michael Harkins, Secretary of State
751189307 AUTHENTICATION: *3102622
DATE: 07/08/1991
<PAGE>
CERTIFICATE OF OWNERSHIP AND MERGER
OF
WINDSOR INTERNATIONAL AGENCIES, INC.
(a New York corporation)
into
The Care Group, Inc.
(a Delaware corporation)
It is hereby certified that:
1. The Care Group, Inc. (the "Corporation") is a business corporation
of the State of Delaware.
2. The Corporation is the owner of all of the outstanding shares of
Windsor International Agencies, Inc. ("Windsor"), which is a business
corporation of the State of New York.
3. The laws of the jurisdiction of organization of Windsor permit the
merger of a business corporation of that jurisdiction with a business
corporation of another jurisdiction.
4. The Corporation hereby merges Windsor into the Corporation.
5. The following is a copy of the resolutions adopted on June 20,
1991 by the Board of Directors of the Corporation to merge Windsor into the
Corporation:
RESOLVED, that Windsor be merged into the Corporation, and
that all of the estate, property, rights, privileges, powers and
franchises of Windsor be vested in and held and enjoyed by the
Corporation as fully and entirely and without change or diminution as
the same were before held and enjoyed by Windsor in its name; and be
it further
RESOLVED, that the Corporation assume all of the obligations
of Windsor; and be it further
RESOLVED, that the Corporation shall cause to be executed
and filed and/or recorded the documents prescribed by the laws of the
State of Delaware, by the laws of the State of New York, and by the
laws of any other appropriate jurisdiction and will cause to be
- 1 -
<PAGE>
performed all necessary acts within the jurisdiction of
Windsor and of this Corporation and in any other appropriate
jurisdiction; and be it further
RESOLVED, that the effective time of the Certificate of
Ownership and Merger setting forth a copy of these resolutions shall
be July 1, 1991, and that, insofar as the General Corporation Law of
the State of Delaware shall govern the time, said time shall be the
effective merger time.
Executed on June 25, 1991
THE CARE GROUP, INC.
By: /s/ Ann T. Mittasch
--------------------------
Ann T. Mittasch,
President
ATTEST:
/s/ Randolph J. Mittasch
- -------------------------
Randolph J. Mittasch,
Secretary
- 2 -
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-------------------------------------
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE,
DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE
OF AMENDMENT OF "THE CARE GROUP, INC.," FILED IN THIS OFFICE ON THE THIRTEENTH
DAY OF JULY, A.D. 1992, AT 9 O'CLOCK A.M.
* * * * * * * * * *
[SEAL] /s/ William T. Quillan
--------------------------------------
William T. Quillen, Secretary of State
AUTHENTICATION: /s/ M. Magrusen
DATE: 06/14/1993
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
-----------------------------------
I, MICHAEL RATCHFORD, SECRETARY OF STATE OF THE STATE OF DELAWARE DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "THE CARE GROUP, INC." FILED IN THIS OFFICE ON THE THIRTIETH DAY
OF JANUARY, A.D. 1992, AT 9 O'CLOCK A.M.
* * * * * * * * * *
[SEAL] /s/ Michael Ratchford
----------------------------------
Secretary of State
920305080
AUTHENTICATION: *3328454
DATE: 01/30/1992
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
It is certified that:
1. The name of the corporation is THE CARE GROUP, INC.
2. The Certificate of Incorporation was filed in the office of the
Secretary of State of the State of Delaware on February 3, 1989.
3. Paragraph FOURTH of the Certificate of Incorporation is hereby
amended by increasing the number of shares of Common Stock, par value $.001
per share, that the corporation is authorized to issue from 15,000,000
(fifteen million) shares to 20,000,000 (twenty million) shares. No change is
made with respect to the 1,000,000 shares of Preferred Stock, par value $.001
per share.
This amendment to the Certificate of Incorporation of the Corporation has
been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the undersigned have executed and attested this
Certificate this 29th day of January, 1992.
/s/ Ann T. Mittasch
------------------------------
Ann T. Mittasch,
President and Chairman
ATTEST:
/s/ Randolph J. Mittasch
- -----------------------------------
Randolph J. Mittasch, Secretary
and Treasurer
<PAGE>
THE CARE GROUP, INC.
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
The undersigned, being the Executive Vice President of The Care
Group, Inc., a Delaware corporation (the "Corporation"), hereby certifies and
sets forth:
1. The name of the corporation is THE CARE GROUP, INC. The name under
which the Corporation was formed is THE CARE GROUP, INC.
2. The Certificate of Incorporation was filed in the office of the
Secretary of State, of the State of Delaware on February 3, 1989.
3. A new ARTICLE ELEVENTH is hereby added to the Certificate of
Incorporation which shall read in its entirety as follows:
ELEVENTH: The Board of Directors shall consist of not less than 3 nor
more than 7 members, and subject to such limitation the number of
directors will be fixed from time to time by the Board of Directors.
This Article Eleventh cannot be amended without the affirmative vote
of the holders of more than two-thirds of the shares of Common Stock
present at a meeting in person or represented by proxy, provided that
a quorum is present thereat.
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
The undersigned, being a majority of the directors of The Care Group,
Inc., a Delaware corporation (the "Corporation"), hereby certify and set
forth:
1. The name of the corporation is THE CARE GROUP, INC. The name under
which the Corporation was formed is THE CARE GROUP, INC.
2. The Certificate of Incorporation was filed in the office of the
Secretary of State of the State of Delaware on February 3, 1989.
3. The certificate of incorporation of the corporation is hereby
amended by adding a new ARTICLE TWELFTH to the certificate of incorporation
which shall read in its entirety as follows:
"12. Directors shall be divided into three classes, Class I,
Class II and Class III. The Board of Directors of the Company shall
determine into which class each director or nominee is assigned. Each
class shall consist of the same number of directors; provided,
however that (i) if the directors cannot be divided evenly into three
classes, Class III shall consist of one fewer director than Class I
and II, and (ii) if there are fewer than five directors, Class I
shall consist of one more director than Classes II and III. The
members of each class shall be elected for three year terms and until
their successors are elected and shall have qualified; provided
however, that the first directors to be assigned to Class II
initially shall be elected for a term of two years and the first
director or directors to be assigned to Class III initially shall be
elected for a term of one year. The provisions of this Article TWELVE
cannot be amended without the affirmative vote of the holders of more
than two-thirds of the shares of Common Stock present at a meeting in
person or represented by proxy, provided that a quorum is present
thereat."
4. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Section 242 of the
General Corporation Law of the State of Delaware.
5. The effective time of the amendment herein certified shall be
11:00 a.m. on June 21, 1995.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 15th day of June, 1995.
/s/ Ann T. Mittasch
---------------------------
Ann T. Mittasch, President
ATTEST:
/s/ Randolph J. Mittasch
- -------------------------------
Randolph J. Mittasch, Secretary
2
<PAGE>
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE
------------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF
AMENDMENT OF "THE CARE GROUP, INC.", FILED IN THIS OFFICE ON THE SECOND DAY OF
AUGUST, A.D. 1995, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT
COUNTY RECORDER OF DEEDS FOR RECORDING.
----------------------------------
[SEAL] Edward J. Freel, Secretary of State
2186394 8100 AUTHENTICATION: 7595571
950174004 DATE: 08-03-95
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
The undersigned, being a majority of the directors of The Care Group,
Inc., a Delaware corporation (the "Corporation"), hereby certify and set
forth:
1. The name of the corporation is THE CARE GROUP, INC. The name under
which the Corporation was formed is THE CARE GROUP, INC.
2. The Certificate of Incorporation was filed in the office of the
Secretary of State of the State of Delaware on February 3, 1989.
3. The paragraph in Article FOURTH of the Certificate of
Incorporation of the Corporation which authorizes the Board of Directors to
determine the preferences, powers, designations, rights, qualifications,
limitations, and restrictions of the preferred stock is hereby amended in its
entirety to read:
"The Board of Directors is hereby authorized to provide for the
issuance of Preferred Stock from time to time in one or more series
with such distinctive serial voting powers, designations,
preferences, rights, qualifications, limitations, and restrictions of
the shares of each such series as the Board of Directors with respect
to each such series shall determine, which shall include, without
limiting the generality of the foregoing, the determination of any or
all of the following:
(i) the number of shares constituting such series, the par value and
the distinctive designation of such series;
(ii) the extent, if any, to which the shares of such series shall
have voting rights;
(iii) whether dividends, if any, with respect to such series shall be
cumulative or noncumulative, the dividend rate or method or
determining the dividend rate of such series, and the dates and
preferences of dividends on such series;
(iv) the rights of the shares of such series in the event of
voluntary of involuntary liquidation, dissolution, or winding up
of the Corporation, or upon any distribution of the
Corporation's assets;
2
<PAGE>
(v) whether the shares of such series shall have conversion
privileges and, if so, the terms and conditions of such
conversion privileges, including a provision, if any, for
adjustment of the conversion rate and for payment of additional
amounts by holders of Preferred Stock of such series upon
exercise of such conversion privileges;
(vi) whether or not the shares of such series shall be redeemable,
and, if so, the price at and the terms and conditions upon which
such shares shall be redeemable, and whether such series shall
have a sinking fund for the redemption or purchase of shares of
such series, and, if so, the terms and amount of such sinking
fund; and
(vii) any other preference and relative, participating, optional, or
other special rights, and qualifications, limitations, or
restrictions thereof.
The powers, designations, preferences, rights, qualifications,
limitations and restrictions of the Preferred Stock shall be
determined from time to time by the Board of Directors and shall be
stated in a resolution or resolutions thereof providing for the
issuance of such Preferred Stock (a "Preferred Stock Designation").
Except as may be provided by the Board of Directors in a Preferred
Stock Designation or by law, shares of any series of Preferred Stock
that have been redeemed (whether through the operation of a sinking
fund or otherwise) or purchased by the Corporation, or which, if
convertible or exchangeable, have been converted into or exchanged
for shares of stock of any other class or classes, shall have the
status of authorized and unissued shares of Preferred Stock and may
be reissued as a part of the series of which they were originally a
part or may be reissued as part of a new series of Preferred Stock to
be created by resolution or resolutions of the Board of Directors or
as part of any other series of Preferred Stock."
4. The amendment of the certificate of incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 242 of the
General Corporation Law of the State of Delaware.
3
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this Certificate
this 25th day of June, 1995.
/s/ Ann T. Mittasch
----------------------------
Ann T. Mittasch, President
ATTEST:
/s/ Randolph J. Mittasch
- --------------------------------
Randolph J. Mittasch, Secretary
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
THE CARE GROUP, INC.
PURSUANT TO SECTIONS 228 AND 242
OF THE GENERAL CORPORATION
LAW OF THE STATE OF DELAWARE
**************************
The Care Group, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation") DOES HEREBY CERTIFY:
FIRST: That the first paragraph in Article FOURTH of the Certificate
of Incorporation of the Corporation, stating the total number of shares the
Corporation is authorized to issue, is hereby amended in its entirety to read:
"FOURTH: The Corporation shall be authorized to issue the following
shares:
CLASS Number of Shares Par Value
Common 30,000,000 $0.001
Preferred 2,000,000 $0.001"
SECOND: That the foregoing amendment has been duly adopted in
accordance with the provisions of Sections 228 and 242 of the General
Corporation Law of the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by Richard G. Jung, its President and CEO, and Randolph J. Mittasch,
its Secretary, this 14th day of November, 1996.
By: /s/ Richard Jung
---------------------------------
Richard G. Jung, President & CEO
ATTEST:
Randolph Mittasch
- -------------------------------
Randolph J. Mittasch, Secretary
Option to Purchase
Units
------
THE CARE GROUP, INC.
Unit Purchase Option
Dated: August __, 1996
THIS CERTIFIES THAT Royce Investment Group, Inc. (herein sometimes
called the "Holder") is entitled to purchase from The Care Group, Inc., a
Delaware corporation (hereinafter called the "Company"), at the prices and
during the periods as hereinafter specified, up to ( ) Units (the
"Units"), each Unit consisting of 40,000 shares of the Company's Common Stock,
$.001 par value, as now constituted ("Common Stock"), and 40,000 Redeemable
Common Stock Purchase Warrants ("Warrants"). Each Warrant is exercisable to
purchase one (1) share of Common Stock.
This Unit Purchase Option, together with options of like tenor,
constituting in the aggregate options (the "Options") to purchase 7.50 Units
(the "Option Units"), subject to adjustment in accordance with Section 8 of
this Option, was originally issued pursuant to an agency agreement between the
Company and Royce Investment Group, Inc., as placement agent (the "Placement
Agent") in connection with a private offering (the "Offering") of a maximum of
100 Units (the "Offering Units") through the Placement Agent.
Except as specifically otherwise provided herein, the Warrants shall
be governed by the same terms and conditions of the Form of Common Stock
Purchase Warrant attached hereto as Exhibit A (the "Warrant Agreement"),
except that (i) the holder of this Option (the "Holder") shall have
registration rights under the Securities Act of 1933, as amended (the "Act"),
for the Common Stock included in the Option Units, and the shares of Common
Stock underlying the Warrants included in the Option Units, as more fully
described in Section 6 of this Option and (ii) the Warrants issuable upon
exercise of the Option may not be redeemed by the Company unless the Holder
consents to such redemption. The Company will list the Common Stock underlying
this Option on the Nasdaq National Market, the Nasdaq Small Cap Market or such
other exchange or market as the Common Stock may then be listed or quoted. In
the event of any extension of the expiration date or reduction of the exercise
price of the Warrants included in the Offering Units, the same changes to the
Warrants included in the Option Units shall be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with Section 8 of this Option
("the "Exercise Price"), and during the periods as follows:
<PAGE>
(a) Between August __, 1996, and August __, 2001,
inclusive, the Holder shall have the option to purchase Option
Units hereunder at a price of $60,000 per Unit. For purposes of
the adjustments under Section 8 hereof, the Per Share Exercise
Price shall be deemed to be $1.50, subject to further adjustment
as provided in such Section 8.
(b) After August __, 2001, the Holder shall have no right
to purchase any Units hereunder.
2. (a) The rights represented by this Option may be exercised at any
time within the period above specified, in whole or in part, by (i) the
surrender of this Option (with the purchase form at the end hereof properly
executed) at the principal executive office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to
the Holder at the address of the Holder appearing on the books of the
Company); and (ii) payment to the Company of the Exercise Price then in effect
for the number of Option Units specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any. This Option shall be
deemed to have been exercised, in whole or in part to the extent specified,
immediately prior to the close of business on the date this Option is
surrendered and payment is made in accordance with the foregoing provisions of
this Section 2, and the person or persons in whose name or names the
certificates for shares of Common Stock and Warrants shall be issuable upon
such exercise shall become the holder or holders of record of such Common
Stock and Warrants at that time and date. The certificates for the Common
Stock and Warrants so purchased shall be delivered to the Holder as soon as
practicable but not later than ten (10) days after the rights represented by
this Option shall have been so exercised.
(b) At any time during the period above specified, during which
this Option may be exercised, the Holder may, at its option, exchange this
Option, in whole or in part (an "Option Exchange"), into the number of Option
Units determined in accordance with this Section 2(b), by surrendering this
Option at the principal executive office of the Company or at the office of
its stock transfer agent, accompanied by a notice stating such Holder's intent
to effect such exchange, the number of Option Units into which this Option is
to be exchanged and the date on which the Holder requests that such Option
Exchange occur (the "Notice of Exchange"). The Option Exchange shall take
place on the date specified in the Notice of Exchange or, if later, the date
the Notice of Exchange is received by the Company (the "Exchange Date").
Certificates for the shares of Common Stock and Warrants issuable upon such
Option Exchange and, if applicable, a new Option of like tenor evidencing the
balance of the Option Units remaining subject to this Option, shall be issued
as of the Exchange Date and delivered to the Holder within seven (7) days
following the Exchange Date. In connection with any Option Exchange, this
Option shall represent the right to subscribe for and acquire the number of
Option Units (rounded to the next highest integer) equal to (x) the number of
Option Units specified by the Holder in its Notice of Exchange up to the
maximum number of Option Units subject to this Option (the "Total Number")
less (y) the number of Option Units equal to the quotient obtained by dividing
(A) the product of the Total Number and the existing Exercise
2
<PAGE>
Price by (B) the Fair Market Value. "Fair Market Value" shall mean first, if
there is a trading market as indicated in Subsection (i) below for the Units,
such Fair Market Value of the Units and if there is no such trading market in
the Units, then Fair Market Value shall have the meaning indicated in
Subsections (ii) through (v) below for the aggregate value of all shares of
Common Stock and Warrants which comprise a Unit:
(i) If the Units are listed on a national securities
exchange or listed or admitted to unlisted trading privileges on
such exchange or listed for trading on the Nasdaq National
Market or the Nasdaq Small Cap Market, the Fair Market Value
shall be the average of the last reported sale prices or the
average of the means of the last reported bid and asked prices,
respectively, of the Units on such exchange or market for the
twenty (20) business days ending on the last business day prior
to the Exchange Date; or
(ii) If the Common Stock or Warrants are listed on a
national securities exchange or admitted to unlisted trading
privileges on such exchange or listed for trading on the Nasdaq
National Market or the Nasdaq Small Cap Market, the Fair Market
Value shall be the average of the last reported sale prices or
the average of the means of the last reported bid and asked
prices, respectively, of Common Stock or Warrants, respectively,
on such exchange or market for the twenty (20) business days
ending on the last business day prior to the Exchange Date; or
(iii) If the Common Stock or Warrants are not so listed or
admitted to unlisted trading privileges, the Fair Market Value
shall be the average of the means of the last reported bid and
asked prices of the Common Stock or Warrants, respectively, for
the twenty (20) business days ending on the last business day
prior to the Exchange Date; or
(iv) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so
reported, the Fair Market Value shall be an amount, not less
than book value thereof as at the end of the most recent fiscal
year of the Company ending prior to the Exchange Date,
determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company; or
(v) If the Warrants are not so listed or admitted to
unlisted trading privileges, and bid and asked prices are not so
reported for Warrants, then Fair Market Value for the Warrants
shall be an amount equal to the difference between (i) the Fair
Market Value of the shares of Common Stock which may be received
upon the exercise of the Warrants, as determined herein, and
(ii) the Warrant Exercise Price.
3
<PAGE>
3. Any assignment of this Option shall be effected by the Holder (i)
executing the form of assignment at the end hereof and (ii) surrendering this
Option for cancellation at the office or agency of the Company referred to in
Section 2 hereof, accompanied by a certificate (signed by an officer of the
Holder if the Holder is a corporation), stating that each transferee is a
permitted transferee under this Section 3 hereof; whereupon the Company shall
issue, in the name or names specified by the Holder (including the Holder) a
new Option or Options of like tenor and representing in the aggregate rights
to purchase the same number of Option Units as are purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Option Units purchased hereunder and the
Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable and no
personal liability will attach to the holder thereof. The Company further
covenants and agrees that during the periods within which this Option may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number
of shares of Common Stock for issuance upon exercise of the Warrants included
in the Option Units.
5. This Option shall not entitle the Holder to any voting rights or
any other rights, or subject to the Holder to any liabilities, as a
stockholder of the Company.
6. (a) The Company shall advise the Holder or its transferee,
whether the Holder holds the Option or has exercised the Option and holds
Option Units or any of the securities underlying the Option Units, by written
notice at least two weeks prior to the filing of any new registration
statement under the Act covering any securities of the Company (other than a
registration statement on Form S-4, S-8 or other limited purpose form), for
its own account or for the account of others, and will for a period of six
years from ___________, 1996, upon the request of the Holder within 10 days
after receipt of such notice from the Company, include in any such
registration statement, such information as may be required to permit a public
offering of the Common Stock included in the Option Units and/or the Common
Stock issuable upon the exercise of the Warrants included in the Option Units
(the "Registrable Securities"). If any registration pursuant to this Section
6(a) shall be underwritten in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this Section
6(a) be included in the underwriting on the same terms and conditions as the
securities otherwise being sold through the underwriters. In the event that
the Registrable Securities requested for inclusion pursuant to this Section
6(a) together with any other shares which have similar piggyback registration
rights (such shares and the Registrable Securities being collectively referred
to as the "Requested Stock") would constitute more than 15% of the total
number of shares to be included in a proposed underwritten public offering, or
if in the good faith judgment of the managing underwriter of such public
offering the inclusion of all of the Requested Stock originally covered by a
request for registration would reduce the number of shares to be offered by
the Company or interfere with the successful marketing of the shares of stock
offered by the
4
<PAGE>
Company, the number of shares of Requested Stock otherwise to
be included in the underwritten public offering may be reduced pro rata (by
number of shares) among the holders thereof requesting such registration or
excluded in their entirety if so required by the underwriter. To the extent
only a portion of the Requested Stock is included in the underwritten public
offering, those shares of Requested Stock which are thus excluded from the
underwritten public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 120 days, which the managing underwriter
reasonably determines is necessary in order to effect the underwritten public
offering.
(b) If any 50% holder (as defined below) shall give notice to
the Company at any time to the effect that such holder desires to register the
Registrable Securities under the Act, then the Company will promptly, but no
later than three weeks after receipt of such notice, prepare and file a
registration statement pursuant to the Act, to the end that the Registrable
Securities may be publicly sold under the Act as promptly as practicable
thereafter and the Company will use its best efforts to cause such
registration statement to become and remain effective (including the taking of
such steps as are necessary to obtain the removal of any stop order);
provided, that such 50% holder shall furnish the Company with appropriate
information in connection therewith as the Company may reasonably request in
writing. The 50% holder may, at its option, request the filing of a
registration statement under the Act pursuant to this Section 6(b) on one
occasion during the five year period beginning three months from _________,
1996. The 50% holder may, at its option request the registration of the
Registrable Securities in a registration statement made by the Company as
contemplated by Section 6(a) or in connection with a request made pursuant to
this Section 6(b) prior to acquisition of the Registrable Securities issuable
upon exercise of the Option and even though the Holder has not given notice of
exercise of the Option.
Within ten days after receiving any such notice pursuant to this
Section 6(b), the Company shall give notice to the other holders of the
Options, advising that the Company is proceeding with a new registration
statement and offering to include therein the securities underlying the
Options of the other holders, provided that they shall furnish the Company
with such appropriate information (relating to the intentions of such holders)
in connection therewith as the Company shall reasonably request in writing. In
the event the registration statement is not filed within the period specified
herein, the expiration date of this Option and the underlying Warrants shall
be extended by an amount of time equal to the delay in filing, and in the
event the registration statement is not declared effective under the Act prior
to ____________, 2001, the Company shall extend the expiration date of the
Option and the underlying Warrants to a date not less than 90 days after the
effective date of such registration statement.
All costs and expenses of the first such new registration statement
under this paragraph 6(b) and all registrations under paragraph 6(a) shall be
borne by the Company, except that the holders shall bear the fees of their own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by them. If the Company determines to
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<PAGE>
include securities to be sold by it in any registration statement originally
requested pursuant to this Section 6(b), such registration shall instead be
deemed to have been a registration under Section 6(a) and not under this
Section 6(b).
The Company will maintain such registration statement or
post-effective amendment current under the Act for a period of at least six
months (and for up to an additional three months if requested by the Holder)
from the effective date thereof.
(c) The term "50% holder" as used in this Section 6 shall mean
the holder of at least 50% of the Common Stock included in the Option Units
and the shares of Common Stock underlying the Warrants included in the Option
Units (considered in the aggregate) and shall include any owner or combination
of owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock held by such owner or owners
as well as the number of shares of Common Stock then issuable upon exercise of
the Warrants.
(d) Whenever pursuant to Section 6 a registration statement
relating to any Registrable Securities is filed, amended or supplemented under
the Act the Company shall (i) supply prospectuses and such other documents as
the Holder may request in order to facilitate the public sale or other
disposition of the Registrable Securities, (ii) use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates, provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation in any jurisdiction in which it is not so qualified, (iii)
furnish indemnification in the manner provided in Section 7 hereof, (iv)
notify each Holder of Registrable Securities at any time when a prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, contains an untrue statement of a
material fact or omits to state a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading and, at the request of any such
Holder, prepare and furnish to such Holder a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and (v) do any and all other acts and things which may be
necessary or desirable to enable such Holders to consummate the public sale or
other disposition of the Registrable Securities. The Holder shall furnish
appropriate information in connection therewith and indemnification as set
forth in Section 7.
(e) The Company shall furnish to each Holder participating in
the offering and to each underwriter, if any, a signed counterpart, addressed
to such Holder or underwriter, of (i) an opinion of counsel to the Company,
dated the effective date of such registration statement (or, if such
registration includes an underwritten public offering, an
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<PAGE>
opinion dated the date of the closing under the underwriting agreement), and
(ii) if such registration includes an underwritten public offering, a "cold
comfort" letter dated the effective date of such registration statement and
dated the date of the closing under the underwriting agreement signed by the
independent public accountants who have issued a report on the Company's
financial statements included in such registration statement, in each case
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of such
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to underwriters in underwritten
public offerings of securities.
(f) The Company shall deliver promptly to each Holder
participating in the offering requesting the correspondence and memoranda
described below and to the managing underwriter copies of all correspondence
between the Securities and Exchange Commission (the "Commission") and the
Company, its counsel or auditors and all memoranda relating to discussions
with the Commission or its staff with respect to the registration statement
and permit each Holder and underwriter to do such investigation, upon
reasonable advance notice, with respect to information contained in or omitted
from the registration statement as it deems reasonable necessary to comply
with applicable securities laws or rules of the National Association of
Securities Dealers, Inc. ("NASD"). Such investigation shall include access to
non-confidential books, records and properties and opportunities to discuss
the business of the Company with its officers and independent auditors, all to
such reasonable extent and at such reasonable times as any such Holder shall
reasonably request.
7. (a) Whenever pursuant to Section 6 a registration statement
relating to the Registrable Securities is filed, amended or supplemented under
the Act, the Company will indemnify and hold harmless each holder of the
Registrable Securities covered by such registration statement, amendment or
supplement (such holder being hereinafter called the "Distributing Holder"),
and each person, if any, who controls (within the meaning of the Act) the
Distributing Holder, and each underwriter (within the meaning of the Act) of
such securities and each person, if any, who controls (within the meaning of
the Act) any such underwriter, against any losses, claims, damages or
liabilities, joint or several, to which the Distributing Holder, any such
controlling person or any such underwriter may become subject, under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in any
such registration statement or any preliminary prospectus or final prospectus
constituting a part thereof or any amendment or supplement thereto, or arise
out of or are based upon the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
will reimburse the Distributing Holder and each such controlling person and
underwriter for any legal or other expenses reasonably incurred by the
Distributing Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out
of or is based upon an
7
<PAGE>
untrue statement or alleged untrue statement or omission or alleged omission
made in said registration statement, said preliminary prospectus, said final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished by such Distributing Holder specifically
for use in the preparation thereof.
(b) Each Distributing Holder agrees, severally but not jointly,
to indemnify and hold harmless the Company against any losses, claims, damages
or liabilities to which the Company may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities arise out of
or are based upon any untrue or alleged untrue statement of any material fact
contained in said registration statement, said preliminary prospectus, said
final prospectus, or said amendment or supplement, or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, in each case to the extent, but only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in said registration statement, said preliminary prospectus, said
final prospectus or said amendment or supplement in reliance upon and in
conformity with written information furnished by such Distributing Holder
specifically for use in the preparation thereof; except that the maximum
amount which may be recovered from the Distributing Holder pursuant to this
Section 7 or otherwise shall be limited to the amount of net proceeds received
by the Distributing Holder from the sale of the Registrable Securities.
(c) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
Section 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
(8) In addition to the provisions of Section 1(a) of this Option, the
Exercise Price in effect at any time and the number and kind of securities
purchasable upon the exercise of the Option shall be subject to adjustment
from time to time upon the happening of certain events as follows:
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<PAGE>
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of
Common Stock, (ii) subdivide or reclassify its outstanding shares of
Common Stock into a greater number of shares, or (iii) combine or
reclassify its outstanding shares of Common Stock into a smaller
number of shares, the Exercise Price in effect at the time of the
record date for such dividend or distribution or of the effective
date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying
the Exercise Price by a fraction, the denominator of which shall be
the number of shares of Common Stock outstanding after giving effect
to such action, and the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such action.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) In case the Company shall fix a record date for the issuance
of rights or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (the
"Subscription Price") (or having a conversion price per share) less
than (i) the current market price of the Common Stock (as defined in
Subsection (h) below) on the record date mentioned below, or (ii) the
Per Share Exercise Price on such record date, the Exercise Price
shall be adjusted so that the same shall equal the lower of (i) the
price determined by multiplying the number of shares then comprising
an Option Unit by the product of the Per Share Exercise Price in
effect immediately prior to the date of such issuance multiplied by a
fraction, the numerator of which shall be the sum of the number of
shares of Common Stock outstanding on the record date mentioned below
and the number of additional shares of Common Stock which the
aggregate offering price of the total number of shares of Common
Stock so offered (or the aggregate conversion price of the
convertible securities so offered) would purchase at such current
market price per share of the Common Stock, and the denominator of
which shall be the sum of the number of shares of Common Stock
outstanding on such record date and the number of additional shares
of Common Stock offered for subscription or purchase (or into which
the convertible securities so offered are convertible) or (ii) in the
event the Subscription Price is equal to or higher than the current
market price but is less than the Per Share Exercise Price, the price
determined by multiplying the number of shares then comprising an
Option Unit by the product of the Per Share Exercise Price in effect
immediately prior to the date of issuance multiplied by a fraction,
the numerator of which shall be the sum of the number of shares
outstanding on the record date mentioned below and the number of
additional shares of Common Stock which the aggregate offering price
of the total number of shares of Common Stock so offered (or the
aggregate conversion price of the convertible securities so offered)
would purchase at the Per Share Exercise Price in effect immediately
prior to the date of such issuance,
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<PAGE>
and the denominator of which shall be the sum of the number of shares
of Common Stock outstanding on the record date mentioned below and
the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so
offered are convertible). Such adjustment shall be made successively
whenever such rights or warrants are issued and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights or warrants; and to the
extent that shares of Common Stock are not delivered (or securities
convertible into Common Stock are not delivered) after the expiration
of such rights or warrants the Exercise Price shall be readjusted to
the Exercise Price which would then be in effect had the adjustments
made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or
securities convertible into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the
holders of its Common Stock evidences of its indebtedness or assets
(excluding cash dividends or distributions and dividends or
distributions referred to in Subsection (a) above) or subscription
rights or warrants (excluding those referred to in Subsection (b)
above), then in each such case the Exercise Price in effect
thereafter shall be determined by multiplying the number of shares
then comprising an Option Unit by the product of the Per Share
Exercise Price in effect immediately prior thereto multiplied by a
fraction, the numerator of which shall be the total number of shares
of Common Stock outstanding multiplied by the current market price
per share of Common Stock (as defined in Subsection (h) below), less
the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed
or of such rights or warrants, and the denominator of which shall be
the total number of shares of Common Stock outstanding multiplied by
such current market price per share of Common Stock. Such adjustment
shall be made successively whenever such a record date is fixed. Such
adjustment shall be made whenever any such distribution is made and
shall become effective immediately after the record date for the
determination of stockholders entitled to receive such distribution.
(d) In case the Company shall issue shares of its Common Stock
excluding shares issued (i) in any of the transactions described in
Subsections (a), (b), (c) or (e) of this Section 8; (ii) upon
exercise of options granted to the Company's employees under a plan
or plans adopted by the Company's Board of Directors and approved by
its stockholders, if such shares would otherwise be included in this
Subsection (d), (but only to the extent that the aggregate number of
shares excluded hereby and issued after the date hereof, shall not
exceed 10% of the Company's Common Stock outstanding at the time of
any issuance); (iii) upon exercise of options and warrants or upon
conversion of convertible securities outstanding at __________, 1996,
and this Option; (iv) to stockholders of any
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<PAGE>
corporation which merges into the Company in proportion to their
stock holdings of such corporation immediately prior to such merger,
upon such merger; (v) in a bona fide public offering pursuant to a
firm commitment underwriting; or (vi) issued in connection with a
corporate partnering transaction, but only if no adjustment is
required pursuant to any other specific subsection of this Section
(8) (without regard to Subsection (i) below) with respect to the
transaction giving rise to such rights for a consideration per share
(the "Offering Price") less than (i) the current market price per
share as defined in Subsection (h) below on the date the Company
fixes the offering price of such additional shares, or (ii) the Per
Share Exercise Price, then the Exercise Price shall be adjusted
immediately thereafter so that it shall equal the lower of (i) the
price determined by multiplying the number of shares then comprising
an Option Unit by the product of the Per Share Exercise Price in
effect immediately prior thereto multiplied by a fraction, the
numerator of which shall be the sum of the number of shares of Common
Stock outstanding immediately prior to the issuance of such
additional shares and the number of shares of Common Stock which the
aggregate consideration received determined as provided in Subsection
(g) below for the issuance of such additional shares would purchase
at such current market price per share of Common Stock, and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares
or (ii) in the event the Offering Price is equal to or higher than
the current market price per share but less than the Per Share
Exercise Price, the price determined by multiplying the number of
shares then comprising an Option Unit by the product of the Per Share
Exercise Price in effect immediately prior to the date of issuance
multiplied by a fraction, the numerator of which shall be the number
of shares of Common Stock outstanding immediately prior to the
issuance of such additional shares and the number of shares of Common
Stock which the aggregate consideration received determined as
provided in Subsection (g) below for the issuance of such additional
shares would purchase at the Per Share Exercise Price in effect
immediately prior to the date of such issuance, and the denominator
of which shall be the number of shares of Common Stock outstanding
immediately after the issuance of such additional shares. Such
adjustment shall be made successively whenever such an issuance is
made.
(e) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock excluding securities issued
in transactions described in Subsections (b) and (c) above for a
consideration per share of Common Stock (the "Conversion Price")
initially deliverable upon conversion or exchange of such securities
determined as provided in Subsection (g) below less than (i) the
current market price per share as defined in Subsection (h) below in
effect immediately prior to the issuance of such securities, or (ii)
the Per Share Exercise Price, then the Exercise Price shall be
adjusted immediately thereafter so that it shall equal the lower of
(i) the price determined by multiplying the number
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<PAGE>
of shares then comprising an Option Unit by the product of the Per
Share Exercise Price in effect immediately prior thereto multiplied
by a fraction, the numerator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to the
issuance of such securities and the number of shares of Common Stock
which the aggregate consideration received determined as provided in
Subsection (g) below for such securities would purchase at such
current market price per share of Common Stock, and the denominator
of which shall be the sum of the number of shares of Common Stock
outstanding immediately prior to such issuance and the maximum number
of shares of Common Stock of the Company deliverable upon conversion
of or in exchange for such securities at the initial conversion or
exchange price or rate, or (ii) in the event the Conversion Price is
equal to or higher than the current market price per share but less
than the Per Share Exercise Price, the price determined by
multiplying the number of shares then comprising an Option Unit by
the product of the Per Share Exercise Price in effect immediately
prior to the date of issuance multiplied by a fraction, the numerator
of which shall be the sum of the number of shares outstanding
immediately prior to the issuance of such securities and the number
of shares of Common Stock which the aggregate consideration received
determined as provided in Subsection (g) below for such securities
would purchase at the Per Share Exercise Price in effect immediately
prior to the date of such issuance, and the denominator of which
shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities and the maximum
number of shares of Common Stock of the Company deliverable upon
conversion of or in exchange for such securities at the initial
conversion or exchange price or rate. Such adjustment shall be made
successively whenever such an issuance is made.
(f) Whenever the Exercise Price payable upon exercise of each
Option is adjusted pursuant to Subsections (a), (b), (c), (d) or (e)
above, (i) the number of shares of Common Stock included in an Option
Unit shall simultaneously be adjusted by multiplying the number of
shares of Common Stock included in Option Unit immediately prior to
such adjustment by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise
Price, as adjusted and (ii) the number of shares of Common Stock or
other securities issuable upon exercise of the Warrants included in
the Option Units and the exercise price of such Warrants shall be
adjusted in accordance with the applicable terms of the Warrant
Agreement.
(g) For purposes of any computation respecting consideration
received pursuant to Subsections (d) and (e) above, the following
shall apply:
(A) in the case of the issuance of shares of Common Stock
for cash, the consideration shall be the amount of such cash,
provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Company
for any underwriting of the issue or otherwise in connection
therewith;
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(B) in the case of the issuance of shares of Common Stock
for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors of the Company (irrespective of the accounting
treatment thereof), whose determination shall be conclusive; and
(C) in the case of the issuance of securities convertible
into or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to
be received by the Company upon the conversion or exchange
thereof the consideration in each case to be determined in the
same manner as provided in clauses (A) and (B) of this
Subsection (g).
(h) For the purpose of any computation under Subsections (b),
(c), (d) and (e) above, the current market price per share of Common
Stock at any date shall be deemed to be the average of the daily
closing prices for 30 consecutive business days before such date. The
closing price for each day shall be the last sale price regular way
or, in case no such reported sale takes place on such day, the
average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange, including
the Nasdaq National Market, on which the Common Stock is admitted to
trading or listed, or if not listed or admitted to trading on such
exchange or market, the average of the highest reported bid and
lowest reported asked prices as reported by Nasdaq, or other similar
organization if Nasdaq is no longer reporting such information, or if
not so available, the fair market price as determined by the Board of
Directors.
(i) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least
five cents ($0.05) in such price; provided, however, that any
adjustments which by reason of this Subsection (i) are not required
to be made shall be carried forward and taken into account in any
subsequent adjustment required to be made hereunder. All calculations
under this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in
this Section 8 to the contrary notwithstanding, the Company shall be
entitled, but shall not be required, to make such changes in the
Exercise Price, in addition to those required by this Section 8, as
it shall determine, in its sole discretion, to be advisable in order
that any dividend or distribution in shares of Common Stock, or any
subdivision, reclassification or combination of Common Stock,
hereafter made by the Company shall not result in any Federal income
tax liability to the holders of Common Stock or securities
convertible into Common Stock (including Warrants issuable upon
exercise of this Option).
(j) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly cause a notice setting forth the adjusted
Exercise Price
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<PAGE>
and adjusted number of Option Units issuable upon exercise of each
Option and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holders, at the
address set forth herein, and shall cause a certified copy thereof to
be mailed to its transfer agent, if any. The Company may retain a
firm of independent certified public accountants selected by the
Board of Directors (who may be the regular accountants employed by
the Company) to make any computation required by this Section 8, and
a certificate signed by such firm shall be conclusive evidence of the
correctness of such adjustment.
(k) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (a) above, the Holder of this Option
thereafter shall become entitled to receive any shares of the
Company, other than Common Stock, thereafter the number of such other
shares so receivable upon exercise of this Option shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the
Common Stock contained in Subsections (a) to (i), inclusive above.
(l) In case any event shall occur as to which the other
provisions of this Section 8 or Section 1(a) hereof are not strictly
applicable but as to which the failure to make any adjustment would
not fairly protect the purchase rights represented by this Option in
accordance with the essential intent and principles hereof then, in
each such case, the Holders of Options representing the right to
purchase a majority of the Option Units may appoint a firm of
independent public accountants reasonably acceptable to the Company,
which shall give their opinion as to the adjustment, if any, on a
basis consistent with the essential intent and principles established
herein, necessary to preserve the purchase rights represented by the
Options. Upon receipt of such opinion, the Company will promptly mail
a copy thereof to the Holder of this Option and shall make the
adjustments described therein. The fees and expenses of such
independent public accountants shall be borne equally by the Company
and the Holder.
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<PAGE>
9. This Agreement shall be governed by and in accordance with the
laws of the State of New York, without giving effect to the principles of
conflicts of law thereof.
IN WITNESS WHEREOF, the Company has caused this Option to be signed
by its duly authorized officers under its corporate seal, and this Option to
be dated August __, 1996.
THE CARE GROUP, INC.
By:
---------------------------
Ann T. Mittasch , President
(Corporate Seal)
Attest:
- ----------------------------------
Randolph J. Mittasch, Secretary
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PURCHASE FORM
(To be signed only upon exercise of option)
The undersigned, the holder of the foregoing Option, hereby
irrevocably elects to exercise the purchase rights represented by such Option
for, and to purchase thereunder, Units of The Care Group, Inc., each Unit
consisting of 40,000 shares of $.001 par value Common Stock, and 40,000
redeemable Common Stock Purchase Warrants, and herewith makes payment of $
thereof, and requests that the Warrants and certificates for shares of Common
Stock be issued in the name(s) of, and delivered to whose address(es) is (are)
Dated: , 19 .
--
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Address
OPTION EXCHANGE
The undersigned, pursuant to the provisions of the foregoing
Option, hereby elects to exchange its Option for Units of The Care Group,
Inc., each Unit consisting of 40,000 shares of $.001 par value Common Stock,
and 40,000 redeemable Common Stock Purchase Warrants, pursuant to the Option
Exchange provisions of the Option.
Dated: , 19 .
--
----------------------------------------
----------------------------------------
Address
<PAGE>
TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto the right to purchase Units represented by the
foregoing Option to the extent of Units, and appoints
attorney to transfer such rights on the books of , with full
power of substitution in the premises.
Dated: , 19
--
ROYCE INVESTMENT GROUP, INC.
By:
-------------------------------------
----------------------------------------
Address
In the presence of:
<PAGE>
Exhibit A
Form of Common Stock Purchase Warrant
THE CARE GROUP, INC.
AGENCY AGREEMENT
Royce Investment Group, Inc.
199 Crossways Park Drive
Woodbury, New York 11797
August 14, 1996
Gentlemen:
The Care Group, Inc., a Delaware corporation (the "Company"),
proposes to offer (the "Offering") for sale to "accredited investors", in a
private placement, units ("Units"), each Unit consisting of 40,000 shares of
the Company's Common Stock, $.001 par value ("Common Stock"), and 40,000
redeemable Common Stock Purchase Warrants, each of which is exercisable to
purchase 1 share of Common Stock ("Warrants"). A minimum of forty-two (42)
Units ("Minimum Offering") and a maximum of one hundred (100) Units ("Maximum
Offering") will be sold in the offering at $50,000 per Unit. The Units will be
offered pursuant to those terms and conditions acceptable to you as reflected
in the Confidential Term Sheet (the "Term Sheet"). Of the Units, 42 will be
offered on an "all-or-none basis" and 58 Units will be offered on a "best
efforts" basis. The Units are being offered pursuant to the Term Sheet and
related documents in accordance with Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act") and Regulation D promulgated
thereunder.
Royce Investment Group, Inc. is sometimes referred to herein as the
"Placement Agent." The Term Sheet (including the exhibits thereto), as it may
be amended from time to time, and the form of proposed subscription agreement
between the Company and each subscriber (the "Subscription Agreement") and the
exhibits which are part of the Term Sheet and/or Subscription Agreement are
collectively referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agent a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units
("Subscriber") will be required to deliver, among other things, a Subscription
Agreement and a confidential purchaser questionnaire ("Questionnaire") in the
form to be provided to offerees. Capitalized terms used herein, unless
otherwise defined or unless the context otherwise indicates, shall have the
same meanings provided in the Offering Documents.
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1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent of the
Company (subject to your right to have Selected Dealers, as defined in Section
1(c) hereof, participate in the Offering) during the Offering Period herein
specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the offering (the "Offering") described in the
Offering Documents. The Offering Period shall commence on the day the Offering
Documents are first made available to you by the Company for delivery in
connection with the offering for sale of the Units and shall continue until
the earlier to occur of (i) the sale of all of the Maximum Offering or (ii)
September 30, 1996 (unless extended for a period of up to 60 days under
circumstances specified in the Term Sheet). If the Minimum Offering is not
sold prior to the end of the Offering Period, the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in
this Agreement, Royce Investment Group, Inc. hereby accepts such agency and
agrees to use its best efforts to assist the Company in finding qualified
subscribers pursuant to the Offering described in the Offering Documents. It
is understood that the Placement Agent has no commitment to sell the Units.
Your agency hereunder is not terminable by the Company except upon termination
of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities
Dealers, Inc., ("NASD") and that have executed a Private Placement Selling
Agreement substantially in the form attached hereto as Schedule A, to assist
you in the Offering (each such person being hereinafter referred to as a
"Selected Dealer") and you may allow such persons such part of the
compensation and payment of expenses payable to you hereunder as you shall
determine. Each Selected Dealer shall be required to agree in writing to
comply with the provisions of, and to make the representations, warranties and
covenants contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by the execution
by Subscribers of a Subscription Agreement. No Subscription Agreement shall be
effective unless and until it is accepted by the Company. Until the Closing,
all subscription funds received shall be held as described in the Subscription
Agreement. The Placement Agent shall not have any obligation to independently
verify the accuracy or completeness of any information contained in any
Subscription Agreement or the authenticity, sufficiency, or validity of any
check delivered by any prospective investor in payment for Units.
(e) The Placement Agent and its affiliates may purchase Units
sold in the Offering.
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2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if
any, as follows:
(a) Securities Law Compliance. The Offering Documents conform in
all respects with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Securities and Exchange Commission (the
"Commission") currently in effect relating to "private offerings" to
"accredited investors" of the type contemplated by the Company. The Offering
Documents will not contain an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. If at any
time prior to the completion of the Offering or other termination of this
Agreement any event shall occur as a result of which it might become necessary
to amend or supplement the Offering Documents so that they do not include any
untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading, the Company will promptly notify
you and will supply you with amendments or supplements correcting such
statement or omission. The Company will also provide the Placement Agent for
delivery to all offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent deems
necessary to comply with applicable state and federal law.
(b) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and lease its
properties, to carry on its business as currently conducted and as proposed to
be conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate and is duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business or ownership or leasing of
its properties requires it to be so qualified and where the failure to be
qualified would have a material adverse effect on the Company.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights
of any stockholder of the Company. All prior sales of securities of the
Company were either registered under the Act and applicable state securities
laws or exempt from such registration, and no security holder has any
rescission rights with respect thereto.
(d) Warrants, Preemptive Rights, Etc. Except for the warrants to
purchase Shares to be issued to you or your designees in consideration for
your acting as Placement Agent hereunder (the "Agent's Warrants"), and except
as set forth in or contemplated by the Term Sheet, there are not, nor will
there be immediately after the Closing (as hereinafter defined), any
outstanding warrants, options, agreements, convertible securities, preemptive
rights
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to subscribe for or other commitments pursuant to which the Company is, or may
become, obligated to issue any shares of its capital stock or other securities
of the Company and this offering will not cause any anti-dilution adjustments
to such securities or commitments except as reflected in the Term Sheet.
(e) Subsidiaries and Investments. Except for the subsidiaries
set forth on Schedule E hereto (the "Subsidiaires"), the Company has no
subsidiaries and the Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.
The Subsidiaries are corporations duly organized and validly existing under
the laws of the state of their respective incorporation. The Company owns all
of the capital stock of each of the Subsidiaries free and clear of all liens,
security interests and encumbrances.
(f) Financial Statements. The financial information contained in
the Offering Documents is accurate in all material respects. The Company's
Form 10-Q for the period ended March 31, 1996 contains the Company's (i)
Balance Sheets at December 31, 1995 and at March 31, 1996 (hereinafter, March
31, 1996 being referred to as the "Balance Sheet Date"), (ii) Statements of
Operations for the three months ended March 31, 1995 and 1996 and (iii)
Statements of Cash Flows for the three months ended March 31, 1995 and 1996
(such financial statements attached to the Offering Documents hereinafter
referred to collectively as the "Financial Statements"). The Financial
Statements have been prepared in conformity with generally accepted accounting
principles consistently applied and show all material liabilities, absolute or
contingent, of the Company required to be recorded thereon and present fairly
the financial position and results of operations of the Company as of the
dates and for the periods indicated.
(g) Absence of Changes. Except as set forth on Exhibit G hereto,
since the Balance Sheet Date, the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which is
material to the business of the Company other than as set forth in the Term
Sheet, and, except as set forth in Schedule G to this Agreement there has not
been any change in the capital stock of, or any incurrence of long-term debt
by, the Company, or any issuance of options, warrants or other rights to
purchase the capital stock of the Company, or any adverse change or any
development involving, so far as the Company can now reasonably foresee, a
prospective adverse change in the condition (financial or otherwise), net
worth, results of operations, business, key personnel or properties which
would be material to the business or financial condition of the Company, and
the Company has not become a party to, and neither the business nor the
property of the Company has become the subject of, any material litigation
whether or not in the ordinary course of business.
(h) Title. Except as set forth on Schedule H hereto, the Company
has good and marketable title to all properties and assets, owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such as
are not materially significant or important
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in relation to the Company's business; all of the material leases and
subleases under which the Company is the lessor or sublessor of properties or
assets or under which the Company holds properties or assets as lessee or
sublessee are in full force and effect, and the Company is not in default in
any material respect with respect to any of the terms or provisions of any of
such leases or subleases, and no material claim has been asserted by anyone
adverse to rights of the Company as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease. The Company
owns or leases all such properties as are necessary to its operations as now
conducted and to be conducted, as presently planned.
(i) Proprietary Rights. Except as set forth in Schedule I
hereto, the Company owns or possesses adequate and enforceable rights to use
all patents, patent applications, trademarks, service marks, copyrights, trade
secrets, processes, formulations, technology or know-how used or proposed to
be used in the conduct of its business as described in or contemplated by the
Term Sheet (the "Proprietary Rights"). The Company has not received any notice
of any claims, nor does it have any actual knowledge of any threatened claims,
and knows of no facts which the Company believes would form the basis of any
claim, asserted by any person to the effect that the sale or use of any
product or process now used or offered by the Company or proposed to be used
or offered by the Company infringes on any patents or infringes upon the use
of any such Proprietary Rights of another person and, to the best of the
Company's knowledge, no others have infringed the Company's Proprietary
Rights.
(j) Litigation. There is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by
or before any arbitrator, governmental instrumentality or other agency now
pending or, to the knowledge of the Company, threatened against the Company
(or basis therefore known to the Company) the adverse outcome of which would
materially adversely affect the Company's business or prospects. The Company
is not subject to any judgment, order, writ, injunction or decree of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign which would materially
adversely affect the Company's business or prospects.
(k) Non-Defaults; Non-Contravention. Except as set forth in
Schedule K hereto, the Company is not in violation of or default under, nor
will the execution and delivery of this Agreement or any of the Offering
Documents or the Agent's UPO (as defined herein) or consummation of the
transactions contemplated herein or therein result in a violation of or
constitute a default in the performance or observance of any obligation (i)
under its Certificate of Incorporation, or its By-laws, or any indenture,
mortgage, contract, material purchase order or other agreement or instrument
to which the Company is a party or by which it or its property is bound or
affected or (ii) with respect to any material order, writ, injunction or
decree of any court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there exists no condition, event or act which
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constitutes, nor which after notice, the lapse of time or both, could
constitute a default under any of the foregoing, which in either case would
have a material adverse effect on the business, financial condition or
prospects of the Company.
(l) Taxes. The Company has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or
which it is obligated to withhold from amounts owing to any employee, creditor
or third party. The Company has properly accrued all taxes required to be
accrued. The tax returns of the Company have never been audited by any state,
local or Federal authorities. The Company has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency.
(m) Compliance With Laws; Licenses, Etc. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a materially adverse effect on the business or operations of
the Company. The Company has all licenses and permits and other governmental
certificates, authorizations and permits and approvals (collectively,
"Licenses") required by every Federal, state and local government or
regulatory body for the operation of its business as currently conducted and
the use of its properties, except where the failure to be licensed would not
have a material adverse effect on the business of the Company. The Licenses
are in full force and effect and no violations are or have been recorded in
respect of any License and no proceeding is pending or threatened to revoke or
limit any thereof.
(n) Authorization of Agreement, Etc. This Agreement has been
duly and validly authorized, executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement, the
Subscription Agreement and the Warrant Agreements have been duly authorized by
all requisite corporate action by the Company and when delivered, constitute
or will constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.
(o) Authorization of Shares and Warrants Etc. The issuance, sale
and delivery of the Shares and Warrants and the Agent's UPO have been duly
authorized by all requisite corporate action of the Company. When so issued,
sold and delivered, the Shares and Warrants will be duly executed, issued and
delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms and, in each case, will
not be subject to preemptive or any other similar rights of the stockholders
of the Company or others which rights shall not have been waived prior to the
Initial Closing.
(p) Authorization of Reserved Shares. The issuance, sale and
delivery by the Company of the shares of Common Stock issuable upon conversion
of the Shares and exercise of the Warrants, including those underlying the
Agent's UPO (the "Reserved Shares")
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have been duly authorized by all requisite corporate action of the Company,
and the Reserved Shares have been duly reserved for issuance upon conversion
of all or any of the Shares and exercise of the Warrants and when so issued,
sold, paid for and delivered, the Reserved Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive or
any other similar rights of the stockholders of the Company or others which
rights shall not have been waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy of
the information provided by the respective Subscribers in the Subscription
Documents and (ii) that the Placement Agent has complied in all material
respects with the provisions of Regulation D promulgated under the Securities
Act, the offer and sale of the Units pursuant to the terms of this Agreement
are exempt from the registration requirements of the Securities Act and the
rules and regulations promulgated thereunder (the "Regulations"). The Company
is not disqualified from the exemption under Regulation D by virtue of the
disqualifications contained in Rule 505(6)(2)(iii) or Rule 507 promulgated
thereunder.
(r) Registration Rights. Except with respect to holders of the
Units and the Agent's UPO, and except as set forth in the Term Sheet and
Schedule R hereto, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(s) Brokers. Neither the Company nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agent.
(t) Title to Units. When certificates representing the
securities comprising the Units and/or the Reserved Shares shall have been
duly delivered to the purchasers and payment shall have been made therefor,
the several purchasers shall have good and marketable title to the Shares and
Warrants and/or the Reserved Shares free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising or through the
acts of the purchasers and except as arising from applicable Federal and state
securities laws), and the Company shall have paid all taxes, if any, in
respect of the original issuance thereof.
(u) Securities Exchange Act Compliance. The Company has filed
with the Securities and Exchange Commission ("SEC") on a timely basis all
filings required of a company whose securities have been registered under the
Securities Exchange Act of 1934, as amended ("Exchange Act"). All information
contained in such filings is true, accurate and complete in all material
respects. The Company covenants to maintain the registration of its Common
Stock under the Exchange Act and to make all filings thereunder on a timely
basis. For the purpose of this paragraph, filings pursuant to Rule 12b-25 of
the Exchange Act shall be deemed timely.
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3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been
subscribed for and funds representing the sale thereof shall have cleared, a
closing (the "Initial Closing") shall take place at the offices of the
Placement Agent, 199 Crossways Park Drive, Woodbury, NY within three (3)
business days after the Minimum Offering has been subscribed for and the funds
have been cleared (which date (the "Closing Date") may be accelerated or
adjourned by agreement between the Company and the Placement Agent). At the
Initial Closing, payment for the Units issued and sold by the Company shall be
made against delivery of certificates representing the Shares and Warrants
comprising such Units. In addition, at any time after stockholder approval of
the Offering is obtained in accordance with (b)(i) herein, subsequent closings
will be scheduled at the discretion of the Company and Placement Agent, each
of which shall be deemed a "Closing" hereunder.
(b) Conditions to Placement Agent's Obligations. The obligations
of the Placement Agent hereunder will be subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(i) Stockholder Approval. The Company will have obtained,
prior to the closing of any sale of Units in excess of the Minimum Offering,
stockholder approval of such sale at a meeting of stockholders to be held on
or about September 15, 1996.
(ii) Due Qualification or Exemption. (A) The offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
Section 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Units shall have been issued,
and no proceeding for that purpose shall have been initiated or threatened;
(iii) No Material Misstatements. Neither the Blue Sky
qualification materials or the Term Sheet, or any supplement thereto, will
contain an untrue statement of a fact which in the opinion of the Placement
Agent is material, or omits to state a fact, which in the opinion of the
Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iv) Compliance with Agreements. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing;
(v) Corporate Action. The Company will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the
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Company's board of directors, for the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder and the
offering contemplated hereby;
(vi) Opinion of Counsel. The Placement Agent shall receive
the opinion of Brobeck, Phleger & Harrison LLP dated the Closing(s),
substantially to the effect that:
(A) The Shares included in the Units have been duly
authorized, validly issued, fully paid and nonassessable and no personal
liability will attach to the ownership thereof. The Reserved Shares have been
duly reserved, and when issued in accordance with the terms of the Shares and
the Warrants, including those underlying the Agent's UPO, will be validly
issued, fully paid and nonassessable and not subject to preemptive or any
other similar rights and no personal liability will attach to the ownership
thereof;
(B) assuming (i) the accuracy of the information
provided by the Subscribers in the Subscription Documents including, without
limitation, that all Subscribers are "Accredited Investors," (ii) that the
Placement Agent has complied in all material respects with the requirements of
Section 4(2) of the Securities Act (and the provisions of Regulation D
promulgated thereunder), and (iii) that there has been no general solicitation
or advertising within the meaning of Rule 502 of the Securities Act, the
issuance and sale of the Units is exempt from registration under the
Securities Act and Regulation D promulgated thereunder;
(vii) The Placement Agent shall receive a copy of a letter
written to the Company by McDermott, Will & Emery ("MWE"), special regulatory
counsel to the Company, dated the Closing(s), in form and substance
satisfactory to counsel for the Placement Agent, detailing MWE's discussions
with Frank Barry, counsel to the Department of Health and Robert Dougherty,
Asst. Director for the Bureau of Home Health Care Services, DOH regarding the
Offering.
(viii) The Placement Agent shall receive a certificate of
the Company, signed by the President and Secretary thereof, that the
representations and warranties contained in Section 2 hereof are true and
accurate in all material respects at such Closing with the same effect as
though expressly made at such Closing.
(ix) The Placement Agent shall receive a copy of a duly
executed escrow agreement in the form previously delivered to you with United
States Trust Company of New York.
(x) Within five days after the Closing, the Placement
Agent shall receive copies of all letters from the Company to the investors
transmitting the Shares and Warrants and shall receive a letter from the
Company confirming transmittal of the securities to the investors.
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(c) Blue Sky. A summary blue sky survey shall be prepared by
counsel to the Placement Agent stating the extent to which and the conditions
upon which offers and sales of the Units may be made in certain jurisdictions.
It is understood that such survey may be based on or rely upon (i) the
representations of each Subscriber set forth in the Subscription Agreement
delivered by such Subscriber, (ii) the representations, warranties and
agreements of the Company set forth in Section 2 of this Agreement, (iii) the
representations and warranties of the Placement Agent, and (iv) the
representations of the Company set forth in the certificate to be delivered at
the Closing pursuant to paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for
and delivery of the Units at each Closing as provided in Section 3(a) above,
the Company shall at such Closing pay to the Placement Agent (i) a commission
equal to 4.5% of the aggregate purchase price of the Units sold and (ii) a
non-accountable expense allowance equal to 1.5% of the aggregate purchase
price of the Units sold. The Company shall also pay all expenses in connection
with the qualification of the Units under the securities or Blue Sky laws of
the states which the Placement Agent shall designate. The Company will, at
each Closing, issue to you or your designees (which may include any Selected
Dealer or any officer of the Placement Agent or a Selected Dealer) a unit
purchase option (the "Agent's UPO") in the form annexed hereto as Exhibit 1 to
purchase 7.5% of the Units sold in the Offering. The Agent's UPO will be
exercisable for a period of five years from the first Closing of the Offering.
(e) Bring-Down Opinions and Certificates. If there is more than
one Closing, then at each such Closing there shall be delivered to the
Placement Agent updated opinions and certificates as described in (vi), (vii)
and (viii) of Section 3(b) above, respectively.
(f) No Adverse Changes. There shall not have occurred, at any
time prior to the Closing or, if applicable, any additional Closing, (i) any
domestic or international event, act or occurrence which has materially
disrupted, or in the Placement Agent's opinion will in the immediate future
materially disrupt, the securities markets; (ii) a general suspension of, or a
general limitation on prices for, trading in securities on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market;
(iii) any outbreak of major hostilities or other national or international
calamity; (iv) any banking moratorium declared by a state or federal
authority; (v) any moratorium declared in foreign exchange trading by major
international banks or other persons; (vi) any material interruption in the
mail service or other means of communication within the United States; (vii)
any material adverse change in the business, properties, assets, results of
operations, or financial condition of the Company; or (viii) any change in the
market for securities in general or in political, financial, or economic
conditions which, in the Placement Agent's reasonable judgment, makes it
inadvisable to proceed with the offering, sale, and delivery of the Units.
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4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will be
used by the Company substantially as set forth in the Term Sheet. The Company
shall not use any of the proceeds from the Offering to repay any indebtedness
to any current executive officers, directors or principal stockholders of the
Company.
(b) Expenses of Offering. The Company shall be responsible for,
and shall bear all expenses directly incurred in connection with, the proposed
Offering including, but not limited to, legal fees (but not including those of
counsel to the Placement Agent) relating to the costs of preparing the
Offering Documents and all amendments, supplements and exhibits thereto;
preparing and delivering all placement agent and selling documents, including,
but not limited to, the Agency Agreement with the Placement Agent and the blue
sky memorandum; Share and Warrant certificates, Reserved Share certificates;
blue sky fees, filing fees and the fees and disbursements of counsel in
connection with blue sky matters (the "Company Expenses"). Such expenses shall
not include the cost of the Placement Agent's mailing, telephone, telegraph,
travel, due diligence meeting and other similar expenses (the "Placement Agent
expenses") which are covered by the 1.5% non-accountable expense allowance
payable by the Company to the Placement Agent.
(c) Reservation of Common Stock. The Company shall reserve and
keep available that maximum number of its authorized but unissued shares of
Common Stock which are issuable upon conversion of the Shares and exercise of
the Warrants, including the Shares and Warrants underlying the Agent's UPO.
(d) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the last
Closing or the Termination Date as a result of which the Offering Documents
would include 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, and (B) of the receipt of any notification
with respect to the modification, rescission, withdrawal or suspension of the
qualification or registration of the Units, or of any exemption from such
registration or qualification, in any jurisdiction. The Company will use its
best efforts to prevent the issuance of any such modification, rescission,
withdrawal or suspension and, if any such modification, rescission, withdrawal
or suspension is issued and you so request, to obtain the lifting thereof as
promptly as possible.
(e) Blue Sky. The Company will use its best efforts to qualify
or register the Units for offering and sale under, or establish an exemption
from such qualification or registration under, the securities or "blue sky"
laws of such jurisdictions as you may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
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<PAGE>
consummate any sale of Units in any jurisdiction in which it is not so
qualified or in any manner in which such sale may not be lawfully made.
(f) Form D Filing. The Company shall file five copies of a
Notice of Sales of Securities on Form D with the Securities and Exchange
Commission (the "Commission") no later than 15 days after the first sale of
the Units. The Company shall file promptly such amendments to such Notices on
Form D as shall become necessary and shall also comply with any filing
requirement imposed by the laws of any state or jurisdiction in which offers
and sales are made. The Company shall furnish the Placement Agent with copies
of all such filings.
(g) Press Releases, Etc. The Company shall not, during the
period commencing on the date hereof and ending on the later of the last
Closing and the Termination Date, issue any press release or other
communication, or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without the prior consent of the Placement
Agent, which consent shall not be unreasonably withheld.
(h) Form 10-Q The Company will provide to the Placement Agent,
promptly upon the filing thereof with the Commission (and in any event no
later than 5 days of such filing), a copy of its Quarterly Report in Form 10-Q
for the six months ended June 30, 1996.
(i) Restrictions on Issuance of Securities. Prior to the last
Closing Date, the Company will not, without the prior written consent of the
Placement Agent, issue additional shares of Common Stock or grant any
warrants, options or other securities of the Company.
(j) Voting Agreement. The Company will cause Ann T. Mittasch,
Randolph J. Mittasch, Gilda G. Schechter and Pat H. Celli to vote their shares
in favor of (i) the sale of the Maximum Offering by the Company and (ii) the
Board Designees chosen in the manner set forth in Section 4(n) below during
the period commencing on the date of the Initial Closing and ending on the
Termination Date.
(k) Consultant. The Company shall hire an independent consultant
designated by the Placement Agent to perform an analysis of the Company. The
fees of such consultant shall not exceed $15,000.
(l) Key-Man Insurance. The Company will obtain "key-man" life
insurance in the amount of at least $2,000,000 on the life of a new Chief
Executive Officer to be hired as soon as practicable after the Initial
Closing. Such policy will be kept in for at least three years from the First
Closing Date or the term of the employment agreement with such officer,
whichever period is longer.
12
<PAGE>
(m) Executive Compensation. The compensation of the current
executive officers of the Company shall not increase from the date of this
Agreement until 13 months from the Termination Date other than pursuant to
existing employment agreements.
(n) Board Designees. The Company shall, for a period of three
years following the Initial Closing Date, at the Placement Agent's option,
nominate two designees of the Placement Agent and at Equity Dynamics option,
two designees of Equity Dynamics, to the Company's Board of Directors.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective
shareholders, directors, officers, agents and controlling persons (an
"Indemnified Party") against any and all loss, liability, claim, damage and
expense whatsoever (and all actions in respect thereof), and to reimburse the
Placement Agent for legal fees and related expenses as incurred (including,
but not limited to the costs of giving testimony or furnishing documents in
response to a subpoena or otherwise, and the costs of investigating, preparing
or defending any such action or claim whether or not in connection with
litigation in which the Placement Agent is a party), arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Documents or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(b) The Company agrees to indemnify and hold harmless an
Indemnified Party to the same extent as the foregoing indemnity, against any
and all loss, liability, claim, damage and expense whatsoever directly arising
out of the exercise by any person of any right under the Securities Act or the
Exchange Act or the securities or Blue Sky laws of any state on account of
violations of the representations, warranties or agreements set forth in
Section 2 hereof.
(c) Promptly after receipt by a person entitled to
indemnification pursuant to the foregoing subsection (a) or (b) (an
"indemnified party") under this Section of notice of the commencement of any
action, the indemnified party will, if a claim in respect thereof is to be
made against the Company under this Section, notify in writing the Company of
the commencement thereof; but the omission so to notify the Company will not
relieve it from any liability which it may have to the indemnified party
otherwise than under this Section. In case any such action is brought against
an indemnified party, and it notifies the Company of the commencement thereof,
the Company will be entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to the indemnified party, and after notice from the
Company to the indemnified party of its election so to assume the defense
thereof, the Company will not be liable to the indemnified party under this
13
<PAGE>
Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Company if the Company has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that the fees and
expenses of such counsel shall be at the expense of the Company if (i) the
employment of such counsel has been specifically authorized in writing by the
Company or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party or parties and the Company and, in
the judgment of the indemnified party, it is advisable for the indemnified
party or parties to be represented by separate counsel (in which case the
Company shall not have the right to assume the defense of such action on
behalf of the indemnified party or parties, it being understood, however, that
the Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for the
indemnified party or parties. No settlement of any action against an
indemnified party shall be made without the consent of the indemnified party,
which shall not be unreasonably withheld in light of all factors of importance
to the indemnified party.
6. Contribution.
To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section (5)
but it is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the
Securities Act, the Exchange Act, or otherwise, then the Company (including
for this purpose any contribution made by or on behalf of any officer,
director, employee or agent for the Company, or any controlling person of the
Company), on the one hand, and the Placement Agent and any Selected Dealers
(including for this purpose any contribution by or on behalf of an indemnified
party), on the other hand, shall contribute to the losses, liabilities,
claims, damages, and expenses whatsoever to which any of them may be subject,
in such proportions as are appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent and the
Selected Dealers, on the other hand; provided, however, that if applicable law
does not permit such allocation, then other relevant equitable considerations
such as the relative fault of the Company and the Placement Agent and the
Selected Dealers in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. In no
case shall the Placement Agent or a Selected Dealer be responsible for a
portion of the contribution obligation in excess of the compensation received
by it pursuant to Section 3 hereof or the Selected Dealer Agreement, as the
case may be. No person guilty of a fraudulent misrepresentation shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls
14
<PAGE>
the Placement Agent or a Selected Dealer within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act and each officer,
director, stockholder, employee and agent of the Placement Agent or a Selected
Dealer, shall have the same rights to contribution as the Placement Agent or
the Selected Dealer, and each person, if any who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, employee and agent of the Company,
shall have the same rights to contribution as the Company, subject in each
case to the provisions of this Section 6. Anything in this Section 6 to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 6 is intended to supersede any right to contribution
under the Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party
except that the indemnification provided in Section 5 hereof and the
contribution provided in Section 6 hereof shall survive any termination and
shall survive the Closing for a period of five years.
(b) Representations, Warranties and Covenants to Survive
Delivery. The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company as of the date hereof shall
survive execution of this Agreement and delivery of the Units and the
termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and no other person, firm or corporation
shall have any third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard
to conflict of law provisions.
(e) Counterparts. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same
instrument.
(f) Notices. Any communications specifically required hereunder
to be in writing, if sent to the Placement Agent, will be mailed, delivered
and confirmed to it at Royce Investment Group, Inc., 199 Crossways Park Drive,
Woodbury, New York 11797, Att: John Higgins, with a copy to Bachner, Tally,
Polevoy & Misher LLP, 380 Madison Avenue, New York, New York 10017, Att: Fran
Stoller, Esq. and if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at One Hollow Lane, Lake Success, New York
15
<PAGE>
11042, Att: Pat Celli, with a copy to Brobeck, Phleger & Harrison LLP, 1301
Avenue of the Americas, 30th Floor, New York, New York 10019, Att: Richard
Plumridge, Esq.
(g) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
THE CARE GROUP, INC.
By:
---------------------------
Ann T. Mittasch, President
Each of the undersigned hereby
accepts and agrees to be bound by
the provisions set forth in
Section 4 (j) hereof:
----------------------
Ann T. Mittasch
----------------------
Randolph J. Mittasch
----------------------
Gilda G. Schechter
----------------------
Pat H. Celli
Agreed:
16
<PAGE>
ROYCE INVESTMENT GROUP, INC.
By:
-------------------------------
Authorized Officer
17
<PAGE>
SCHEDULE A
THE CARE GROUP, INC.
PRIVATE PLACEMENT SELLING AGREEMENT
-----------------------------------
New York, New York
, 1996
Dear Sirs:
1. The Care Group, Inc. ("Company") is offering for sale a maximum
of 100 Units, each unit consisting of 40,000 shares of the Company's Common
Stock, $.001 par value ("Common Stock"), and 40,000 Redeemable Common Stock
Purchase Warrants, each of which is exercisable to purchase 1 share of Common
Stock ("Units"). The Units and the terms under which they are to be offered
for sale by the Company are more particularly described in the Confidential
Term Sheet dated August 6, 1996 (the "Term Sheet") and the form of
subscription agreement between the Company and each subscriber (the
"Subscription Agreement"), the exhibits to the Term Sheet and the Subscription
Agreement, and any other documents delivered to subscribers (herein,
collectively the "Offering Documents"). Royce Investment Group, Inc. (the
"Placement Agent") has agreed to act as exclusive placement agent to the
Company for the purpose of assisting the Company in finding subscribers who
satisfy the requirements set forth in the Offering Documents and more
particularly in the Subscription Agreement (herein, "Qualified Subscribers")
pursuant to the offering ("Private Placement") described in the Offering
Documents.
2. The Units are to be offered to a limited number of subscribers by
the Company at the price per Unit set forth in the Offering Documents (the
"Subscription Price"), in accordance with the terms of offering thereof set
forth in the Offering Documents.
3. We are extending the right, subject to the terms and conditions
hereof, to assist the Company in finding Qualified Subscribers to purchase a
portion of the Units, to certain dealers who are actually engaged in the
investment banking or securities business and who are members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") (such
dealers who shall agree to assist in locating Qualified Subscribers for Units
hereunder being herein called "Selected Dealers"), at the Subscription Price,
for which they will receive a commission of ___% of the Subscription Price for
Units purchased by Qualified Subscribers presented to the Company by them. The
Selected Dealers have agreed to comply with the
<PAGE>
provisions of all applicable Rules of Fair Practice of the NASD. We may be
included among the Selected Dealers.
4. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the Private Placement of the
Units.
5. If you desire to present to the Company any Qualified Subscribers
for units, your application should reach us promptly by telephone or telegraph
at 199 Crossways Park Drive, Woodbury, New York 11797, Attention: John
Higgins, Sr., telephone number 212-393-8300. We reserve the right to reject
subscriptions in whole or in part, to make allotments and to close the
subscription books at any time without notice. The Units allotted to the
Qualified Subscribers presented by you will be confirmed, subject to the terms
and conditions of this Agreement.
6. The privilege of assisting the Company in finding Qualified
Subscribers for the Units is extended to you only so long as the Company may
lawfully sell the Units to residents in the state in which any such Qualified
Subscribers reside pursuant to the terms of the Offering Documents.
7. Any Units offered under the terms of this Agreement and the
Offering Documents may only be offered and sold subject to the securities or
blue sky laws of the various states or other jurisdictions.
You agree to advise us from time to time, upon request, of the number
of sets of Offering Documents delivered to qualified subscribers by you
hereunder at the time of such request.
No expenses shall be charged to Selected Dealers.
Neither you nor any other person is or has been authorized to give
any information or to make any representation in connection with the offer or
sale of the Units other than as contained in the Offering Documents.
8. On becoming a Selected Dealer, and in assisting the Company in
finding Qualified Subscribers for the Units, you agree to comply with all the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act") specifically with respect to the requirements of Regulation D
thereunder. You confirm that you are familiar with Rules 501 and 502 under the
1933 Act relating to the limitations on the manner in which a private
placement may be conducted pursuant to Regulation D under the 1933 Act.
9. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Units have been qualified
or are exempt from registration requirements for offer and sale under the
respective securities or blue sky laws of such states and other jurisdictions,
but we do not assume any obligation or responsibility as to the right of any
2
<PAGE>
Selected Dealer to offer the Units in any state or other jurisdiction or as to
the eligibility of the Units for sale therein. We will, if requested, file a
Further State Notice in respect of the Units pursuant to Article 23-A of the
General Business Law of the State of New York.
10. No Selected Dealer is authorized to act as our agent or an agent
of the Company or otherwise to act on our behalf in assisting the Company in
finding Qualified Subscribers or otherwise or to furnish any information or
make any representation except as contained in the Offering Documents.
11. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim to
the contrary. We shall not be under any liability for or in respect of value,
validity or form of the components of the Units or the delivery of the shares
and warrants comprising the Units or the performance by anyone of any
agreement on its part, or the qualification of the Units for offer or sale
under the laws of any jurisdiction, or for or in respect of any other matter
relating to this Agreement, except for lack of good faith and for obligations
expressly assumed by us in this Agreement and no obligation on our part shall
be implied herefrom. The foregoing provisions shall not be deemed a waiver of
any liability imposed under the federal securities laws.
12. Payment for the Units subscribed for hereunder is to be made by
Qualified Subscribers at the Subscription Price during the term of the Private
Placement set forth in the Offering Documents at the office of Royce
Investment Group, Inc., 199 Crossways Park Drive, Woodbury, New York 11797, by
a certified or official bank check, payable to the order of United States
Trust Company of New York: Special Account Re: The Care Group, Inc.
13. Notice to us should be addressed to Royce Investment Group, Inc.,
199 Crossways Park Drive, Woodbury New York 11797, Attention: John Higgins,
Sr. Notices to you shall be deemed to have been duly given if mailed to you at
the address to which this letter is addressed.
14. If you desire to assist the Company in finding Qualified
Subscribers pursuant to the terms set forth above, please confirm your
application by signing and returning to
3
<PAGE>
us your confirmation on the duplicate copy of this letter enclosed herewith,
even though you may have previously advised us thereof by telephone or
telegraph. Our signature hereon may be by facsimile.
Very truly yours,
ROYCE INVESTMENT GROUP, INC.
By:
--------------------------------
Authorized Officer
4
<PAGE>
Royce Investment Group, Inc.
199 Crossways Park Drive
Woodbury, New York 11797
We hereby present to The Care Group, Inc. (the "Company") Qualified
Subscribers for Units in accordance with the terms and conditions stated in
the foregoing letter. We hereby acknowledge receipt of the Offering Documents
referred to in the first paragraph thereof relating to said Units. We confirm
that we are a dealer actually engaged in the investment banking or securities
business and that we are a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). We hereby agree to comply with all
of the applicable provisions of the Rules of Fair Practice of the NASD.
[NAME]
By:
--------------------------------
Authorized Officer
Address:
Dated:
----------------------------
<PAGE>
Schedule E
----------
The Care Group, Inc.
The Care Group of New York, Inc.
The Care Group of Georgia, Inc.
The Care Group of Texas, Inc.
The Care Group of Los Angeles, Inc.
Careline of New York, Inc.
Careline of Dallas, Inc.
Careline of Georgia, Inc.
Careline of Houston, Inc.
Mail Order Meds, Inc.
Commonwealth Certified
Home Care, Inc.
<PAGE>
Schedule K
----------
The Company is not in compliance with terms of its Revolving Credit Agreement,
as amended, (the "Agreement") with The Chase Manhattan Bank, N.A. ("Chase").
<PAGE>
Schedule R
----------
A holder of 150,000 shares of Common Stock has the right to demand that the
Company register its shares on a Form S-3 commencing September 2, 1996.
Holders of an additional 450,000 shares of Common Stock have the right to
demand that the Company register their shares commencing November 25, 1996.
<PAGE>
Exhibit 1
Agent's UPO
-----------
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<ARTICLE> 5
<CIK> 0000847935
<NAME> THE CARE GROUP INC.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 193
<SECURITIES> 33
<RECEIVABLES> 16,680
<ALLOWANCES> 4,943
<INVENTORY> 1,144
<CURRENT-ASSETS> 16,541
<PP&E> 6,047
<DEPRECIATION> 2,514
<TOTAL-ASSETS> 32,340
<CURRENT-LIABILITIES> 10,109
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 19,986
<TOTAL-LIABILITY-AND-EQUITY> 32,340
<SALES> 9,622
<TOTAL-REVENUES> 9,622
<CGS> 4,590
<TOTAL-COSTS> 4,590
<OTHER-EXPENSES> 5,094
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 200
<INCOME-PRETAX> (262)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (262)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
