SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) AUGUST 14, 1996
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THE CARE GROUP, INC.
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(Exact name of registrant as specified in charter)
DELAWARE 0-17821 11-2962027
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1 HOLLOW LANE, LAKE SUCCESS, NEW YORK, N.Y. 11042
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 869-8383
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N.A.
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(Former name or former address, if changed since last report.)
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Item 5. Other Events
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See attached press release.
Exhibits
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10.1 Form of Subscription Agreement, dated August 14, 1996.
10.2 Form of Redeemable Common Stock Purchase Warrants.
20 Confidential Term Sheet dated, August 6, 1996.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
The Care Group, Inc.
(Registrant)
By: /s/ Randolph J. Mittasch
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Name: Randolph J. Mittasch
Title: Secretary
Dated: August 21, 1996
NEWS
THE CARE GROUP, INC.
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One Hollow Lane, Suite 110, Lake Success, New York 11042--(516) 869-8383
CONTACT:
PAT CELLI-Chief Financial Officer
(516) 869-8383
FOR IMMEDIATE RELEASE
THE CARE GROUP CLOSES FIRST STAGE OF FINANCING
Reports $8.8 Million Non-cash Charge in Second Quarter of 1996
New Board Members and Management Team Announced
LAKE SUCCESS, NY, August 14, 1996 - The Care Group, Inc. (NASDAQ:CARE) announced
today that it has closed on the first stage of a private placement of units of
Common Stock and Warrants. The Company sold 42 units at a price of $50,000 per
unit. Each unit consists of 40,000 shares of Common Stock and a Stock Purchase
Warrant to purchase up to 40,000 additional shares of common stock. The net
proceeds to the Company, after expenses, were approximately $1,970,000. The
Company will use the proceeds from the Private Placement to repay existing
indebtedness and for general corporate purposes. The Company expects to place an
additional 58 units, of gross proceeds of $2,600,000, upon receiving shareholder
approval.
In connection with the Private Placement, John Pappajohn and Derace Lan
Schaffer, M.D. have been appointed as members of the Company's Board of
Directors. Ann Mittasch, Chairperson, said "We are extremely pleased that Mr.
Pappajohn and Dr. Schaffer are joining our board as they bring a wealth of
experience and a highly successful track record to The Care Group". Mr.
Pappajohn is a leading health care investor and serves as a director of many
public companies. Dr. Schaffer is a practicing radiologist and serves as
Chairperson and President of the Ide Radiology Group. Ms. Mittasch also said
that "a new management team is currently being formed to better capitalize on
the outstanding reputation The Care Group has earned as a health care provider".
She added "The members of this new management team are expected to be announced
shortly".
The Company also announced today that it has evaluated certain of its goodwill
and other assets and, as a result, will reduce such assets by a non-recurring
charge to operations in the June quarter of approximately $3,500,000. In
addition, as part of its previously announced restructuring plan, the Company
has reevaluated its accounts receivable and has identified certain accounts that
will be given to collection agencies for follow-up and they expect that the
majority of such accounts will be written-off. THe Company recorded a non-cash
charge of approximately $5,300,000 in June, of which approximately $4,500,000
was recorded as an allowance for doubtful accounts and approximately $800,000
represented direct write-offs.
The Company reported a net loss of $5,815,000 or $.70 per share on net revenues
of $9,545,000 for the quarter ended June 30, 1996 as compared to net income of
$328,000 or $.04 per share on net revenues of $11,899,000 for the same quarter
last year.
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Care Group--Page 2
For the six months ended June 30, 1996, the Company reported a net loss of
$5,754,000 of $.68 per share on net revenues of $19,188,000 versus net income of
$469,000 or $.06 per share on net revenues of $24,486,000 for the six months
ended June 30, 1995.
The revenue reduction related to the increasing effect of managed care as well
as the decrease in patient population in our New York and Dallas offices. The
net loss was primarily due to the write-offs mentioned above.
The Care Group is a leading full service provider of alternate site health care
that includes mail order pharmaceuticals and medical supplies, home medical
equipment, patient services, nursing, paraprofessionals and infusion therapy.
The Care Group's branch offices are located in New York City and Nassau County,
NY; Houston, Dallas and Austin, TX; Los Angeles, CA; and Roswell and Marietta,
GA.
SELECTED FINANCIAL DATA
000's Omitted
Except For Per Share Data
Three Months Ended Six Months Ended
June 30 June 30
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1996 1995 1996 1995
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Net Revenues $ 9,545 $11,900 $19,188 $24,486
Net Income $(5,815) $ 328 $(5,754) $ 469
Net Income Per Share $ (.70) $ .04 $ (.68) $ .06
Weighted Average
Common and Common
Equivalent Shares
Outstanding 8,311 8,414 8,463 8,402
This press release contains forward-looking statements. All forward-looking
statements involve risk and uncertainties, including, without limitations, the
risks detailed in the Company's filings and reports with the Securities and
Exchange Commission. Such statements are only predictions and actual events or
results may differ materially.
THE CARE GROUP, INC.
SUBSCRIPTION AGREEMENT made as of this 14th day of August, 1996 between
The Care Group, Inc., a Delaware corporation with its principal offices at One
Hollow Lane, Lake Success, New York (the "Company") and the undersigned (the
"Subscriber").
WHEREAS, the Company desires to issue a minimum of forty-two (42) and a
maximum of one hundred (100) Units in a private placement solely to "accredited
investors" as such term is defined in Rule 501(a) under the Securities Act of
1933, as amended, each Unit consisting of forty thousand (40,000) shares (the
"Shares") of the Company's Common Stock, $.001 par value (the "Common Stock"),
and forty thousand (40,000) Common Stock Purchase Warrants (the "Warrants") in
the form attached hereto as Exhibit A on the terms and conditions hereinafter
set forth and the Subscriber desires to acquire that number of Units set forth
on the signature page hereof;
NOW, THEREFORE, for and in consideration of the promises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF
SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth,
the Subscriber hereby subscribes for and agrees to purchase from the Company
such number of Units as is set forth upon the signature page hereof at a price
equal to $50,000 per Unit, and the Company agrees to sell such Units to the
Subscriber for said purchase price subject to the Company's right to sell to
the Subscriber such lesser number of Units as it may, in its sole discretion,
deem necessary or desirable. The purchase price is payable by certified or bank
check made payable to United States Trust Company of New York, as escrow agent
(the "Escrow Agent"), by wire transfer to an account maintained by the Escrow
Agent, or by surrender of convertible debentures of the Company in the
principal amount of $250,000, contemporaneously with the execution and delivery
of this Subscription Agreement. The Warrants and certificates for the Shares
will be delivered by the Company within ten (10) days following the Termination
Date as defined in Article III hereof. The Subscriber understands however, that
this purchase of Units is contingent upon the Company making sales of a minimum
of 42 Units prior to the Termination Date and the approval of sales of Units in
excess of 42 Units by the Company's stockholders.
1.2 The Subscriber recognizes that the purchase of Units involves
a high degree of risk including, but not limited to, (i) the Company has
recently experienced a decline in revenues and operating income and working
capital shortages; (ii) an investment in the Company is highly speculative and
only investors who can afford the loss of their entire investment should
consider investing in the Company and the Units; (iii) an investor may not be
able to liquidate his investment; (iv) transferability of the securities
comprising the Units is extremely limited; (v) in the event of a disposition,
an investor could sustain the loss of his
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entire investment; (vi) the Company is currently in default of its Credit
Agreement with The Chase Manhattan Bank, N.A.; (vii) the Company expects to
record a net charge to its earnings for the second quarter ended June 30, 1996
of $5,300,000 which may reduce or eliminate net income during such quarter;
(viii) the Company has not paid any dividends since inception and does not
anticipate the payment of dividends in the foreseeable future; (ix) the Company
is authorized to issue up to 1,000,000 shares of preferred stock the issuance
of which could have a depressive effect on the price of its Common Stock and
(x) the Company is primarily reimbursed for its services by insurance
companies, managed care companies, Medicare/Medicaid programs or other
third-party payors, which may result in delayed or denied reimbursement, as
well as other risk factors as more fully set forth herein and the Confidential
Term Sheet dated August 6, 1996 (the "Term Sheet").
1.3 The Subscriber represents that he is an "accredited investor"
as such term in defined in Rule 501 of Regulation D promulgated under the
United States Securities Act of 1933, as amended (the "Act"), as indicated by
his responses to the Confidential Purchaser Questionnaire, and that he is able
to bear the economic risk of an investment in the Units.
1.4 The Subscriber acknowledges that he has prior investment
experience, including investment in non-listed and non-registered securities,
or he has employed the services of an investment advisor, attorney or
accountant to read all of the documents furnished or made available by the
Company both to him and to all other prospective investors in the Units and to
evaluate the merits and risks of such an investment on his behalf, and that he
recognizes the highly speculative nature of this investment.
1.5 The Subscriber acknowledges receipt and careful review of the
Term Sheet and the attachments thereto (the "Offering Documents") and hereby
represents that he has been furnished by the Company during the course of this
transaction with all information regarding the Company which he had requested
or desired to know; that he has been afforded the opportunity to ask questions
of and receive answers from duly authorized officers or other representatives
of the Company concerning the terms and conditions of the offering, and any
additional information which he had requested.
1.6 The Subscriber acknowledges that this offering of Units may
involve tax consequences, including but not limited to the possible need to
recognize interest income relating to the Warrants, and that the contents of
the Offering Documents do not contain tax advice or information. The Subscriber
acknowledges that he must retain his own professional advisors to evaluate the
tax and other consequences of an investment in the Units.
1.7 The Subscriber acknowledges that this offering of Units has
not been reviewed by the United States Securities and Exchange Commission
("SEC") because of the Company's representations that this is intended to be a
nonpublic offering pursuant to Sections 4(2) or 3(b) of the Act. The Subscriber
represents that the Shares and
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Warrants comprising his Units are being purchased for his own account, for
investment and not for distribution or resale to others. The Subscriber agrees
that he will not sell or otherwise transfer such securities unless they are
registered under the Act or unless an exemption from such registration is
available.
1.8 The Subscriber understands that the Shares and Warrants
comprising the Units have not been registered under Act by reason of a claimed
exemption under the provisions of the Act which depends, in part, upon his
investment intention. In this connection, the Subscriber understands that it is
the position of the SEC that the statutory basis for such exemption would not
be present if his representation merely meant that his present intention was to
hold such securities for a short period, such as the capital gains period of
tax statutes, for a deferred sale, for a market rise, assuming that a market
develops, or for any other fixed period. The Subscriber realizes that, in the
view of the SEC, a purchase now with an intent to resell would represent a
purchase with an intent inconsistent with his representation to the Company,
and the SEC might regard such a sale or disposition as a deferred sale to which
such exemptions are not available.
1.9 The Subscriber understands that Rule 144 (the "Rule")
promulgated under the Act requires, among other conditions, a two year holding
period prior to the resale (in limited amounts) of securities acquired in a
non-public offering without having to satisfy the registration requirements
under the Act. The Subscriber understands that the Company makes no
representation or warranty regarding its fulfillment in the future of any
reporting requirements under the Securities Exchange Act of 1934, as amended,
or its dissemination to the public of any current financial or other
information concerning the Company, as is required by the Rule as one of the
conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the securities
comprising the Units under the Act, with the exception of certain registration
rights set forth in Article IV herein. The Subscriber consents that the Company
may, if it desires, permit the transfer of the securities comprising the Units
or issuable upon either the exercise or conversion thereof out of his name only
when his request for transfer is accompanied by an opinion of counsel
reasonably satisfactory to the Company that neither the sale nor the proposed
transfer results in a violation of the Act or any applicable state "blue sky"
laws (collectively "Securities Laws"). The Subscriber agrees to hold the
Company and its directors, officers and controlling persons and their
respective heirs, representatives, successors and assigns harmless and to
indemnify them against all liabilities, costs and expenses incurred by them as
a result of any misrepresentation made by him contained herein or in the
Confidential Purchaser Questionnaire or any sale or distribution by the
undersigned Subscriber in violation of any Securities Laws.
1.10 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Shares and Warrants comprising his
Units and the Common Stock issuable upon exercise of such Warrants
(collectively, the "Warrant Shares") stating that they have not been registered
under the Act and setting forth or referring to the restrictions on
transferability and sale thereof.
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1.11 The Subscriber hereby represents that the address of
Subscriber furnished by him at the end of this Subscription Agreement is the
undersigned's principal residence if he is an individual or its principal
business address if it is a corporation or other entity.
1.12 The Subscriber acknowledges that if he is a Registered
Representative of an NASD member firm, he must give such firm the notice
required by the NASD's Rules of Fair Practice, receipt of which must be
acknowledged by such firm on the signature page hereof.
1.13 The Subscriber acknowledges that at such time, if ever, as
his Shares and Warrant Shares are registered, sales of such securities will be
subject to state securities laws, including those of New Jersey which require
any securities sold in New Jersey to be sold through a registered broker-dealer
or in reliance upon an exemption from registration.
1.14 The Subscriber will not, upon the completion of this
offering, own 10% or more of the Company's outstanding Common Stock, measured
on an "as-converted" basis, nor is the Subscriber aware of any other Subscriber
in this offering who will own 10% or more of the Company's outstanding Common
Stock, measured on an "as-converted" basis.
1.15 The Subscriber will not, upon the exercise of Warrants held
by him, own 10% or more of the Company's outstanding Common Stock, nor is the
Subscriber aware of any other Subscriber in this offering who will own 10% or
more of the Company's outstanding Common Stock upon the exercise of their
Warrants.
1.16 The Subscriber has not entered into any voting agreement or
any other agreement or understanding, whether oral or written, whereby he has
agreed to vote his Common Stock with any other Subscriber nor has the
Subscriber given another Subscriber power of attorney to vote his shares of
Common Stock.
1.17 The Subscriber is purchasing the Units with his own assets
and is not acting as nominee for any company or other Subscriber.
1.18 The Subscriber understands that if he is found to be in
violation of the representations set forth in 1.14 through 1.17 above, the
Company may be subject to penalties from the Department of Health of the State
of New York, including, but not limited to, imposition of fines and loss of its
license.
II. REPRESENTATIONS BY THE COMPANY
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The Company represents and warrants to the Subscriber that prior
to the consummation of this offering and at the Closing Date:
(a) The Company is a corporation duly organized, existing and in
good standing under the laws of the State of Delaware and has the corporate
power to conduct the business which it conducts and proposes to conduct and is
qualified to do business in New York.
(b) The execution, delivery and performance of this Subscription
Agreement by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the offer
and sale of the Units and the securities contained therein will have been duly
taken and approved.
(c) The Shares and Warrants comprising the Units have been duly
and validly authorized and when issued and paid for in accordance with the
terms hereof, will be valid and binding obligations of the Company enforceable
in accordance with their respective terms.
(d) The Company will at all times during the term of the Warrants
have authorized and reserved a sufficient number of shares of Common Stock to
provide for exercise of the Warrants.
(e) The Company has obtained, or is in the process of obtaining,
all licenses, permits and other governmental authorizations necessary to the
conduct of its business; such licenses, permits and other governmental
authorizations obtained are in full force and effect; and the Company is in all
material respects complying therewith.
(f) The Company knows of no pending or threatened legal or
governmental proceedings to which the Company is a party which could materially
adversely affect the business, property, financial condition or operations of
the Company other than as set forth in the Offering Documents.
(g) The Company is not in violation of or default under, nor will
the execution and delivery of this Subscription Agreement, the issuance of the
Shares or the Warrants, and the incurrence of the obligations herein and
therein set forth and the consummation of the transactions herein or therein
contemplated, result in a violation of, or constitute a default under, the
certificate of incorporation or by-laws, in the performance or observance of
any material obligations, agreement, covenant or condition contained in any
bond, debenture, note or other evidence of indebtedness or in any material
contract, indenture, mortgage, loan agreement, lease, joint venture or other
agreement or instrument to which the Company is a party or by which it or any
of its properties may be bound or in violation of any material order, rule,
regulation, writ, injunction, or decree of any government, governmental
instrumentality or court, domestic or foreign, except for violations and
defaults under the Company's Revolving Credit Agreement with The Chase
Manhattan
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Bank, N.A. ("Chase") dated as of February 14, 1994 and amended as of November
16, 1995 and June 5, 1996 which violations and defaults will be waived by Chase
on or before the Closing Date.
(h) The financial information contained in the Offering Documents
previously furnished by the Company to the Subscriber presents fairly the
financial condition of the Company as of the date and for the periods
indicated.
III. TERMS OF SUBSCRIPTION
3.1 The subscription period will begin as of August 6, 1996 and
will terminate at 11:59 PM Eastern Daylight Savings Time on September 30, 1996,
unless extended by the Company and the Placement Agent until the first to occur
of (i) the expiration of an additional sixty (60) days or (ii) the sale of all
one hundred (100) Units offered by the Company (the "Termination Date"). Of the
Units, 42 will be offered on an all or none basis and the remaining 58 Units
will be offered on a "best efforts" basis as more particularly set forth in the
Term Sheet. The minimum subscription per subscriber shall be one Unit
($50,000), provided, however, that smaller investments may be accepted at the
discretion of the Placement Agent and the Company.
3.2 Placement of the Units will be made by Royce Investment
Group, Inc. (the "Placement Agent"), which will receive (i) a placement fee in
the amount of 4.5% of the purchase price of the Units placed; (ii) a
non-accountable expense allowance of 1.5% of the purchase price of the Units
placed; and (iii) a unit purchase option to purchase 7.5% of the Units sold in
this offering.
3.3 Pending the sale of the Units, all funds paid hereunder shall
be deposited by the Company in escrow with United States Trust Company of New
York. If the Company shall not have obtained subscriptions (including this
subscription) for purchases of 42 Units for an aggregate purchase price of
$2,100,000 on or before the Termination Date, then this subscription shall be
void and all funds paid hereunder by the Subscriber, without interest, shall be
promptly returned to the Subscriber, subject to paragraph 3.5 hereof. If 42
Units are sold at or prior to the Termination Date, then all subscription
proceeds shall be paid over to the Company within ten (10) days of the earlier
of such date or the date on which the Company's Stockholders approve this
offering thereafter. In such event, placements of additional Units may continue
until the Termination Date, with subsequent releases of funds to be at the
mutual consent of the Company and the Placement Agent.
3.4 The Subscriber hereby authorizes and directs the Company to
deliver the securities to be issued to such Subscriber pursuant to this
Subscription Agreement either (a) to the residential or business address
indicated in the Confidential Purchaser Questionnaire or (b) directly to the
Subscriber's account maintained by the Placement Agent,
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if any. (If the Subscriber does not desire the securities to be delivered to
such account, the Subscriber should delete Subsection (b) of this Section 3.4.)
3.5 The Subscriber hereby authorizes and directs the Company to
return any funds for unaccepted subscriptions to the same account from which
the funds were drawn, including any customer account maintained with the
Placement Agent.
IV. REGISTRATION RIGHTS
4.1 Demand Registration. If at any time after three (3) months
following the Termination Date, but not more than six (6) years from the
Termination Date, the Company shall receive a written request therefor (the
"Demand Notice") from any record holder or holders of an aggregate of more than
50% of the Shares and Warrant Shares (the "Requesting Holders"), the Company
will use its best efforts to promptly prepare and file with the SEC a
registration statement under the Act covering the Shares and the Warrant Shares
(collectively, the "Registrable Securities") which are the subject of such
request and shall use its best efforts to cause such registration statement to
become effective. In addition, upon the receipt of such request, the Company
shall promptly give written notice to all other record holders of the
Registrable Securities that such registration is to be effected. The Company
shall include in such registration statement such Registrable Securities for
which it has received written requests to register by such other record holders
within twenty (20) days after the delivery of the Company's written notice to
such other record holders.
The obligation of the Company under this Section 4.1 shall be
limited to one registration statement. The Company shall pay the expenses
described in Section 4.4 for the registration statement filed pursuant to this
Section 4.1, except for underwriting discounts and commissions and legal fees
of the Requesting Holders, which shall be borne by the Requesting Holders.
4.2 "Piggyback" Registration Rights. From and after three (3)
months following the Termination Date, but not more than six (6) years from the
Termination Date, if the Company shall determine to proceed with the actual
preparation and filing of a registration statement under the Act in connection
with the proposed offer and sale of any of its securities by it or any of its
security holders (other than a registration statement on Form S-4, S-8 or other
limited purpose form), the Company will give written notice of its
determination to all record holders of the Registrable Securities. Upon the
written request from the Requesting Holders, (as defined in Section 4.1) within
twenty (20) days after receipt of any such notice from the Company, the Company
will, except as herein provided, cause all such Registrable Securities to be
included in such registration statement, all to the extent requisite to permit
the sale or other disposition by the prospective seller or sellers of the
Registrable Securities to be so registered; provided, further, that nothing
herein shall prevent the Company from, at any time, abandoning or delaying any
registration. If any registration pursuant to this Section 4.2 shall be
underwritten in whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant to this
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Section 4.2 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 4.2
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
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.
4.3 Registration Procedures. If and whenever the Company is
required by the provisions of Section 4.1 or 4.2 to effect the registration of
Registrable Securities under the Act, the Company will:
(a) prepare and file with the SEC a registration statement
with respect to such securities, and use its best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed nine
months;
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed nine months;
(c) furnish to the security holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state securities
or blue sky laws of such jurisdictions as such participating holders may
reasonably request in writing within twenty (20) days following the original
filing of such registration statement, except that the Company shall not for
any purpose be required to execute a general consent to service of
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process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof, of the time when
such registration statement has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed;
(f) notify such holders promptly of any request by the SEC
for the amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the SEC, promptly upon the request
of any such holders, any amendments or supplements to such registration
statement or prospectus which, in the opinion of counsel for such holders (and
concurred in by counsel for the Company), is required under the Act or the
rules and regulations thereunder in connection with the distribution of Common
Stock by such holder;
(h) prepare and promptly file with the SEC and promptly
notify such holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading; and
(i) advise such holders, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order by the
SEC suspending the effectiveness of such registration statement or the
initiation or threatening of any proceeding for that purpose and promptly use
its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued.
4.4 Expenses.
(a) With respect to the registration requested pursuant to
Section 4.1 hereof, and with respect to each inclusion of Registrable
Securities in a registration statement pursuant to Section 4.2 hereof, all
fees, costs and expenses of and incidental to such registration, inclusion and
public offering (as specified in paragraph (b) below) in connection therewith
shall be borne by the Company, provided, however, that any security holders
participating in such registration shall bear their pro rata share of the
underwriting discount and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne
by the Company as provided in paragraph (a) above shall include, without
limitation, all
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registration, filing, and NASD fees, printing expenses, fees and disbursements
of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 4.4(a) above). Fees and
disbursements of counsel and accountants for the selling security holders and
any other expenses incurred by the selling security holders not expressly
included above shall be borne by the selling security holders.
4.5 Indemnification.
(a) The Company will indemnify and hold harmless each holder
of Registrable Securities which are included in a registration statement
pursuant to the provisions of Sections 4.1 or 4.2 hereof, its directors and
officers, and any underwriter (as defined in the Act) for such holder and each
person, if any, who controls such holder or such underwriter within the meaning
of the Act, from and against, and will reimburse such holder and each such
underwriter and controlling person with respect to, any and all loss, damage,
liability, cost and expense to which such holder or any such underwriter or
controlling person may become subject under the Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that the Company will
not be liable in any such case to the extent that any such loss, damage,
liability, cost or expenses arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the preparation thereof.
(b) Each holder of Registrable Securities included in a
registration pursuant to the provisions of Sections 4.1 or 4.2 hereof will
indemnify and hold harmless the Company, its directors and officers, any
controlling person and any underwriter from and against, and will reimburse the
Company, its directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or expense to which
the Company or any controlling person and/or any underwriter may become subject
under the Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue statement or alleged untrue statement of
any material fact contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or arise out of or
are based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in 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 so made in
reliance upon and in strict
10
<PAGE>
conformity with written information furnished by or on behalf of such holder
specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant
to the provisions of paragraph (a) or (b) of this Section 4.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability which it may have to any indemnified party
otherwise than hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right 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 satisfactory to
such indemnified party, provided, however, if the defendants in any action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or in addition to those available to the indemnified party, or if there is
a conflict of interest which would prevent counsel for the indemnifying party
from also representing the indemnified party, the indemnified party or parties
have the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. 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 pursuant to the provisions of said paragraph (a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after the notice of the commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party.
4.6 "Market Stand-Off". The Subscriber hereby agrees that,
during the period specified by the Company and an underwriter of securities of
the Company, which period shall not exceed 90 days following the effective date
of a registration statement of the Company filed under the Act, it shall not
(i) publicly sell the Units, Shares or Warrant Shares acquired hereunder or
(ii) privately sell the Units, Shares or Warrant Shares acquired hereunder
unless the purchaser of such Units, Shares or Warrant Shares in such private
sale agrees to be bound by the provisions of this Section 4.6; provided,
however, that:
(a) such agreement shall be applicable only to the first
such registration statement of the Company which covers securities to be sold
on its behalf to the public in an underwritten offering during the two year
period following the date of this Agreement.
11
<PAGE>
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Units, Shares or Warrant
Shares of the Subscriber (and the shares or securities of every other person
subject to the foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in
this Section 4.6 shall not apply to a registration statement on Form S-4 or S-8
or other limited purpose form.
V. MISCELLANEOUS
5.1 Any notice or other communication given hereunder shall be
deemed sufficient if in writing and sent by registered or certified mail,
return receipt requested, addressed to the Company, at its registered office, 1
Hollow Lane, Lake Success, New York 11042 , Attention: Ms. Ann T. Mittasch,
President and Chairman, and to the Subscriber at his address indicated on the
last page of this Subscription Agreement. Notices shall be deemed to have been
given on the date of mailing, except notices of change of address, which shall
be deemed to have been given when received.
5.2 This Subscription Agreement shall not be changed, modified or
amended except by a writing signed by the parties to be charged, and this
Subscription Agreement may not be discharged except by performance in
accordance with its terms or by a writing signed by the party to be charged.
5.3 This Subscription Agreement shall be binding upon and inure
to the benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
5.4 Notwithstanding the place where this Subscription Agreement
may be executed by any of the parties hereto, the parties expressly agree that
all the terms and provisions hereof shall be construed in accordance with and
governed by the laws of the State of New York. The parties hereby agree that
any dispute which may arise between them arising out of or in connection with
this Subscription Agreement shall be adjudicated before a court located in New
York City and they hereby submit to the exclusive jurisdiction of the courts of
the State of New York located in New York, New York and of the federal courts
in the Southern District of New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now
or hereafter may have respecting the venue of any such action or proceeding
brought in such a court or respecting the fact that such court is an
inconvenient forum, relating to or arising out of this
12
<PAGE>
Subscription Agreement or any acts or omissions relating to the sale of the
securities hereunder, and consent to the service of process in any such action
or legal proceeding by means of registered or certified mail, return receipt
requested, in care of the address set forth below or such other address as the
undersigned shall furnish in writing to the other.
5.5 This Subscription Agreement may be executed in counterparts.
Upon the execution and delivery of this Subscription Agreement by the
Subscriber, this Subscription Agreement shall become a binding obligation of
the Subscriber with respect to the purchase of Units as herein provided;
subject, however, to the right hereby reserved to the Company to enter into the
same agreements with other subscribers and to add and/or to delete other
persons as subscribers.
5.6 The holding of any provision of this Subscription Agreement
to be invalid or unenforceable by a court of competent jurisdiction shall not
affect any other provision of this Subscription Agreement, which shall remain
in full force and effect.
5.7 It is agreed that a waiver by either party of a breach of any
provision of this Subscription Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
5.8 The parties agree to execute and deliver all such further
documents, agreements and instruments and take such other and further action as
may be necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
VI. BLUE SKY LEGENDS
Connecticut
The undersigned acknowledges that the Securities have not been
registered under the Connecticut Uniform Securities Act, as amended (the "Act")
and are subject to restrictions on transferability and sale of securities as
set forth herein. The undersigned hereby agrees that such Securities will not
be transferred or sold without registration under the Act or exemption
therefrom.
Maine
These securities are being sold pursuant to an exemption from
registration with the bank superintendent of the State of Maine under Section
10502(2)(r) of Title 32 of the Maine revised statutes. These securities may be
deemed restricted securities and as such the holder may not be able to resell
the securities unless pursuant to registration under state or federal
securities laws or unless an exemption under such laws exists.
Missouri
The undersigned acknowledges that the Securities have not been
registered under the Missouri Uniform Securities Act, as amended (the "Act")
and are subject to restrictions on transferability and sale of securities as
set forth herein. The
13
<PAGE>
undersigned hereby acknowledges that such Securities may be disposed of only
through a licensed broker-dealer. It is a felony to sell securities in
violation of the Missouri Securities Act.
Pennsylvania
The undersigned hereby acknowledges that the Issuer is relying
upon the exemption from registration of securities set forth in Section 203(d)
of the Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act")
in connection with the sale of the Securities to the undersigned.
In accordance with the requirements of Section 203(d) of the
Pennsylvania Act, the undersigned hereby agrees not to sell his Securities
within twelve (12) months from the date of purchase except pursuant to Section
204.01 of the Blue Sky Regulations of the Pennsylvania Securities Act of 1972.
Additionally, the undersigned is aware of the right of withdrawal under Section
207(m) of the Act described in the cover pages of the Memorandum.
Texas
The undersigned hereby acknowledges that the Securities cannot be
sold unless they are subsequently registered under the Securities Act of 1933,
as amended, and the Texas Securities Act, or an exemption from registration is
available. The undersigned further acknowledges that because the Securities are
not readily transferable, he must bear the economic risk of his investment for
an indefinite period of time.
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this
Subscription Agreement as of the day and year first written above.
- ------------------------------ ------------------------------------
Signature of Subscriber(s)
- ------------------------------ ------------------------------------
Name of Subscriber(s)
[please print]
- ------------------------------ ------------------------------------
Address of Subscriber(s)
- ------------------------------ ------------------------------------
Social Security or Taxpayer
Identification Number of Subscriber(s)
- ------------------------------
Number of Units Subscribed For
*IF SUBSCRIBER IS A REGISTERED REPRESENTATIVE
WITH AN NASD MEMBER FIRM, HAVE THE FOLLOWING
ACKNOWLEDGEMENT SIGNED BY THE APPROPRIATE PARTY:
The undersigned NASD member firm
acknowledges receipt of the notice
required by Article 3, Sections 28(a) Subscription Accepted:
and (b) of the Rules of Fair Practice.
THE CARE GROUP, INC.
By:
- ------------------------------ ---------------------------------
Name of NASD Member Firm Ann Mittasch, President
By
---------------------------
Authorized Officer
15
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COMMON STOCK PURCHASE WARRANT
To Purchase Common Stock of
THE CARE GROUP, INC.
************************************************************************
<PAGE>
Void after 5:00 p.m. New York Time, on __________, 2001.
Warrant to Purchase ______ Shares of Common Stock.
WARRANT TO PURCHASE COMMON STOCK
OF
THE CARE GROUP, INC.
This is to Certify That, FOR VALUE RECEIVED, , or assigns
("Holder"), is entitled to purchase, subject to the provisions of this Warrant,
from The Care Group, Inc., a Delaware corporation ("Company"), _______ fully
paid, validly issued and nonassessable shares of Common Stock, par value $.001
per share, of the Company ("Common Stock") at a cash price per share equal to
$_____ [the greater of (i) $2.50 or (ii) book value per share as reflected in
the Company's 10-Q for the period ended June 30, 1996 plus $.10.] The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for each share of Common Stock may be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares" and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price". This Warrant, together with warrants of
like tenor, constituting in the aggregate warrants (the "Warrants") to purchase
up to 4,000,000 shares of Common Stock, was originally issued in connection
with a private placement (the "Private Placement") through Royce Investment
Group, Inc., as placement agent, pursuant to a Confidential Term Sheet dated
August __, 1996.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in
part at any time or from time to time on or after ______________, 1996 and
until ___________, 2001 (the "Exercise Period"), subject to the provisions of
Section (i) hereof; provided, however, that if either such day is a day on
which banking institutions in the State of New York are authorized by law to
close, then on the next succeeding day which shall not be such a day. This
Warrant may be exercised by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, if any,
with the Purchase Form annexed hereto duly executed and accompanied by payment
of the Exercise Price for the number of Warrant Shares specified in such form.
As soon as practicable after each such exercise of the warrants, but not later
than seven (7) days from the date of such exercise, the Company shall issue and
deliver to the Holder a certificate or certificate for the Warrant Shares
issuable upon such exercise, registered in the name of the Holder or its
designee. If this Warrant should be exercised in part only, the Company shall,
upon
<PAGE>
surrender of this Warrant for cancellation, execute and deliver a new Warrant
evidencing the rights of the Holder thereof to purchase the balance of the
Warrant Shares purchasable thereunder. Upon receipt by the Company of this
Warrant at its office, or by the stock transfer agent of the Company at its
office, in proper form for exercise, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such shares of Common Stock shall not
then be physically delivered to the Holder.
(b) RESERVATION OF SHARES. The Company shall at all times reserve for
issuance and/or delivery upon exercise of this Warrant such number of shares of
its Common Stock as shall be required for issuance and delivery upon exercise
of the Warrants.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of a share, determined as follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq National Market, the current market
value shall be the last reported sale price of the Common Stock on such
exchange or market on the last business day prior to the date of
exercise of this Warrant or if no such sale is made on such day, the
average closing bid and asked prices for such day on such exchange or
market; or
(2) If the Common Stock is not so listed or admitted to unlisted
trading privileges, but is traded on the Nasdaq Small Cap Market, the
current market value shall be the average of the closing bid and asked
prices for such day on such market and if the Common Stock is not so
traded, the current market value shall be the mean of the last reported
bid and asked prices reported by the National Quotation Bureau, Inc. on
the last business day prior to the date of the exercise of this Warrant;
or
(3) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current 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 date of the exercise of the Warrant, determined in
such reasonable manner as may be prescribed by the Board of Directors of
the Company.
2
<PAGE>
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender hereof to the Company or at the office of its stock transfer
agent, if any, for other warrants of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of Common
Stock purchasable hereunder. Upon surrender of this Warrant to the Company at
its principal office or at the office of its stock transfer agent, if any, with
the Assignment Form annexed hereto duly executed and funds sufficient to pay
any transfer tax, the Company shall, without charge, execute and deliver a new
Warrant in the name of the assignee named in such instrument of assignment and
this Warrant shall promptly be cancelled. This Warrant may be divided or
combined with other warrants which carry the same rights upon presentation
hereof at the principal office of the Company or at the office of its stock
transfer agent, if any, together with a written notice specifying the names and
denominations in which new Warrants are to be issued and signed by the Holder
hereof. The term "Warrant" as used herein includes any Warrants into which this
Warrant may be divided or exchanged. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this
Warrant, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Warrant, if mutilated, the Company will execute and deliver a new Warrant of
like tenor and date. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be
at any time enforceable by anyone.
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be
entitled to any rights of a stockholder in the Company, either at law or
equity, and the rights of the Holder are limited to those expressed in the
Warrant and are not enforceable against the Company except to the extent set
forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon the exercise of the
Warrants shall be subject to adjustment from time to time upon the happening of
certain events as follows:
(1) 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
3
<PAGE>
outstanding immediately prior to such action. Such adjustment shall be
made successively whenever any event listed above shall occur.
(2) 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 the current market price
of the Common Stock (as defined in Subsection (8) below) on the record
date mentioned below, the Exercise Price shall be adjusted so that the
same shall equal the price determined by multiplying the Exercise Price
in effect immediately prior to the date of such issuance 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).
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.
(3) 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 (1) above) or subscription rights or warrants
(excluding those referred to in Subsection (2) above), then in each such
case the Exercise Price in effect thereafter shall be determined by
multiplying the Exercise Price in effect immediately prior thereto 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 (8) 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
4
<PAGE>
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
shareholders entitled to receive such distribution.
(4) In case the Company shall issue shares of its Common Stock
excluding shares issued (i) in any of the transactions described in
Subsection (1) above, (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 shareholders, if such shares would
otherwise be included in this Subsection (4), (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 outstanding at ______, 1996 and this Warrant (iv) to
stockholders of any corporation which merges into the Company in
proportion to their stock holdings or option holdings of such
corporation immediately prior to such merger, upon such merger, (v)
issued in a bona fide public offering pursuant to a firm commitment
underwriting (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 (f) (without regard to Subsection
(9) below) with respect to the transaction giving rise to such rights
for a consideration per share (the "Offering Price") less than the
current market price per share as defined in Subsection (8) below on the
date the Company fixes the offering price of such additional shares, the
Exercise Price shall be adjusted immediately thereafter so that it shall
equal the price determined by multiplying the Exercise Price in effect
immediately prior thereto 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 (7) 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 Such adjustment shall be made successively whenever
such an issuance is made.
(5) In case the Company shall issue any securities convertible
into or exchangeable for its Common Stock excluding securities issued in
transactions described in Subsections (2) and (3) 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 (7) below less than the current
market price per share as defined in
5
<PAGE>
Subsection (8) below in effect immediately prior to the issuance
of such securities, the Exercise Price shall be adjusted immediately
thereafter so that it shall equal the price determined by multiplying
the Exercise Price in effect immediately prior thereto 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 (7) 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. Such
adjustment shall be made successively whenever such an issuance is made.
(6) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and (5)
above, the number of Shares purchasable upon exercise of this Warrant
shall simultaneously be adjusted by multiplying the number of Shares
initially issuable upon exercise of this Warrant by the Exercise Price
in effect on the date hereof and dividing the product so obtained by the
Exercise Price, as adjusted.
(7) For purposes of any computation respecting consideration
received pursuant to Subsections (4) and (5) 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;
(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
6
<PAGE>
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 (7)).
(8) For the purpose of any computation under Subsections
(2), (3), (4) and (5) above, the current market price per share
of Common Stock at any date shall be determined in the manner set
forth in Section (c) hereof except that the current market price
per share shall be deemed to be the average of the prices for 30
consecutive business days immediately preceding such date.
(9) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least five
cents in such price; provided, however, that any adjustments which by
reason of this Subsection (9) 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 (f)
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 (f) 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 (f), 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).
(10) Whenever the Exercise Price is adjusted, as herein provided,
the Company shall promptly, cause a notice setting forth the adjusted
Exercise Price and adjusted number of Shares issuable upon exercise of
each Warrant, and, if requested, information describing the transactions
giving rise to such adjustments, to be mailed to the Holders at their
last addresses appearing in the Warrant Register, 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 (f), and a certificate signed by such firm shall be conclusive
evidence of the correctness of such adjustment.
(11) In the event that at any time, as a result of an adjustment
made pursuant to Subsection (1) above, the Holder of this Warrant
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 Warrant shall be subject to adjustment
from time to time in a manner
7
<PAGE>
and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in Subsections (1) to (9),
inclusive above.
(12) Irrespective of any adjustments in the Exercise Price or the
number or kind of shares purchasable upon exercise of this Warrant,
Warrants theretofore or thereafter issued may continue to express the
same price and number and kind of shares as are stated in the similar
Warrants initially issuable pursuant to this Agreement.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted
as required by the provisions of the foregoing Section, the Company shall
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and with its stock transfer agent, if any, an officer's
certificate showing the adjusted Exercise Price determined as herein provided,
setting forth in reasonable detail the facts requiring such adjustment,
including a statement of the number of additional shares of Common Stock, if
any, and such other facts as shall be necessary to show the reason for and the
manner of computing such adjustment. Each such officer's certificate shall be
made available at all reasonable times for inspection by the holder or any
holder of a Warrant executed and delivered pursuant to Section (a) and the
Company shall, forthwith after each such adjustment, mail a copy by certified
mail of such certificate to the Holder or any such holder.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (i) if the Company shall pay any dividend or make any distribution
upon the Common Stock or (ii) if the Company shall offer to the holders of
Common Stock for subscription or purchase by them any share of any class or any
other rights or (iii) if any capital reorganization of the Company,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with or into another corporation, sale, lease or transfer of all
or substantially all of the property and assets of the Company to another
corporation, or voluntary or involuntary dissolution, liquidation or winding up
of the Company shall be effected, then in any such case, the Company shall
cause to be mailed by certified mail to the Holder, at least fifteen days prior
the date specified in (x) or (y) below, as the case may be, a notice containing
a brief description of the proposed action and stating the date on which (x) a
record is to be taken for the purpose of such dividend, distribution or rights,
or (y) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. Subject to the
provisions of Section (k)(2) hereof, in case of any reclassification, capital
reorganization or other change of outstanding shares of Common Stock of the
Company, or in case of any consolidation or merger of the Company with or into
another corporation
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(other than a merger with a subsidiary in which merger the Company is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock of
the class issuable upon exercise of this Warrant) or in case of any sale, lease
or conveyance to another corporation of the property of the Company as an
entirety, the Company shall, as a condition precedent to such transaction,
cause effective provisions to be made so that the Holder shall have the right
thereafter by exercising this Warrant at any time prior to the expiration of
the Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been purchased
upon exercise of this Warrant immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance. Any such provision shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. The foregoing
provisions of this Section (i) shall similarly apply to successive
reclassifications, capital reorganizations and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances. In the
event that in connection with any such capital reorganization or
reclassification, consolidation, merger, sale or conveyance, additional shares
of Common Stock shall be issued in exchange, conversion, substitution or
payment, in whole or in part, for a security of the Company other than Common
Stock, any such issue shall be treated as an issue of Common Stock covered by
the provisions of Subsection (1) of Section (f) hereof.
(j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Holder of this
Warrant shall have the registration rights set forth in Section IV of the
subscription agreement dated August __, 1996 between the Holder and the Company
relating to the Private Placement.
(k) REDEMPTION.
(1) Commencing _________, 1997, on notice (the "Redemption
Notice") to the Holder, the Warrants may be redeemed, at the option of
the Company, at a redemption price of $.05 per Warrant, provided the
Market Price of the Common Stock equals or exceeds $7.00 per share (the
"Target Price"), subject to adjustment as set forth in Section (k)(6),
below. For purposes of this Section (k), "Market Price" shall mean (i)
the average closing bid price of the Common Stock, for thirty (30)
consecutive business days ending on the Calculation Date as reported by
Nasdaq, if the Common Stock is traded on the Nasdaq SmallCap Market, or
(ii)the average last reported sale price of the Common Stock, for thirty
(30) consecutive business days ending on the Calculation Date, as
reported by the primary exchange on which the Common Stock is traded, if
the Common Stock is traded on a national securities exchange, or by
Nasdaq, if the Common Stock is traded on the Nasdaq National Market. For
purposes of this Section (k), the Calculation
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Date shall mean a date within five days of the mailing of the Redemption
Notice.
(2) In case of the consummation of any consolidation, merger or
sale of all or substantially all of the Common Stock of the Company (a
"Sale Event") with or into another corporation (the "Successor
Corporation") which has been consummated prior to ____________, 2001
(other than a merger with a subsidiary in which merger the Company is
the continuing corporation and which does not result in any
reclassification, capital reorganization or other change of outstanding
shares of Common Stock of the class issuable upon exercise of this
Warrant) which results in consideration being paid to the Company's
stockholders of at least $7.00 per share (the "Transaction Price"), the
Warrants may be redeemed, at the option of the Successor Corporation, at
a redemption price of $.05 per Warrant.
(3) If the conditions set forth in Section (k)(1) or (2) are met,
and the Company or the Successor Corporation, as applicable, desires to
exercise its right to redeem the Warrants, it shall mail a Redemption
Notice to each of the Registered Holders of the Warrants to be redeemed,
first class, postage prepaid, not later than the thirtieth day before
the date fixed for redemption, at their last address as shall appear on
the records maintained by the Company or the Successor Corporation, as
applicable. Such Redemption Notice may only be mailed by a Successor
Corporation after consummation of the Sale Event. Any notice mailed in
the manner provided herein shall be conclusively presumed to have been
duly given whether or not the Registered Holder receives such notice.
The date fixed for redemption of the Warrants is referred to herein as
the "Redemption Date."
(4) The Redemption Notice shall specify (i) the redemption price,
(ii) the Redemption Date, (iii) the place where the Warrant shall be
delivered, (iv) that Royce Investment Group, Inc. will assist each
Registered Holder of a Warrant in connection with the exercise thereof
and (v) that the right to exercise the Warrant shall terminate at 5:00
P.M. (New York time) on the business day immediately preceding the
Redemption Date. No failure to mail such notice nor any defect therein
or in the mailing thereof shall affect the validity of the proceedings
for such redemption except as to a Registered Holder (a) to whom notice
was not mailed or (b) whose notice was defective. An affidavit of the
Warrant Agent or of the Secretary or an Assistant Secretary of the
Company or the Successor Corporation, as applicable, that notice of
redemption has been mailed shall, in the absence of fraud, be prima
facie evidence of the facts stated therein.
(5) Any right to exercise a Warrant shall terminate at 5:00 P.M.
(New York time) on the business day immediately preceding the Redemption
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Date. In the event of a Sale Event and a Holder of this Warrant
exercises this Warrant prior to the Redemption Date, the Holder of this
Warrant shall receive upon exercise from the Successor Corporation the
same per share consideration received by the holders of the Company's
Common Stock in the Sale Event (calculated as if the Holder of this
Warrant had exercised this Warrant and held Common Stock immediately
prior to the Sale Event). On and after the Redemption Date, Registered
Holders of the Warrants shall have no further rights except to receive,
upon surrender of the Warrant, the Redemption Price.
(6) From and after the Redemption Date, the Company or the
Successor Corporation, as applicable, shall, at the place specified in
the Redemption Notice, upon presentation and surrender to the Company or
the Successor Corporation, as applicable, by or on behalf of the
Registered Holder thereof of one or more Warrant Certificates evidencing
Warrants to be redeemed, deliver or cause to be delivered to or upon the
written order of such Registered Holder a sum in cash equal to the
redemption price of each such Warrant. From and after the Redemption
Date and upon the deposit or setting aside by the Company or the
Successor Corporation, as applicable, of a sum sufficient to redeem all
the Warrants called for redemption, such Warrants shall expire and
become void and all rights hereunder and under the Warrant Certificates,
except the right to receive payment of the redemption price, shall
cease.
(7) If the shares of the Common Stock are subdivided or combined
into a greater or smaller number of shares of Common Stock, the Target
Price or Transaction Price shall be proportionally adjusted by the ratio
which the total number of shares of Common Stock outstanding immediately
prior to such event bears to the total number of shares of Common Stock
to be outstanding immediately after such event.
THE CARE GROUP, INC.
By
-------------------------------------
Ann Mittasch, President
[SEAL]
Dated: , 1996
-------------
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Attest:
- -----------------------------
Randolph Mittasch, Secretary
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PURCHASE FORM
Dated ____________, 19
The undersigned hereby irrevocably elects to exercise the
within Warrant to the extent of purchasing _______ shares of Common Stock and
hereby makes payment of _______ in payment of the actual exercise price
thereof.
----------------
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name ________________________________
(Please typewrite or print in block letters)
Address ______________________________
Signature _____________________________
<PAGE>
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________ hereby sells, assigns and
transfers unto
Name _____________________________
(Please typewrite or print in block letters)
Address ____________________________
the right to purchase Common Stock represented by this Warrant to the extent of
______ shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ___________ as attorney, to transfer the same on the
books of the Company with full power of substitution in the premises.
Date ____________, 19__
Signature ___________________
THE CARE GROUP, INC.
CONFIDENTIAL TERM SHEET
--------------------------------------------
Term Sheet for Private Placement of a minimum of 42 and a maximum of 100 Units
(as hereinafter defined) of The Care Group, Inc., a Delaware corporation (the
"Company").
--------------------------------------------
Investment in the Units offered hereby is highly speculative. Prospective
investors should retain their own professional advisors to review and evaluate
the economic, tax and other consequences of investment in a private offering
(the Offering" or the "Private Placement") and are not to construe the contents
of this Term Sheet, or any other information finished by the Company, as legal
or tax advice.
SECURITIES Units consisting of shares of Common Stock, $.001 par value
BEING OFFERED: (the "Common Stock"), and redeemable Common Stock Purchase
Warrants (the "Warrants"). Each Unit will consist of 40,000
shares of Common Stock and 40,000 Warrants, each of which
is exercisable to purchase 1 share of Common Stock (the
"Warrant Shares").
OFFERING PRICE: $50,000 per Unit
MINIMUM NUMBER 42 Units (gross proceeds of $2,100,000)
OF UNITS OFFERED:
MAXIMUM NUMBER 100 Units (gross proceeds of $5,000,000)
OF UNITS OFFERED:
MINIMUM $50,000 (1 Unit), provided that smaller subscriptions may
SUBSCRIPTION: be accepted at the discretion of Royce Investment Group,
Inc. (the "Placement Agent") and the Company.
TERMS OF 42 Units (the "Minimum Offering") are being offered on an
THE OFFERING: "all-or-none" basis and the remaining 58 Units are being
offered on a "best efforts" basis. After the Minimum
Offering is sold, an interim closing (the date of which is
referred to herein as the "Initial Closing Date") will be
held. The Offering will continue until September 30, 1996,
unless extended by the Company and the Placement Agent
until the first to occur of (i) the expiration of an
additional sixty (60) days (the "Termination Date"), or
(ii) the sale of all the Units offered hereby. The sale of
any Units in excess of the Minimum Offering is contingent
upon the Company obtaining
<PAGE>
stockholder approval of the additional issuances at its
Annual Meeting of Stockholders scheduled to be held on or
about September 15, 1996. Stockholder approval of any sales
in excess of the Minimum Offering is required by the rules
of The Nasdaq National Market. Assuming the requisite
stockholder approval is obtained, the final closing will be
held within ten (10) days after the Termination Date.
Ten (10) of the Units included in the Minimum Offering will
be purchased upon conversion of $500,000 principal amount
of outstanding debentures (the "Investor Debentures") held
by two investors, including John Pappajohn.
The Placement Agent and its affiliates have reserved the
right to purchase Units in this private placement.
PLACEMENT AGENT: Royce Investment Group, Inc. is acting as Placement Agent
in the sale of the securities offered hereby and will
receive (i) a placement fee equal to 4 and one half percent
(4.5%) of the proceeds from this private placement; (ii) a
non-accountable expense allowance equal to one and one half
percent (1.5%) of the proceeds from this private placement;
and (iii) a unit purchase option to purchase a number of
Units equal to seven and one half percent (7.5%) of the
Units sold in this private placement. In addition, the
Placement Agent will receive indemnification for
liabilities arising out of this private placement and
registration rights with respect to the shares of Common
Stock underlying its Unit purchase option.
ESCROW ACCOUNT: All funds paid for the Units shall be deposited in escrow
at United States Trust Company of New York. If the Company
shall not have received subscriptions for purchases
aggregating $2,100,000 of Units on or before the
Termination Date, all funds paid will be returned to the
subscribers without interest.
THE SUBSCRIPTION The investment shall be made pursuant to a subscription
AGREEMENT: agreement (the "Subscription Agreement"), which
Subscription Agreement will contain, among other things,
customary representations and warranties by the Company,
covenants of the Company reflecting the provisions set
forth herein, investment representations by the investors
as may be required by the Securities Act of 1933, as
amended (the "Act") and applicable state Blue Sky laws, and
appropriate conditions to closing which shall include,
among other things, qualifications of the Units under
applicable state Blue Sky laws.
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TERMS OF Each of the Warrants will be exercisable through the fifth
WARRANTS: anniversary of the Initial Closing Date to purchase 1 share
of Common Stock at a price per share of Common Stock (the
"Exercise Price") equal to the greater of (i) $2.50 or (ii)
the book value of a share of Common Stock as reflected in
the Company's Quarterly Report on Form 1O-Q for the period
ended June 30, 1996 plus $.10 (subject to adjustment). The
Exercise Price and the number of shares purchasable upon
exercise thereof will be subject to anti-dilution
adjustments in the event of future sales of securities by
the Company below fair market value.
At the sole discretion of the Company, commencing one year
from the final closing, the Warrants may be redeemed by the
Company at a redemption price of $.05 per Warrant, upon no
less than thirty (30) days' prior notice, provided the
closing bid price of the Common Stock exceeds $7.00
(subject to adjustment) on each of the thirty consecutive
(30) trading days ending not more than 5 days prior to the
notice of redemption.
REGISTRATION Upon request of at least 50% of the shares of Common Stock
RIGHTS: and Warrant Shares offered pursuant to this private
placement, purchasers in this private placement will have
one demand registration right and unlimited piggyback
registration rights with respect to the shares of Common
Stock and the Warrant Shares underlying the Units. Such
registration rights will be exercisable between three
months and six years after the final closing of this
private placement.
USE OF PROCEEDS: Upon completion of this private placement, the Company will
receive net proceeds of between $1,974,000 and $4,700,000
of which (i) $1,000,000 will be used to temporarily place
the Company in compliance with its credit facility with The
Chase Manhattan Bank, N.A. ("Chase") and (ii) the balance
will be used for working capital and general corporate
purposes. See "Risk Factors - Security Interest in Assets;
Restriction in Credit Facility," "Risk Factors - Charge
Against Earnings; Anticipated Losses" and "Financial Data."
REDEMPTION OF The Warrants are subject to redemption by the Company under
THE WARRANTS: certain circumstances as described above in the section
"Terms of Warrants." Redemption of the Warrants could force
the holders to exercise the Warrants and pay the exercise
price at a time when it may be disadvantageous for the
holders to do so, to sell the Warrants at the current
market price when they might otherwise wish to hold the
Warrants, or to accept the redemption price, which
3
<PAGE>
is likely to be substantially less than the market value of
the Warrants at the time of redemption.
4
