SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[x] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Materials Under Rule 14a-12
CONTINENTAL CHOICE CARE, INC.
(Name of Registrant as Specified in its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
N.A.
(2) Aggregate number of securities to which transaction applies: N.A.
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): N.A.
(4) Proposed maximum aggregate value of transaction: N.A.
(5) Total fee paid: N.A.
[_] Fee paid previously with preliminary materials: N.A.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid: N.A.
(2) Form, Schedule or Registration Statement No.: N.A.
(3) Filing Party: N.A.
(4) Date Filed: N.A.
<PAGE>
PRELIMINARY PROXY STATEMENT
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
July ____, 2000
To the Shareholders of Continental Choice Care, Inc.:
You are cordially invited to attend the 2000 Annual Meeting of
Shareholders (the "Annual Meeting") of Continental Choice Care, Inc., a New
Jersey corporation (the "Company"), to be held at the Westin Morristown Hotel, 2
Whippany Road, Morristown, New Jersey 07960, on Tuesday, August 22, 2000 at 4:00
p.m., local time. We have enclosed the Notice of Annual Meeting, Proxy
Statement, Proxy, and the Company's 1999 Annual Report.
At the Annual Meeting you will be asked to elect Directors to the Board
of Directors and to approve the sale of certain securities, the issuance of
certain warrants to purchase Common Stock to certain employees and officers, the
adoption of the 2000 Incentive Compensation Plan, and an amendment to the
Company's Certificate of Incorporation to change the name of the Company to
TechSys, Inc.
We urge you to complete, sign and date the enclosed Proxy and return it
promptly in the enclosed envelope, whether or not you plan to attend the Annual
Meeting. If you attend the Annual Meeting, you may vote in person, even if you
previously returned your Proxy.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
Steven L. Trenk
President
<PAGE>
PRELIMINARY PROXY STATEMENT
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
--------------------------------------------------------------------
Notice Of Annual Meeting Of Shareholders
--------------------------------------------------------------------
To Be Held August 22, 2000
--------------------------------------------------------------------
The 2000 Annual Meeting of Shareholders (the "Annual Meeting") of
Continental Choice Care, Inc. (the "Company") will be held at the Westin
Morristown Hotel, 2 Whippany Road, Morristown, New Jersey 07960, on Tuesday,
August 22, 2000 at 4:00 p.m., local time, for the following purposes:
(1) To elect two Class III Directors.
(2) To approve the sale and issuance of 200,000 shares of Common
Stock and a warrant to purchase up to 6,800,000 shares of Common
Stock.
(3) To approve the issuance of warrants to purchase up to an
aggregate of 1,350,000 shares of Common Stock to certain key
employees and officers.
(4) To approve the adoption of the 2000 Incentive Compensation Plan.
(5) To approve the amendment to the Company's Certificate of
Incorporation to change the name of the Company to TechSys, Inc.
The Board of Directors has fixed the close of business on July 14, 2000
as the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting and at adjournments or postponements thereof.
Your attention is directed to the accompanying Proxy Statement for
further information regarding each Item.
All shareholders are asked to complete, sign and date the enclosed Proxy
and return it promptly by mail in the enclosed self-addressed envelope, which
does not require postage if mailed in the United States.
By Order of the Board of Directors
Steven L. Trenk
President
July ___, 2000
Livingston, New Jersey
<PAGE>
PRELIMINARY PROXY STATEMENT
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
(973) 422-1666
--------------------------------------------------------------------
Proxy Statement
Annual Meeting of Shareholders
to be Held August 22, 2000
--------------------------------------------------------------------
General Information
This Proxy Statement is furnished by the Board of Directors (the "Board
of Directors") of Continental Choice Care, Inc., a New Jersey corporation (the
"Company"), in connection with the solicitation of proxies to be used at the
Company's Annual Meeting of Shareholders (the "Annual Meeting") to be held at
the Westin Morristown Hotel, 2 Whippany Road, Morristown, New Jersey 07960, on
Tuesday, August 22, 2000 at 4:00 p.m., local time, and at adjournments or
postponements thereof. This Proxy Statement and the accompanying Notice of
Annual Meeting, Proxy, and 1999 Annual Report are first being mailed to
shareholders on or about July 20, 2000.
Only shareholders of record at the close of business on the record
date, July 14, 2000, will be entitled to vote at the Annual Meeting and at
adjournments or postponements thereof.
On June 26, 2000, there were outstanding and entitled to vote 3,635,878
shares of the Company's common stock, no par value (the "Common Stock"). Each
outstanding share of Common Stock is entitled to one vote on each matter to be
voted upon. Holders of Common Stock have no cumulative voting rights.
A majority of the outstanding shares of the Company's Common Stock
entitled to vote, represented in person or by proxy, will constitute a quorum at
the Annual Meeting.
Voting Of Proxies
If a proxy is properly signed by a shareholder and is not revoked, the
shares represented thereby will be voted at the Annual Meeting in the manner
specified on the proxy, or if no manner is specified with respect to any matter
therein, such shares will be voted by the persons designated therein (a) FOR the
election of each of Alvin S. Trenk and Jeffrey B. Mendell as Class III
Directors, (b) FOR the sale and issuance of 200,000 shares of Common Stock and a
warrant to purchase up to 6,800,000 shares of Common Stock, (c) FOR the issuance
of warrants to purchase up to an aggregate of 1,350,000 shares of Common Stock
to certain key employees and officers, (d) FOR the approval of the adoption of
the 2000 Incentive Compensation Plan, and (e) FOR the approval of the amendment
to the Company's Certificate of Incorporation to change the name of the Company
to TechSys, Inc.
A proxy may be revoked by a shareholder at any time prior to the voting
thereof by giving notice of revocation in writing to the Secretary of the
Company, or by duly executing and delivering to the Secretary of the Company a
proxy bearing a later date.
Directors of the Company will be elected by a plurality of the vote of
the outstanding shares of Common Stock present, in person or by proxy, and
entitled to vote at the Annual Meeting. The affirmative vote of a majority of
the votes cast by the holders of shares entitled to vote is required for
approval of Item 2, Item 3, Item 4 and Item 5. As to any particular Item,
abstentions and broker non-votes will not be counted as votes for or against the
Item, and will not be included in counting the number of votes necessary for
approval of the Item. Votes cast, either in person or by proxy, will be
tabulated by First City Transfer Company, the Company's transfer agent.
Shareholder Proposals For Next Annual Meeting
Any shareholder proposals intended to be presented at the Company's
next annual meeting of shareholders must be received by the Company at its
principal executive offices at 44 Aspen Drive, Livingston, New Jersey 07039, on
or before March 22, 2001 for consideration for inclusion in the proxy material
for such annual meeting of shareholders.
Proxy Solicitation
The accompanying proxy is solicited by the Company. All costs of the
solicitation of proxies will be borne by the Company. In addition to the use of
the mails, proxies may be solicited by regular employees of the Company, either
personally, by electronic mail, by facsimile, or by telephone, without
additional compensation. The Company does not expect to pay any compensation for
the solicitation of proxies, but may reimburse brokers and other persons holding
shares in their names or in the names of nominees for expenses in sending proxy
material to beneficial owners and obtaining proxies of such owners.
<PAGE>
ITEM 1
ELECTION OF CLASS III DIRECTORS
The Company's Certificate of Incorporation requires that the Board of
Directors be divided into three classes. The members of each class of directors
serve for staggered three-year terms. The Class I Directors, Martin G. Jacobs,
M.D. and Stanley B. Amsterdam, are each currently serving three-year terms
expiring in 2001. The Class II Director, Steven L. Trenk, is currently serving a
three-year term expiring in 2002. The Class III Directors, Alvin S. Trenk and
Jeffrey B. Mendell, are each currently serving three-year terms expiring as of
the date of the Annual Meeting. Each of the current directors holds office until
the expiration of their respective term and until their respective successors
are elected and qualified, or until death, resignation or removal. Officers
serve at the discretion of the Board of Directors.
The Board of Directors proposes the re-election of Alvin S. Trenk and
Jeffrey B. Mendell as Class III Directors. If elected, each nominee will serve
for a three-year term expiring in 2003 and until their respective successors are
elected and qualified, or until death, resignation, or removal.
Vote Required to Elect each Class III Director
The election of each Class III Director requires the affirmative vote of
the plurality of votes cast by the holders of shares entitled to vote thereon.
If either nominee becomes unable to serve or for good cause will not serve, an
event that is not anticipated by the Company, either the shares represented by
the proxies will be voted for a substitute nominee or substitute nominees
designated by the Board of Directors, or the Board of Directors may determine to
reduce the size of the Board of Directors.
Board Recommendation
The Board of Directors recommends that shareholders vote for each of
the nominees for Class III Directors.
<PAGE>
Directors Standing for Election
Class III Directors
Alvin S. Trenk Director since 1993
Alvin S. Trenk, 71, a founder of the Company and TechTron, Inc. (a
principal shareholder of the Company ("TechTron")), has served as the Chairman
of the Board of Directors, Chief Executive Officer and a director of the Company
and of each of the Company's current subsidiaries since formation. Mr. A. Trenk
has served as the Chairman of the Board of Directors of TechTron since prior to
1995 and as Chairman of the Board of Directors, Chief Executive Officer and a
director of Continental Dialysis Center of the Bronx, Inc., an affiliate and
former consulting customer of the Company ("CDBI"), since its formation. Since
December 1993 he has served as Chairman of the Board of Directors and Chief
Executive Officer of Alpha Administration Corp., an affiliate and former
consulting customer of the Company ("Alpha"). Mr. A. Trenk is also Chairman of
the Board of Directors of Upper Manhattan Dialysis Center, Inc., a former
consulting customer of the Company ("UMDC"). Mr. A. Trenk also serves as
Chairman of the Board of Directors, Chief Executive Officer and a director of
Trenk Enterprises, Inc. ("TEI"), which is wholly-owned by Mr. A. Trenk and
through which Mr. A. Trenk provides services to the Company. In addition, Mr. A.
Trenk is an officer and director of various corporations engaged in the
ownership and development of real property and the operation of helicopter
landing facilities, helicopter charter, air taxi, sightseeing and tour
operations, as well as other activities. Mr. A. Trenk is the father of Steven L.
Trenk, the Company's President and Chief Operating Officer, and the
brother-in-law of Martin G. Jacobs, M.D., the Company's Corporate Medical
Director. See "Executive Compensation - Compensation Arrangement," and "Certain
Relationships and Related Transactions."
Jeffrey B. Mendell Director since 1994
Jeffrey B. Mendell, 47, is Chairman of the Board of Directors and Chief
Executive Officer of JBM Realty Capital Corp. through which he acts as principal
in the acquisition and development of commercial real estate. He was the
President of National Realty & Development Corp., a privately-held corporation
which owns and manages commercial real estate, from May 1992 to August 1996. Mr.
Mendell also participates in various other business ventures.
<PAGE>
Directors Continuing in Office
Class I Directors
Martin G. Jacobs, M.D. Director since 1993
Martin G. Jacobs, M.D., 70, a founder of the Company, is a physician
engaged in the treatment of renal disease and hypertension. Dr. Jacobs is
President of Nephrological Associates, P.A., which he founded in 1964. Dr.
Jacobs has served as the Corporate Medical Director for the Company and for
TechTron since formation. Dr. Jacobs is the brother-in-law of Mr. A. Trenk and
the uncle of Mr. S. Trenk. See "Executive Compensation - Compensation
Arrangements," and "Certain Relationships and Related Transactions."
Stanley B. Amsterdam Director since 1998
Stanley B. Amsterdam, 70, is the Product Manager for the elastic
fabrics division of Guilford Mills, Inc., a position he has held for
approximately 20 years.
Class II Directors
Steven L. Trenk Director since 1993
Steven L. Trenk, 46, a founder of the Company, has served as the
President of the Company and each of the Company's subsidiaries, other than
Renal Management, Inc. ("RMI"), since October 1991. Mr. S. Trenk has served as
Vice President for Business Development of TechTron from 1987 through October
1991 and, since December 1993, has served as the President of Alpha. Mr. S.
Trenk served as Vice Chairman of RMI, a majority-owned subsidiary of the
Company, until its sale in 1998. Mr. S. Trenk is the Treasurer of UMDC and also
serves as the Vice President of Orange Y Associates, Inc., a real estate
development company. Mr. S. Trenk is the son of Mr. A. Trenk and the nephew of
Dr. Jacobs. See "Executive Compensation - Compensation Arrangements," and
"Certain Relationships and Related Transactions."
Certain Biographical Information Concerning Executive Officers
Mark N. Raab, 36, joined the Company in 1995, was appointed Controller
in 1997, Chief Financial Officer and Treasurer in 1998, and Secretary in 1999.
From 1987 until joining the Company, Mr. Raab worked in the banking industry in
various positions, the last being Accounting Manager, the position he held with
First Fidelity Bank N.A. Mr. Raab holds a Bachelor's degree in Business
Administration.
Meetings of the Board and Committees
During fiscal year 1999, the Board of Directors held two meetings and
acted by unanimous written consent on other occasions. Each of the directors
attended all meetings of the Board of Directors and meetings held by all
committees of the Board of Directors of which each respective director was a
member during the time he was serving as such during fiscal year 1999. The Board
of Directors has a Compensation Committee and an Audit Committee, but does not
have a nominating committee or any committee performing the functions of such a
committee.
The Compensation Committee is comprised of Mr. Amsterdam and Mr.
Mendell. The Compensation Committee provides recommendations concerning salaries
and incentive compensation for executive officers and key personnel, and
administers the Company's equity incentive plans. All actions which would
otherwise be taken by the Compensation Committee were taken by the full Board of
Directors during fiscal year 1999.
The Audit Committee is comprised of Mr. Amsterdam and Mr. Mendell, each
of whom is independent, as such term is defined under the rules of the National
Association of Securities Dealers. The Audit Committee held one meeting during
fiscal year 1999. On June 14, 2000 the Board of Directors adopted a written
charter for the Audit Committee, a copy of which is attached as Appendix A to
this Proxy Statement.
Change In Control
The sale and issuance of 200,000 shares of Common Stock and a warrant
to purchase up to 6,800,000 shares of Common Stock, which is being submitted to
the shareholders as Item 2 of this Proxy Statement, may result in a change
in control of the Company. See "Item 2."
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information as of June 26, 2000,
regarding the beneficial ownership of the Common Stock of the Company and the
common stock of TechTron by each director and named executive officer, and by
all directors and executive officers as a group, and by each person known to be
the beneficial owner of more than five percent of the outstanding Common Stock.
The Company has been advised that each beneficial owner listed below has sole
voting and dispositive power with respect to such shares unless otherwise noted
in the footnotes below.
<TABLE>
<CAPTION>
Percent of
Amount and Nature of Outstanding
Beneficial Ownership Common Stock
-------------------- ------------
Name and Address Company TechTron Company TechTron
of Beneficial Owner(2) Common Stock Common Stock Common Stock Common Stock
------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
TechTron, Inc. 1,527,500 -- 42.01% --
Alvin S. Trenk 331,500 (2) 4,841,666 47.23%(3) 80.69%
Steven L. Trenk 326,000 (4) 4,841,666 46.80%(3) 80.69%
Martin G. Jacobs, M.D. 325,000 (5) 4,841,666 46.77%(3) 80.69%
Stanley B. Amsterdam 61,000 (6) 2,000 1.66% *
Jeffrey B. Mendell 140,000 (7) -- 3.71% --
All Directors and Officers
as a Group (6 persons) 2,786,000 4,843,666 57.67% 80.73%
------------------
</TABLE>
*Comprises less than one percent of the outstanding Common Stock.
(1) The address of each beneficial owner is 44 Aspen Drive, Livingston, New
Jersey 07039.
(2) Includes 300,000 shares of Common Stock underlying currently exercisable
options issued to Mr. A. Trenk under the Company's 1997 Equity Incentive
Plan (the "1997 Plan").
(3) Includes 1,527,500 shares held by TechTron. Messrs. Trenk and Dr. Jacobs
are each officers, directors and principal shareholders of TechTron and
directly own an aggregate of approximately 80.69% of the outstanding
common stock of TechTron. These individuals may also be considered to
beneficially own, and to have shared investment and voting power with
respect to, all shares of Common Stock owned by TechTron. Messers. Trenk
and Dr. Jacobs are treated as a group herein for purposes of determining
beneficial ownership.
(4) Includes 1,000 shares of Common Stock held in the name of Mr. S. Trenk's
children. Includes 25,000 and 300,000 shares of Common Stock underlying
currently exercisable options issued to Mr. S. Trenk under the Company's
1994 Long Term Incentive Award Plan (the "1994 Plan") and the 1997 Plan,
respectively.
(5) Includes 25,000 and 300,000 shares of Common Stock underlying currently
exercisable options issued to Dr. Jacobs under the 1994 Plan and the 1997
Plan, respectively.
(6) Includes 10,000 and 20,000 shares of Common Stock underlying currently
exercisable options granted under the Directors' Stock Option Plan (the
"Directors' Plan") and the 1997 Plan, respectively. Does not include
options to purchase 10,000 shares of Common Stock to be issued on July 1,
2000 under the Directors' Plan.
(7) Includes 50,000 and 90,000 shares of Common Stock underlying currently
exercisable options granted under the Directors' Plan and the 1997 Plan,
respectively. Does not include options to purchase 10,000 shares of Common
Stock to be issued on July 1, 2000 under the Directors' Plan.
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth certain compensation information for the
Company's Chief Executive Officer and the other most highly compensated
executive officers of the Company (together, the "named executive officers") for
services rendered in all capacities during the three fiscal years ended December
31, 1999, 1998, and 1997:
<TABLE>
<CAPTION>
Summary Compensation Table(1)
Annual Compensation Long-Term Compensation
------------------------------------ --------------------------------------
Common Stocks
Underlying
Name and Principal Position Fiscal Year Salary Bonus Options/SARs
---------------------------------------- ---------------------- ------------- ---------- --------------------
<S> <C> <C> <C> <C>
Alvin S. Trenk 1999 $ 300,000(2) -- --
Chairman and 1998 300,000(2) -- 150,000
Chief Executive Officer 1997 300,000(2) -- 150,000
Steven L. Trenk 1999 $ 250,000 -- --
President and 1998 189,615 -- 150,000
Chief Operating Officer 1997 120,000 -- 175,000(3)
Martin G. Jacobs, M.D. 1999 $ 111,000 -- --
Corporate Medical Director 1998 115,269 -- 150,000
1997 88,923 $ 25,000 175,000(3)
</TABLE>
(1) See "Certain Relationships and Related Transactions" for additional
information with respect to benefits received by certain members of
management of the Company.
(2) Paid to TEI. See "--Compensation Arrangements."
(3) Includes all options issued during fiscal years 1995 and 1996, all of
which were repriced to $1.875 per share in February 1997.
<PAGE>
Option Exercises and Fiscal Year-End Values
The following table contains information with respect to the exercise
of options by the named executive officers during the last fiscal year and with
respect to unexercised options held by those officers as of the end of the last
fiscal year.
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option Value
----------------------- ---------------- ----------- -------------------------------- ------------------------------
Number of Number of Unexercised Value of Unexercised
Shares Options at In-the-Money Options
Acquired on Value Fiscal Year-End at Fiscal Year-End
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
----------------------- ---------------- ----------- --------------- ---------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Alvin S. Trenk 0 $ 0 300,000 0 $103,125 $ 0
----------------------- ---------------- ----------- --------------- ---------------- ------------- ----------------
Steven L. Trenk 0 0 325,000 0 139,313 0
----------------------- ---------------- ----------- --------------- ---------------- ------------- ----------------
Martin G. Jacobs M.D. 0 0 325,000 0 141,469 0
----------------------- ---------------- ----------- --------------- ---------------- ------------- ----------------
</TABLE>
Option Grants during Last Fiscal Year
No options to purchase Common Stock were granted to the named executive
officers during the Company's last fiscal year.
Report on Repricing of Options
In February 1996, the Board of Directors of the Company, on the
recommendation of the Compensation Committee, adopted a stock option plan (the
"Contingent Plan") substantially similar to the 1997 Plan and granted certain
options thereunder. The Board of Directors conditioned the effectiveness of the
Contingent Plan on approval by the shareholders of the Company within twelve
months after adoption. At the time of the adoption of the Contingent Plan, the
Board of Directors granted options under the 1994 Plan to officers of the
Company and granted options, subject to shareholder approval, to officers,
directors and substantially all employees of the Company under the Contingent
Plan. Options were granted to employees generally to reward them for the
services they had performed for the Company in connection with the prior
operations of the Company, the efforts they expended at the time of the
Company's reorganization and initial public offering, and as a future incentive
to the employees. Options were granted under the 1994 Plan and the Contingent
Plan to officers and directors of the Company for substantially the same reasons
that options were granted to employees generally and, in addition, to reward
certain of those officers and directors for voluntarily decreasing their pay for
the benefit of the Company and for undertaking obligations under various
guarantees on behalf of the Company. The Contingent Plan was not approved by the
shareholders within twelve months of approval by the Board of Directors.
Accordingly, in February 1997, the Board of Directors adopted the 1997 Plan. At
the time of adoption of the 1997 Plan, the Board of Directors granted options to
substantially all officers, directors and employees to whom options were granted
under the Contingent Plan at the then current fair market value for
substantially the same reasons for which the grants were originally made under
the Contingent Plan. In addition, the Board of Directors believed that those
officers who had received grants in 1996 under the 1994 Plan should be accorded
the same reduction in exercise price as those officers, directors and employees
who were conditionally granted options under the Contingent Plan. As a result,
at the time of the adoption of the 1997 Plan, the Board of Directors also
repriced all options previously granted under the 1994 Plan, which options were
not exercisable on or before the sixth month following the repricing.
The Board of Directors
Director Compensation
The non-employee directors of the Company receive compensation of
$1,000 per meeting of the Board of Directors attended and $500 for each meeting
of a committee of the Board of Directors which they attend as a committee
member. Directors are entitled to participate in the Directors' Plan and certain
directors received options to acquire Common Stock pursuant to the 1997 Plan.
See "--Compensation Plans."
Compensation Arrangements
Employment Agreements
The Company entered into a consulting agreement with TEI dated as of
April 1, 1994 (the "TEI Agreement"). TEI is wholly-owned by Alvin S. Trenk.
Under the terms of the TEI Agreement, TEI agreed to make Mr. A. Trenk available
to serve as the Chairman of the Board of Directors and Chief Executive Officer
of the Company, to serve as Chairman of the Board of Directors, Chief Executive
Officer and director of any of the Company's subsidiaries, and to serve as a
shareholder, officer and director of any entity to which the Company provides
services, equipment and supplies. Mr. A. Trenk is required to perform up to 750
hours of service per year. The TEI Agreement provides for payments by the
Company to TEI of a fee of $300,000 per year plus such cash bonuses as may be
determined by the Board of Directors. The TEI Agreement has an initial term of
five years which automatically renews for an additional year on every
anniversary date unless such renewal is terminated by the Board of Directors in
writing not less than 90 days prior to the anniversary date or unless the TEI
Agreement is otherwise terminated pursuant to its terms. The Company has agreed
to permit the employees of TEI to participate in employee benefit plans
established for senior management of the Company. The Company has also agreed to
make payments, not in excess of $1,500 per month, for an automobile for Mr. A.
Trenk's use, to pay for $1,000,000 of term life insurance for Mr. A. Trenk, the
beneficiary of which will be the Company, to pay for disability insurance for
Mr. A. Trenk and to permit Mr. A. Trenk to participate in stock option plans
consistent with other members of senior management of the Company. The TEI
Agreement terminates upon the death of Mr. A. Trenk and may be terminated by the
Company upon his disability.
Steven L. Trenk entered into an employment agreement with the Company
dated as of April 1, 1994 (the "Employment Agreement") providing for an annual
base salary of $150,000 for serving as President of the Company and its
subsidiaries on an essentially full-time basis. In May 1998, the Board of
Directors amended the Employment Agreement and increased Mr. S. Trenk's annual
base salary to $250,000. In addition, Mr. S. Trenk is entitled to receive an
annual bonus equal to 10% of the Company's pre-tax income in excess of the prior
year's pre-tax income, up to 100% of base salary. The amended Employment
Agreement has an initial term of five years and renews for an additional one
year term on every anniversary date, unless terminated by the Board of Directors
in writing no later than 90 days prior to the end of the initial or any renewal
term unless sooner terminated upon the death or disability of Mr. S. Trenk. The
Company has also agreed to permit Mr. S. Trenk to participate in any employee
benefit plans established for senior management employees of the Company, to
make payments not in excess of $1,500 per month on an automobile for his use, to
pay for $1,000,000 term life insurance for Mr. S. Trenk, the beneficiary of
which will be the Company, to pay for disability insurance for Mr. S. Trenk, and
to permit Mr. S. Trenk to participate in stock option plans consistent with
other members of senior management of the Company. Under the terms of Mr. S.
Trenk's amended Employment Agreement, Mr. S. Trenk is entitled to terminate his
employment if there is a "change of control" of the Company. If Mr. S. Trenk
terminates his employment as a result of a change of control, he will be
entitled to receive all amounts due to him from the Company to the date of
termination plus two years' base salary, payable in cash in two lump sum
payments. A "change of control" pursuant to the amended Employment Agreement
includes, among other things: (i) the approval by the public shareholders of the
Company of a merger, as a result of which the shareholders of the Company
immediately prior to such approval do not, immediately after the consummation of
such transaction, own more than 50% of the voting stock of the surviving entity;
(ii) the acquisition, other than from the Company directly, by any person or
group (other than Messrs. Trenk, or Dr. Jacobs, or their respective family
members or any person in which any of them individually or collectively holds
30% or more of the voting stock) of beneficial ownership of 50% or more of the
outstanding Common Stock, or (iii) if the individuals who serve on the Board of
Directors as of the date of the Employment Agreement no longer constitute a
majority of the members of the Board of Directors; provided, however, that any
person who becomes a director subsequent to the date of the Employment Agreement
who is elected to fill a vacancy by a majority of the individuals then serving
on the Board shall be considered as if such person was a member prior to the
commencement date.
Martin G. Jacobs, M.D. entered into a medical director agreement with
the Company dated as of April 1, 1994, as amended (the "Medical Director
Agreement"). The Medical Director Agreement provides for an annual base salary
of $111,000 for serving as Corporate Medical Director and agreeing to devote not
less than 500 hours per year to the Company's business. The Medical Director
Agreement has an initial one year term and renews every anniversary thereafter,
unless terminated by the Board of Directors in writing no later than ninety (90)
days preceding the anniversary date. The Medical Director Agreement also
provides that Dr. Jacobs shall participate in any employee benefit plans
established for senior management employees of the Company. The Company has also
agreed to make payments not in excess of $500 per month for an automobile for
Dr. Jacob's use, to pay for disability insurance for Dr. Jacobs and to permit
Dr. Jacobs to participate in stock option plans consistent with other members of
senior management of the Company. The Medical Director Agreement terminates upon
the death of Dr. Jacobs and may be terminated by the Company upon his
disability.
Each of Mr. A. Trenk, Mr. S. Trenk and Dr. Jacobs has agreed that
during the term of his respective compensation agreement discussed above, he
will not, directly or indirectly, engage in business activities that are
competitive with the Company's activities in any county of any state in the
United States, or any country outside of the United States, in which, during his
employment, the Company conducted any material business or in which its
customers were located. In addition, each such individual has agreed that he
will not solicit or accept business from any customers of the Company or hire
any employees of the Company and shall maintain the Company's proprietary
information during the term of his compensation agreement and for at least one
year after the expiration of such agreement.
Compensation Plans
Directors' Stock Option Plan
The Continental Choice Care, Inc. Directors' Stock Option Plan (the
"Directors' Plan") covers 200,000 shares of Common Stock. The Directors' Plan is
intended to encourage directors who are not on the active salaried payroll of
the Company (a "non-employee director") to invest in the Common Stock of the
Company in order to promote long-term shareholder value and increase the
non-employee directors' personal interest in the continued success and progress
of the Company.
The Directors' Plan provides that on July 1 of each year, commencing on
July 1, 1994, each non-employee director shall, automatically and without
necessity of any action by the Board of Directors, receive a non-statutory
option for 10,000 shares of Common Stock with an exercise price per share equal
to the fair market value of a share as of the date of grant of the option. The
option is exercisable upon payment of the exercise price in cash at any time
during the period commencing one year after the date the option is granted and
terminating ten years after the date of grant, provided that the person
exercising the option has been at all relevant times a member of the Board of
Directors. A non-employee director must exercise his or her option (to the
extent it is then exercisable) prior to the earlier of three years after leaving
the Board of Directors or the expiration date of the option. Upon the death of a
non-employee director, the option must be exercised prior to the earlier of one
year after such death or the expiration date of the option. Unless sooner
terminated by the Board of Directors, the Directors' Plan terminates in 2004.
1994 Long-Term Incentive Award Plan
The Continental Choice Care, Inc. 1994 Long-Term Incentive Award Plan
(the "1994 Plan") covers 300,000 shares of Common Stock pursuant to which
officers and key employees of the Company designated as senior executives are
eligible to receive incentive and/or non-statutory stock options, awards of
shares of Common Stock and stock appreciation rights ("SARs"). The 1994 Plan,
which expires in 2004, is generally administered by the Compensation Committee
designated by the Board of Directors. The Board of Directors in its entirety may
also administer the 1994 Plan. The purposes of the 1994 Plan are to assist in
attracting, retaining, and motivating senior executives and to promote the
identification of their interests with those of the shareholders of the Company.
Incentive stock options and SARs granted under the 1994 Plan are generally
exercisable during the period commencing six months after the date the option is
granted and terminating ten years after the date of grant. The exercise prices
for incentive stock options are not less than the fair market value of the
Common Stock on the date of the grant. In addition, a SAR may be exercised only
when the fair market value of a share exceeds either the fair market value per
share on the date of grant of the SAR or the base price of the SAR (which is
determined by the Compensation Committee) if it is not a SAR related to an
option. A SAR related to an option may be exercised only when and to the extent
the option is able to be exercised. No participant in the 1994 Plan is entitled
to receive grants of options, SARs and awards of incentive shares in the
aggregate exceeding 25,000 shares per year.
1997 Equity Incentive Plan
The Continental Choice Care, Inc. 1997 Equity Incentive Plan (the "1997
Plan") covers 2,500,000 shares of Common Stock pursuant to which employees of
the Company and its subsidiaries and other persons who are in a position to make
a significant contribution to the Company and its subsidiaries are eligible to
receive incentive and/or non-qualified options, awards of shares of Common Stock
and SARs. The 1997 Plan, which expires in 2007 is generally administered by the
Compensation committee designated by the Board of Directors. The Board of
Directors in its entirety may also administer the 1997 Plan. The purposes of the
1997 Plan are to assist in attracting, retaining, and motivating persons who can
make a significant contribution to the Company and to promote the identification
of their interests with those of the shareholders of the Company. Pursuant to
the terms of the 1997 Plan, the Company may grant awards in the form of
incentive stock options, non-statutory stock options, stock appreciation rights,
awards of shares for no cash consideration subject to certain restrictions or
awards of shares to be delivered in the future to employees of the Company and
others who may be in a position to make a significant contribution to the
Company. Incentive stock options, however, may only be issued to employees of
the Company. Stock options granted under the 1997 Plan are generally exercisable
during the period commencing six months after the date of grant of the option
and terminating ten years after the date of grant (five years in the case of an
option granted to a holder of 10% of the Company's issued and outstanding
shares). Options are generally exercisable at an exercise price which is not
less than the fair market value of the Common Stock on the date of grant. SARs
granted under the 1997 Plan are exercisable during the period established by the
committee (except in the event of death or disability of the holder), or in the
case of a SAR related to an option, the expiration of the related option. In
addition, a SAR may be exercised only when the fair market value of a share
exceeds either the fair market value per share on the date of grant of the SAR
or the base price of the SAR (which is determined by the Compensation Committee)
if it is not a SAR related to an option. A SAR related to an option may be
exercised only when and to the extent the option is able to be exercised.
401(k) Plan
In January 1994, the Company adopted a salary deferral and savings plan
(the "Savings Plan") which is qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code") and includes a qualified cash or
deferred arrangement under Section 401(k) of the Code. Subject to limits set
forth in the Code, an employee who meets certain age and service requirements
may participate in the Savings Plan by contributing through payroll deductions
up to 15% of compensation into an account established for the participating
employee and may allocate amounts in such account among a variety of investment
vehicles. The Company makes matching contributions to an employee's account in
an amount of up to and including 10% of the first 6% of the compensation
contributed by each employee. The Savings Plan also provides for loans to, and
withdrawals by, participating employees, subject to certain limitations.
Certain Relationships And Related Transactions
Dry Cleaning Transactions. On November 16, 1999, the Company sold its
majority interest in United Dry Cleaning, LLC ("United") to UDC Acquisition
Corp, Inc. ("UDC"), an Arizona corporation. The majority of the outstanding
common stock of UDC is owned by Jeffrey M. Trenk, brother of Steven L. Trenk,
the Company's President and Chief Operating Officer, son of Alvin S. Trenk, the
Company's Chairman of the Board of Directors and Chief Executive Officer, and
nephew of Martin G. Jacobs, M.D., the Company's Corporate Medical Director.
Jeffrey M. Trenk is the President of UDC. The aggregate purchase price for the
Company's stock interest, $10,000, was offset against amounts due to Jeffrey M.
Trenk from the Company. Under the terms of the sale, UDC Acquisition acquired
substantially all of the assets and liabilities of United at the time of sale.
The Company did not recognize any gain or loss related to the transaction. The
sale included net fixed assets of $199,292, and a write-off of net goodwill of
$588,959 offset by a relief from liabilities of $1,544,015. As of March 31,
2000, the Company advanced an aggregate of $69,152 to UDC Acquisition. The
Company has obtained demand promissory notes for the advances. The notes bear
interest at a rate of 8% per annum and have been guaranteed by Jeffrey M. Trenk.
Insider Loans. In 1998 and 1997, respectively, the Company loaned
$350,000 and $35,000 to Mr. S. Trenk. Mr. S. Trenk executed promissory notes for
these loans which were due and payable in full within one year. In 1999, the
Company received $55,000 representing payment of the 1997 loan and partial
payment of the 1998 loans. The notes relating to the 1998 loans bear interest at
a rate imputed by the Internal Revenue Service for instruments having a maturity
of one or more years (4.33% to 5.58%). The Company has extended the term of the
notes to be payable prior to December 31, 2000.
Transactions with TechTron. As of March 31, 2000, the Company had
advanced $520,108 to TechTron. Of this amount, $125,868 was secured by a
promissory note dated August 9, 1994. Under the original terms of this note,
principal and interest were due and payable by December 31, 1996. The term of
the note was amended by the Company to be due and payable on demand. The Company
has obtained demand promissory notes from TechTron for all of the advances, the
majority of which bear interest at a rate of 8% per annum. Interest of
approximately $84,000 has accrued under these notes through March 31, 2000 but
has not been recorded due to TechTron's lack of sufficient revenues to make
payment. The majority of outstanding shares of TechTron are owned by Mr. A.
Trenk, Mr. S. Trenk and Dr. Jacobs. All amounts due from TechTron are unsecured
and are guaranteed by Mr. A. Trenk, Mr. S. Trenk and Dr. Jacobs. Any demand for
payment under the personal guarantees will have to be made by the Company's
Board of Directors. The Company's Board of Directors does not currently intend
to make demand for payment.
Dialysis Business. The Company was a party to consulting and service
agreements with, or assumed certain rights and obligations of Alpha, UMDC, and
CDBI. Under the terms of the various consulting and services agreements, the
Company provided consulting, administrative and other services to or on behalf
of each of these consulting customers.
Mr. A. Trenk, Mr. S. Trenk and Dr. Jacobs collectively own all of the
outstanding common stock of each of Alpha and CDBI, and 50% of the outstanding
common stock of UMDC. Effective October 8, 1997, each of Alpha and CDBI sold
substantially all of their respective assets to IHS of New York, Inc. On January
29, 1998, UMDC sold substantially all of its assets to Renal Research Institute,
LLC ("RRI") pursuant to the terms of an asset purchase agreement among UMDC, RRI
and the shareholders of UMDC (the "RRI Purchase Agreement") for an aggregate
purchase price of approximately $7,984,000 (the "RRI Sale"). UMDC retained its
accounts receivable, cash and cash equivalents in the transaction, as well as
certain liabilities of UMDC outstanding as of January 29, 1998 closing (the
"First RRI Closing"). At the time of the First RRI Closing, RRI paid
approximately $4,174,000 in partial payment for the assets of UMDC.
Under the terms of the RRI Purchase Agreement, Beth Israel Medical
Center applied for approval from the New York State Department of Health (the
"NYS Approval") to operate the in-center dialysis facility currently operated by
UMDC. In connection with the grant of the NYS Approval, which is currently
expected to occur in 2000, RRI is expected to pay additional amounts aggregating
approximately $3,810,000, less the net value of certain current assets to be
retained by UMDC.
The Company previously loaned monies to and incurred additional
non-bank liabilities on behalf of UMDC and certain of its shareholders, of which
approximately $3,452,000 was outstanding as of the date of the First RRI
Closing. Further, as of the date of the sale, UMDC owed the Company
approximately $1,389,000 in various accrued consulting and service fees. At the
time of the First RRI Closing, the Company received approximately $2,665,000
from UMDC. In 2000, 1999, and 1998, respectively, the Company received
additional payments aggregating $415,082, 0, and $310,000, from UMDC subsequent
to the First RRI Closing. In 2000 and 1998, respectively, the Company recorded
$415,082 and $310,000, in additional revenue related to payments from UMDC
subsequent to the First RRI Closing not previously recorded due to realization
uncertainties.
Although the Company expects to receive payment of amounts due from
UMDC at a second RRI closing, there can be no assurance given that the second
RRI closing will occur as the transaction is contingent on the NYS Approval. No
assurance can be given that the NYS Approval will be granted. However, pending
the completion of the second RRI closing with UMDC, if any, UMDC and RRI have
entered into a consulting and service agreement pursuant to which RRI will
perform certain services for UMDC. Under the terms of the RRI Agreements (as
defined below), UMDC is entitled to a set rate of income from available UMDC
cash prior to any payments being made to RRI and UMDC's entitlement accrues if
not paid. Further, the amount of the entitlement increases in the event NYS
Approval is not received in a timely manner.
Through March 31, 2000, the Company had not recorded certain
transactions relating to the transaction with UMDC approximating $1,450,000 due
to realization uncertainties. Of this amount, two notes dated May 16, 1994, each
in the amount of $50,000, were due from Dr. Lorch and Dr. Cortell, the remaining
unaffiliated physician shareholders of UMDC. Under the original terms of these
notes, principal plus interest was due one year after the date of the notes. The
Company does not currently expect to be repaid under these notes and thus has
not recorded the interest of $26,758 due it under these notes. The Company
expects to forgive the unpaid accrued interest in accordance with the various
agreements among Dr. Lorch, Dr. Cortell, Mr. A. Trenk, Mr. S. Trenk, Dr. Jacobs,
UMDC, RRI and the Company (collectively, the "RRI Agreements"). All other notes
relating to UMDC, including accrued interest, were paid to the Company at the
First RRI Closing.
As of March 31, 2000, all amounts due from Alpha had been paid, except
for interest on a promissory note for $300,000 dated April 24, 1994. The
principal was repaid in October 1997 and interest aggregating approximately
$83,000 remains owing to the Company as of March 31, 2000. As of March 31, 2000,
$104,189 was payable to Alpha by the Company. The interest is not considered to
be in default since the Company intends to offset amounts payable to Alpha with
amounts due from Alpha for interest once the Company has determined that there
are no outstanding liabilities of Alpha that the Company may be required to pay
on Alpha's behalf.
Of amounts due under agreements with related parties, only consulting
fees owed to the Company from CDBI under a consulting services agreement are in
default. A total of $200,000, representing all consulting fees from the
inception of such agreement, is owed to the Company from CDBI. The unpaid
consulting fees were not recognized by the Company since there was insufficient
cash from the closing of the transaction with IHS to pay these amounts and CDBI
does not expect to earn sufficient revenues to make payments.
<PAGE>
ITEM 2
APPROVAL OF THE SALE AND ISSUANCE OF
200,000 SHARES OF COMMON STOCK AND A WARRANT TO PURCHASE
UP TO 6,800,000 SHARES OF COMMON STOCK
Background
The Company entered into a Purchase Agreement, dated as of June 7,
2000, (the "Purchase Agreement") with Lazar & Company I.G., LLC (the
"Purchaser"). Pursuant to the Purchase Agreement, subject to approval by the
shareholders the Company would sell (the "Sale") to the Purchaser 200,000 shares
of Common Stock (the "Shares") and a Warrant to purchase up to 6,800,000 shares
of Common Stock (the "Warrant"). The Company believes that the Purchaser's
experience in the financial and high-tech communities would bring important
shareholder insights regarding the technology sector and enhance shareholder
value.
Terms of the Sale
The following summary of the Sale is qualified by reference to the
complete text of the Purchase Agreement, the Warrant, the Note and the Pledge
Agreement, which are attached as Appendices B through E, respectively, to this
Proxy Statement.
Purchase Agreement. Subject to certain conditions including, but not
limited to, approval of the Sale by the shareholders, the Company has agreed to
sell, and the Purchaser has agreed to purchase, the Shares at a purchase price
of $750,000 ($3.75 per share) and the Warrant at a purchase price of $350,000,
for an aggregate purchase price of $1,100,000 (the "Total Purchase Price"). Of
the Total Purchase Price, $50,000 would be paid in cash and the balance would be
paid by a three-year secured promissory note in the principal amount of
$1,050,000 (the "Note"). The purchase price for the Shares was based upon the
closing bid price of the Common Stock on the Nasdaq SmallCap on June 7, 2000,
the date of the Purchase Agreement, however, the Company did not receive an
independent evaluation or appraisal of the fairness of the exercise price of the
Warrant from a financial point of view.
Warrant. The Warrant would be exercisable immediately at $3.00 per
share, subject to certain vesting criteria based upon the Company's Market
Capitalization (as such term is defined in the Warrant). The Warrant would be
exercisable for three years, subject to extension at the option of the Purchaser
for two additional one-year periods upon the payment by the Purchaser of
$1,000,000 for each additional one-year period. The Warrant would vest in
increments as the Company's Market Capitalization ranges from $63,750,000 to
$443,750,000. The Warrant would contain customary anti-dilution provisions.
Note; Pledge Agreement. The Note would bear interest from the date of
original issuance at a rate of 7%, compounded annually, and principal and unpaid
accrued interest thereon would be due on the third anniversary of the closing of
the Sale. Pursuant to a pledge agreement between the Company and the Purchaser,
the Shares and other assets of the Purchaser would be pledged as security for
the Purchaser's obligations under the Note.
Use of Proceeds. The Company would use the net proceeds from the Sale,
and, if any, money received as payment of the exercise price of the Warrant for
working capital and general corporate purposes. If the Warrant were exercised in
full (as to which there is no assurance) the Company would receive $20,400,000
as payment of the exercise price.
Registration. The Company would be required, no later than ten business
days following the closing, to file a registration statement on Form S-3 under
the Securities Act of 1933, as amended, for the resale of the Shares and the
shares of Common Stock issuable upon exercise of the Warrant. The Company would
be required to cause the registration statement to become effective on or before
the ninetieth calendar day following the closing, unless the registration
statement is not declared effective due to action within the control of the
Securities and Exchange Commission and unrelated to action within the control of
the Company or the Company's agents. The expenses associated with such
registration, other than the expenses of the Purchaser's counsel, transfer
taxes, and selling commissions, would be borne by the Company.
Board Nominees. The Company would be required to enlarge the size of
the Board of Directors by two directors and, subject to approval by the
shareholders, appoint two persons to the Board designated by the Purchaser. At
that time the Board would determine the class and term for each new director.
The Purchaser has advised the Company that it currently intends to appoint Mr.
Charles S. Lazar, Chief Executive Officer of Lazar & Company I.G., Inc., the
managing member of the Purchaser, and Mr. Mark Schwartz, the managing director
of the Purchaser. The Purchaser would be entitled to continue to nominate two
directors to the Board of Directors for as long as the Warrant is outstanding.
Preemptive Rights. The Company would grant to the Purchaser the right
to purchase a pro rata share of securities which the Company may propose to
sell. The right would not be applicable in certain transactions including, but
not limited to, securities issued pursuant to any stock option, stock purchase
or stock bonus plan, agreement or arrangement approved by the Board of
Directors, and securities issued pursuant to the sale of all or substantially
all of the Company's assets or in a merger or consolidation of the Company with
or into another corporation in which the Company is not the surviving
corporation.
Negative Covenants. Commencing on the date of the Purchase Agreement
and continuing until the Warrant is no longer outstanding, or thereafter, so
long as the Purchaser holds at least 25% of the then outstanding Common Stock,
the Company cannot, without the prior written consent of the Purchaser, amend or
propose to amend the Company's charter documents in a manner which would have an
adverse effect on the Shares, incur or assume certain indebtedness, and enter
into any merger or consolidation where the Company would not be the surviving
corporation.
Nasdaq Shareholder Approval Requirement
The Nasdaq rules require shareholder approval of any issuance of
securities that will result in the issuance of shares representing 20% or more
of the issuer's outstanding voting common stock prior to the issuance of such
securities, at a price per share below the market of the issuer's voting common
stock. The Shares contemplated to be issued in the Sale would constitute
approximately 6% of the outstanding Common Stock on the date the Purchase
Agreement was executed and, together with the shares issuable upon exercise in
full of the Warrant, would constitute approximately 66% of the then outstanding
Common Stock, or 200,000 shares and 7,000,000 shares, respectively. Although the
Shares would be sold at the price of $3.75, which was the closing bid price of
the Common Stock on the date the Purchase Agreement was executed, the exercise
price of the Warrant would be $3.00.
The Nasdaq rules also require shareholder approval of any transaction
that may result in a change in control of the issuer. If the Sale is
consummated, and the Warrant is exercised in full, and assuming no other
issuances of, or conversions or exchanges of securities into, Common Stock, the
Purchaser of such securities would hold approximately 66% of the Common Stock.
Risk Factors
While the Board of Directors unanimously recommends approval of the
Sale and is of the opinion that the Sale would be fair to, and in the best
interest of, the Company and its shareholders, the Company's shareholders should
consider the following possible effects in evaluating the Sale:
Effect of Actual or Potential Future Conversions Below Market Price. If
consummated, the Sale would substantially increase the number of warrants which
could be exercisable from time to time, into shares of Common Stock at a
conversion price per share that could be below the then current market price of
the Common Stock. The potential issuance of Common Stock upon exercise of the
Warrant at an exercise price lower than the then current market price could have
a depressive effect on the market price of, and reduce trading activity in, the
Common Stock.
Dilution. If the Sale is consummated, and the Warrant is exercised in
full, and assuming no other issuances of, or conversions or exchanges of
securities into, Common Stock, the number of shares of outstanding Common Stock
would increase by approximately 194% and significantly dilute the ownership
interests and proportionate voting power of the existing holders of Common
Stock.
Certain Potential Effects of the Acquisition of up to 66% Ownership
Interest by the Purchaser. If the Sale is consummated, and the Warrant is
exercised in full, and assuming no other issuances of, or conversions or
exchanges of securities into, Common Stock, the Purchaser would hold
approximately 66% of the Common Stock. The acquisition of up to 66% of the
outstanding shares of the Company's Common Stock would place a substantial block
of the outstanding shares in the hands of a single investor. The concentration
of such stock in the hands of a single investor could render more difficult an
acquisition of the Company which was favored by a majority of the other
shareholders but opposed by the Purchaser. The Purchaser's ownership of up to
66% of the outstanding shares may enable the Purchaser to block a business
combination involving the Company and, therefore, deter any such transaction.
The Company is not aware of any expression of interest or proposal to acquire
the Company or to effect any such business combination. The acquisition of a 66%
ownership interest by the Purchaser would make the Purchaser the Company's
largest shareholder. Through the voting of such shares and the ability of the
Purchaser to designate two individuals to serve on the Board of Directors,
subject to approval by the shareholders, the Purchaser would be in a position to
exercise a significant degree of influence over the management and affairs of
the Company.
Vote Required to Approve Item 2
The approval of Item 2 requires the affirmative vote of the
majority of the votes cast by the holders of shares entitled to vote thereon.
TechTron, the holder of 1,527,500 shares of the Company's outstanding Common
Stock of which Messrs. Trenk and Dr. Jacobs are officers, directors and
principal shareholders, has advised the Company that it intends to vote its
shares in favor of Item 2.
Board Recommendation
The Board of Directors is of the view that Item 2 is in the best
interests of the Company and all of its shareholders. In reaching its
determination, the Board considered the price and other terms and conditions of
the purchase of the Shares and the purchase and exercise of the Warrant,
together with the important shareholder insights that the Purchaser would
provide to the Company. The Board of Directors recommends a vote FOR the
approval of Item 2.
<PAGE>
ITEM 3
APPROVAL OF THE ISSUANCE OF WARRANTS TO PURCHASE
UP TO AN AGGREGATE OF 1,350,000 SHARES OF COMMON STOCK TO
ALVIN S. TRENK, STEVEN L. TRENK AND MARTIN G. JACOBS, M.D.
Background
The Board of Directors unanimously approved the issuance of warrants to
purchase an aggregate of 1,350,000 shares of the Company's Common Stock to Alvin
S. Trenk, Steven L. Trenk and Martin G. Jacobs, M.D. (the "Key Employee and
Officer Warrants"). The Company believes that additional efforts of the key
employees and officers would help the Company complete transactions in the
technology sector and enhance shareholder value. The Purchase Agreement in
connection with the Sale, which is being submitted to the shareholders as Item 2
of this Proxy Statement, provides for the issuance of the Key Employee and
Officer Warrants as a condition to the closing of the Sale.
Terms of the Key Employee and Officer Warrants
The following summary of the Key Employee and Officer Warrants is
qualified by reference to the complete text of the Key Employee and Officer
Warrants, which is attached as Appendix F to this Proxy Statement.
Key Employee and Officer Warrants. The Key Employee and Officer Warrants
would be exercisable immediately at $3.00 per share, subject to certain vesting
criteria based upon the Company's Market Capitalization (as such term is defined
in the Key Employee and Officer Warrants). The Key Employee and Officer Warrants
would be exercisable for five years, notwithstanding termination of the holder's
employment with the Company prior thereto. The Key Employee and Officer Warrants
would vest in increments as the Company's Market Capitalization ranges from
$63,750,000 to $443,750,000. The Key Employee and Officer Warrants would contain
customary anti-dilution provisions.
Nasdaq Shareholder Approval Requirement
The Nasdaq rules require shareholder approval of an arrangement
pursuant to which more than 25,000 shares of stock may be acquired by officers
or directors. The shares of Common Stock contemplated to be issued to Mr. A.
Trenk, Mr. S. Trenk and Dr. Jacobs upon exercise of the Key Employee and Officer
Warrants require shareholder approval.
Vote Required to Approve Item 3
The approval of Item 3 requires the affirmative vote of the majority of
the votes cast by the holders of shares entitled to vote thereon. TechTron, the
holder of 1,527,500 of the Company's outstanding Common Stock of which Messrs.
Trenk and Dr. Jacobs are officers, directors and principal shareholders, has
advised the Company that it intends to vote its shares in favor of Item 3.
Board Recommendation
The Board of Directors is of the view that Item 3 is in the best
interests of the Company and all of its shareholders. The Board of Directors
recommends a vote FOR the approval of Item 3.
<PAGE>
ITEM 4
APPROVAL OF THE 2000 INCENTIVE COMPENSATION PLAN
Background
The Board of Directors of the Company proposes that the shareholders
approve the 2000 Incentive Compensation Plan (the "2000 Plan") which was adopted
by the Board of Directors, subject to shareholder approval. The Board of
Directors believes that the 2000 Plan will assist the Company in attracting,
retaining, and rewarding high-quality executives, employees and other persons
who provide services to the Company. By enabling such persons to acquire or
increase a proprietary interest in the Company, the Board of Directors believes
that the mutuality of interests between such persons and the shareholders would
strengthen and such persons would have annual and long-term performance
incentives to expend their maximum efforts in the creation of shareholder value.
Summary of Material Features
The following summary of the 2000 Plan is qualified by reference to the
complete text of the 2000 Plan, which is attached as Appendix G to this Proxy
Statement.
Types of Awards. The terms of the 2000 Plan provide for grants of stock
options, stock appreciation rights ("SARs"), restricted stock, deferred stock,
other stock-related awards, and performance or annual incentive awards that may
be settled in cash, stock, or other property ("Awards").
Shares Subject to the 2000 Plan and Annual Limitations. Under the 2000
Plan, the total number of shares of the Company's Common Stock reserved and
available for delivery to participants in connection with Awards is 3,500,000,
provided, however, that the total number of shares of Common Stock with respect
to which incentive stock options may be granted shall be 3,500,000 shares.
Shares of Common Stock subject to an Award that is canceled, expired, forfeited,
settled in cash, or otherwise terminated without a delivery of shares to the
participant, including Common Stock withheld or surrendered in payment of any
exercise or purchase price of an Award or taxes relating to an Award, will again
be available for Awards under the 2000 Plan. Common Stock issued under the 2000
Plan may be either authorized and unissued shares or treasury shares.
In addition, the 2000 Plan imposes individual limitations on the amount
of certain Awards. Under these limitations, during any fiscal year the number of
options, SARs, shares of restricted stock, shares of deferred stock, shares of
Common Stock issued as a bonus or in lieu of other Company obligations, and
other stock-based Awards granted to any one participant shall not exceed one
million shares for each type of such Award, subject to adjustment in certain
circumstances. The maximum amount that may be earned as a final annual incentive
award or other cash Award in any fiscal year by any one participant is $3
million, and the maximum amount that may be earned as a final performance award
or other cash Award in respect of a performance period by any one participant is
$5 million.
The Committee is authorized to adjust the number and kind of shares
subject to the aggregate share limitations and annual limitations under the 2000
Plan and subject to outstanding Awards (including adjustments to exercise prices
and number of shares of options and other affected terms of Awards) in the event
that a dividend or other distribution (whether in cash, shares, or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, or share exchange, or other
similar corporate transaction or event affects the Common Stock so that an
adjustment is appropriate. The Committee is also authorized to adjust
performance conditions and other terms of Awards in response to these kinds of
events or in response to changes in applicable laws, regulations, or accounting
principles.
Eligibility and Administration. Executive officers and other officers
and employees of the Company or any subsidiary, including any such person who
may also be a director of the Company, and other persons who provide services to
the Company and/or its subsidiaries shall be eligible to be granted Awards under
the 2000 Plan. Currently, approximately 35 persons will be eligible to be
granted Awards under the 2000 Plan. The 2000 Plan will be administered by the
Committee except to the extent the Board of Directors elects to administer the
2000 Plan. The Committee will be comprised of two or more directors designated
by the Board each of whom, unless otherwise determined by the Board, will be a
"non-employee director" and an "outside director" within the meaning of Rule
16b-3 under the Exchange Act and Section 162(m) of the Internal Revenue Code,
respectively. Subject to the terms and conditions of the 2000 Plan, the
Committee is authorized to select participants, determine the type and number of
Awards to be granted and the number of shares of Common Stock to which Awards
will relate, specify times at which Awards will be exercisable or settleable
(including performance conditions that may be required as a condition thereof),
set other terms and conditions of such Awards, prescribe forms of Award
agreements, interpret and specify rules and regulations relating to the 2000
Plan, and make all other determinations that may be necessary or advisable for
the administration of the 2000 Plan.
Stock Options and SARS. The Committee is authorized to grant stock
options, including both incentive stock options ("ISOs") and non-qualified stock
options, and SARs entitling the participant to receive the excess of the fair
market value of a share of Common Stock on the date of exercise over the grant
price of the SAR. The exercise price per share subject to an option and the
grant price of an SAR is determined by the Committee, but must not be less than
the fair market value of a share of Common Stock on the date of grant (except to
the extent of in-the-money awards or cash obligations surrendered by the
participant at the time of grant). The maximum term of each option or SAR may
not exceed ten years. Options may be exercised by payment of the exercise price
in cash, Common Stock, outstanding Awards, or other property (possibly including
notes or obligations to make payment on a deferred basis) having a fair market
value equal to the exercise price, as the Committee may determine from time to
time. Methods of exercise and settlement and other terms of the SARs are
determined by the Committee.
Restricted Stock, Deferred Stock and Dividend Equivalents. The
Committee is authorized to grant restricted stock and deferred stock. Restricted
stock is a grant of Common Stock which may not be sold or disposed of, and which
may be forfeited in the event of certain terminations of employment and/or
failure to meet certain performance requirements, prior to the end of a
restricted period specified by the Committee. An Award of deferred stock confers
upon a participant the right to receive shares at the end of a specified
deferral period, subject to possible forfeiture of the Award in the event of
certain terminations of employment and/or failure to meet certain performance
requirements prior to the end of a specified restricted period (which restricted
period need not extend for the entire duration of the deferral period). The
Committee is authorized to grant dividend equivalents conferring on participants
the right to receive, currently or on a deferred basis, cash, shares, other
Awards, or other property equal in value to dividends paid on a specific number
of shares or other periodic payments.
Bonus Stock and Awards in Lieu of Cash Obligations and Other
Stock-Based Awards. The Committee is authorized to grant shares as a bonus free
of restrictions, or to grant shares or other Awards in lieu of Company
obligations to pay cash under other plans or compensatory arrangements, subject
to such terms as the Committee may specify. The 2000 Plan also authorizes the
Committee to grant other Awards that are denominated or payable in, valued by
reference to, or otherwise based on or related to shares.
Performance Awards, Including Annual Incentive Awards. The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions as may be
specified by the Committee. In addition, the 2000 Plan authorizes specific
annual incentive awards, which represent a conditional right to receive cash,
shares or other Awards upon achievement of pre-established performance goals
during a specified one-year period. Performance awards and annual incentive
awards granted to persons the Committee expects will, for the year in which a
deduction arises, be among the Chief Executive Officer and four other most
highly compensated executive officers (the "Named Executive Officers"), will, if
so intended by the Committee, be subject to provisions that should qualify such
Awards as "performance-based compensation" not subject to the limitation on tax
deductibility by the Company under Code Section 162(m).
The performance goals to be achieved as a condition of payment or
settlement of a performance award or annual incentive award will consist of (i)
one or more business criteria and (ii) a targeted level or levels of performance
with respect to each such business criteria. In the case of performance awards
intended to meet the requirements of Internal Revenue Code Section 162(m), the
business criteria used must be one of those specified in the 2000 Plan, although
for other participants the Committee may specify any other criteria. The
business criteria specified in the 2000 Plan are: (1) earnings per share; (2)
revenues; (3) cash flow; (4) cash flow return on investment; (5) return on
assets, return on investment, return on capital, return on equity; (6) economic
value added; (7) operating margin; (8) net income; pretax earnings; pretax
earnings before interest, depreciation and amortization; pretax operating
earnings after interest expense and before incentives, service fees, and
extraordinary or special items; operating earnings; (9) total shareholder
return; and (10) any of the above goals as compared to the performance of a
published or special index deemed applicable by the Committee including, but not
limited to, the Standard & Poor's 500 Stock Index. The Committee may, in its
discretion, determine that the amount payable as a final annual incentive or
performance award will be increased or reduced from the amount of any potential
Award, but may not exercise discretion to increase any such amount intended to
qualify under Internal Revenue Code Section 162(m). Subject to the requirements
of the 2000 Plan, the Committee will determine other performance award and
annual incentive award terms, including the required levels of performance with
respect to the business criteria, the corresponding amounts payable upon
achievement of such levels of performance, termination and forfeiture
provisions, and the form of settlement.
Other Terms of Awards. Awards may be settled in the form of cash,
Common Stock, other Awards, or other property, in the discretion of the
Committee. The Committee may require or permit participants to defer the
settlement of all or part of an Award in accordance with such terms and
conditions as the Committee may establish, including payment or crediting of
interest or dividend equivalents on deferred amounts, and the crediting of
earnings, gains, and losses based on deemed investment of deferred amounts in
specified investment vehicles. The Committee is authorized to place cash,
shares, or other property in trusts or make other arrangements to provide for
payment of the Company's obligations under the 2000 Plan. Awards granted under
the 2000 Plan generally may not be pledged or otherwise encumbered and are not
transferable except by will or by the laws of descent and distribution, or to a
designated beneficiary upon the participant's death, except that the Committee
may, in its discretion, permit transfers for estate planning or other purposes.
Awards under the 2000 Plan are generally granted without a requirement that the
participant pay consideration in the form of cash or property for the grant (as
distinguished from the exercise), except to the extent required by law. The
Committee may, however, grant Awards in exchange for other Awards under the 2000
Plan, awards under other Company plans, or other rights to payment from the
Company, and may grant Awards in addition to and in tandem with such other
Awards, awards, or rights as well.
Change in Control. The Committee may, in its discretion, accelerate the
exercisability, the lapsing of restrictions, or the expiration of deferral or
vesting periods of any Award, and such accelerated exercisability, lapse,
expiration and vesting shall occur automatically in the case of a "change in
control" of the Company except to the extent otherwise determined by the
Committee at the date of grant. In addition, the Committee may provide that the
performance goals relating to any performance-based award will be deemed to have
been met upon the occurrence of any change in control. Upon the occurrence of a
change in control, except to the extent otherwise determined by the Committee at
the date of grant, options may at the election of the participant be cashed out
based on a defined "change in control price," which will be the higher of (i)
the cash and fair market value of property that is the highest price per share
of Common Stock paid (including extraordinary dividends) in any change in
control or liquidation of shares of Common Stock following a sale of
substantially all of the assets of the Company, or (ii) the highest fair market
value per share of Common Stock (generally based on market prices) at any time
during the twenty-day period before and the twenty-day period after a change in
control. "Change in Control" is defined in the 2000 Plan to include a variety of
events, including significant changes in the stock ownership of the Company or a
significant subsidiary, changes in the Company's Board of Directors, certain
mergers and consolidations of the Company or a significant subsidiary, and the
sale or disposition of all or substantially all the consolidated assets of the
Company.
Amendment and Termination of the 2000 Plan. The Board of Directors may
amend, alter, suspend, discontinue, or terminate the 2000 Plan or the
Committee's authority to grant Awards without further shareholder approval,
except shareholder approval must be obtained for any amendment or alteration if
required by law or regulation or under the rules of any stock exchange or
automated quotation system on which the shares are then listed or quoted.
Without the consent of an affected participant, no action by the Board of
Directors may materially and adversely affect the rights of such participant
under any previously granted and outstanding Awards. Shareholder approval will
not be deemed to be required under laws or regulations, such as those relating
to ISOs, that condition favorable treatment of participants on such approval,
although the Board of Directors may, in its discretion, seek shareholder
approval in any circumstance in which it deems such approval advisable. Unless
earlier terminated by the Board, the 2000 Plan will terminate at such time as no
shares remain available for issuance under the 2000 Plan and the Company has no
further rights or obligations with respect to outstanding Awards under the 2000
Plan.
New Plan Benefits. Awards under the 2000 Plan are not currently
determinable because such Awards are based on the discretionary determination of
the Board of Directors.
Federal Income Tax Consequences
The following description of the federal income tax consequences
generally arising with respect to Awards under the 2000 Plan is provided for
general information only. Interested parties should consult their own advisors
as to specific tax consequences, including the application and effect of
foreign, state and local tax laws.
The grant of an option or SAR will create no tax consequences for the
participant or the Company. A participant will not recognize taxable income upon
exercising an ISO (except that the alternative minimum tax may apply). Upon
exercising an option other than an ISO, the participant must generally recognize
ordinary income equal to the difference between the exercise price and fair
market value of the freely transferable and nonforfeitable shares acquired on
the date of exercise. Upon exercising an SAR, the participant must generally
recognize ordinary income equal to the cash or the fair market value of the
freely transferable and nonforfeitable shares received.
Upon a disposition of shares acquired upon exercise of an ISO before
the end of the applicable ISO holding periods, the participant must generally
recognize ordinary income equal to the lesser of (i) the fair market value of
the shares at the date of exercise of the ISO minus the exercise price, or (ii)
the amount realized upon the disposition of the ISO shares minus the exercise
price.
Generally, for Awards granted under the 2000 Plan that result in the
payment or issuance of cash or shares or other property, the participant must
recognize ordinary income equal to the cash or the fair market value of shares
or other property received. With respect to Awards involving the issuance of
shares or other property that is restricted as to transferability and subject to
a substantial risk of forfeiture, the participant must generally recognize
ordinary income equal to the fair market value of the shares or other property
received at the first time the shares or other property becomes transferable or
is not subject to a substantial risk of forfeiture, whichever occurs earlier.
However, a participant may elect to be taxed at the time of receipt of shares or
other property rather than upon lapse of restrictions on transferability or
substantial risk of forfeiture. The Company generally will be entitled to a tax
deduction equal to the amount recognized as ordinary income by the participant
in connection with an option, SAR or the Award.
Vote Required to Approve Item 4
The approval of Item 4 requires the affirmative vote of the majority of
the votes cast by the holders of shares entitled to vote thereon.
Board Recommendation
The Board of Directors is of the view that Item 4 is in the best
interests of the Company and all of its shareholders. The Board of Directors
recommends a vote FOR the approval of Item 4.
<PAGE>
ITEM 5
APPROVAL OF THE AMENDMENT TO THE
COMPANY'S CERTIFICATE OF INCORPORATION TO
CHANGE THE COMPANY'S NAME TO TECHSYS, INC.
Background
The Board of Directors approved the amendment to the Company's
Certificate of Incorporation to change the Company's name to TechSys, Inc. The
amendment amends Article 1 in its entirety to read as follows:
"1. The name of the corporation is TechSys, Inc. (the "Corporation")."
In the judgment of the Board of Directors, the change of Company's name to
TechSys, Inc. would appropriately complement the Company's intention to complete
transactions in the technology sector.
Vote Required to Approve Item 5
The approval of Item 5 requires the affirmative vote of the majority of
the votes cast by the holders of shares entitled to vote thereon.
Board Recommendation
The Board of Directors is of the view that Item 5 is in the best
interests of the Company and all of its shareholders. The Board of Directors
recommends a vote FOR the approval of Item 5. If Item 5 is approved, the Company
would amend its Certificate of Incorporation as provided above, which amendment
would be effective upon its filing with the Treasurer of the State of New
Jersey.
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors, executive officers, and persons who
beneficially own more than ten percent of a registered class of the Company's
equity securities, to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. All reports required to be filed during
the year ended December 31, 1999 were timely filed except for a Form 4 for Alvin
S. Trenk to report Mr. A. Trenk's purchase of 31,500 shares of Common Stock, a
Form 3 for Mark N. Raab to report Mr. Raab's initial holding of 2,750 options at
the time he became Chief Financial Officer of the Company, and a Form 5 for Mr.
Raab to report the issuances of 10,000, 37,250, and 25,000 options to him.
By Order of the Board of Directors
Steven L. Trenk
President
Dated: July ___, 2000
<PAGE>
APPENDIX A
CONTINENTAL CHOICE CARE, INC.
Audit Committee Charter
The audit committee of Continental Choice Care, Inc. (the "Company") will
provide assistance to the corporate directors in fulfilling their responsibility
to the shareholders, potential shareholders, and investment community relating
to corporate accounting, reporting practices of the corporation, and the quality
and the integrity of the financial reports of the Company. In so doing, it is
the responsibility of the audit committee to maintain free and open means of
communication between the directors, the independent auditors and the financial
management of the corporation. The Company's external auditors are ultimately
accountable to the Company's Board of Directors and the Audit Committee. To
effectively perform their role, each committee member will obtain an
understanding of the detailed responsibilities of committee membership as well
as the Company's business, operations and risks.
The audit committee will consist of at least two members of the board of
directors and will meet at least twice per year. All members of the committee
will be independent directors, one of whom will serve as chairman of the
committee. On an annual basis, the committee will review and assess the adequacy
of the written charter.
A. With respect to internal controls, the committee will:
* Ensure that external auditors keep the audit committee informed
about fraud, illegal acts, deficiencies in internal controls, and
other matters specified by the audit committee.
B. With respect to financial reporting in general, the committee will:
* Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements, and understand
their impact on financial statements.
* Ask management and the external auditors about significant risks
and exposures and the plans to minimize such risks.
C. With respect to annual financial statements, the committee will:
* Review the annual financial statements and determine whether they
are complete and consistent with the information known to
committee members, and assess whether the financial statements
reflect appropriate accounting principles.
* Meet with management and the external auditors to review the
financial statements, the results of the audit, as well as
discuss the Company's accounting principles and the quality of
financial reporting in the Company's 10-KSB.
* Review the MD&A and other sections of the annual report before
its release and consider whether the information is adequate and
consistent with members' knowledge about the Company and its
operations.
* Ensure that the external auditors communicate to the committee as
to items specified by the committee.
* Consider whether the Company's annual financial statements should
be included in the Company's Annual Report on Form 10-KSB.
D. With respect to interim financial statements, the committee will:
* Review the Company's Quarterly 10-QSB Reports before filing and
obtain explanations from management and from the external
auditors on whether:
* Generally accepted accounting principles have been
consistently applied.
* There are any significant or unusual events or
transactions.
* The Company's financial and operating controls are
functioning effectively.
* Determine that the Company's external auditors have
reviewed the Company's Quarterly Reports on Form 10-Q
before filing.
E. The committee will assess the Company's compliance with laws and
regulations, including:
* Ask management about significant risks and exposures and the
plans to minimize such risks.
F. With respect to the Company's external auditors, the committee will:
* Review the performance of the external auditors and recommend to
the board of directors the appointment or discharge of the
external auditors.
* Review and confirm the independence of the external auditors by
reviewing the nonaudit services provided and the auditors'
written assertion of their independence in accordance with
professional standards.
* Ensure the receipt from external auditors of a formal, written
statement delineating all relationships between the auditor and
the Company, consistent with Independence Standards Board
Standard 1.
* Engage in a dialogue with the external auditors with respect to
any disclosed relationships or services that may impact the
objectivity and independence of the auditor.
* Take, or recommend that the full board of directors take,
appropriate action to oversee the independence of the external
auditor.
G. The committee will annually provide a report to the board of directors
regarding the above matters.
H. The committee will review the scope of the proposed audit and discuss
the results of the annual audit with management and the external
auditors.
Audit Committee Membership
As of: June 14, 2000
Chairman: Jeffrey B. Mendell
Members:
Jeffrey B. Mendell
Stanley A. Amsterdam
June 14, 2000
<PAGE>
APPENDIX B
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made as of the 7th day of
June, 2000, by and between CONTINENTAL CHOICE CARE, INC., a New Jersey
corporation with its principal executive offices located at 44 Aspen Drive,
Livingston, New Jersey 07039 (the "Company") and LAZAR & COMPANY I.G., LLC, a
New York limited liability company with its principal executive offices located
at One Penn Plaza, 36th Floor, New York, New York 10119 (the "Purchaser").
Capitalized terms used in this Agreement but not defined upon their first usage
are defined in Section 9.1, unless otherwise noted.
The parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1
PURCHASE AND SALE OF COMMON STOCK
AND COMMON STOCK PURCHASE WARRANT
1.1 Purchase. Subject to the terms and conditions hereof, on the
Closing Date the Company shall sell to the Purchaser, and the Purchaser shall
purchase from the Company, (a) 200,000 shares (the "Shares") of the Company's
common stock, no par value per share (the "Common Stock") upon the terms
hereinafter set forth, and (b) a warrant (the "Warrant") to purchase 6,800,000
shares of Common Stock (the "Warrant Shares") in substantially the form attached
hereto as Exhibit A (the "Sale").
1.2 Form of Payment. The purchase price for the Shares shall be
$750,000 and the purchase price for the Warrant shall be $350,000, for an
aggregate purchase price of $1,100,000 (the "Purchase Price"). On the Closing
Date, the Purchaser shall pay the Purchase Price by delivering to the Company
(a) $50,000 in cash or other immediately available U.S. funds, and (b) a 7%
Secured Promissory Note (the "Note") in the principal amount of $1,050,000 in
substantially the form attached hereto as Exhibit B and a pledge agreement (the
"Pledge Agreement") in substantially the form attached hereto as Exhibit C.
1.3 Closing Date. The closing (the "Closing") of the Sale will take
place no later than the fifth business day following the date the Company
obtains Shareholder Approval or such other time and date as shall be mutually
agreed upon by the Purchaser and the Company. Such time and date is herein
called the "Closing Date." The Closing shall occur at the offices of Pitney,
Hardin, Kipp & Szuch LLP, 200 Campus Drive, Florham Park, New Jersey, or at such
other location as may be agreed upon by the parties.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Jersey. The Company has all requisite corporate power and authority to carry
on its business as described in the Company Reports (as defined herein). The
Company is duly qualified as a foreign corporation to do business and is in good
standing in every jurisdiction where the failure to so qualify or be in good
standing would materially adversely affect its business.
2.2 Capitalization. The authorized capital stock of the Company
consists of 20,000,000 shares of Common Stock and 5,000,000 shares of preferred
stock. As of June 6, 2000, there were:
(a) 3,612,544 shares of Common Stock outstanding,
(b) 1,707,100 shares of Common Stock reserved for
issuance pursuant to outstanding securities that are
convertible into or exchangeable for shares of Common
Stock, other than the Shares and shares of Common
Stock reserved for issuance upon exercise of the
Warrant and the Key Employee Warrants (as defined
herein), and
(c) 3,500,000 shares to be reserved for issuance
under a stock incentive plan to be approved by the
Company's board of directors and subject to approval
by the Company's shareholders (the "Incentive Plan").
As of June 6, 2000, (i) of the 3,612,544 shares of Common Stock referred to in
clause (a) above, 1,527,500 shares are beneficially owned by Techtron, Inc.,
(ii) of the 1,707,100 shares referred to in clause (b) above, an aggregate of
950,000 are reserved for issuance pursuant to outstanding securities
beneficially owned by Steven L. Trenk, Alvin S. Trenk and Martin G. Jacobs,
M.D., collectively, and (iii) Steven L. Trenk, Alvin S. Trenk and Martin G.
Jacobs, M.D. collectively own approximately 80% of the outstanding capital stock
of Techtron, Inc. Except for interests pursuant to which shares have been
reserved for issuance as set forth in the preceding sentence or as so excluded
therefrom, there are no outstanding or authorized options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights or other
contracts or commitments that could require the Company to issue, sell or
otherwise cause to become outstanding any of its capital stock or equity
interests or other instruments convertible into such interests. Except as set
forth on Schedule 2.2, there are no shareholder agreements, voting agreements,
voting trusts, trust deeds, irrevocable proxies or any other similar agreement
or instruments to which the Company is a party or of which it is aware, or any
agreements or arrangements under which the Company is obligated to register the
sale of any of its securities under the Securities Act.
2.3 Authorization; Binding Effect; No Breach. Subject to Shareholder
Approval: The Company's execution, delivery and performance of each Transaction
Document to which it is a party has been duly authorized by it; Each Transaction
Document to which the Company is a party constitutes a valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, except to the extent that such validity or enforceability may be
subject to or affected by any bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights or remedies of creditors generally, or by
other equitable principles of general application; The execution, delivery and
performance by the Company of the Transaction Documents to which it is a party
do not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in a
violation of, (d) require any authorization, consent, approval, exemption or
other action by or declaration or notice to any Government Entity pursuant to,
or (e) create any Lien under, the charter or bylaws of the Company or any
agreement, instrument, or other document, or any Legal Requirement, to which the
Company is, or any of its assets are, subject.
2.4 Validity of the Shares, the Warrant, and the Warrant Shares. The
Shares, the Warrant, and the Warrant Shares are duly authorized, reserved for
issuance and will, when issued in accordance with the terms hereof and thereof,
be validly issued, fully paid and non-assessable, free and clear of all Liens
and any pre-emptive rights of the shareholders of the Company, except for the
Pledge Agreement and with respect to the Warrant the exercise price thereof.
2.5 Governmental Filings. Except for the filing of an Additional
Listing Application with The Nasdaq Stock Market, Inc. and a Notice of Sale of
Securities Pursuant to Regulation D on Form D with the SEC, no notices, reports
or other filings are required to be made by the Company with, nor are any
consents, registrations, approvals, permits or authorizations required to be
obtained by the Company from, any Government Entity in connection with the
execution and delivery of this Agreement by the Company and the consummation of
the transactions contemplated by the Transaction Documents. Attached hereto as
Exhibit D-1 is a certificate by the Company certifying that, within the meaning
of the Hart-Scott-Rodino Antitrust Improvement Act of 1976 (the "HSR Act"), the
Company is not a person with total assets or net sales of $100 million or more,
and attached hereto as Exhibit D-2 is a certificate by the Purchaser certifying
that, within the meaning of the HSR Act, the Purchaser is not a person with
total assets of $10 million or more.
2.6 Company Reports; Financial Statements. The Company has filed with
the SEC each report, proxy statement or information statement required to be
filed by it since January 1, 2000 through the date hereof, including (a) the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999, as
amended, and (b) the Company's Quarterly Report on Form 10-Q for the calendar
quarter ended March 31, 2000 (collectively, the "Company Reports"), copies of
which have been made available to the Purchaser. As of their respective dates,
the Company Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances in which they were
made, not misleading. As of their respective dates, the consolidated financial
statements included in the Company Reports complied as to form in all material
respects with then applicable accounting requirements and the published rules
and regulations of the SEC with respect thereto. Each of the consolidated
balance sheets included in or incorporated by reference into the Company Reports
(including the related notes and schedules) fairly presents in all material
respects the consolidated financial position of the Company and its subsidiaries
as of its date and each of the consolidated statements of income and of changes
in cash flows included in or incorporated by reference into the Company Reports
(including any related notes and schedules) fairly presents in all material
respects the results of operations and changes in cash flows, as the case may
be, of the Company for the periods set forth therein (subject, in the case of
unaudited statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP, except as may be noted
therein.
2.7 Nasdaq Listing. The Common Stock is listed on the Nasdaq SmallCap
and the Company has not received any notice from The Nasdaq Stock Market, Inc.
advising the Company of the initiation of any delisting proceedings with respect
to the Common Stock.
2.8 Absence of Certain Changes. Except as disclosed in the Company
Reports filed prior to the date hereof, since January 1, 2000 the Company has
conducted its business only in, and has not engaged in any material transaction
other than in, the ordinary and usual course of its business and there has not
been any material adverse change in the financial condition, business, prospects
or results of operations of the Company and its Subsidiaries, taken as a whole,
since January 1, 2000.
2.9 Absence of Undisclosed Liabilities. The Company and its
Subsidiaries, taken as a whole, do not have any material liability (whether
accrued, absolute, contingent, unliquidated or otherwise, whether or not known,
whether due or to become due, and regardless of when asserted) other than: (a)
the liabilities included on the latest balance sheet contained in the Company
Reports (the "Latest Balance Sheet"), (b) current liabilities which have arisen
in the ordinary course of business and consistent with the Company's past
practice after the date of the Latest Balance Sheet (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, violation of law, claim or lawsuit), all of which have been
disclosed to the Purchaser, and (c) other liabilities and obligations expressly
disclosed in this Agreement or in any Transaction Document.
2.10 Litigation. There are no civil, criminal or administrative
actions, suits, claims, hearings, investigations, arbitrations, or proceedings
pending or, to the knowledge of the Company, threatened against the Company
preventing, or which, if determined adversely to the Company would prevent the
Company from consummating the transactions contemplated by the Transaction
Documents or would have a material adverse effect on the financial condition,
business, prospects or results of operations of the Company or its Subsidiaries,
taken as a whole.
2.11 Brokerage. There is no claim for brokerage commissions, finders'
fees or similar compensation in connection with the transactions contemplated by
the Transaction Documents which is binding upon the Company.
2.12 Disclosure. Neither this Article 2 nor any certificate or other
item delivered to the Purchaser by or on behalf of the Company with respect to
the transactions contemplated by the Transaction Documents contains any untrue
statement of a material fact or omits a material fact which is necessary to make
any statement contained herein or therein, in light of the circumstances in
which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants that:
3.1 Organization and Qualification. The Purchaser is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of New York. The Purchaser has all requisite power and
authority to carry on its business as presently conducted. The Purchaser is duly
qualified to do business and is in good standing in every other jurisdiction
where the failure to so qualify or be in good standing would materially
adversely affect its business.
3.2 Authorization; Binding Effect; No Breach. The Purchaser's
execution, delivery and performance of each Transaction Document to which it is
a party has been duly authorized by it. Lazar & Company I.G., Inc. is the
managing member of the Purchaser (the "Managing Member") and the Purchaser
hereby represents that the Managing Member is duly authorized to execute and
deliver, on behalf of the Purchaser, each Transaction Document to which the
Purchaser is a party. Each Transaction Document to which the Purchaser is a
party constitutes a valid and binding obligation of the Purchaser which is
enforceable against the Purchaser in accordance with its terms, except to the
extent that such validity or enforceability may be subject to or affected by any
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of, creditors' rights or
remedies of creditors generally, or by other equitable principles of general
application. The execution, delivery and performance by the Purchaser of the
Transaction Documents to which it is a party do not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in a violation of, or (d) require any
authorization, consent, approval, exemption or other action by or declaration or
notice to any Government Entity pursuant to, the charter or bylaws of the
Purchaser or any agreement, instrument, or other document, or any Legal
Requirement, to which the Purchaser or any of its assets is subject.
3.3 Investment Purpose. The Purchaser is capable of evaluating the risk
of its investment in the Shares and the Warrant and is able to bear the economic
risk of such investment, that it is purchasing the Shares and the Warrant for
its own account and that the Shares and the Warrant are being purchased by the
Purchaser for investment and not with a view to any resale or distribution
thereof. If the Purchaser should in the future decide to dispose of the Shares
or the Warrant (which it does not now contemplate), it is understood that the
Purchaser may do so only in compliance with the Securities Act and any
applicable state blue sky or securities laws.
3.4 Accredited Investor Status. The Purchaser and each of the equity
owners of the Purchaser is an "accredited investor" within the meaning of
Regulation D of the General Rules and Regulations promulgated under the
Securities Act ("Regulation D"). Each of the equity owners of the Purchaser
meets either of the following standards for determination of "accredited
investor" status of Regulation D: (a) a natural person whose individual net
worth, or joint net worth with that person's spouse, at the time of his purchase
exceeds $1,000,000; or (b) a natural person who had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
that person's spouse in excess of $300,000 in each of those years and has a
reasonable expectation of reaching the same income level in the current year.
3.5 Information. The Purchaser (a) has received and carefully reviewed
the Company Reports, and (b) has had the opportunity to ask questions and
receive answers from the Company concerning the Company Reports and the terms
and conditions of the offering of the Shares and the Warrant to obtain any
documents relating to the Company which are publicly available and any
additional information or documents relating to the Company which the Company
possesses or can acquire without unreasonable effort or expense.
ARTICLE 4
COVENANTS
4.1 Confidentiality.
(a) Confidential Information furnished to the Purchaser prior
to the Closing. The Purchaser and the Company acknowledge that Confidential
Information (as defined herein) may be furnished by the Company to the Purchaser
in connection with transactions contemplated by this Agreement or pursuant
hereto. The term "Confidential Information" shall mean all information
concerning the Company or any of its Subsidiaries or Affiliates, whether in
verbal, visual, written, electronic or other form which is made available by the
Company to the Purchaser or any its Representatives (as defined herein) and
which the Company identifies to the Purchaser, whether verbally or in writing,
as being confidential. The term "Confidential Information" shall not apply to
(i) any information which (A) the Purchaser can establish by convincing evidence
was already in its rightful possession prior to the disclosure thereof to it by
the Company; (B) was then generally known to the public other than as a result
of a disclosure by the Purchaser or its Representative; (C) became known to the
public through no fault of the Purchaser; or (D) was disclosed to the Purchaser
by a third-party who, to the Purchaser's knowledge, was not bound by an
obligation of confidentiality; or (ii) information disclosed pursuant to a
legal, regulatory requirement or in accordance with an order of a court of
competent jurisdiction, provided that in the event of any disclosure required by
this clause (ii), the Purchaser will give reasonable prior written notice of
such disclosure to the Company, and disclosure under this clause (ii) does not
constitute the public knowledge under clause (i). The term "Representative"
shall mean the Purchaser's agents and representatives, including, without
limitation, officers, directors, employees, attorneys, accountants and financial
advisors. The Purchaser acknowledges that it has informed and hereafter shall
inform its Representatives of the terms of this Section 4.1. Any breach of this
Section 4.1 by a Representative of the Purchaser shall be deemed to be a breach
thereof by the Purchaser.
(b) Confidential Information furnished to the Purchaser after
the Closing. The Purchaser acknowledges that Confidential Information may be
furnished by the Company to the Purchaser after the Closing in connection with
the Purchaser's investment in the Shares, the Warrant, and the Warrant Shares.
The Purchaser further acknowledges its awareness of the restrictions imposed by
federal and state securities laws on persons in possession of material nonpublic
information, and the Purchaser hereby agrees that while it is in possession of
material nonpublic information with respect to the Company, the Purchaser shall
not purchase or sell any securities of the Company or communicate such
information to any third-party, in violation of any such laws.
(c) Use of Confidential Information. Confidential Information
shall be (i) kept confidential, (ii) used solely by the Purchaser and its
Representatives, (iii) used solely for the purposes specified by the Company at
the time the Company furnishes the Confidential Information to the Purchaser,
and (iv) treated as the sole property of the Company.
(d) Equitable Relief. In addition to all other remedies that
may be available to the Company in connection with a breach by the Purchaser of
its or its Representative's obligations under this Section 4.1, the Company
shall be entitled to specific performance and injunctive and other equitable
relief with respect to this Section 4.1. The Purchaser waives, and agrees to use
all reasonable efforts to cause its Representatives to waive, any requirement to
secure or post a bond in connection with any such relief.
4.2 Board Representation. At, or prior to, the Closing, the Company
shall enlarge the size of its Board of Directors to seven members and, of the
vacancies so created, fill two vacancies with two persons selected by the
Purchaser to serve until its next annual meeting of shareholders for the
election of directors. The Company shall include among nominees in the slate of
directors recommended by the management of the Company in the proxy statement
for the next held annual meeting for the election of directors, and for as long
as the Warrant is outstanding for each next held annual meeting for the election
of directors, two directors selected by the Purchaser by giving written notice
to the Company of such nominations, together with the written consent of such
nominees to serve as directors, not less than 120 calendar days before the date
of the Company's proxy statement released to shareholders in connection with the
previous year's annual meeting.
4.3 Stock Incentive Plan. The Company shall submit for approval from
its shareholders in the proxy statement for the next held meeting the
establishment of the Incentive Plan pursuant to which common stock and options
to purchase up to 3,500,000 shares of common stock may be issued. Common Stock
and options under such plan shall be available for issuance to employees,
strategic partners and advisors to the Company.
4.4 Key Employee Warrants. At, or prior to, the Closing, the Company
shall issue warrants to purchase up to an aggregate of 1,350,000 shares of the
Company's Common Stock to certain key employees of the Company (the "Key
Employee Warrants") in substantially the form attached hereto as Exhibit E.
4.5 Non-Competition.
(a) Scope of Agreement. During the period beginning on the
date of this Agreement and continuing so long as the Warrant is outstanding (the
"Non-Competition Period"), the Purchaser will not, directly or indirectly,
either for itself or for any other Person, participate in the acquisition of any
business the acquisition of which is within the Company's acquisition strategy,
as agreed upon between the Purchaser and the Company from time to time;
provided, the restriction set forth in this Section 4.5 shall not apply (i) to
any investment by the Purchaser prior to the date of this Agreement, (ii) to any
wholly passive investment by the Purchaser after the date of this Agreement, and
(iii) to any investment by the Purchaser after the date of this Agreement if the
Sale is not consummated.
(b) Specific Performance. The parties hereto agree that the
Company would suffer irreparable harm from a breach by the Purchaser of any of
the covenants or agreements contained in this Section 4.5. In the event of an
alleged or threatened breach by any such Persons of any of the provisions of
this Section 4.5, the Company or its successors or assigns may, in addition to
all other rights and remedies existing in its favor, apply to any court of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violations of the provisions hereof.
The Purchaser agrees that these restrictions are reasonable.
(c) Reasonableness. If, at the time of enforcement of any of
the provisions of Section 4.5(a) or Section 4.5(b), a court holds that the
restrictions stated therein are unreasonable under the circumstances then
existing, the parties hereto agree that the maximum period, scope or
geographical area reasonable under such circumstances will be substituted for
the stated period, scope or area.
4.6 Securities Laws. The Company shall timely file a Notice of Sale of
Securities Pursuant to Regulation D on Form D with respect to the Shares and the
Warrant with the SEC as required under Regulation D and to provide a copy
thereof to the Purchaser promptly after such filing. The Company agrees to file
a Current Report on Form 8-K disclosing this Agreement and the transactions
contemplated hereby with the SEC within fifteen calendar days after the Sale is
consummated.
4.7 Legends. The Company may endorse on all certificates evidencing the
Shares, the Warrants, and the Warrant Shares a legend restricting their transfer
that shall read as follows: "The securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act") or the securities laws of any state of the United States. The
securities represented hereby have been acquired for investment and may not be
sold, transferred, pledged, assigned or otherwise disposed of in the absence of
an effective registration statement for the securities under the Securities Act
or an opinion, if requested, of counsel satisfactory to the Company that
registration is not required under the Securities Act." Where applicable, the
Company shall remove such legends so as to facilitate the transfer of such
securities pursuant to an effective registration statement or, if and to the
extent applicable, pursuant to Rule 144 under the Securities Act, provided (in
the case of Rule 144 transfers) that the Purchaser has provided such
documentation as the Company and its transfer agent shall reasonably require in
connection therewith.
4.8 Consummation of Transaction. Each of the parties hereto agrees to
use its best efforts to take promptly, or cause to be taken, all actions and to
do promptly, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement.
4.9 Proxy Statement. As soon as practicable following the date of this
Agreement, the Company shall prepare a proxy statement (the "Proxy Statement")
which shall be utilized to solicit proxies in connection with a meeting at which
the Company's shareholders will vote upon the Sale and the transactions
contemplated by this Agreement. The Company will afford the Purchaser and its
counsel a reasonable opportunity to comment on (a) the Proxy Statement in
preliminary form prior to its being filed with the SEC, (b) any response to any
comments from the staff of the SEC with respect to such Proxy Statement, and (c)
any proposed revisions to the Proxy Statement in response to any comments from
the staff of the SEC with respect to such Proxy Statement.
4.10 Registration Rights.
(a) Registration Period. The registration rights granted to
the Purchaser pursuant to this Section 4.10 shall cease as to some or all of the
Shares or the Warrant Shares when (i) a registration statement with respect to
the sale of such Shares or Warrant Shares shall have become effective under the
Securities Act and such Shares or Warrant Shares shall have been disposed of in
accordance with such registration statement, (ii) such Shares or Warrants Shares
are permitted to be sold to the public under the Securities Act pursuant to Rule
144 (or any successor provision) without any limitations or restrictions, (iii)
such Shares or Warrant Shares shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer shall
have been delivered by the Company and subsequent disposition of them shall not
require registration or qualification of them under the Securities Act or any
state securities or blue sky law then in force, or (iv) such Shares or Warrant
Shares shall have ceased to be outstanding (the period prior to the cessation of
such rights being the "Registration Period").
(b) Registration by the Company. Prior to the Closing Date,
the Company shall file a registration statement covering the resale of the
Shares and the Warrant Shares on Form S-3 under the Securities Act (if such form
is then available for use by the Company, or if such form is not then available
for use by the Company, such form as is then available to the Company for such
registration), and thereafter diligently pursue the effectiveness of such
registration statement; provided, however, solely in the event that the SEC does
not permit the Company to file such registration statement prior to the Closing
Date, the Company shall file such registration statement on or before the tenth
business day following the Closing Date. The registration statement shall have
been declared effective by the SEC on or before the ninetieth calendar day
following the Closing Date, unless the registration statement is not declared
effective due to action within the control of the SEC and unrelated to action
within the control of the Company or the Company's agents or representatives;
provided, however, that if the registration statement shall not have been
declared effective on or before such ninetieth calendar day, the Company shall
thereafter use its best efforts to cause such registration statement to be
declared effective as promptly as possible, until such registration statement is
declared effective.
(c) Terms and Conditions of Registration. Except as otherwise
provided herein, in connection with any registration statement filed pursuant to
this Section 4.10, the following provisions shall apply:
(i) The Company will afford the Purchaser and its
counsel a reasonable opportunity to comment on (A) such registration statement
prior to its being filed with the SEC, (B) any response to any comments from the
staff of the SEC with respect to such registration statement, and (C) any
proposed revisions to such registration statement in response to any comments
from the staff of the SEC with respect to such registration statement.
(ii) All expenses in connection with the preparation
and filing of such registration statement, including all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, counsel for the Company, independent
certified public accountants, and other Persons retained by the Company, shall
be borne solely by the Company, except for any transfer taxes payable with
respect to the disposition of such Shares and Warrant Shares, and any selling
commissions applicable to such Shares and Warrant Shares, which shall be paid by
the Purchaser.
(iii) The Company shall use its best efforts to cause
the Shares and Warrant Shares covered by such registration statement to be
listed on the Nasdaq SmallCap (or such other market or exchange on which the
Common Stock is then listed) and comply in all material respects with the
Company's reporting, filing and other obligations under the bylaws and rules of
the Nasdaq SmallCap (or such other market or exchange).
(iv) The Company shall use its best efforts to
register or qualify the Shares and the Warrant Shares covered by such
registration statement under the securities or blue sky laws of such
jurisdictions as the Purchaser reasonably requests, and do any and all other
acts and things which may be reasonably necessary or advisable to enable the
Purchaser to consummate the disposition in such jurisdictions of such Shares or
Warrant Shares, provided, that the Company shall not be required to (A) qualify
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 4.10, (B) subject itself to taxation in
any such jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(v) Following the effective date of such registration
statement, the Company shall, upon the request of the Purchaser, forthwith
supply such number of prospectuses (including exhibits thereof and preliminary
prospectuses and amendments and supplements thereto) meeting the requirements of
the Securities Act and such other documents as are referred to in the prospectus
as shall be reasonably requested by the Purchaser to permit the Purchaser to
make a public distribution of the Shares and Warrant Shares.
(vi) The Company shall prepare, if necessary, and
file such amendments and supplements to such registration statement as may be
necessary to keep such registration statement effective, subject to applicable
laws, rules and orders, during the Registration Period.
(vii) The Purchaser shall cooperate with the Company
and provide the Company with all information reasonably requested by the Company
for inclusion in the registration statement or as necessary to comply with the
Securities Act.
(viii) The Company shall cooperate with any
underwriters selected by the Purchaser and counsel to such underwriters and
shall provide reasonable and customary access to the Company's books and records
(upon receipt from such underwriters of customary confidentiality agreements) in
order to facilitate such underwriters' review and examination of the Company in
connection with such underwriting, and shall provide customary comfort letters
from its legal counsel and accountants to such underwriters.
(ix) The Company will indemnify the Purchaser, each
of its officers, directors, managers, partners, members, legal counsel, and
accountants and each person controlling the Purchaser within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Section 4.10,
and each underwriter, if any, and each person who controls within the meaning of
Section 15 of the Securities Act any underwriter, against all expenses, claims,
losses, damages, and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification, or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification, or compliance, and will reimburse the Purchaser,
each of its officers, directors, managers, partners, members, legal counsel, and
accountants and each person controlling the Purchaser, each such underwriter,
and each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability, or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
the Purchaser and stated to be specifically for use therein. It is agreed that
the indemnity agreement contained in this clause (A) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld). Notwithstanding the foregoing, to the extent that
the provisions on indemnification and contribution contained in any underwriting
agreement entered into in connection with such registration statement are in
conflict with the foregoing provisions, the provisions of the underwriting
agreement shall control.
(x) The Purchaser will, if any Shares or Warrant
Shares held by the Purchaser are included in the securities as to which such
registration, qualification, or compliance is being effected, indemnify the
Company, each of its directors, officers, partners, legal counsel, and
accountants and each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company or such
underwriter within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
circular, or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such
directors, officers, partners, legal counsel, and accountants, persons,
underwriters, or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability, or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission (or
alleged omission) is made in such registration statement, prospectus, offering
circular, or other document in reliance upon and in conformity with written
information furnished to the Company by the Purchaser and stated to be
specifically for use therein, provided, however, that the obligations of the
Purchaser hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of the Purchaser (which consent shall
not be unreasonably withheld); and provided, further, that the liability of the
Purchaser hereunder shall be limited to the net proceeds received by the
Purchaser from the sale of securities covered by such registration statement.
Notwithstanding the foregoing, to the extent the provisions on indemnification
and contribution contained in any underwriting agreement entered into in
connection with such registration statement are in conflict with the foregoing
provisions, the provisions of the underwriting agreement shall control.
(xi) If the indemnification provided for in Section
4.10(ix) and Section 4.10(x) is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim,
damage, or expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission; provided, however, that no party guilty of
fraudulent misrepresentation shall be entitled to contribution from any party
who was not guilty of such fraudulent misrepresentation.
(xii) The Company shall notify the Purchaser, at any
time after effectiveness 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,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of circumstances then existing (and upon receipt of such
notice and until a supplemented or amended prospectus as set forth below is
available, the Purchaser shall not offer or sell any securities covered by such
registration statement and shall return all copies of such prospectus to the
Company if requested to do so by it), and at the request of the Purchaser
prepare and furnish the Purchaser promptly 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 shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances than existing.
(xiii) The Company will use its best efforts to
comply in a timely manner with the reporting requirements of Sections 13 and
15(d) of the Exchange Act and all other public information reporting
requirements of the SEC of Rule 144 promulgated by the SEC under the Securities
Act from time to time in effect and relating to the availability of an exemption
from the Securities Act for the sale of any of the Shares or Warrant Shares. The
Company will also cooperate with the Purchaser in supplying such information and
documentation as may be necessary for the Purchaser to complete and file any
information reporting forms presently or hereafter required by the SEC as a
condition to the availability of an exemption from the Securities Act for the
sale of any Shares or Warrant Shares held by the Purchaser. Upon request of the
Purchaser, the Company shall furnish the Purchaser with a copy of all documents
filed by the Company after the date of this Agreement with the SEC pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act.
(xiv) The Company will use its best efforts to comply
with the requirements of the Securities Act with respect to any registration
statement filed pursuant to Section 4.10, including any undertakings pursuant to
Section 415 under the Securities Act.
(xv) The Company will use its best efforts to keep
such registration statement continuously effective under the Securities Act
during the Registration Period.
(xvi) In the event that the Purchaser engages an
underwriter with respect to the sale of any Shares or Warrant Shares pursuant to
such registration statement, the Company shall amend such registration statement
with respect to, among other things, the plan of distribution and any related
exhibits, as soon as practicable following receipt of such information from the
Purchaser.
4.11 Negative Covenants. During the period beginning on the date of
this Agreement and so long as the Warrant is outstanding or, thereafter, so long
as the Purchaser holds at least 25% of the then outstanding Common Stock (on a
Fully Diluted Basis), the Company shall not, without the prior written consent
of the Purchaser, which consent shall not be unreasonably withheld, take any of
the following actions:
(a) make or propose any change or amendment to the Company's
Certificate of Incorporation or bylaws which has or would have an adverse effect
on the Shares;
(b) incur or assume any indebtedness for a term in excess of
12 months and in excess of $2,000,000 in any single transaction or $10,000,000
in the aggregate;
(c) enter into any merger or consolidation with or of any
other corporation, association or business entity where the Company would not be
the surviving corporation or where the shareholders of the Company prior to such
merger or consolidation would hold less than fifty percent of the voting power
of the surviving corporation immediately after such merger or consolidation or
sell or transfer all or substantially all of any material Subsidiary or all or
substantially all of the Company's or any material Subsidiary's assets; or
(d) enter into any contract, agreement or commitment with
respect to, or propose or authorize, any of the actions described in the
foregoing clauses (a) through (c).
4.12 Transactions with Related Parties. The Company shall not, without
the approval of all of the disinterested members of the Company's Board of
Directors, engage in any loans, leases, contracts or other transactions with any
director, officer or key employee of the Company, or any member of any such
person's immediately family, including the parents, spouse, children and other
relatives of any such person, on terms less favorable than the Company would
obtain in a transaction with an unrelated party, as determined in good faith by
such members of the Board of Directors.
4.13 Preemptive Rights
(a) Right to Purchase. Subject to the provisions of this
Section 4.13, the Company hereby grants to the Purchaser the right (the
"Preemptive Right") to purchase a pro rata share of New Securities (as defined
herein) which the Company may, from time to time, propose to sell and issue. The
Purchaser's "pro rata share", for purposes of this Section, shall be the ratio
of the number of shares of Common Stock owned by the Purchaser immediately prior
to the issuance of New Securities (assuming full exercise of all outstanding
rights, options and warrants to acquire Common Stock by the Purchaser, including
any Warrant Shares then exercisable by the Purchaser, and after giving effect to
the proposed issuance of New Securities) to the total number of shares of Common
Stock outstanding immediately prior to the issuance of New Securities (assuming
full exercise of all outstanding rights, options and warrants to acquire Common
Stock of the Company).
(b) Definition of New Securities. As used in this Agreement,
the term "New Securities" shall mean any capital stock of the Company, whether
now authorized or not, and rights, options or warrants to purchase such capital
stock, and securities of any type whatsoever that are, or may become,
convertible into or exchangeable or exercisable for capital stock; provided that
the term "New Securities" does not include (i) the Shares, the Warrant, or the
Warrant Shares; (ii) the Key Employee Warrants; (iii) securities issued pursuant
to the acquisition of another business entity or business segment of any such
entity by the Company by merger, purchase of substantially all the assets or
other reorganization whereby the Company will own more than 50% of the voting
power of such business entity or business segment of any such entity; (iv)
securities issued pursuant to the sale of all or substantially all of the
Company's assets or in a merger or consolidation of the Company with or into
another corporation in which the Company is not the surviving corporation; (v)
any borrowings, direct or indirect, from financial institutions or other persons
by the Company, whether or not presently authorized, including any type of loan
or payment evidenced by any type of debt instrument, provided such borrowings do
not have any equity features including warrants, options or other rights to
purchase capital stock and are not convertible into capital stock of the
Company; (vi) securities issued to employees, consultants, officers or directors
of the Company pursuant to any stock option, stock purchase or stock bonus plan,
agreement or arrangement approved by the Board of Directors, including
securities issued pursuant to the Incentive Plan; (vii) securities issued to
Strategic Investors (as defined below); (viii) securities issued in connection
with any stock split, stock dividend or recapitalization of the Company; (ix)
securities issued other than for cash and for not less than the fair market
value of such securities, as determined in good faith by the Board of Directors;
(x) securities issued to a provider of services to the Company for such
services, in exchange for cash in an amount equivalent to the amount the Company
has paid or is to pay for such services, and for not less than the fair market
value of such securities as determined in good faith by the Board of Directors;
and (xi) any right, option or warrant to acquire any security convertible into
the securities excluded from the definition of New Securities pursuant to
clauses (i) through (x) above. As used herein, the term "Strategic Investor"
means any Person (other than an entity engaged primarily in venture capital or
other investment activities) that is not an Affiliate of the Company (i) to
which the Company proposes to issue securities for the primary purpose of
forming a relationship that the Board of Directors of the Company determines
will enhance its (a) perception in its marketplace, (b) ability to attract
sales, technology or future investments or (c) perceived value and (ii) who, in
connection with such investor's equity investment, also enters into a licensing,
distribution, marketing, development or services agreement or the like with the
Company.
(c) Procedures. In the event the Company proposes to undertake
an issuance of New Securities, it shall give the Purchaser written notice of its
intention, describing the type of New Securities, and their price and the
general terms upon which the Company proposes to issue the same. The Purchaser
shall have 10 business days after any such notice is effective to agree to
purchase up to the Purchaser's pro rata share of such New Securities for the
price and upon the terms specified in the notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased. In
the event the Purchaser fails to exercise the Preemptive Right within said 10
business day period, the Company shall have 90 days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities covered thereby
shall be closed, if at all, within 120 days from the date of said agreement) to
sell the New Securities respecting which the Preemptive Right set forth in this
Section 4.13 was not exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's notice to Purchaser
pursuant to this Section 4.13. In the event the Company has not entered into an
agreement to sell the New Securities and sold the New Securities within the time
periods set forth above, the Company shall not thereafter issue or sell any New
Securities, without first again offering such securities to the Purchaser in the
manner provided in this Section 4.13.
(d) Termination of Preemptive Right. The Preemptive Right
granted under this Section 4.13 shall expire at such time as the Warrant has
expired, or, thereafter, at such time as the Purchaser no longer holds at least
25% of the then outstanding Common Stock (on a Fully Diluted Basis).
ARTICLE 5
CONDITIONS
5.1 Conditions to Each Party's Obligations to Effect the Sale. The
respective obligations of each party to effect the Sale shall be subject to the
Company obtaining Shareholder Approval.
5.2 Conditions to Obligations of the Purchaser to Effect the Sale. The
obligations of the Purchaser to effect the Sale shall be subject to the
fulfillment or waiver at or prior to the Closing of the additional following
conditions:
(a) Each representation and warranty of the Company set forth
in Article 2 shall be true and correct in all material respects as of the
Closing.
(b) The Company shall have performed in all material respects
each covenant or other obligation required to be performed by it pursuant to the
Transaction Documents prior to the Closing.
(c) The consummation of the transactions contemplated by the
Transaction Documents shall not be prohibited by any Legal Requirement or
subject the Purchaser to any penalty or liability arising under any Legal
Requirement or imposed by any Government Entity.
(d) No action, suit or proceeding shall be pending or
threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following such
consummation or adversely affect the Company's performance of its obligations
pursuant to the Transaction Documents, and no judgment, order, decree,
stipulation, injunction or charge having any such effect shall exist.
(e) All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the Company to effect the Sale
or any other transaction contemplated by the Transaction Documents shall have
been duly made or obtained and the Company shall have delivered copies thereof
to the Purchaser.
(f) The Company shall have delivered to the Purchaser a
certificate dated the Closing Date, signed by the President of the Company
stating that the conditions set forth in Section 5.2 (a) through (e) have been
satisfied.
(g) The Company shall have delivered to the Purchaser a copy
of the resolutions duly adopted by the Company's board of directors authorizing
the Company's execution, delivery and performance of the Transaction Documents
to which the Company is a party, the Sale, and all other transactions
contemplated by the Transaction Documents, as in effect as of the Closing,
certified by an officer of the Company.
(h) The Company shall have delivered to the Purchaser a
certificate (dated not less than five business days prior to the Closing) of the
Treasurer of the State of New Jersey as to the good standing of the Company in
New Jersey.
(i) The Company shall have delivered to the Purchaser (i) a
certificate representing the Shares, and (ii) the Warrant.
(j) The Shares and the Warrant Shares shall have been listed,
or approved for listing subject to issuance, on the Nasdaq SmallCap (or such
other market or exchange on which the Common Stock is then listed).
(k) The Purchaser shall have received an opinion of counsel
for the Company as to the valid existence of the Company, the Company's
corporate power and authority to enter into the Transaction Documents, the due
execution of the Transaction Documents, the enforceability of the Transaction
Documents in accordance with their respective terms (as may be limited by
bankruptcy), and the valid issuance of the Shares and the Warrant, in form and
substance reasonably satisfactory to the Purchaser.
(l) The Company shall have filed a registration statement
pursuant to Section 4.10(b), or shall have delivered written notice to the
Purchaser that the SEC prohibited the Company from filing such registration
statement prior to the Closing Date.
5.3 Conditions to Obligations of the Company to Effect the Sale. The
obligations of the Company to effect the Sale shall be subject to the
fulfillment or waiver at or prior to the Closing of the additional following
conditions:
(a) Each representation and warranty by the Purchaser
(including those relating to equity holders of the Purchaser) set forth in
Article 3 shall be true and correct in all material respects as of the Closing.
(b) The Purchaser shall have performed in all material
respects each covenant or other obligation required to be performed by it
pursuant to the Transaction Documents prior to the Closing.
(c) The consummation of the transactions contemplated by the
Transaction Documents shall not be prohibited by any Legal Requirement or
subject the Company or any of its assets to any penalty or liability arising
under any Legal Requirement or imposed by any Government Entity.
(d) No action, suit or proceeding shall be pending or
threatened before any Government Entity the result of which could prevent or
prohibit the consummation of any transaction pursuant to the Transaction
Documents, cause any such transaction to be rescinded following such
consummation or adversely affect the Company's performance of its obligations
pursuant to the Transaction Documents, and no judgment, order, decree,
stipulation, injunction or charge having any such effect shall exist.
(e) All filings, notices, licenses, consents, authorizations,
accreditation, waivers, approvals and the like of, to or with any Government
Entity or any other Person that are required for the Purchaser to effect the
Sale or any other transaction contemplated by the Transaction Documents shall
have been duly made or obtained and the Purchaser shall have delivered copies
thereof to the Company.
(f) The Purchaser shall have delivered to the Company a
certificate, dated the Closing Date, signed by the Managing Member of the
Purchaser stating that the conditions set forth in Sections 5.3(a) through (e)
have been satisfied.
(g) The Purchaser shall have delivered to the Company a copy
of the resolutions duly adopted by the Managing Member of the Purchaser
authorizing the Purchaser's execution, delivery and performance of the
Transaction Documents to which the Purchaser is a party, the Sale, and all other
transactions contemplated by the Transaction Documents, as in effect as of the
Closing, certified by an officer of the Purchaser.
(h) The Purchaser shall have delivered to the Company a
certificate (dated not less than five business days prior to the Closing) of the
Secretary of State of the State of New York as to the good standing of the
Purchaser in New York.
(i) The Purchaser shall have delivered to the Company the Note
and the Pledge Agreement.
(j) The Company shall have issued and delivered the Key
Employee Warrants.
(k) The Company shall have received an opinion of counsel for
the Purchaser as to the valid existence of the Purchaser, the Purchaser's power
and authority to enter into the Transaction Documents, the due execution of the
Transaction Documents, and the enforceability of the Transaction Documents in
accordance with their respective terms (as may be limited by bankruptcy), in
form and substance reasonably satisfactory to the Company.
ARTICLE 6
SURVIVAL AND INDEMNIFICATION
6.1 Survival of Representations, Warranties and Covenants.
(a) Survival Term. All representations, warranties and
covenants contained herein or made in writing by any party in connection
herewith shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby (regardless of any
investigation made by any party or on its behalf) and will continue in full
force and effect for:
(i) perpetuity, in the case of the representations,
warranties and covenants in Sections 2.3, 2.4 and 3.2;
(ii) for a period of two years following the Closing
Date for all other representations and warranties set forth in Articles 2 and 3;
and
(iii) in the case of the covenant in Section 4.1, for
a period of two years (A) following termination of negotiations in connection
with the Sale in the event the Sale is not consummated, or (B) following the
Closing Date in the event the Sale is consummated.
(iv) for the term set forth therein, or if no term is
set forth therein for a period of two years following the Closing Date, in the
case of all other covenants set forth in Article 4.
(b) Special Rule for Fraud. Notwithstanding anything in this
Section 6.1 to the contrary, in the event of a breach by any party of a
representation or warranty which breach is intentional, or constitutes fraud,
the representation or warranty that has been breached will survive the execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby (regardless of any investigation made by any party or on its
behalf) and will continue in full force and effect for six years following the
Closing Date or the discovery of such fraud, whichever is later.
(c) No Waiver. Neither a party's participation in the
consummation of any transaction pursuant to any Transaction Document nor any
waiver of any condition to such participation (including any condition that a
representation or warranty of any other party be true and correct) will
constitute a waiver by such participating party of any representation or
warranty of any party or otherwise affect the survival of any such
representation or warranty.
6.2 Indemnification Obligations of the Purchaser.
(a) Specific Indemnifiable Losses. The Purchaser will
indemnify the Company and its Affiliates, shareholders, officers, directors,
employees, agents, representatives and permitted successors and assigns
(collectively, the "Company Indemnitees") in respect of, and save and hold each
Company Indemnitee harmless against and pay on behalf of or reimburse each
Company Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating or incidental to or by virtue of, without duplication:
(i) subject to the survival provisions of Section
6.1, any misrepresentation or breach of any representation or warranty (other
than intentional misrepresentations or breaches of representations and
warranties arising out of fraud) by the Purchaser set forth in this Agreement or
any certificate or other instrument or document furnished to the Company by the
Purchaser pursuant to any Transaction Document;
(ii) any intentional misrepresentation or breach of
any representation or warranty arising out of fraud by the Purchaser set forth
in this Agreement or any certificate or other instrument or document furnished
to the Company by the Purchaser pursuant to any Transaction Document; or
(iii) any nonfulfillment or breach of any covenant or
agreement of the Purchaser set forth in any Transaction Document.
(b) Limitation of Liability. In no event, except with respect
to any claim described in Sections 6.2(a)(ii) and 6.1(b) of this Agreement,
shall any indemnification be made under Section 6.2 until the aggregate amount
of Losses with respect to an indemnity obligation of the Purchaser exceeds
$10,000, then indemnification for such obligation shall be made to the full
extent of Losses (including the initial $10,000).
6.3 Indemnification Obligations of the Company.
(a) Specific Indemnifiable Losses. The Company will indemnify
the Purchaser and its Affiliates, members, officers, directors, employees,
agents, representatives and permitted successors and assigns (collectively, the
"Purchaser Indemnitees") in respect of, and save and hold each Purchaser
Indemnitee harmless against and pay on behalf of or reimburse each Purchaser
Indemnitee as and when incurred, any Loss which any Purchaser Indemnitee
suffers, sustains or becomes subject to as a result of, in connection with,
relating to or by virtue of, without duplication:
(i) subject to the survival provisions of Section
6.1, any misrepresentation or breach of any representation or warranty (other
than intentional misrepresentations or breaches of representations and
warranties arising out of fraud) by the Company set forth in this Agreement or
any certificate or other instrument or document furnished to the Purchaser by
the Company pursuant to any Transaction Document;
(ii) any intentional misrepresentation or breach of
any representation or warranty arising out of fraud by the Company set forth in
this Agreement or any certificate furnished to the Purchaser by the Company
pursuant to any Transaction Document; or
(iii) any nonfulfillment or breach of any covenant or
agreement of the Company set forth in any Transaction Document.
(b) Limitation of Liability. In no event, except with respect
to any claim described in Sections 6.3(a)(ii) and 6.1(b) of this Agreement,
shall any indemnification be made under Section 6.2 until the aggregate amount
of Losses with respect to an indemnity obligation of the Company exceeds
$10,000, then indemnification for such obligation shall be made to the full
extent of Losses in excess of $10,000.
6.4 Indemnification Procedures.
(a) Notice of Claim. Any Person making a claim for
indemnification pursuant to Section 6.2 or Section 6.3 (an "Indemnified Party")
must give the party from whom indemnification is sought (an "Indemnifying
Party") written notice of such claim (an "Indemnification Claim Notice")
promptly after the Indemnified Party receives any written notice of any action,
lawsuit, proceeding, investigation or other claim (a "Proceeding") against or
involving the Indemnified Party by a Government Entity or other third-party or
otherwise discovers the liability, obligation or facts giving rise to such claim
for indemnification; provided, that the failure to notify or delay in notifying
an Indemnifying Party will not relieve the Indemnifying Party of its obligations
pursuant to Section 6.2 or Section 6.3, as applicable, except to the extent that
such failure actually harms the Indemnifying Party. Such notice must contain a
description of the claim and the nature and amount of such Loss (to the extent
that the nature and amount of such Loss is known at such time).
(b) Control of Defense; Conditions. With respect to the
defense of any Proceeding against or involving an Indemnified Party in which a
Government Entity or other third-party in question seeks only the recovery of a
sum of money for which indemnification is provided in Section 6.2 or Section
6.3, at its option an Indemnifying Party may appoint as lead counsel of such
defense any legal counsel selected by the Indemnifying Party; provided, that
before the Indemnifying Party assumes control of such defense it must first:
(i) enter into an agreement with the Indemnified
Party (in form and substance satisfactory to the Indemnified Party) pursuant to
which the Indemnifying Party agrees to be fully responsible (with no reservation
of any rights other than the right to be subrogated to the rights of the
Indemnified Party) for all Losses relating to such Proceeding and
unconditionally guarantees the payment and performance of any liability or
obligation which may arise with respect to such Proceeding or the facts giving
rise to such claim for indemnification; and
(ii) furnish the Indemnified Party with evidence that
the Indemnifying Party, in the Indemnified Party's sole judgment, is and will be
able to satisfy any such liability.
(c) Control of Defense; Related Matters. Notwithstanding
Section 6.4(b):
(i) the Indemnified Party will be entitled to
participate in the defense of such claim and to employ counsel of its choice for
such purpose at its own expense; provided, that the Indemnifying Party will bear
the reasonable fees and expenses of such separate counsel incurred prior to the
date upon which the Indemnifying Party effectively assumes control of such
defense;
(ii) the Indemnifying Party will not be entitled to
assume control of the defense of such claim, and will pay the reasonable fees
and expenses of legal counsel retained by the Indemnified Party, if
(A) the Indemnified Party reasonably
believes that an adverse determination of such Proceeding could be materially
detrimental to or injure the Indemnified Party's reputation or future business
prospects, or
(B) a court of competent jurisdiction rules
that the Indemnifying Party has failed or is failing to prosecute or defend
vigorously such claim; and
(iii) the Indemnifying Party must obtain the prior
written consent of the Indemnified Party (which the Indemnified Party will not
unreasonably withhold) prior to entering into any settlement of such claim or
Proceeding or ceasing to defend such claim or Proceeding.
ARTICLE 7
TERMINATION
7.1 Events of Termination. This Agreement may be terminated at any time
prior to the Closing, whether before or after the Company obtains Shareholder
Approval:
(a) By mutual consent of the Company and the Managing Member
of the Purchaser;
(b) By either the Company or the Purchaser (provided the
terminating party is not otherwise in material breach of its obligations under
this Agreement and the terminating party has not otherwise taken action to
prevent the Closing) if the Sale shall not have been consummated on or before
September 30, 2000 (the "Termination Date"); provided, however, the Termination
Date may be extended until November 30, 2000 by the Company in its sole
discretion if the Sale shall not been consummated on or before the Termination
Date because of (i) delays resulting from comments from the staff of the SEC
with respect to the Proxy Statement, or (ii) the Company has scheduled, but has
not yet concluded, the meeting at which the Company intends to solicit
Shareholder Approval.
(c) By either the Company or the Purchaser if the Company does
not obtain Shareholder Approval; and
(d) By the Company or the Purchaser in the event of (i) a
breach by the other party of any representation or warranty contained herein,
which breach has not been cured within 30 days after the giving of written
notice to the breaching party of such breach and which breach, individually or
in the aggregate when combined with other such breaches, would cause the
conditions set forth in Section 5.2 or Section 5.3, as the case may be, not to
be met if the date of the action described above were the date of the Closing or
(ii) a material breach by the other party of any of the covenants or agreements
contained herein, which breach has not been cured within 30 days after the
giving of written notice to the breaching party of such breach.
7.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement, except for the provisions of
Section 4.1, shall become void and have no effect, without any liability on the
part of any party or its directors, officers or shareholders. Notwithstanding
the foregoing, nothing in this Section 7.2 shall relieve any party to this
Agreement of liability for a material breach of any provision of this Agreement
and provided, further, however, that if it shall be judicially determined that
termination of this Agreement was caused by an intentional breach of this
Agreement, then, in addition to other remedies at law or equity for breach of
this Agreement, the party so found to have intentionally breached this Agreement
shall indemnify and hold harmless the other party for its out-of-pocket costs,
fees and expenses of its counsel, accountants, financial advisors and other
experts and advisors (as well as fees and expenses) incident to negotiation,
preparation and execution of this Agreement and related documentation and
shareholders' meetings and consents.
ARTICLE 8
MISCELLANEOUS
8.1 Rights and Remedies. No course of dealing between the parties or
failure or delay in exercising any right, remedy, power or privilege (each, a
"right") pursuant to this Agreement will operate as a waiver of any rights of
any party, nor will any single or partial exercise of any right under this
Agreement preclude any other or further exercise of such right or the exercise
of any other right. Except as expressly set forth herein, the rights provided
pursuant to this Agreement are cumulative and not exhaustive of any other rights
which may be provided by law.
8.2 Waivers, Amendments to be in Writing. No waiver, amendment,
modification or supplement of this Agreement will be binding upon a party unless
such waiver, amendment, modification or supplement is set forth in writing and
is executed by such party.
8.3 Successors and Assigns. Except as otherwise expressly provided in
this Agreement, all covenants and agreements set forth in this Agreement by or
on behalf of the Purchaser and the Company will bind and inure to the benefit of
the respective successors and assigns of the Purchaser and the Company, whether
so expressed or not. Prior to the Closing, this Agreement and any of the rights,
interests or obligations hereunder may not be assigned by the Purchaser.
Following the Closing, this Agreement, and any of the rights, interests or
obligations hereunder (except for the Shares, the Warrant or the Warrant Shares,
which may be assigned except as otherwise provided therein or elsewhere in the
Transaction Documents) may not be assigned by the Purchaser except to (i) an
individual who was a direct or indirect equity holder of the Purchaser on the
date of this Agreement, (ii) Shlomo Lazar, a member of his immediate family or a
trust for the benefit of same, or any entity controlled by any of the foregoing,
or (iii) to any third-party with the prior written consent of the Company, which
consent shall not be unreasonably withheld; so long as prior to any such
assignment the Company receives (A) notice of and a description of the
particular rights, interest or obligations being assigned, and (B) a written
agreement by the assignee whereby such assignee agrees to be bound by this
provision.
8.4 Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of New Jersey, without giving
effect to any choice of law or conflict rule of any jurisdiction that would
cause the laws of any other jurisdiction to be applied. In furtherance of the
foregoing, the internal law of the State of New Jersey will control the
interpretation and construction of this Agreement, even if under any choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
8.5 Jurisdiction. Each of the parties hereby (a) irrevocably submits to
the exclusive jurisdiction of the state courts of, and the federal courts
located in, the State of New Jersey in any action or proceeding arising out of
or relating to, this Agreement, (b) waives, and agrees to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution under
the law of another jurisdiction, that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and agrees not to seek any review by any court of any other
jurisdiction which may be called upon to grant an enforcement of the judgment of
any such court.
8.6 Notices.
(a) All demands, notices, communications and reports
("notices") provided for in this Agreement will be in writing and will be either
personally delivered, mailed by registered or certified mail (return receipt
requested) or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other Person, and with such other copy, as the recipient party
has specified by prior written notice to the sending party pursuant to the
provisions of this Section 8.6.
If to the Purchaser:
--------------------
Lazar & Company I.G., LLC
One Penn Plaza, 36th Floor
New York, New York 10119
Attention: President
with a copy, which will not constitute notice to the Purchaser, to:
-------------------------------------------------------------------
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Facsimile Number: (212) 872-1002
Attention: Steven H. Scheinman
If to the Company:
------------------
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
Attention: President
with a copy, which will not constitute notice to the Company, to:
-----------------------------------------------------------------
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile Number: (973) 966-1550
(b) Any such notice will be deemed to have been given when
delivered personally, on the third business day after deposit postage pre-paid
in the U.S. mail, or on the business day after deposit with a reputable
overnight courier service delivery charges pre-paid, as the case may be.
8.7 Severability of Provisions. If any provision of this Agreement is
held to be invalid for any reason whatsoever, then such provision will be deemed
severable from the remaining provisions of this Agreement and will in no way
affect the validity or enforceability of any other provision of this Agreement.
8.8 Counterparts. The parties may execute this Agreement in separate
counterparts (no one of which need contain the signatures of all parties), each
of which will be an original and all of which together will constitute one and
the same instrument.
8.9 No Third-Party Beneficiaries. Except as otherwise expressly
provided in this Agreement, no Person which is not a party will have any right
or obligation pursuant to this Agreement.
8.10 Headings. The headings used in this Agreement are for the purpose
of reference only and will not affect the meaning or interpretation of any
provision of this Agreement.
8.11 Merger and Integration. Except as otherwise provided in this
Agreement, this Agreement sets forth the entire understanding of the parties
relating to the subject matter hereof, and all prior understandings, whether
written or oral, are superseded by this Agreement.
8.12 Transaction Expenses. The Purchaser and the Company, whether or
not the Sale is consummated, shall bear their own legal and other fees and
expenses with respect to the Sale.
8.13 Further Assurances. From and after the Closing, the Purchaser and
the Company will, and will cause their respective Affiliates to, execute all
documents and take any other action which they are reasonably requested to
execute or take to further effectuate the transactions contemplated by the
Transaction Documents.
8.14 Announcements. The Company and the Purchaser shall have the right
to review any press release or other public statement with respect to the
transactions contemplated by this Agreement for a reasonable period of time
before issuance thereof; provided, however, that the Company shall be entitled,
without the prior approval of the Purchaser, to make any press release or other
public statement with respect to such transactions as is required by applicable
law and regulations (although the Purchaser shall be consulted by the Company in
connection with any such press release or other public statement prior to its
release and shall be provided with a copy thereof and be given an opportunity to
comment thereon).
8.15 SEC. The Purchaser acknowledges that following the Closing Date
the Purchaser and its Affiliates will have obligations to file certain reports
pursuant to Section 13 and Section 16 of the Exchange Act with the SEC.
8.16 Cooperation on SEC Filings. The Company and the Purchaser
acknowledge that the Company may now or in the future be required to include
information concerning the Purchaser in SEC reports or other filings. The
Purchaser shall provide the Company with any information, certificates,
documents or other materials about the Purchaser that are reasonably necessary
to be included in such SEC reports or other filings.
ARTICLE 9
DEFINITIONS
9.1 Definitions. For purposes hereof, the following terms, when used
herein with initial capital letters, shall have the respective meanings set
forth herein:
"Affiliate" of any Person means any other Person controlling,
controlled by or under common control with such first Person.
"Agreement" means this Purchase Agreement (including Exhibits
and Schedules) as it may be amended from time to time in accordance with its
terms.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fully Diluted Basis" means (i) assuming the conversion or
exercise of outstanding securities that are convertible into or exchangeable for
shares of Common Stock (whether such outstanding securities are "in the money"
or not), (ii) not assuming the exercise of options to be issued under any plan,
and (iii) not taking into account authorized, but unissued, shares of capital
stock.
"GAAP" means, at a given time, United States generally
accepted accounting principles, consistently applied.
"Government Entity" means the United States of America or any
other nation, any state or other political subdivision thereof, or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of government.
"Legal Requirement" means any requirement arising under any
action, law, treaty, rule or regulation, determination or direction of an
arbitrator or Government Entity.
"Lien" means any mortgage, pledge, security interest,
encumbrance, easement, restriction on use, restriction on transfer, charge, or
other lien.
"Loss" means, with respect to any Person, any diminution in
value, consequential or other damage, liability, demand, claim, action, cause of
action, cost, damage, deficiency, Tax, penalty, fine or other loss or expense,
whether or not arising out of a third-party claim, including all interest,
penalties, reasonable attorneys' fees and expenses and all amounts paid or
incurred in connection with any action, demand, proceeding, investigation or
claim by any third-party (including any Government Entity) against or affecting
such Person or which, if determined adversely to such Person, would give rise
to, evidence the existence of, or relate to, any other Loss and the
investigation, defense or settlement of any of the foregoing, together with
interest thereon from the date on which such Person provides the written notice
of the related claim as described in Section 6.4 through and including the date
on which the total amount of the claim, including such interest, is recovered or
recouped pursuant to Article 6.
"Person" means an individual, a partnership, a corporation, an
association, a limited liability company, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"SEC" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shareholder Approval" means approval and adoption of the Sale
and the issuance of the Key Employee Warrants by the requisite vote of the
holders of the Company's Common Stock.
"Subsidiary" of any Person means any corporation, partnership,
association or other business entity which such Person, directly or indirectly,
controls or in which such Person has a majority ownership interest. For purposes
of this definition, a Person is deemed to have a majority ownership interest in
a partnership, association or other business entity if such Person is allocated
a majority of the gains or losses of such entity or is or controls the managing
director or general partner of such entity.
"Transaction Documents" means this Agreement, and all other
agreements, instruments, certificates and other documents to be entered into or
delivered by any party hereto in connection with the Sale.
9.2 Other Definitional Provisions.
(a) "Hereof," etc. The terms "hereof," "herein" and
"hereunder" and terms of similar import are references to this Agreement as a
whole (including Exhibits and Schedules) and not to any particular provision of
this Agreement. Section and clause references contained in this Agreement are
references to Sections and clauses in this Agreement, unless otherwise
specified.
(b) "Including." The term "including" means including, without
limitation.
(c) Successor Laws. Any reference to any particular law or
regulation will be interpreted to include any revision of or successor to that
section regardless of how it is numbered or classified.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Purchase
Agreement as of the date first written above.
LAZAR & COMPANY I.G., LLC
By: LAZAR & COMPANY I.G., INC.
Managing Member
SHLOMO LAZAR
By: __________________________
Shlomo Lazar
Chief Executive Officer
CONTINENTAL CHOICE CARE, INC.
STEVEN L. TRENK
By: _______________________________
Steven L. Trenk
President
<PAGE>
Schedule 2.2
1. Techtron, Inc. holds approximately 47% of the Company's Common Stock. Steven
L. Trenk, Alvin S. Trenk and Martin G. Jacobs, M.D., officers, directors and
principal shareholders of Techtron, Inc., have voted in unanimity in the past
with respect to the voting of Techtron, Inc. of its shares of the Company's
Common Stock, although not bound by any agreement to do so.
2. The Company granted registration rights to Ryan, Beck & Co. and Josephthal &
Co. Inc. Ryan, Beck & Co. and Josephthal & Co. Inc. have demanded registration
pursuant to such rights and the Company is in the process of registering
securities pursuant thereto.
<PAGE>
APPENDIX C
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED
OR OTHERWISE DISPOSED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION, IF REQUESTED, OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: [Closing Date], 2000
to Purchase 6,800,000 Shares of Common Stock of
CONTINENTAL CHOICE CARE, INC.
CONTINENTAL CHOICE CARE, INC., a New Jersey corporation (the
"Company"), hereby certifies that LAZAR & COMPANY I.G., LLC and its Permitted
Assigns (as defined herein) (collectively, the "Holder"), for value received, is
entitled to purchase from the Company at any time commencing on the date hereof
and terminating on the Expiration Date (as defined herein) up to 6,800,000
shares (each a "Share" and collectively the "Shares") of the Company's common
stock, no par value per share (the "Common Stock"), at an exercise price of
$3.00 per Share (the "Exercise Price"). The number of Shares purchasable
hereunder and the Exercise Price are subject to adjustment as provided in
Section 5 hereof.
1. Exercise of Warrants.
(a) Portions. The rights to purchase the Shares shall vest in
five portions (each a "Portion"), the "First Portion" being 850,000 Shares; the
"Second Portion" being 850,000 Shares; the "Third Portion" being 1,700,000
Shares; the "Fourth Portion" being 1,700,000 Shares; and the "Fifth Portion"
being 1,700,000 Shares.
(b) Targets.
(i) The First Portion shall be exercisable upon
the Market Capitalization (as defined
herein) being equal to or greater than
$63,750,000 (the "First Target");
(ii) The Second Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $143,750,000 (the "Second
Target");
(iii) The Third Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $243,750,000 (the "Third
Target");
(iv) The Fourth Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $343,750,000 (the "Fourth
Target");
(v) The Fifth Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $443,750,000 (the "Fifth
Target"); the First Target, Second Target,
Third Target, Fourth Target and Fifth
Target, each a "Target").
(c) Market Capitalization. "Market Capitalization" shall mean
the lowest Daily Market Value for a Trading Day (as such terms are defined
herein) during any period of twenty consecutive Trading Days. "Daily Market
Value" shall be computed by multiplying (i) the number of shares of the
Company's then outstanding Common Stock, plus the number of then unexercised
Warrant Shares, plus the number of shares then reserved for issuance pursuant to
the Company's Incentive Plan, plus the number of shares then reserved for
issuance pursuant to the Key Employee Warrants (as such undefined terms are
defined in the Purchase Agreement by and between the Company and the Holder
dated June 7, 2000), by (ii) (A) if the Common Stock is registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the price at
which the Common Stock was last sold on such Trading Day in the principal
securities exchange or other securities market on which the Common Stock is
being traded (or the equivalent in an over-the-counter market), or if no sale
occurred on such Trading Day, the average of the last bid and asked prices of
such Common Stock, in the principal securities exchange or other securities
market on which the Common Stock is being traded (or the equivalent in an
over-the-counter market), or (B) if the Common Stock is not registered under the
Exchange Act, the value of the Common Stock as determined by an independent
financial expert mutually agreed upon by the Company and the Holder and, in the
event the Company and the Holder fail to so mutually agree within 30 days after
the Holder requests that a determination of Market Capitalization hereunder be
made, the parties shall submit the selection of the independent financial expert
to the American Arbitration Association for arbitration in New Jersey.
(d) Procedure. Upon presentation and surrender of this Common
Stock Purchase Warrant Certificate ("Warrant Certificate"), or Lost Certificate
Affidavit (as defined herein), accompanied by a completed Election to Purchase
in the form attached hereto as Exhibit A (the "Election to Purchase") duly
executed, to the Company in accordance with Section 10, together with a check
payable to the Company in the amount of the Exercise Price multiplied by the
number of Shares being purchased, the Company or the Company's Transfer Agent,
as the case may be, shall, within two business days of receipt of the foregoing,
deliver to the Holder hereof, certificates of fully paid and non-assessable
Common Stock which in the aggregate represent the number of Shares being
purchased; provided, however, that the Holder may elect to utilize the cashless
exercise provisions set forth in Section 1(e) in lieu of tendering all or part
of the Exercise Price in cash. The certificates so delivered shall be in such
denominations as may be reasonably requested by the Holder and shall be
registered in the name of the Holder or such other name as shall be designated
by the Holder. All or less than all of the Warrants represented by this Warrant
Certificate or that may be exercised with respect to a specific Target may be
exercised and, in case of the exercise of less than all, the Company, upon
surrender hereof, will at the Company's expense deliver to the Holder a new
Warrant Certificate or Certificates (in such denominations as may be requested
by the Holder) of like tenor and dated the date hereof entitling the Holder to
purchase the number of Shares represented by this Warrant Certificate which have
not been exercised and to receive all other rights with respect to the Shares
which the Holder has on the date hereof.
(e) Cashless Exercise. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, in lieu of tendering all or
part of the Exercise Price in cash the Holder may:
(i) elect to pay all or part of the Exercise Price by
delivery of shares of Common Stock held by the Holder for at least six months,
in which case (A) the number of shares of Common Stock to be delivered shall be
determined by dividing the aggregate of the Exercise Price for the number of
Shares with respect to which the Holder elects to pay all or part of the
Exercise Price by delivery of shares of Common Stock, by the Market Value (as
defined herein) of one share of Common Stock, (B) such shares of Common Stock so
delivered shall be free and clear of all liens and encumbrances, and (C)
certificates for such shares of Common Stock shall be delivered to the Company
duly endorsed in blank for transfer; and/or
(ii) elect to pay all or part of the Exercise Price
by delivery of a promissory note to the Company in the principal amount of the
aggregate of the Exercise Price for the number of Shares with respect to which
the Holder elects to pay all or part of the Exercise Price by delivery of a
promissory note; provided, the Company may not accept any such promissory note
as payment if the Board of Directors of the Company determines in good faith
that receipt of any such promissory note as payment would, as a result of the
application thereto of generally accepted accounting principles, have a material
adverse effect on the Company. Each promissory note delivered to the Company
pursuant to this Section (1)(e) shall be a three-year, full-recourse note, and
shall bear interest at a rate of 7% (compounded annually, computed on the basis
of a year of 360 days counting the actual number of days elapsed).
As used in this Section (1)(e), "Market Value" refers to the Current Market
Value of the Common Stock on the day before the Election to Purchase and this
Warrant Certificate are duly surrendered to the Company for a full or partial
exercise hereof.
2. Expiration. This Warrant shall expire on [day prior to Closing
Date], 2003, provided, at the election of the Holder and upon payment by the
Holder to the Company of $1,000,000 on or before such date, the expiration date
shall be extended until [day prior to Closing Date], 2004; and if so extended,
at the election of the Holder and upon payment by the Holder to the Company of
an additional $1,000,000 on or before such extended date, the extended date
shall be further extended until [day prior to the Closing Date], 2005 (such date
or such extended dates being the "Expiration Date").
3. Exchange, Transfer and Replacement.
(a) Exchange. At any time prior to the exercise hereof, this
Warrant Certificate may be exchanged upon presentation and surrender to the
Company, alone or with other Warrant Certificates of like tenor of different
denominations registered in the name of the same Holder, for another Warrant
Certificate or Certificates of like tenor in the name of such Holder exercisable
for the aggregate number of Shares as the Warrant Certificate or Certificates
surrendered.
(b) Replacement of Warrant Certificate. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this Warrant Certificate and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement of the Holder
reasonably satisfactory in form and amount to the Company (collectively, a "Lost
Certificate Affidavit"), or, in the case of any such mutilation, upon surrender
and cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver in lieu thereof, a new Warrant Certificate of like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant Certificate in connection with any transfer, exchange or
replacement as provided in this Section 3, this Warrant Certificate shall be
promptly canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses, if
any, incurred by the Holder or transferees) and charges payable in connection
with the preparation, execution and delivery of the Warrant Certificates
pursuant to this Section 3.
(d) Warrant Register. The Company shall maintain, at its
principal executive offices (or at the offices of the transfer agent for the
Warrant Certificate or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant
Certificate (the "Warrant Register"), in which the Company shall record the name
and address of the person in whose name this Warrant Certificate has been
issued, as well as the name and address of each Permitted Assign and each prior
Holder of this Warrant Certificate.
4. Rights and Obligations of Holders of this Warrant Certificate. The
Holder of this Warrant Certificate shall not, by virtue hereof, be entitled to
any rights of a shareholder in the Company, either at law or in equity;
provided, however, that upon exercise of some or all of the Warrants, such
Holder shall, for all purposes, be deemed to have become the Holder of record of
such Common Stock on the date on which this Warrant Certificate, together with a
duly executed Election to Purchase, was surrendered and payment of the aggregate
Exercise Price was made, irrespective of the date of delivery of such share
certificate.
5. Adjustments.
(a) Stock Dividends, Reclassifications, Recapitalizations,
etc. In the event the Company: (i) pays a dividend in Common Stock or makes a
distribution in Common Stock, (ii) subdivides its outstanding Common Stock into
a greater number of shares, (iii) combines its outstanding Common Stock into a
smaller number of shares, or (iv) increases or decreases the number of shares of
Common Stock outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (A) the Exercise Price on the
record date of such dividend or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (B) the
number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(b) Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the securities receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available to it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 5.
(c) Merger, Sale of Assets, etc. If at any time while this
Warrant, or any portion hereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5(c) shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
(d) Adjustments for Certain Further Issuances of Stock. If
while this Warrant, or any portion hereof, remains outstanding and unexpired the
Company shall issue any shares of Common Stock or any securities convertible,
exchangeable or exercisable for shares of Common Stock (other than shares of
Common Stock or securities exercisable for shares of Common Stock issuable upon
exercise of this Warrant or the Key Employee Warrants, or pursuant to the
Incentive Plan), then the Exercise Price applicable to any subsequent exercise
of this Warrant shall be adjusted by multiplying the Exercise Price then in
effect by a fraction, the numerator of which is the number of shares of Common
Stock and other securities convertible, exchangeable or exercisable for shares
of Common Stock outstanding immediately before such issuance and the denominator
of which is the number of shares of Common Stock and other securities
convertible, exchangeable or exercisable for shares of Common Stock outstanding
immediately after such issuance, giving effect to all adjustments called for
during such period by the provisions of this Section 5.
(e) No Impairment. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant against impairment.
(f) Notice of Adjustment. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrant Certificates is adjusted, as herein provided, the
Company shall deliver to the Holders of the Warrant Certificates in accordance
with Section 10 a certificate of the Company's Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated and specifying the Exercise Price and
number of shares of Common Stock issuable upon exercise of Warrant Certificates
after giving effect to such adjustment.
(g) Current Market Value. "Current Market Value" per share of
Common Stock or any other security at any date means (i) if the security is
registered under the Exchange Act, the average of the daily closing bid prices
(or the equivalent in an over-the-counter market) for each day on which the
Common Stock is traded for any period on the principal securities exchange or
other securities market on which the Common Stock is being traded (each, a
"Trading Day") during the period commencing eleven Trading Days before such date
and ending on the date one day prior to such date; provided, however that if the
closing bid price is not determinable for at least five Trading Days in such
period, the "Current Market Value" of the security shall be determined as if the
security were not registered under the Exchange Act, or (ii) if the security is
not registered under the Exchange Act, (A) the value of the security, determined
in good faith by the Board of Directors of the Company and certified in a board
resolution, based on the most recently completed arm's-length transaction
between the Company and a person other than an affiliate of the Company and the
closing of which occurs on such date or shall have occurred within the six-month
period preceding such date, or (B) if no such transaction shall have occurred
within the six-month period, the value of the security as determined by an
independent financial expert mutually agreed upon by the Company and the Holder
and, in the event the Company and the Holder fail to so mutually agree within 30
days after the date of the requirement to determine the Current Market Value
hereunder, the parties shall submit the selection of the independent financial
expert to the American Arbitration Association for arbitration in New Jersey.
6. Notices of Certain Events. In case: (i) the Company shall take a
record of the holders of its Common Stock (or other stock or securities at the
time receivable upon the exercise of this Warrant) for the purpose of entitling
them to receive any dividend or other distribution, or any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, or (ii) of any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be delivered or
given in the manner provided herein to the Holder of this Warrant a notice
specifying, as the case may be, (A) the date of which a record is to be taken
for the purpose of such dividend, distribution or right, or (B) the date on
which such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered or given
at least 15 days prior to the date therein specified.
7. Issuance of Certificates. Within two business days of receipt of a
duly completed Election to Purchase, together with this Warrant Certificate and
payment of the Exercise Price, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this Warrant, a certificate
or certificates for the number of fully paid and non-assessable shares of Common
Stock to which the Holder shall be entitled on such exercise. In lieu of
issuance of a fractional share upon any exercise hereunder, the Company will pay
the cash value of that fractional share, calculated on the basis of the Exercise
Price. In the event the shares of Common Stock underlying this Warrant
Certificate are not registered under the Securities Act for resale under a then
effective registration statement, all such certificates shall bear a restrictive
legend to the effect that the Shares represented by such certificate have not
been registered under the Securities Act, and that the Shares may not be sold or
transferred in the absence of such registration or an exemption therefrom, such
legend to be substantially in the form of the bold-face language appearing at
the top of Page 1 of this Warrant Certificate. Where applicable, the Company
shall remove such legends so as to facilitate the transfer of such securities
pursuant to an effective registration statement or, if and to the extent
applicable, pursuant to Rule 144 under the Securities Act, provided (in the case
of Rule 144 transfers) that the Holder has provided such documentation as the
Company and its transfer agent shall reasonably require in connection therewith.
In the event that unlegended certificates have been delivered to the Holder, and
a previously effective registration statement with respect to the underlying
securities is no longer effective and the underlying securities are not
otherwise freely transferable, the Holder shall return such certificates to the
Company in exchange for legended certificates of like tenor within 10 days
following the written request therefor by the Company.
8. Reservation of Stock. The Company covenants that during the term
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of this
Warrant. The Company further covenants that all shares that may be issued upon
the exercise of the rights represented by this Warrant will, upon exercise of
the rights represented by this Warrant and payment of the Exercise Price, all as
set forth herein, be free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon any exercise of this
Warrant.
9. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, and each holder and transferee of any Shares, by his or its
acceptance thereof, agrees that no public distribution of Warrants or Shares
will be made in violation of the provisions of the Securities Act. Any
transferee shall acquire the Warrants subject to all of the relevant terms and
conditions contained in this Warrant Certificate.
10. Notices.
(a) All demands, notices, and communications ("notices")
provided for in this Warrant Certificate will be in writing and will be either
personally delivered, mailed by registered or certified mail (return receipt
requested) or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other Person, and with such other copy, as the recipient party
has specified by prior written notice to the sending party pursuant to the
provisions of this Section 10.
If to the Holder:
-----------------
Lazar & Company, LLC
One Penn Plaza, 36th Floor
New York, New York 10119
Attention: President
with a copy, which will not constitute notice to the Holder, to:
----------------------------------------------------------------
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Steven H. Scheinman
Facsimile Number: (212) 872-1002
If to the Company:
------------------
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
Attention: President
with a copy, which will not constitute notice to the Company, to:
-----------------------------------------------------------------
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile Number: (973) 966-1550
(b) Any such notice will be deemed to have been given when
delivered personally, on the third business day after deposit postage pre-paid
in the U.S. mail, or on the business day after deposit with a reputable
overnight courier service delivery charges pre-paid, as the case may be.
11. Governing Law. This Warrant Certificate will be governed by and
construed in accordance with the domestic laws of the State of New Jersey,
without giving effect to any choice of law or conflict rule of any jurisdiction
that would cause the laws of any other jurisdiction to be applied. In
furtherance of the foregoing, the internal law of the State of New Jersey will
control the interpretation and construction of this Warrant Certificate, even if
under any choice of law or conflict of law analysis, the substantive law of some
other jurisdiction would ordinarily apply.
12. Jurisdiction. Each of the parties hereby (a) irrevocably submits to
the exclusive jurisdiction of the state courts of, and the federal courts
located in, the State of New Jersey in any action or proceeding arising out of
or relating to, this Warrant Certificate, (b) waives, and agrees to assert, by
way of motion, as a defense, or otherwise, in any such suit, action or
proceeding, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution under the law of another jurisdiction, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Warrant Certificate or the subject
matter hereof may not be enforced in or by such court, and agrees not to seek,
any review by any court of any other jurisdiction which may be called upon to
grant an enforcement of the judgment of any such court.
13. Successors and Assigns. This Warrant Certificate shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and Permitted Assigns.
14. Severability. If any provision of this Warrant Certificate is held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant Certificate, and the balance hereof shall be interpreted as if such
provision were so excluded.
15. Modification and Waiver. This Warrant Certificate and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
16. Specific Enforcement. The Company and the Holder acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Warrant Certificate were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Warrant Certificate and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which either of them may be entitled by law or equity.
17. Assignment. This Warrant Certificate may not be transferred or
assigned, in whole or in part, at any time, except to (i) an individual who, on
June 7, 2000 was a direct or indirect equity holder of the Holder, (ii) Shlomo
Lazar, a member of his immediate family or a trust for the benefit of same, or
any entity controlled by any of the foregoing, or (iii) to any third-party with
the prior written consent of the Company, which consent shall not be
unreasonably withheld; so long as such individual or entity acquires the Warrant
subject to this provision ("Permitted Assign"). Assignment to a Permitted Assign
can be effected by the Holder's submission of this Warrant to the Company
together with a duly executed Assignment in substantially the form and substance
of the Form of Assignment which accompanies this Warrant Certificate and, upon
the Company's receipt hereof, and in any event, within three business days
thereafter, the Company shall issue a Warrant Certificate to the Holder to
evidence that portion of this Warrant Certificate, if any as shall not have been
so transferred or assigned.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or by facsimile, by one of its officers thereunto
duly authorized.
CONTINENTAL CHOICE CARE, INC.
Date: By:
---------------------- ----------------------------------
Name:
Title:
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder in Order to Exercise the
Common Stock Purchase Warrant Certificate
The undersigned Holder hereby elects to exercise _______ of the
Warrants represented by the attached Common Stock Purchase Warrant Certificate,
and to purchase the shares of Common Stock issuable upon the exercise of such
Warrants, and requests that certificates for securities be issued in the name
of:
---------------------------------------------
(Please type or print name and address)
---------------------------------------------
(Social Security or Tax Identification Number)
and delivered to:
--------------------------------------------------------------
(Please type or print name and address if different from above)
If such number of Warrants being exercised hereby shall not be all the Warrants
evidenced by the attached Common Stock Purchase Warrant Certificate, a new
Common Stock Purchase Warrant Certificate for the balance of such Warrants shall
be registered in the name of, and delivered to, the Holder at the address set
forth below.
[In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$______________ by check, money order or wire transfer payable in United States
currency to the order of CONTINENTAL CHOICE CARE, INC.] or [The undersigned
elects cashless exercise in accordance with Section 1(e) of the Common Stock
Purchase Warrant Certificate.]
HOLDER:
Dated: By:
------------------ --------------------------------------
Name:
Title:
Address:
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
_______________ the right represented by the within Warrant to purchase
____________ shares of Common Stock of CONTINENTAL CHOICE CARE, INC., a New
Jersey corporation, to which the within Warrant relates, and appoints
_____________ Attorney to transfer such right on the books of CONTINENTAL CHOICE
CARE, INC., a New Jersey corporation, with full power of substitution of
premises.
Dated: By:
--------------- ----------------------------------------
Name:
Title:
(signature must conform to
name of holder as specified on
the fact of the Warrant)
Address:
Signed in the presence of:
<PAGE>
APPENDIX D
PROMISSORY NOTE
$1,050,000 [Closing Date], 2000
FOR VALUE RECEIVED, the undersigned, LAZAR & COMPANY I.G.,
LLC, a New York limited liability company with its principal executive offices
located at One Penn Plaza, New York, New York 10119 ("Lazar"), hereby
unconditionally promises to pay to the order of CONTINENTAL CHOICE CARE, INC., a
New Jersey corporation with its principal executive offices located at 44 Aspen
Drive, Livingston, New Jersey 07039 (the "Company") or to any other holder of
this Note (the Company or such other holder being the "Payee"), the principal
amount of $1,050,000. Principal and interest hereunder shall be paid on the
Maturity Date (as defined herein). Principal and interest hereunder are payable
in lawful money of the United States of America to the Payee at its place of
business specified in Section 6 or in accordance with Section 6, (such place of
business or other place being the "Payment Place"), in cash or other immediately
available U.S. funds. Unless otherwise noted, capitalized terms used herein but
not defined upon their first usage shall have the meaning ascribed to such terms
in Section 16 hereof. This Note has been issued under the Purchase Agreement and
is secured pursuant to the provisions of the Pledge Agreement and entitled to
the rights thereof.
SECTION 1. Payment of Principal and Interest.
(a) Maturity Date. The "Maturity Date" is [Closing Date],
2003.
(b) Interest. Lazar hereby promises to pay interest on the
unpaid principal amount of this Note from the date hereof until this Note shall
be paid in full in cash or other immediately available U.S. funds at the
Applicable Rate, compounded annually, computed on the basis of a year of 360
days counting the actual number of days elapsed; provided, however, during any
period in which an Event of Default has occurred and is continuing, the unpaid
principal amount of this Note, shall thereafter bear interest, payable on demand
at a rate which is 2% per annum in excess of the Applicable Rate, but not in
excess of the maximum rate of interest permitted by applicable law.
(c) Optional Prepayment. Lazar may, at any time and from time
to time, without premium or penalty, prepay all or a portion of the unpaid
principal amount of this Note, together with unpaid accrued interest on the
amount so prepaid to the date chosen for prepayment, payable in cash or other
immediately available U.S. funds. All prepayments in respect of this Note shall
be applied first to the payment of all expenses to the Payee hereunder, second
to interest, and last to the principal amount of this Note.
(d) Payment Date. If any date fixed for payment hereunder is
not a Business Day, such payment date shall be extended to the next succeeding
Business Day, and during any such extension, interest on the unpaid principal
amount of this Note shall accrue and be payable at the Applicable Rate.
SECTION 2. Events of Default.
(a) For purposes of this Note, an "Event of Default" shall be
deemed to have occurred upon:
(i) any failure by Lazar to pay (by delivery of cash
or other immediately available U.S. funds) all or any portion of principal,
interest accruing thereon or other amounts due and owing under this Note when
the same shall be due and payable in accordance with the terms hereof, whether
on the scheduled date, by acceleration or otherwise; or
(ii) any default by Lazar in the due and punctual
performance or observance of any of the covenants or agreements of Lazar
contained in this Note or in the Pledge Agreement, which failure continues
unremedied for a period of 30 days after written notice of such default is given
by the Payee to Lazar; or
(iii) (A) the filing by Lazar or Shlomo Lazar, Lazar
& Company I.G., Inc. or assignees thereof to the Purchase Agreement or the
Warrant (each a "Lazar Affiliate") of a voluntary petition seeking liquidation,
reorganization, arrangement or readjustment, in any form, of their respective
debts under Title 11 of the United States Code or any other applicable domestic
or foreign bankruptcy, insolvency or similar law (or corresponding provisions of
future laws), or the filing by Lazar or a Lazar Affiliate of an answer
consenting to or acquiescing in any such petition, (B) the making by Lazar or a
Lazar Affiliate of any assignment for the benefit of their respective creditors,
or the admission by Lazar or a Lazar Affiliate in writing of their respective
inability to pay their respective debts as they become due, (C) the filing of
(x) an involuntary petition against Lazar or a Lazar Affiliate under Title 11 of
the United States Code, or any other applicable domestic or foreign bankruptcy,
insolvency or similar law (or corresponding provisions of future laws), (y) an
application for the appointment of a custodian, receiver, trustee or other
similar official for Lazar or a Lazar Affiliate for all or a substantial part of
their respective assets, or (z) an involuntary petition against Lazar or a Lazar
Affiliate seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of Lazar or a Lazar Affiliate or
any of their respective debts under any other domestic or foreign insolvency
law, provided that any such filing under this subsection (iii)(C) shall not have
been vacated, set aside or stayed within a 60 day period from the date thereof,
or (D) the entry against Lazar or a Lazar Affiliate of a final and nonappealable
order for relief under any domestic or foreign bankruptcy, insolvency or similar
law now or hereafter in effect; or
(iv) all or any substantial part of Lazar's assets
the loss of which would materially and adversely affect the financial condition,
prospects, assets or business of Lazar shall be condemned, seized or otherwise
appropriated, or custody or control of such assets shall be assumed by any
governmental agency or by any court of competent jurisdiction at the instance of
any governmental agency and shall be retained for a period of 60 days; or
(v) any material representation or material warranty
made or deemed made by Lazar to the Payee in connection with the issuance of
this Note or in any of the Collateral Documents shall be false or misleading in
any material respect on the date as of which made or deemed made; or
(vi) any money judgment (other than a money judgment
covered by insurance, but only if the insurer has admitted liability with
respect to such money judgment), writ or warrant of attachment, or similar
process shall be entered or filed against Lazar involving in any such case an
amount in excess of 30% of the then outstanding principal and accrued interest
due under this Note, or any of its assets and shall remain undischarged,
unvacated, unbonded or unstayed for a period of 60 days; or
(vii) for any reason (not due to the fault of the
Payee) any Collateral Document ceases to be in full force and effect or any Lien
intended to be created thereby ceases to be or is not valid and perfected; or
any Lien in favor or made for the benefit of the Payee contemplated by any
Collateral Document, shall, at any time, be invalidated or otherwise cease to be
in full force and effect (not due to the fault of the Payee); or
(viii) the dissolution, liquidation, or termination
of Lazar.
(b) Upon the occurrence and during the continuance of any
Event of Default described in Section 2(a) above other than in clause (iii)
thereof, the Payee may, by written notice to Lazar, declare all or any portion
of the unpaid principal amount of this Note and all interest accrued thereon and
other amounts due and owing hereunder to be immediately due and payable. Upon
the occurrence of any Event of Default described in clause (iii) of Section 2(a)
above, the unpaid principal amount of this Note and all interest accrued thereon
and other amounts due and owing hereunder shall accelerate and become due and
payable, without any action or express notice by the Payee. Demand, presentment,
protest and notice of non-payment are hereby waived by Lazar. All payments made
following an Event of Default and all proceeds of Collateral received by the
Payee in respect of this Note shall be applied first to the payment of all
expenses owing to the Payee hereunder, second to interest, and last to the
original principal amount of this Note.
SECTION 3. Collateral. The obligations of Lazar under this
Note are secured by the Pledge Agreement and reference is made to such document
for the terms and conditions governing the collateral security for the
obligations of Lazar hereunder.
SECTION 4. Waiver or Alteration. None of the provisions hereof
may be waived, altered or amended, except by a written instrument signed by the
Payee and Lazar, but no such waiver shall extend to any subsequent or other
Event of Default or impair any right consequent thereon except to the extent
expressly provided in such waiver.
SECTION 5. Remedies Cumulative. No failure to exercise or
delay in exercising any right, remedy, power or privilege hereunder or under the
Collateral Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder or under the
Collateral Documents preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided herein and in the Collateral Documents are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided at law or in equity.
SECTION 6. Notices.
(a) All demands, notices, communications and reports
("notices") provided for in this Note will be in writing and will be either
personally delivered, mailed by registered or certified mail (return receipt
requested) or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other person, and with such other copy, as the recipient party
has specified by prior written notice to the sending party pursuant to the
provisions of this Section 6.
If to Lazar:
------------
Lazar & Company I.G., LLC
One Penn Plaza, 36th Floor
New York, New York 10119
Attention: President
with a copy, which will not constitute notice to Lazar, to:
-----------------------------------------------------------
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Steven H. Scheinman
Facsimile Number: (212) 872-1002
If to the Company:
------------------
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
Attention: President
with a copy, which will not constitute notice to the Company, to:
-----------------------------------------------------------------
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile Number: (973) 966-1550
(b) Any such notice will be deemed to have been given when
delivered personally, on the third business day after deposit postage pre-paid
in the U.S. mail, or on the business day after deposit with a reputable
overnight courier service delivery charges pre-paid, as the case may be.
SECTION 7. Governing Law. This Note will be governed by and
construed in accordance with the domestic laws of the State of New Jersey,
without giving effect to any choice of law or conflict rule of any jurisdiction
that would cause the laws of any other jurisdiction to be applied. In
furtherance of the foregoing, the internal law of the State of New Jersey will
control the interpretation and construction of this Note, even if under any
choice of law or conflict of law analysis, the substantive law of some other
jurisdiction would ordinarily apply.
SECTION 8. Jurisdiction. Each of the parties hereby (a)
irrevocably submits to the exclusive jurisdiction of the state courts of, and
the federal courts located in, the State of New Jersey in any action or
proceeding arising out of or relating to, this Note, (b) waives, and agrees to
assert, by way of motion, as a defense, or otherwise, in any such suit, action
or proceeding, any claim that it is not subject personally to the jurisdiction
of the above-named courts, that its property is exempt or immune from attachment
or execution under the law of another jurisdiction, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Note or the subject matter hereof
may not be enforced in or by such court, and agrees not to seek, any review by
any court of any other jurisdiction which may be called upon to grant an
enforcement of the judgment of any such court.
SECTION 9. Severability. If any provision of this Note is
invalid or unenforceable in any jurisdiction, the other provisions hereof shall
remain in full force and effect in such jurisdiction and the remaining
provisions hereof shall be liberally construed in favor of the Payee in order to
effectuate the provisions hereof and the invalidity of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of any other
provision in any other jurisdiction, including the State of New Jersey.
SECTION 10. Costs of Enforcement. Lazar agrees to pay, or
reimburse the Payee, on demand, for all losses, including, without limitation,
attorneys' fees and disbursements, and costs of settlement incurred by the Payee
after the occurrence of an Event of Default in enforcing any obligation of Lazar
hereunder or in foreclosing against the Collateral or exercising or enforcing
any other right or remedy available by reason of an Event of Default.
SECTION 11. Successors and Assigns: Transferability. This Note
shall inure to the benefit of the Payee and be binding upon Lazar and their
respective transferees, successors and assigns; provided, however, that Lazar
may not transfer or assign any of its rights or obligations hereunder without
the prior written consent of the Payee; provided, further, that the Payee may
not transfer or assign any of its rights or obligations hereunder without the
prior written consent of Lazar, unless any such transfer or assignment is by
operation of law. Within five Business Days after receipt of notice of any
assignment by the Payee to any person or entity of all or any part of this Note,
Lazar shall, at the request and expense of such assignee, execute and deliver to
such assignee, in exchange for the surrendered Note or Notes, a new Note to the
order of such assignee in an amount equal to the amount of this Note assigned to
it, and if the Payee has retained any amount owing to it hereunder, a new Note
to the order of the Payee in an amount equal to the amount retained by it
hereunder, which new Note or Notes shall be dated the same date as the
surrendered Note or Notes and be in substantially the form of this Note, and
such assignee will be deemed the Payee under the Note issued to it.
SECTION 12. Replacement of Note. Upon receipt of evidence
reasonably satisfactory to Lazar of the loss, theft, destruction or mutilation
of this Note, and Lazar's receipt of an indemnity agreement of the Payee
reasonably satisfactory to Lazar, Lazar will, at the expense of the Payee,
execute and deliver, in lieu thereof, a new Note of like terms.
SECTION 13. Further Assurances. Lazar shall execute and
deliver from time to time to the Payee all such further documents and
instruments and do all such other acts and things as may be reasonably required
by the Payee to enable the Payee to exercise and enforce its rights hereunder
and under the Collateral Documents and to perfect, continue the perfection of,
preserve and protect its Lien on the Collateral.
SECTION 14. Waiver of Jury Trial. LAZAR AND THE PAYEE
IRREVOCABLY WAIVE ANY AND ALL RIGHTS LAZAR AND THE PAYEE MAY HAVE TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING, OR CLAIM OF ANY NATURE RELATING TO THIS NOTE OR
THE PLEDGE AGREEMENT. Lazar and the Payee acknowledge that the foregoing waiver
is knowing and voluntary.
SECTION 15. Descriptive Headings. The descriptive headings of
this Note are inserted for convenience only and do not constitute a part of this
Note.
SECTION 16. Definitions.
(a) For purposes of this Note, the following terms have the
following meanings:
"Applicable Rate" means 7% per annum.
"Business Day" shall mean a day other than a Saturday, Sunday
or other day on which commercial banks in New York or New Jersey are authorized
or required by law to close.
"Collateral" shall have the meaning given such term in the
Pledge Agreement.
"Collateral Documents" shall mean the Purchase Agreement, the
Pledge Agreement, and all other security agreements, collateral assignments and
other agreements or conveyances at any time delivered to the Payee to create or
evidence Liens to secure the obligations of Lazar hereunder.
"Lien" shall mean any mortgage, lien, pledge, charge, security
interest or encumbrance of any kind in respect of any asset, whether now owned
or hereafter acquired, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell and any filing of or agreement to give any financing statement under the
Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Note" means, collectively, this Note and any note issued to
an assignee pursuant to Section 11 hereof.
"Pledge Agreement" shall mean the Pledge Agreement dated as of
the date hereof made by Lazar in favor of the Company, for itself and for the
benefit of the Payee, as such agreement may be amended, supplemented or modified
from time to time.
"Purchase Agreement" shall mean the Purchase Agreement dated
as of June 7, 2000 entered into between the Company and Lazar regarding the
purchase and sale of the Shares and the Warrant as such agreement may be
amended, supplemented or modified from time to time.
"Warrant" shall mean the Warrant dated as of the date hereof
issued by the Company to Lazar.
(b) All references to "Sections" of this Note shall be to
Sections of this Note unless otherwise specifically provided.
IN WITNESS WHEREOF, Lazar has caused this Note to be executed
by its duly authorized officer as of the day and year first written above.
LAZAR & COMPANY I.G., LLC
By: LAZAR & COMPANY I.G., INC.
Managing Member
By: ________________________
Shlomo Lazar
Chief Executive Officer
<PAGE>
APPENDIX E
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Agreement") is made as of this ___ day of
____, [Closing Date] 2000, by and between LAZAR & COMPANY I.G., LLC, a New York
limited liability company (hereinafter, together with its successors and
assigns, the "Pledgor") and CONTINENTAL CHOICE CARE, INC., a New Jersey
corporation (hereinafter, together with its successors and assigns, the
"Pledgee"). Capitalized terms used in this Agreement but not defined upon their
first usage are defined in Section 9.1, unless otherwise noted.
WHEREAS, the Pledgor and the Pledgee have entered into a
Purchase Agreement dated as of June 7, 2000 (the "Purchase Agreement"), upon the
terms and subject to the conditions of which the Pledgee has agreed to sell to
the Pledgor certain "Shares" and a "Warrant" (as defined in the Purchase
Agreement); and
WHEREAS, in connection with the Purchase Agreement, the
Pledgor has executed and delivered to the Pledgee a promissory note dated
[Closing Date], 2000 in the original principal amount of $1,050,000 (the
"Promissory Note") in partial payment of the "Purchase Price" (as defined in the
Purchase Agreement) for the Shares and the Warrant; and
WHEREAS, it is a condition to the Pledgee's execution and
delivery of the Purchase Agreement and the receipt and acceptance of the
Promissory Note that, in order to secure the payment and performance in full of
all of the obligations of the Pledgor under the Promissory Note, the Pledgor
pledge to the Pledgee: (1) all of the Shares, and (2) 80,000 shares of common
stock of Tutor 2000, Inc. (the "Tutor 2000 Shares"), upon the terms and
conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants and
agreements herein contained, the parties agree as follows:
ARTICLE 1
PLEDGE AND ASSIGNMENT BY THE PLEDGOR
1.1 Pledge and Assignment. Pursuant to the Purchase Agreement and the
Promissory Note, and in order to secure the payment and performance in full of
all of the Pledgor's Obligations (whether existing on the date of this Agreement
or arising at any time or times thereafter), the Pledgor, as beneficial owner,
hereby pledges, hypothecates and assigns to the Pledgee, and hereby grants to
the Pledgee a continuing security interest in, the following: (a) each of the
Initial Pledged Securities and all of the certificates representing the Initial
Pledged Securities; (b) all of the Pledged Securities which shall be issued,
distributed or transferred at any time or times after the date of this Agreement
and all of the certificates representing such Pledged Securities; (c) all of the
Pledged Securities Dividends; and (d) all of the Pledgor's rights, title,
interests, claims and remedies and all other benefits whatever now existing or
hereafter arising in, to, under or in respect of all of the Initial Pledged
Securities, all of the other Pledged Securities, all of the Pledged Securities
Dividends and all of the income and proceeds of any thereof.
TO HAVE AND TO HOLD all of the foregoing unto the Pledgee,
subject, however, to the terms and conditions set forth in this Agreement.
1.2 Delivery of Certificates Representing Pledged Securities.
(a) All of the certificates representing the Initial Pledged
Securities have been delivered by the Pledgor to the Pledgee in pledge on the
date of this Agreement. Each of such certificates names the Pledgor as the owner
of record of the Initial Pledged Securities represented thereby. Each of the
Initial Pledged Securities has been duly transferred by the Pledgor pursuant to
instruments of transfer which have been duly executed in blank and delivered to
the Pledgee by the Pledgor.
(b) If (and on each occasion that) any Additional Pledged
Securities shall, at any time after the date of this Agreement, be issued,
distributed or otherwise transferred, the Pledgor will forthwith (i) cause all
of the certificates representing such Additional Pledged Securities to be
delivered to the Pledgee, and (ii) execute in blank and deliver to the Pledgee
instruments of securities transfer, satisfactory to the Pledgee in form and
substance, by which each of such Additional Pledged Securities shall be duly
transferred by the Pledgor to the Pledgee. Each of such certificates will name
the Pledgor as the owner of record of such Additional Pledged Securities
represented thereby.
1.3 Voting Power.
(a) Until a Notice of Acceleration is given to the Pledgor,
the Pledgor will be permitted to exercise all voting powers pertaining to
Pledged Securities for any purpose not inconsistent with the terms of this
Agreement or the Promissory Note.
(b) The Pledgor acknowledges and agrees with the Pledgee that,
unless the Pledgee otherwise consents, the Pledgor shall have no rights whatever
to exercise any voting powers pertaining to any Pledged Securities at any time
after a Notice of Acceleration is given by the Pledgee to the Pledgor.
1.4 Cash Dividends.
(a) Until a Notice of Acceleration is given by the Pledgee to
the Pledgor, the Pledgor will be permitted to receive, collect and recover
ordinary cash dividends payable in respect of the Pledged Securities (subject to
the covenants and obligations of the Pledgor under Article 3 of this Agreement)
except that all such cash dividends shall be immediately applied by the Pledgor
in payment of any outstanding amounts under the Promissory Note.
(b) The Pledgor acknowledges and agrees with the Pledgee that
the Pledgor shall have no rights prior to the release of all of the Collateral
pursuant to Section 5.4(a) (whether before or after a Notice of Acceleration is
given by the Pledgee to the Pledgor) to receive, collect or recover any Pledged
Securities Dividends payable (i) in shares of any class of the capital stock of
the Pledgee or of the capital stock of any other entity, (ii) in securities
convertible into or exchangeable for or carrying any rights to acquire any
shares of any class in the capital stock of the Pledgee or the capital stock of
any other entity, (iii) in options or any other rights to acquire any shares of
any class in the capital stock of the Pledgee or of the capital stock of any
other entity, or (iv) in any other property of any kind other than cash.
(c) The Pledgor hereby covenants with the Pledgee that, if
(and on each occasion that) the Pledgor shall receive, collect or recover any
Pledged Securities Dividends in violation or contravention of the provisions of
this Agreement or the Promissory Note prior to the release of all of the
Collateral pursuant to Section 5.4(a), then the Pledgor will hold the dividends
so received, collected or recovered in trust for the Pledgee without commingling
the same with any other property or funds of the Pledgor, and, promptly after
any such dividends shall be received, collected or recovered by the Pledgor, the
Pledgor will pay or deliver the same directly to the Pledgee.
ARTICLE 2
REPRESENTATIONS
The Pledgor hereby represents and warrants to the Pledgee as follows:
2.1 Beneficial Ownership of Initial Pledged Securities. The Pledgor is
the sole record and beneficial owner of each of the Initial Pledged Securities.
None of the Initial Pledged Securities is subject to any pledge, hypothecation,
assignment, mortgage, lien, security interest, charge or other encumbrance of
any kind except that created by this Agreement (unless created by the Pledgee
after the date of this Agreement). None of the Initial Pledged Securities is
subject to any shareholder agreements, voting agreements, voting trusts, trust
deeds, irrevocable proxies or any other similar agreements or instruments,
except this Agreement (unless created by the Pledgee after the date of this
Agreement).
2.2 Binding Effect of Agreement. This Agreement has been duly
authorized, executed and delivered by the Pledgor and is in full force and
effect. All of the agreements and obligations of the Pledgor contained in this
Agreement constitute legal, valid and binding obligations of the Pledgor
enforceable against the Pledgor in accordance with their respective terms.
ARTICLE 3
COVENANTS
3.1 Defense of the Pledgee's Title and Rights. The Pledgor hereby
covenants with the Pledgee that the Pledgor will defend the Pledgee's right,
title and property interest in and to all of the Pledged Securities. So long as
the Pledgor's Obligations remain outstanding and subject to Article 5, the
Pledgor will not sell, assign or otherwise transfer or dispose of any of the
Pledged Securities, and it will not create, assume, incur or permit to exist any
mortgage, lien, pledge, charge, security interest or other encumbrance of any
kind in respect of any of the Pledged Securities; excluding, however, the lien,
pledge, and security interest created under this Agreement.
3.2 Shareholders Agreements. The Pledgor hereby covenants with the
Pledgee that the Pledgor will not, with respect to any of the Pledged
Securities, enter into any shareholder agreements, voting agreements, voting
trusts, trust deeds, irrevocable proxies or any other similar agreements or
instruments, except this Agreement, which would restrain, prohibit or adversely
affect the satisfaction by the Pledgor of its obligations under this Agreement.
ARTICLE 4
POWER OF ATTORNEY
The Pledgor hereby absolutely and irrevocably constitutes and appoints
the Pledgee the Pledgor's true and lawful agent and attorney-in-fact, with full
power of substitution, in the name of the Pledgor or in the name of the Pledgee
or in the name of any of the Pledgee's substitute agents or attorneys: (a) to
execute such documents and instruments and do all such acts and things which the
Pledgor ought to do under the covenants and provisions contained in this
Agreement; (b) to take any and all such action as the Pledgee or any of its
substitute agents or attorneys may, in its or their sole and absolute
discretion, determine to be necessary or advisable for the purpose of
maintaining, preserving or protecting the security constituted by this Agreement
or any of the rights, remedies, powers or privileges of the Pledgee under this
Agreement; and (c) generally, in the name of the Pledgor or in the name of the
Pledgee or in the name of any of the Pledgee's substitute agents or attorneys,
to exercise all or any of the powers, authorities and discretions conferred on
or reserved to the Pledgee by or pursuant to this Agreement, and (without
prejudice to the generality of any of the foregoing) to seal and deliver or
otherwise perfect any deed, assurance, agreement, instrument or act which the
Pledgee or any of the Pledgee's substitute agents or attorneys may deem proper
in or for the purpose of exercising any of such powers, authorities or
discretions. The Pledgor hereby ratifies and confirms, and hereby agrees to
ratify and confirm, whatever the Pledgee or any of the Pledgee's substitute
agents or attorneys shall do or purport to do in the exercise of the power of
attorney granted to the Pledgee pursuant to this Article 4, which power of
attorney, being given for security, is irrevocable. The Pledgee shall not
exercise the power of attorney granted pursuant to this Article 4 unless the
Pledgee gives the Pledgor seven days' prior written notice of the action
required to be taken by the Pledgor and the Pledgor fails to take such action
during the seven day period.
ARTICLE 5
TERMS OF THE SECURITY HELD AND RELEASE OF SECURITY
5.1 Continuing Security. The security created by this Agreement shall
be held by the Pledgee as a continuing security for the payment and performance
of all of the Pledgor's Obligations (whether existing on the date of this
Agreement or arising from time to time thereafter). This Agreement, all of the
rights, remedies, powers and privileges of the Pledgee hereunder and the
security created hereby shall be in addition to, and shall not in any way be
prejudiced or affected by, any other collateral or any other security now or at
any time or times hereafter held by the Pledgee for all or any part of the
Pledgor's Obligations. Each and every right, remedy, power and privilege
conferred on or reserved to the Pledgee shall be cumulative and in addition to,
and not in limitation of, each and every other right, remedy, power or privilege
conferred on or reserved to the Pledgee under this Agreement or otherwise
existing or arising. All of the rights, remedies, powers and privileges vested
in the Pledgee may be exercised at such time or times and in such order and
manner as the Pledgee may, in its sole and absolute discretion, deem expedient.
5.2 Waivers of Notice; Assent. The agreements and obligations of the
Pledgor to the Pledgee hereunder and the security constituted hereby shall not
be, to any extent or in any way or manner whatsoever, satisfied, discharged,
impaired, diminished, released or otherwise affected by any of the following,
whether or not the Pledgor shall have had any notice or knowledge of any
thereof: (a) the absorption, consolidation, merger or amalgamation of, or the
effectuation of any other change whatsoever in the name, membership,
constitution or place of formation of, the Pledgor, the Pledgee, or any of their
respective subsidiaries or affiliates; (b) any extension or postponement of the
time for the payment or performance of all or any part of the Pledgor's
Obligations, the acceptance of any partial payment on all or any part of the
Pledgor's Obligations, any and all other indulgences whatsoever by the Pledgee
in respect of all or any part of the Pledgor's Obligations, the taking,
addition, substitution or release, in whole or in part, of any security for all
or any part of the Pledgor's Obligations, or the addition, substitution or
release, in whole or in part, of any person or persons primarily or secondarily
liable in respect of all or any part of the Pledgor's Obligations; (c) any
action or delay in acting or failure to act on the part of the Pledgee under
this Agreement or the Promissory Note or in respect of all or any part of the
Pledgor's Obligations, (d) any modification or amendment of, or any supplement
or addition to, the Promissory Note; (e) any waiver, consent or other action or
acquiescence by the Pledgee at any time in respect of any default by the Pledgor
in the performance or observance of or the compliance with any term, covenant,
condition, agreement or obligation contained in the Promissory Note; or (f) the
Promissory Note or any provisions of any thereof shall at any time and for any
reason whatsoever cease to be in full force and effect or shall be declared null
and void or illegal, invalid, unenforceable or inadmissible in evidence. The
Pledgor hereby absolutely and irrevocably assents to and waives notice of any
and all events, conditions, matters and things hereinbefore specified in clauses
(a) to (f), inclusive, of this Section 5.2.
5.3 No Implied Waivers. No course of dealing between the Pledgor and
the Pledgee, and no delay on the part of the Pledgee in exercising any right,
remedy, power or privilege hereunder or provided by statute or by law or in
equity or otherwise, shall impair, prejudice or constitute a waiver of any such
right, remedy, power or privilege or be construed as a waiver of any default or
as an acquiescence therein; and any single or partial exercise of any such
right, remedy, power or privilege shall not preclude any other or further
exercise thereof or the exercise of any other rights, remedies, powers or
privileges.
5.4 Release of Collateral.
(a) Satisfaction of all of the Pledgor's Obligations. Upon the
payment and satisfaction in full of all of the Pledgor's Obligations to the
Pledgee, the Pledgee will, at the cost and expense of the Pledgor, (i) release
all of the Pledged Securities and reassign to the Pledgor all such Pledged
Securities, and (ii) do and execute all such acts, things and instruments as in
the reasonable opinion of the Pledgor are necessary to effect such release or
reassignment.
(b) Satisfaction of a Portion of the Pledgor's Obligations.
Upon the payment and satisfaction in full of a portion of the Pledgor's
Obligations to the Pledgee, and in accordance with Section 5.5, the Pledgee
will, at the cost and expense of the Pledgor, (i) release a pro-rated portion of
the Collateral and reassign to the Pledgor such pro-rated portion of the
Collateral, and (ii) do and execute all such acts, things and instruments as in
the reasonable opinion of the Pledgor are necessary to effect such release or
reassignment.
(c) Additional Pledged Securities. Upon the request of the
Pledgor, and subject to Section 5.5, the Pledgee will, at the cost and expense
of the Pledgor, (i) release all or a portion of the Collateral and reassign to
the Pledgor all or such portion of the Collateral upon the pledge by the Pledgor
of Additional Pledged Securities in exchange for such Collateral, so long as
such Additional Pledged Securities are equal or greater in value than the
Collateral requested to be released, and (ii) do and execute all such acts,
things and instruments as in the reasonable opinion of the Pledgor are necessary
to effect such release or reassignment.
5.5 Value of Collateral. Collateral may be released pursuant to Section
5.4 so long as the value of the Collateral remaining after any such proposed
release would equal 115% of the then outstanding principal amount of the Note
and unpaid accrued interest thereon. In the event that the Pledgor pledges any
Additional Pledged Securities in exchange for Initial Pledged Securities, the
value of the Collateral at all times thereafter shall equal or exceed 115% of
the then outstanding principal amount of the Note and unpaid accrued interest
thereon, to be calculated as follows:
(a) remaining Initial Pledged Securities comprised of Shares
shall be valued at 100% of the last market closing price of Continental Choice
Care, Inc.'s Common Stock on the Nasdaq SmallCap (or such other market or
exchange on which Continental Choice Care, Inc.'s Common Stock is then listed);
and
(b) remaining Initial Pledged Securities comprised of Tutor
2000 Shares and/or Additional Pledged Securities shall be valued at (i) the last
market closing price of such Additional Pledged Security if such Additional
Pledged Security is then freely tradeable in an established public market, or
(ii) such value as determined in good faith by the Pledgor and the Pledgee if
such Additional Pledged Security is not then freely tradeable in an established
public market, provided, however, if the Pledgor and the Pledgee are unable to
agree upon a value for any such proposed Additional Pledged Security after using
reasonable efforts to do so, the Pledgor may not pledge such security in
exchange for any Collateral.
Following any release or exchange of all or a portion of the Collateral pursuant
to Section 5.4(c), in the event that the value of the Collateral is less than
100% of the then outstanding principal amount of the Note for 30 consecutive
days, the Pledgor shall pledge such Additional Pledged Securities as necessary
to increase the value of the Collateral to 115% of the then outstanding
principal amount of the Note.
ARTICLE 6
ENFORCEMENT OF THE SECURITY
6.1 Conditions of Enforceability of the Security. If any Event of
Default (as defined in the Promissory Note) shall at any time occur, the Pledgee
may, by giving notice to the Pledgor, declare all of the Pledgor's Obligations
immediately due and payable. Upon the giving of any such notice, all of the
Pledgor's Obligations shall (to the extent not already due and payable) become
and be immediately due and payable, and the security constituted by this
Agreement shall become immediately enforceable by the Pledgee, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly and irrevocably waived by the Pledgor.
6.2 Evidence of Pledgor's Obligations. In any legal proceedings against
the Pledgor for enforcing any agreements or obligations of the Pledgor under
this Agreement, a certificate of the Pledgee as to the aggregate amount of all
of the Pledgor's Obligations shall be conclusive evidence thereof absent
manifest error.
6.3 Manner of Enforcement of Security. At any time after the security
constituted by this Agreement shall have become enforceable, the Pledgee shall
have, in any jurisdiction where enforcement is sought, all of the rights,
remedies, powers and privileges conferred on the Pledgee, as secured party,
under the Uniform Commercial Code of the State of New Jersey, and, without
limiting the generality of the foregoing, the Pledgee shall have the full right
and power in respect of the Collateral or any part thereof in the Pledgee's sole
and complete discretion to do all and any of the following things:
(a) to cause all or any of the Initial Pledged Securities
comprised of Shares to be reacquired by the Pledgee and thereafter canceled, and
the value thereof (as determined pursuant to Section 5.5) applied to the
original principal amount of the Note;
(b) to take possession of the Collateral or any part thereof,
wherever the same may be, without legal process and without compliance with any
other condition precedent imposed by statute, rule of law or otherwise (all of
which the Pledgor hereby expressly and irrevocably waives), and to call in,
collect, convert into money or otherwise deal with the Collateral or any part
thereof with full power to sell (including the power to postpone such sale) the
Collateral or any part thereof, either together or in lots, and either by public
auction or private contract, and either for a lump sum or for a sum payable by
installments or for a sum on account and a mortgage or charge for the balance,
and with full power upon every sale to make any special or other stipulation as
to title or evidence thereof or otherwise which the Pledgee shall deem proper,
and with full power to buy in or rescind or vary any contract for sale of the
Collateral or any part thereof and to resell the same without being responsible
for any loss which may be occasioned thereby, and with full power to compromise
and effect compositions, and, for the purposes aforesaid or any of them, to
execute and do all such assurances and things as the Pledgee may think fit;
(c) to settle, adjust, compromise and arrange all accounts,
reckonings, controversies, questions, claims and demands whatsoever in relation
to all or any part of the Collateral;
(d) to cause all or any of the Pledged Securities and all or
any other Collateral to be sold, assigned or transferred to the Pledgee or to
any other person or persons and to be registered in the name of the Pledgee or
any other person or persons and to exercise or permit the exercise of any powers
or rights incident to all or any part of the Collateral in such manner as the
Pledgee shall think fit, and, in respect of all or any of the Pledged
Securities, to exercise or permit the exercise of all rights and powers
conferred by statute or otherwise upon a registered holder or owner of record
thereof, including, without limitation, the calling or causing to be called of
meetings, and proposing or causing to be proposed resolutions (whether ordinary
or special resolutions), including resolutions for winding up and voting at
meetings;
(e) to execute and do all such contracts, agreements, deeds,
documents and things, and to bring, defend and abandon all such actions, suits
and proceedings in relation to all or any part of the Collateral as the Pledgee
shall think expedient;
(f) to appoint managers, agents, officers and servants for any
of the purposes mentioned in the foregoing provisions of this Section 6.3 for
such periods as the Pledgee shall think fit and to dismiss the same; and
(g) generally, to do all such other acts and things as may be
considered incidental or conducive to any of the matters or powers mentioned in
the foregoing provisions of this Section 6.3 and which the Pledgee may or can do
lawfully and to use the name of the Pledgor for the purposes aforesaid and in
any proceedings arising therefrom.
Without limiting the foregoing and so long as the Shares are
not registered for resale under a then effective registration statement, at any
bona fide public sale, and to the extent permitted by law, at any private sale,
the Pledgee shall be free to purchase all or any part of the Collateral, free of
any right or equity of redemption in the Pledgor, which right or equity is
hereby waived and released. Any such sale may be on cash or credit. Following
any such sale, the value of the Collateral sold (as determined pursuant to
Section 5.5), shall be applied to the original principal amount of the Note. The
Pledgee shall be authorized at any such sale (if it deems it advisable to do so)
to restrict the prospective bidders or purchasers to persons who will represent
and agree that they are purchasing the Collateral for their own account in
compliance with Section 4(1) or Section 4(2) or Regulation D of the Securities
Act of 1933, as amended (the "Act") or any other applicable exemption available
under the Act. The Pledgee will not be obligated to make any sale if it
determines not to do so, regardless of the fact that notice of the sale may have
been given. The Pledgee may adjourn any sale and sell at the time and place to
which the sale is adjourned. If the Collateral is customarily sold on a
recognized market or threatens to decline speedily in value, the Pledgee may
sell such Collateral at any time without giving prior notice to the Pledgor.
Whenever notice is otherwise required by law to be sent by the Pledgee to the
Pledgor of any sale or other disposition of the Collateral, five days written
notice sent to the Pledgor will be deemed reasonable.
The Pledgor recognizes that the Pledgee may, if the Shares are
not registered for resale under a then effective registration statement, be
unable to effect or cause to be effected a public sale of the Collateral by
reason of certain prohibitions contained in the Act, so that the Pledgee may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire the
Collateral for their own account, for investment and without a view to the
distribution or resale thereof. The Pledgor understands that private sales so
made may be at prices and on other terms less favorable to the seller than if
the Collateral were sold at public sales, and agrees that the Pledgee has no
obligation to delay or agree to delay the sale of any of the Collateral for the
period of time necessary to permit the issuer of the securities which are part
of the Collateral (even if the issuer would agree) to register such securities
for sale under the Act. The Pledgor agrees that private sales made under the
foregoing circumstances shall be deemed to have been made in a commercially
reasonable manner.
6.4 Cooperation of the Pledgor. The Pledgor recognizes that the Initial
Pledged Securities are not readily marketable and that the Initial Pledged
Securities or any Additional Pledged Securities may not be marketable at all. In
order, therefore, to enable the Pledgee to use such means as the Pledgee may
determine necessary or advisable to realize upon the Collateral from time to
time, and in order to induce the Pledgee to enter into the Purchase Agreement in
reliance upon the Collateral, the Pledgor hereby absolutely and irrevocably
consents that the Pledgee may use whatever means the Pledgee may reasonably
consider necessary or advisable to sell any or all of the Collateral at any time
or times after the security constituted by this Agreement shall have become
enforceable, including, without limitation, the giving of options to purchase
any or all of the Collateral and the giving of credit to any purchaser of the
Collateral.
6.5 Protection of Persons Dealing with Agent. No purchaser, mortgagor,
mortgagee, lender, debtor or other person dealing with the Pledgee or with any
attorney or agent of the Pledgee shall be concerned to inquire (a) whether the
security constituted by this Agreement has become enforceable, (b) whether any
power exercised or purported to be exercised hereunder has become exercisable,
(c) whether any money remains due upon the security of this Agreement, (d) as to
the propriety, regularity or purpose of the exercise of any power hereunder, or
(e) as to the application of any money paid to the Pledgee or to any such
attorney or agent.
6.6 Protection of Security. In addition to the rights and powers
hereinabove given, the Pledgee may, whether or not any Event of Default shall
have occurred and whether or not the security constituted by this Agreement
shall have become enforceable, enter into possession of and hold, or appoint a
receiver to take possession of and hold, any part of the Collateral which may at
any time appear to the Pledgee in danger of being taken under any process of law
by any creditor of the Pledgor or to be in jeopardy or otherwise endangered.
ARTICLE 7
APPLICATION OF MONEY IN COLLATERAL
Cash realized by the Pledgee after the security constituted by this
Agreement shall have become enforceable as well as all cash then held or at any
time or times thereafter received by the Pledgee as realizations of all or any
part of the Collateral shall be held by the Pledgee to apply the same as
follows:
FIRST: in or towards the payment and discharge of all (if any) debts,
damages and liabilities, the payment of which shall be secured by any
assignments, mortgages, security interests, charges, liens or other encumbrances
having priority over the rights of the Pledgee in and to such money;
SECOND: in or towards the payment of, or (as the case may be) the
reimbursement of, the Pledgee for or in respect of all costs, expenses,
disbursements and losses which shall have been incurred or sustained by the
Pledgee in or about or incidental to the collection of such money by the Pledgee
or the exercise, protection or enforcement by the Pledgee of all or any of the
rights, remedies, powers and privileges of the Pledgee under this Agreement or
in respect of the Collateral and in or towards the provision of adequate
indemnity to the Pledgee against all taxes or liens which by law shall have, or
may have, priority over the rights of the Pledgee in and to such money;
THIRD: in or towards the payment of all of the Pledgor's Obligations;
FOURTH: to the payment of the surplus (if any) to the Pledgor or to
such other person or persons as shall be entitled to receive such surplus.
If after exhausting all of the Collateral there is a deficiency, the
Pledgor will be liable therefor to the Pledgee; provided, however, that nothing
contained herein will obligate the Pledgee to proceed against the Pledgor or any
other party obligated under the Pledgor's Obligations or against any other
collateral for the Pledgor's Obligations prior to proceeding against the
Collateral.
ARTICLE 8
PROVISIONS OF GENERAL APPLICATION
8.1 Notices.
(a) All demands, notices, communications and reports
("notices") provided for in this Agreement will be in writing and will be either
personally delivered, mailed by registered or certified mail (return receipt
requested) or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other person, and with such other copy, as the recipient party
has specified by prior written notice to the sending party pursuant to the
provisions of this Section 8.1.
If to the Pledgor:
------------------
Lazar & Company I.G., LLC
One Penn Plaza, 36th Floor
New York, New York 10119
Attention: President
with a copy, which will not constitute notice to the Pledgor, to:
-----------------------------------------------------------------
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
Attention: Steven H. Scheinman
Facsimile Number: (212) 872-1002
If to the Pledgee:
------------------
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
Attention: President
with a copy, which will not constitute notice to the Pledgee, to:
-----------------------------------------------------------------
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile Number: (973) 966-1550
(b) Any such notice will be deemed to have been given when
delivered, on the third business day after deposit postage pre-paid in the U.S.
mail, or on the business day after deposit with a reputable overnight courier
services delivery charges pre-paid, as the case may be.
8.2 Indemnification. Following the occurrence of an Event of Default
and while such Event of Default is continuing, without prejudice to any of the
other provisions of this Agreement, the Pledgor will pay to the Pledgee, on
demand by the Pledgee at any time and as often as the occasion therefor may
require, any and all reasonable costs, charges, expenses and other sums
expended, paid or debited in account by the Pledgee, whether by itself or
through any receiver, attorney, substitute or agent, for any of the purposes
referred to in this Agreement or otherwise howsoever in relation to the security
over the Collateral or any part thereof created by this Agreement, including
(without prejudice to the generality of the foregoing) the reasonable
remuneration of any such receivers, attorneys, substitutes or agents employed by
the Pledgee for any such purposes and any and all other reasonable costs,
charges and expenses (whether in respect of litigation or not) incurred in the
maintenance, preservation, protection, realization or enforcement of, or the
collection and recovery of any moneys from time to time arising under, such
security (or any security collateral or supplemental thereto), or in realizing
or exercising any other power, authority or discretion in relation to the
Collateral or any part thereof, or otherwise incurred under any provision of
this Agreement, to the intent that the Pledgee shall be afforded a full and
unlimited indemnity in respect thereof, and, until so repaid, such costs,
charges, expenses and other sums shall be charged on the Collateral (but without
prejudice to any other remedy, lien or security available to the Pledgee).
8.3 Further Assurances. The Pledgor hereby further agrees with the
Pledgee to execute, acknowledge and deliver any and all such further assurances
and other deeds, agreements or instruments, and to take or cause to be taken all
such other action, as shall be reasonably requested by the Pledgee from time to
time in order to give full effect to this Agreement and to maintain, preserve,
safeguard and continue at all times all or any of the rights, remedies, powers
and privileges of the Pledgee under this Agreement, all without any cost or
expense to the Pledgee. Without limiting the foregoing, if the Collateral
includes securities or any other financial or other assets maintained in a
securities account, then the Pledgor agrees to cause the financial or securities
intermediary on whose books and records the ownership interest of the Pledgor in
the Collateral appears to execute and deliver a notification and control
agreement satisfactory to the Pledgee in order to perfect and protect the
Pledgee's security interests in the Collateral.
8.4 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Pledgor and the Pledgee and their respective successors and
assigns; except that (i) the Pledgor shall not have the right to assign its
obligations hereunder or any interest herein without the prior written consent
of the Pledgee, and (ii) the Pledgor shall not have the right to assign its
rights hereunder or any interest herein without the prior written consent of the
Pledgee unless any such assignment is to any successor to its business, by
operation of law, or pursuant to a pledge by the Pledgee to secure obligations
of the Pledgee.
8.5 Severability. In the event that any one or more of the provisions
contained in this Agreement shall be invalid, illegal or unenforceable in any
respect under any law applicable thereto, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby, and the Pledgor hereby agrees with the Pledgee
to execute any new agreement, deed or other instrument necessary to remedy such
invalidity, illegality or unenforceability or in order to preserve the security
constituted by the Collateral.
8.6 Governing Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of New Jersey, without giving
effect to any choice of law or conflict rule of any jurisdiction that would
cause the laws of any other jurisdiction to be applied. In furtherance of the
foregoing, the internal law of the State of New Jersey will control the
interpretation and construction of this Agreement, even if under any choice of
law or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily apply.
8.7 Jurisdiction. Each of the parties hereby (a) irrevocably submits to
the exclusive jurisdiction of the state courts of, and the federal courts
located in, the State of New Jersey in any action or proceeding arising out of
or relating to, this Agreement, (b) waives, and agrees to assert, by way of
motion, as a defense, or otherwise, in any such suit, action or proceeding, any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution under
the law of another jurisdiction, that the suit, action or proceeding is brought
in an inconvenient forum, that the venue of the suit, action or proceeding is
improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court, and agrees not to seek, any review by any court of any
other jurisdiction which may be called upon to grant an enforcement of the
judgment of any such court.
8.8 Effect of Headings. The headings used in this Agreement are for the
purpose of reference only and will not affect the meaning or interpretation of
any provision of this Agreement.
8.9 Execution in Counterparts. The parties may execute this Agreement
in separate counterparts (no one of which need contain the signatures of all
parties), each of which will be an original and all of which together will
constitute one and the same instrument.
ARTICLE 9
DEFINITIONS
9.1 Provisions Pertaining to Definitions. For purposes of this
Agreement:
(a) "Additional Pledged Securities" means other shares of
capital stock, bonds, notes or other securities from time to time pledged to the
Pledgee (i) in exchange for any of the Pledged Securities in accordance with
Section 5.4(b), or (ii) in order to increase the value of the Collateral in
accordance with Section 5.5; and "Additional Pledged Security" means any one of
the Additional Pledged Securities.
(b) "Collateral" means, collectively, all of the Pledged
Securities, all of the Pledged Securities Dividends, and all other property,
assets, accounts and money, and all of the income, proceeds and products of any
thereof, in, to, under or in respect of which the Pledgee or any of the
nominees, agents or representatives of the Pledgee, by this Agreement or by any
agreement or agreements supplemental hereto, shall acquire any rights or
interests as security for the payment or performance of all or any part of the
Pledgor's Obligations.
(c) "Initial Pledged Securities" means (i) the Shares, and
(ii) the Tutor 2000 Shares; all of which the Pledgor warrants are legally and
beneficially owned by the Pledgor on the date of this Agreement, and the
certificates for which shall be delivered by the Pledgor to the Pledgee in
pledge upon the terms contained in this Agreement.
(d) "Notice of Acceleration" means a notice from the Pledgee
to the Pledgor by which the Pledgee shall, as provided in the Promissory Note,
declare all of the Pledgor's Obligations immediately due and payable.
(e) "Pledged Securities" means, collectively, (i) the Initial
Pledged Securities, (ii) any Additional Pledged Securities, and (iii) all other
shares of capital stock into which any Initial Pledged Securities or Additional
Pledged Securities may be converted, exchanged or reclassified or otherwise
which may be issued, transferred or distributed on or in respect of all of any
of the Initial Pledged Securities, the Additional Pledged Securities or other
Pledged Securities.
(f) "Pledged Securities Dividends" means, collectively, (i)
all dividends and distributions of every kind whatever which shall become and be
due and payable or distributable on or in respect of all or any of the Pledged
Securities, (ii) all payments of every kind whatever which shall become and be
due and payable or distributable on account of the purchase, redemption,
repurchase or other retirement of all or any of the Pledged Securities, and
(iii) all other distributions of every kind whatever (including, without
limitation, all capital distributions) which shall become and be due and payable
or distributable on or in respect of all or any of the Pledged Securities; and
"Pledged Securities Dividend" means any one of the Pledged Securities Dividends.
(g) "Pledgor's Obligations" means, collectively, all of the
indebtedness, obligations and liabilities existing on the date of this Agreement
or arising from time to time thereafter, whether direct or indirect, joint or
several, actual, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, of the Pledgor to the Pledgee under the Promissory Note and this
Agreement; and "Pledgor's Obligation" means any one of the Pledgor's
Obligations.
IN WITNESS WHEREOF, this Pledge Agreement has been duly executed by or
on behalf of each of the parties hereto as of the day and in the year first
above written in the State of New Jersey.
LAZAR & COMPANY I.G., LLC
By: LAZAR & COMPANY I.G., INC.
Managing Member
By: _________________________
Shlomo Lazar
Chief Executive Officer
CONTINENTAL CHOICE CARE, INC.
By: ________________________________
Steven L. Trenk
President
<PAGE>
APPENDIX F
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE SECURITIES REPRESENTED HEREBY HAVE
BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, ASSIGNED
OR OTHERWISE DISPOSED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER THE SECURITIES ACT OR AN OPINION, IF REQUESTED, OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT.
COMMON STOCK PURCHASE WARRANT CERTIFICATE
Dated: [Closing Date], 2000
to Purchase [1,350,000] Shares of Common Stock of
CONTINENTAL CHOICE CARE, INC.
CONTINENTAL CHOICE CARE, INC., a New Jersey corporation (the
"Company"), hereby certifies that [Steven L. Trenk, Alvin S. Trenk, Martin G.
Jacobs, M.D.] and its Permitted Assigns (as defined herein) (collectively, the
"Holder"), for value received, is entitled to purchase from the Company at any
time commencing on the date hereof and terminating on the Expiration Date (as
defined herein) up to [1,350,000] shares (each a "Share" and collectively the
"Shares") of the Company's common stock, no par value per share (the "Common
Stock"), at an exercise price of $3.00 per Share (the "Exercise Price"). The
number of Shares purchasable hereunder and the Exercise Price are subject to
adjustment as provided in Section 5 hereof.
1. Exercise of Warrants.
(a) Portions. The rights to purchase the Shares shall vest in
five portions (each a "Portion"), the "First Portion" being [12.5%] Shares; the
"Second Portion" being [12.5%] Shares; the "Third Portion" being [25%] Shares;
the "Fourth Portion" being [25%] Shares; and the "Fifth Portion" being [25%]
Shares.
(b) Targets.
(i) The First Portion shall be exercisable upon
the Market Capitalization (as defined
herein) being equal to or greater than
$63,750,000 (the "First Target");
(ii) The Second Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $143,750,000 (the "Second
Target");
(iii) The Third Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $243,750,000 (the "Third
Target");
(iv) The Fourth Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $343,750,000 (the "Fourth
Target");
(v) The Fifth Portion shall be exercisable upon
the Market Capitalization being equal to or
greater than $443,750,000 (the "Fifth
Target"); the First Target, Second Target,
Third Target, Fourth Target and Fifth
Target, each a "Target").
(c) Market Capitalization. "Market Capitalization" shall mean
the lowest Daily Market Value for a Trading Day (as such terms are defined
herein) during any period of twenty consecutive Trading Days. "Daily Market
Value" shall be computed by multiplying (i) the number of shares of the
Company's then outstanding Common Stock, plus the number of then unexercised
Warrant Shares, plus the number of shares then reserved for issuance pursuant to
the Common Stock Purchase Warrant issued to Lazar & Company I.G., LLC pursuant
to the Purchase Agreement dated June 7, 2000 between the Company and Lazar &
Company I.G., LLC (the "Purchase Agreement"), plus the number of shares then
reserved for issuance pursuant to the Key Employee Warrants other than this
Warrant, plus the number of shares then reserved for issuance pursuant to the
Company's Incentive Plan (as such undefined terms are defined in the Purchase
Agreement), by (ii) (A) if the Common Stock is registered under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the price at which the
Common Stock was last sold on such Trading Day, in the principal securities
exchange or other securities market on which the Common Stock is being traded
(or the equivalent in an over-the-counter market), or if no sale occurred on
such Trading Day, the average of the last bid and asked prices of such Common
Stock, in the principal securities exchange or other securities market on which
the Common Stock is being traded (or the equivalent in an over-the-counter
market), or (B) if the Common Stock is not registered under the Exchange Act,
the value of the Common Stock as determined by an independent financial expert
mutually agreed upon by the Company and the Holder and, in the event the Company
and the Holder fail to so mutually agree within 30 days after the Holder
requests that a determination of Market Capitalization hereunder be made, the
parties shall submit the selection of the independent financial expert to the
American Arbitration Association for arbitration in New Jersey.
(d) Procedure. Upon presentation and surrender of this Common
Stock Purchase Warrant Certificate ("Warrant Certificate"), or Lost Certificate
Affidavit (as defined herein), accompanied by a completed Election to Purchase
in the form attached hereto as Exhibit A (the "Election to Purchase") duly
executed, to the Company in accordance with Section 10, together with a check
payable to the Company in the amount of the Exercise Price multiplied by the
number of Shares being purchased, the Company or the Company's Transfer Agent,
as the case may be, shall, within two business days of receipt of the foregoing,
deliver to the Holder hereof, certificates of fully paid and non-assessable
Common Stock which in the aggregate represent the number of Shares being
purchased; provided, however, that the Holder may elect to utilize the cashless
exercise provisions set forth in Section 1(e) in lieu of tendering all or part
of the Exercise Price in cash. The certificates so delivered shall be in such
denominations as may be reasonably requested by the Holder and shall be
registered in the name of the Holder or such other name as shall be designated
by the Holder. All or less than all of the Warrants represented by this Warrant
Certificate or that may be exercised with respect to a specific Target may be
exercised and, in case of the exercise of less than all, the Company, upon
surrender hereof, will at the Company's expense deliver to the Holder a new
Warrant Certificate or Certificates (in such denominations as may be requested
by the Holder) of like tenor and dated the date hereof entitling the Holder to
purchase the number of Shares represented by this Warrant Certificate which have
not been exercised and to receive all other rights with respect to the Shares
which the Holder has on the date hereof.
(e) Cashless Exercise. Notwithstanding the foregoing provision
regarding payment of the Exercise Price in cash, in lieu of tendering all or
part of the Exercise Price in cash the Holder may:
(i) elect to pay all or part of the Exercise Price by
delivery of shares of Common Stock held by the Holder for at least six months,
in which case (A) the number of shares of Common Stock to be delivered shall be
determined by dividing the aggregate of the Exercise Price for the number of
Shares with respect to which the Holder elects to pay all or part of the
Exercise Price by delivery of shares of Common Stock, by the Market Value (as
defined herein) of one share of Common Stock, (B) such shares of Common Stock so
delivered shall be free and clear of all liens and encumbrances, and (C)
certificates for such shares of Common Stock shall be delivered to the Company
duly endorsed in blank for transfer; and/or
(ii) elect to pay all or part of the Exercise Price
by delivery of a promissory note to the Company in the principal amount of the
aggregate of the Exercise Price for the number of Shares with respect to which
the Holder elects to pay all or part of the Exercise Price by delivery of a
promissory note; provided, the Company may not accept any such promissory note
as payment if the Board of Directors of the Company determines in good faith
that receipt of any such promissory note as payment would, as a result of the
application thereto of generally accepted accounting principles, have a material
adverse effect on the Company. Each promissory note delivered to the Company
pursuant to this Section 1(e) shall be a three-year, full-recourse note, and
shall bear interest at a rate of 7% (compounded annually, computed on the basis
of 360 days counting the actual number of days elapsed).
As used in this Section (1)(e), "Market Value" refers to the Current Market
Value of the Common Stock on the day before the Election to Purchase and this
Warrant Certificate are duly surrendered to the Company for a full or partial
exercise hereof.
2. Expiration. This Warrant shall expire on [day prior to Closing
Date], 2005 (the "Expiration Date"), notwithstanding termination of the Holder's
employment with the Company prior thereto.
3. Exchange, Transfer and Replacement.
(a) Exchange. At any time prior to the exercise hereof, this
Warrant Certificate may be exchanged upon presentation and surrender to the
Company, alone or with other Warrant Certificates of like tenor of different
denominations registered in the name of the same Holder, for another Warrant
Certificate or Certificates of like tenor in the name of such Holder exercisable
for the aggregate number of Shares as the Warrant Certificate or Certificates
surrendered.
(b) Replacement of Warrant Certificate. Upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft, destruction,
or mutilation of this Warrant Certificate and, in the case of any such loss,
theft, or destruction, upon delivery of an indemnity agreement of the Holder
reasonably satisfactory in form and amount to the Company (collectively, a "Lost
Certificate Affidavit"), or, in the case of any such mutilation, upon surrender
and cancellation of this Warrant Certificate, the Company, at its expense, will
execute and deliver in lieu thereof, a new Warrant Certificate of like tenor.
(c) Cancellation; Payment of Expenses. Upon the surrender of
this Warrant Certificate in connection with any transfer, exchange or
replacement as provided in this Section 3, this Warrant Certificate shall be
promptly canceled by the Company. The Company shall pay all taxes (other than
securities transfer taxes) and all other expenses (other than legal expenses, if
any, incurred by the Holder or transferees) and charges payable in connection
with the preparation, execution and delivery of the Warrant Certificates
pursuant to this Section 3.
(d) Warrant Register. The Company shall maintain, at its
principal executive offices (or at the offices of the transfer agent for the
Warrant Certificate or such other office or agency of the Company as it may
designate by notice to the holder hereof), a register for this Warrant
Certificate (the "Warrant Register"), in which the Company shall record the name
and address of the person in whose name this Warrant Certificate has been
issued, as well as the name and address of each Permitted Assign and each prior
Holder of this Warrant Certificate.
4. Rights and Obligations of Holders of this Warrant Certificate. The
Holder of this Warrant Certificate shall not, by virtue hereof, be entitled to
any rights of a shareholder in the Company, either at law or in equity;
provided, however, that upon exercise of some or all of the Warrants, such
Holder shall, for all purposes, be deemed to have become the Holder of record of
such Common Stock on the date on which this Warrant Certificate, together with a
duly executed Election to Purchase, was surrendered and payment of the aggregate
Exercise Price was made, irrespective of the date of delivery of such share
certificate.
5. Adjustments.
(a) Stock Dividends, Reclassifications, Recapitalizations,
etc. In the event the Company: (i) pays a dividend in Common Stock or makes a
distribution in Common Stock, (ii) subdivides its outstanding Common Stock into
a greater number of shares, (iii) combines its outstanding Common Stock into a
smaller number of shares, or (iv) increases or decreases the number of shares of
Common Stock outstanding by reclassification of its Common Stock (including a
recapitalization in connection with a consolidation or merger in which the
Company is the continuing corporation), then (A) the Exercise Price on the
record date of such dividend or distribution or the effective date of such
action shall be adjusted by multiplying such Exercise Price by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (B) the
number of shares of Common Stock for which this Warrant Certificate may be
exercised immediately before such event shall be adjusted by multiplying such
number by a fraction, the numerator of which is the Exercise Price immediately
before such event and the denominator of which is the Exercise Price immediately
after such event.
(b) Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the securities receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available to it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 5.
(c) Merger, Sale of Assets, etc. If at any time while this
Warrant, or any portion hereof, is outstanding and unexpired there shall be (i)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (ii) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash, or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the Holder of this Warrant shall thereafter be entitled to
receive upon exercise of this Warrant, during the period specified herein and
upon payment of the Exercise Price then in effect, the number of shares of stock
or other securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer if this
Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 5. The foregoing provisions of this Section 5(c) shall similarly
apply to successive reorganizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
(d) Adjustments for Certain Further Issuances of Stock. If
while this Warrant, or any portion hereof, remains outstanding and unexpired the
Company shall issue any shares of Common Stock or any securities convertible,
exchangeable or exercisable for shares of Common Stock (other than shares of
Common Stock or securities exercisable for shares of Common Stock issuable upon
exercise of this Warrant or the Key Employee Warrants, or pursuant to the
Incentive Plan), then the Exercise Price applicable to any subsequent exercise
of this Warrant shall be adjusted by multiplying the Exercise Price then in
effect by a fraction, the numerator of which is the number of shares of Common
Stock and other securities convertible, exchangeable or exercisable for shares
of Common Stock outstanding immediately before such issuance and the denominator
of which is the number of shares of Common Stock and other securities
convertible, exchangeable or exercisable for shares of Common Stock outstanding
immediately after such issuance, giving effect to all adjustments called for
during such period by the provisions of this Section 5.
(e) No Impairment. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 5
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holder of this Warrant against impairment.
(f) Notice of Adjustment. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrant Certificates is adjusted, as herein provided, the
Company shall deliver to the Holders of the Warrant Certificates in accordance
with Section 10 a certificate of the Company's Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated and specifying the Exercise Price and
number of shares of Common Stock issuable upon exercise of Warrant Certificates
after giving effect to such adjustment.
(g) Current Market Value. "Current Market Value" per share of
Common Stock or any other security at any date means (i) if the security is
registered under the Exchange Act, the average of the daily closing bid prices
(or the equivalent in an over-the-counter market) for each day on which the
Common Stock is traded for any period on the principal securities exchange or
other securities market on which the Common Stock is being traded (each, a
"Trading Day") during the period commencing eleven Trading Days before such date
and ending on the date one day prior to such date; provided, however that if the
closing bid price is not determinable for at least five Trading Days in such
period, the "Current Market Value" of the security shall be determined as if the
security were not registered under the Exchange Act, or (ii) if the security is
not registered under the Exchange Act, (A) the value of the security, determined
in good faith by the Board of Directors of the Company and certified in a board
resolution, based on the most recently completed arm's-length transaction
between the Company and a person other than an affiliate of the Company and the
closing of which occurs on such date or shall have occurred within the six-month
period preceding such date, or (B) if no such transaction shall have occurred
within the six-month period, the value of the security as determined by an
independent financial expert mutually agreed upon by the Company and the Holder
and, in the event the Company and the Holder fail to so mutually agree within 30
days after the date of the requirement to determine the Current Market Value
hereunder, the parties shall submit the selection of the independent financial
expert to the American Arbitration Association for arbitration in New Jersey.
6. Notices of Certain Events. In case: (i) the Company shall take a
record of the holders of its Common Stock (or other stock or securities at the
time receivable upon the exercise of this Warrant) for the purpose of entitling
them to receive any dividend or other distribution, or any right to subscribe
for or purchase any shares of stock of any class or any other securities, or to
receive any other right, or (ii) of any capital reorganization of the Company,
any reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance of all
or substantially all of the assets of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be delivered or
given in the manner provided herein to the Holder of this Warrant a notice
specifying, as the case may be, (A) the date of which a record is to be taken
for the purpose of such dividend, distribution or right, or (B) the date on
which such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up is to take place, and the time, if any is
to be fixed, as of which the holders of record of Common Stock (or such stock or
securities at the time receivable upon the exercise of this Warrant) shall be
entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be delivered or given
at least 15 days prior to the date therein specified.
7. Issuance of Certificates. Within two business days of receipt of a
duly completed Election to Purchase, together with this Warrant Certificate and
payment of the Exercise Price, the Company, at its expense, will cause to be
issued in the name of and delivered to the Holder of this Warrant, a certificate
or certificates for the number of fully paid and non-assessable shares of Common
Stock to which the Holder shall be entitled on such exercise. In lieu of
issuance of a fractional share upon any exercise hereunder, the Company will pay
the cash value of that fractional share, calculated on the basis of the Exercise
Price. In the event the shares of Common Stock underlying this Warrant
Certificate are not registered under the Securities Act for resale under a then
effective registration statement, all such certificates shall bear a restrictive
legend to the effect that the Shares represented by such certificate have not
been registered under the Securities Act, and that the Shares may not be sold or
transferred in the absence of such registration or an exemption therefrom, such
legend to be substantially in the form of the bold-face language appearing at
the top of Page 1 of this Warrant Certificate. Where applicable, the Company
shall remove such legends so as to facilitate the transfer of such securities
pursuant to an effective registration statement or, if and to the extent
applicable, pursuant to Rule 144 under the Securities Act, provided (in the case
of Rule 144 transfers) that the Holder has provided such documentation as the
Company and its transfer agent shall reasonably require in connection therewith.
In the event that unlegended certificates have been delivered to a Holder, and a
previously effective registration statement with respect to the underlying
securities is no longer effective and the underlying securities are not
otherwise freely transferable, the Holder shall return such certificates to the
Company in exchange for legended certificates of like tenor within 10 days
following the written request therefor by the Company.
8. Reservation of Stock. The Company covenants that during the term
this Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant and, from time to time, will
take all steps necessary to amend its Certificate of Incorporation to provide
sufficient reserves of shares of Common Stock issuable upon exercise of this
Warrant. The Company further covenants that all shares that may be issued upon
the exercise of the rights represented by this Warrant will, upon exercise of
the rights represented by this Warrant and payment of the Exercise Price, all as
set forth herein, be free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously or otherwise specified herein). The Company agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon any exercise of this
Warrant.
9. Disposition of Warrants or Shares. The Holder of this Warrant
Certificate, and each holder and transferee of any Shares, by his or its
acceptance thereof, agrees that no public distribution of Warrants or Shares
will be made in violation of the provisions of the Securities Act. Any
transferee shall acquire the Warrants subject to all of the relevant terms and
conditions contained in this Warrant Certificate.
10. Notices.
(a) All demands, notices, and communications ("notices")
provided for in this Warrant Certificate will be in writing and will be either
personally delivered, mailed by registered or certified mail (return receipt
requested) or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below, or at such address, to the
attention of such other Person, and with such other copy, as the recipient party
has specified by prior written notice to the sending party pursuant to the
provisions of this Section 10.
If to the Holder:
-----------------
--------------------------
--------------------------
Attention:----------------
with a copy, which will not constitute notice to the Holder, to:
----------------------------------------------------------------
--------------------------
--------------------------
Attention:----------------
Facsimile Number:---------
If to the Company:
------------------
Continental Choice Care, Inc.
44 Aspen Drive
Livingston, New Jersey 07039
Attention: President
with a copy, which will not constitute notice to the Company, to:
-----------------------------------------------------------------
Pitney, Hardin, Kipp & Szuch LLP
200 Campus Drive
P.O. Box 1945
Morristown, New Jersey 07962-1945
Attention: Joseph Lunin
Facsimile Number: (973) 966-1550
(b) Any such notice will be deemed to have been given when
delivered personally, on the third business day after deposit postage pre-paid
in the U.S. mail, or on the business day after deposit with a reputable
overnight courier service delivery charges pre-paid, as the case may be.
11. Governing Law. This Warrant Certificate will be governed by and
construed in accordance with the domestic laws of the State of New Jersey,
without giving effect to any choice of law or conflict rule of any jurisdiction
that would cause the laws of any other jurisdiction to be applied. In
furtherance of the foregoing, the internal law of the State of New Jersey will
control the interpretation and construction of this Warrant Certificate, even if
under any choice of law or conflict of law analysis, the substantive law of some
other jurisdiction would ordinarily apply.
12. Jurisdiction. Each of the parties hereby (a) irrevocably submits to
the exclusive jurisdiction of the state courts of, and the federal courts
located in, the State of New Jersey in any action or proceeding arising out of
or relating to, this Warrant Certificate, (b) waives, and agrees to assert, by
way of motion, as a defense, or otherwise, in any such suit, action or
proceeding, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment or
execution under the law of another jurisdiction, that the suit, action or
proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Warrant Certificate or the subject
matter hereof may not be enforced in or by such court, and agrees not to seek,
any review by any court of any other jurisdiction which may be called upon to
grant an enforcement of the judgment of any such court.
13. Successors and Assigns. This Warrant Certificate shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and Permitted Assigns.
14. Severability. If any provision of this Warrant Certificate is held
to be unenforceable under applicable law, such provision shall be excluded from
this Warrant Certificate, and the balance hereof shall be interpreted as if such
provision were so excluded.
15. Modification and Waiver. This Warrant Certificate and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the Company and the Holder.
16. Specific Enforcement. The Company and the Holder acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Warrant Certificate were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Warrant Certificate and to enforce
specifically the terms and provisions hereof, this being in addition to any
other remedy to which either of them may be entitled by law or equity.
17. Assignment. This Warrant Certificate may not be transferred or
assigned, in whole or in part, at any time, except to (i) [Holder's name], a
member of his immediate family or a trust for the benefit of same, or any entity
controlled by any of the foregoing, or (ii) to any third-party with the prior
written consent of the Company, which consent shall not be unreasonably
withheld; so long as such individual or entity acquires the Warrant subject to
this provision ("Permitted Assign"). Assignment to a Permitted Assign can be
effected by the Holder's submission of this Warrant to the Company together with
a duly executed Assignment in substantially the form and substance of the Form
of Assignment which accompanies this Warrant Certificate and, upon the Company's
receipt hereof, and in any event, within three business days thereafter, the
Company shall issue a Warrant Certificate to the Holder to evidence that portion
of this Warrant Certificate, if any as shall not have been so transferred or
assigned.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or by facsimile, by one of its officers thereunto
duly authorized.
CONTINENTAL CHOICE CARE, INC.
Date: By:
---------------------- --------------------------------------
Name:
Title:
<PAGE>
ELECTION TO PURCHASE
To Be Executed by the Holder in Order to Exercise the
Common Stock Purchase Warrant Certificate
The undersigned Holder hereby elects to exercise _______ of the
Warrants represented by the attached Common Stock Purchase Warrant Certificate,
and to purchase the shares of Common Stock issuable upon the exercise of such
Warrants, and requests that certificates for securities be issued in the name
of:
---------------------------------------------
(Please type or print name and address)
---------------------------------------------
(Social Security or Tax Identification Number)
and delivered to:
--------------------------------------------------------------
(Please type or print name and address if different from above)
If such number of Warrants being exercised hereby shall not be all the Warrants
evidenced by the attached Common Stock Purchase Warrant Certificate, a new
Common Stock Purchase Warrant Certificate for the balance of such Warrants shall
be registered in the name of, and delivered to, the Holder at the address set
forth below.
[In full payment of the purchase price with respect to the Warrants
exercised and transfer taxes, if any, the undersigned hereby tenders payment of
$______________ by check, money order or wire transfer payable in United States
currency to the order of CONTINENTAL CHOICE CARE, INC.] or [The undersigned
elects cashless exercise in accordance with Section 1(e) of the Common Stock
Purchase Warrant Certificate.]
HOLDER:
Dated: By:
------------- ----------------------------------------
Name:
Title:
Address:
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
_______________ the right represented by the within Warrant to purchase
____________ shares of Common Stock of CONTINENTAL CHOICE CARE, INC., a New
Jersey corporation, to which the within Warrant relates, and appoints
_____________ Attorney to transfer such right on the books of CONTINENTAL CHOICE
CARE, INC., a New Jersey corporation, with full power of substitution of
premises.
Dated: By:
------------- -----------------------------------------
Name:
Title:
(signature must conform to
name of holder as specified on
the fact of the Warrant)
Address:
Signed in the presence of:
<PAGE>
APPENDIX G
CONTINENTAL CHOICE CARE, INC.
-------------------------------------
2000 Incentive Compensation Plan
--------------------------------------
<PAGE>
<TABLE>
<CAPTION>
CONTINENTAL CHOICE CARE, INC.
-------------------------------------
2000 Incentive Compensation Plan
--------------------------------------
Page
<S> <C> <C>
1. Purpose..................................................................................................1
2. Definitions..............................................................................................1
3. Administration...........................................................................................3
(a) Authority of the Committee......................................................................3
(b) Manner of Exercise of Committee Authority.......................................................4
(c) Limitation of Liability.........................................................................4
4. Stock Subject to Plan....................................................................................4
(a) Overall Number of Shares Available for Delivery.................................................4
(b) Application of Limitation to Grants of Awards...................................................4
(c) Availability of Shares Not Delivered under Awards...............................................5
5. Eligibility; Per-Person Award Limitations................................................................5
6. Specific Terms of Awards.................................................................................5
(a) General 5
(b) Options 5
(c) Stock Appreciation Rights.......................................................................6
(d) Restricted Stock................................................................................6
(e) Deferred Stock..................................................................................7
(f) Bonus Stock and Awards in Lieu of Obligations...................................................8
(g) Dividend Equivalents............................................................................8
(h) Other Stock-Based Awards........................................................................8
7. Certain Provisions Applicable to Awards..................................................................9
(a) Stand-Alone, Additional, Tandem, and Substitute Awards..........................................9
(b) Term of Awards..................................................................................9
(c) Form and Timing of Payment under Awards; Deferrals..............................................9
(d) Exemptions from Section 16(b) Liability........................................................10
8. Performance and Annual Incentive Awards.................................................................10
(a) Performance Conditions.........................................................................10
(b) Performance Awards Granted to Designated Covered Employees.....................................10
(c) Annual Incentive Awards Granted to Designated Covered Employees................................11
(d) Written Determinations.........................................................................12
(e) Status of Section 8(b) and 8(c) Awards under Code Section 162(m)...............................13
9. Change in Control.......................................................................................13
(a) Effect of "Change in Control"..................................................................13
(b) Definition of "Change in Control"..............................................................14
(c) Definition of "Change in Control Price"........................................................14
10. General Provisions......................................................................................14
(a) Compliance with Legal and Other Requirements...................................................14
(b) Limits on Transferability; Beneficiaries.......................................................15
(c) Adjustments....................................................................................15
(d) Taxes..........................................................................................16
(e) Changes to the Plan and Awards.................................................................16
(f) Limitation an Rights Conferred under Plan......................................................16
(g) Unfunded Status of Awards; Creation of Trusts..................................................17
(h) Nonexclusivity of the Plan.....................................................................17
(i) Payments in the Event of Forfeitures; Fractional Shares........................................17
(j) Governing Law..................................................................................17
(k) Plan Effective Date and Shareholder Approval...................................................17
</TABLE>
<PAGE>
CONTINENTAL CHOICE CARE, INC.
2000 Incentive Compensation Plan
1. Purpose. The purpose of this Continental Choice Care, Inc. 2000
Incentive Compensation Plan (the "Plan") is to assist Continental Choice Care,
Inc., a New Jersey corporation (the "Company"), and its subsidiaries in
attracting, retaining, and rewarding high-quality executives, employees, and
other persons who provide services to the Company and/or its subsidiaries,
enabling such persons to acquire or increase a proprietary interest in the
Company in order to strengthen the mutuality of interests between such persons
and the Company's shareholders, and providing such persons with annual and
long-term performance incentives to expend their maximum efforts in the creation
of shareholder value. The Plan is also intended to qualify certain compensation
awarded hereunder for tax deductibility under Section 162(m) of the Code (as
hereafter defined) to the extent deemed appropriate by the Committee (or any
successor committee) of the Board of Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof:
(a) "Annual Incentive Award" means a conditional right,
granted to a Participant under Section 8(c) hereof, to receive a cash payment,
Stock or other Award, unless otherwise determined by the Committee, after the
end of a specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of another
award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual
Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts
which have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefit
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner" shall have the meaning ascribed to such
term in Rule 13d-3 under the Exchange Act and any successor to such rule.
(e) "Board" means the Company's Board of Directors.
(f) "Change in Control" means Change in Control as defined in
Section 9 hereof.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) hereof.
(h) "Code" means the Internal Revenue Code of 1986, as amended
from time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee of two or more directors
designated by the Board to administer the Plan; provided, however, that, unless
otherwise determined by the Board, the Committee shall consist solely of two or
more directors, each of whom shall be (i) a "non-employee director" within the
meaning of Rule 16b-3, unless administration of the Plan by "non-employee
directors" is not then required in order for exemptions under Rule 16b-3 to
apply to transactions under the Plan, and (ii) an "outside director" as defined
under Section 162(m) of the Code, unless administration of the Plan by "outside
directors" is not then required in order to qualify for tax deductibility under
Section 162(m) of the Code.
(j) "Covered Employee" means an Eligible Person who is a
Covered Employee as specified in Section 8(e) hereof.
(k) "Deferred Stock" means a right, granted to a Participant
under Section 6(e) hereof, to receive Stock, cash or a combination thereof at
the end of a specified deferral period.
(l) "Dividend Equivalent" means a right, granted to a
Participant under Section 6(g) hereof, to receive cash, Stock, other Awards or
other property equal in value to dividends paid with respect to a specified
number of shares of Stock, or other periodic payments.
(m) "Effective Date" means the effective date of the Plan as
defined in Section 10(k) hereof.
(n) "Eligible Person" means each Executive Officer and other
officers and employees of the Company or of any subsidiary, including such
persons who may also be directors of the Company and other persons who provide
services to the Company and/or its subsidiaries. An employee on leave of absence
may be considered as still in the employ of the Company or a subsidiary for
purposes of eligibility for participation in the Plan.
(o) "Exchange Act" means the Securities Exchange Act of 1934,
as amended from time to time, including rules thereunder and successor
provisions and rules thereto.
(p) "Executive Officer" means an executive officer of the
Company as defined under the Exchange Act.
(q) "Fair Market Value" means the fair market value of Stock,
Awards or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock as of any given date shall be the closing sale price
per share reported on a consolidated basis for Stock listed on the principal
stock exchange or market on which Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the last
previous day on which a sale was reported.
(r) "Incentive Stock Option" or "ISO" means any Option
intended to be and designated as an incentive stock option within the meaning of
Section 422 of the Code or any successor provision thereto.
(s) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(t) "Option" means a right, granted to a Participant under
Section 6(b) hereof, to purchase Stock or other Awards at a specified price
during specified time periods.
(u) "Other Stock Based Awards" means Awards granted to a
Participant under Section 6(h) hereof.
(v) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer an
Eligible Person.
(w) "Performance Award" means a right, granted to a
Participant under Section 8 hereof, to receive Awards based upon performance
criteria specified by the Committee.
(x) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(y) "Restricted Stock" means Stock, granted to a Participant
under Section 6(d) hereof, that is subject to certain restrictions and to a risk
of forfeiture.
(z) "Rule 16b-3" means Rule 16b-3 promulgated by the
Securities and Exchange Commission under Section 16 of the Exchange Act, as from
time to time in effect and applicable to the Plan and Participants.
(aa) "SAR" or "Stock Appreciation Right" means a right granted
to a Participant under Section 6(c) hereof.
(bb) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(cc) "Stock Appreciation Right" or "SAR" means a right granted
to a Participant under Section 6(c) hereof.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered
by the Committee except to the extent that the Board elects to administer the
Plan itself, in which case references herein to the "Committee" shall be deemed
to include references to the "Board". The Committee shall have full and final
authority, in each case subject to and consistent with the provisions of the
Plan, to select Eligible Persons to become Participants, grant Awards, determine
the type, number and other terms and conditions of, and all other matters
relating to, Awards, prescribe Award agreements (which need not be identical for
each Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee may deem necessary or advisable for the
administration of the Plan.
(b) Manner of Exercise of Committee Authority. Any action of
the Committee shall be final, conclusive and binding on all persons, including
the Company, its subsidiaries, Participants, Beneficiaries, transferees under
Section 10(b) hereof or other persons claiming rights from or through a
Participant, and shareholders. The express grant of any specific power to the
Committee, and the taking of any action by the Committee, shall not be construed
as limiting any power or authority of the Committee. The Committee may delegate
to officers or managers of the Company or any subsidiary, or committees thereof,
the authority, subject to such terms as the Committee shall determine, (i) to
perform administrative functions, (ii) with respect to Participants not subject
to Section 16 of the Exchange Act, to perform such other functions as the
Committee may determine, and (iii) with respect to Participants subject to
Section 16, to perform such other functions of the Committee as the Committee
may determine to the extent performance of such functions will not result in the
loss of an exemption under Rule 16b-3 otherwise available for transactions by
such persons, in each case to the extent permitted under applicable law and
subject to the requirements set forth in Section 8(d) hereof. The Committee may
appoint agents to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and each member
thereof shall be entitled to, in good faith, rely or act upon any report or
other information furnished to it, him or her by any executive officer, other
officer or employee of the Company or a subsidiary, the Company's independent
auditors, consultants or any other agents assisting in the administration of the
Plan. Members of the Committee and any officer or employee of the Company or a
subsidiary acting at the direction of, or on behalf of, the Committee shall not
be personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.
4. Stock Subject to Plan.
(a) Overall Number of Shares Available for Delivery. Subject
to adjustment as provided in Section 10(c) hereof, the total number of shares of
Stock reserved and available for delivery in connection with Awards under the
Plan shall be 3,500,000 provided, however, that the total number of shares of
Stock with respect to which ISOs may be granted shall be 3,000,000. Any shares
of Stock delivered under the Plan may consist, in whole or in part, of
authorized and unissued shares or treasury shares.
(b) Application of Limitation to Grants of Awards. No Award
may be granted if the number of shares of Stock to be delivered in connection
with such Award or, in the case of an Award relating to shares of Stock but
settleable only in cash (such as cash-only SARs), the number of shares to which
such Award relates, exceeds the number of shares of Stock remaining available
under the Plan minus the number of shares of Stock issuable in settlement of or
relating to then-outstanding Awards. The Committee may adopt reasonable counting
procedures to ensure appropriate counting, avoid double counting (as, for
example, in the case of tandem or substitute awards) and make adjustments if the
number of shares of Stock actually delivered differs from the number of shares
previously counted in connection with an Award.
(c) Availability of Shares Not Delivered under Awards. Shares
of Stock subject to an Award under the Plan that is canceled, expired,
forfeited, settled in cash or otherwise terminated without a delivery of shares
to the Participant, including (i) the number of shares withheld in payment of
any exercise or purchase price of an Award or award or taxes relating to Awards
or awards, and (ii) the number of shares surrendered in payment of any exercise
or purchase price of an Award or award or taxes relating to any Award or award,
will again be available for Awards under the Plan, except that if any such
shares could not again be available for Awards to a particular Participant under
any applicable law or regulation, such shares shall be available exclusively for
Awards to Participants who are not subject to such limitation.
5. Eligibility; Per-Person Award Limitation. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 1,000,000 shares of Stock, subject to adjustment as
provided in Section 10(c) hereof, under each of Sections 6(b), 6(c), 6(d), 6(e),
6(f), 6(g), 6(h), 8(b) and 8(c) hereof. In addition, the maximum cash amount
that may be earned under the Plan as a final Annual Incentive Award or other
cash annual Award in respect of any fiscal year by any one Participant shall be
$3 million, and the maximum cash amount that may be earned under the Plan as a
final Performance Award or other cash Award in respect of a performance period
by any one Participant shall be $5 million.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions
set forth in this Section 6. In addition, the Committee may impose on any Award
or the exercise thereof, at the date of grant or thereafter (subject to Section
10(e) hereof), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to his
or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award that
is not mandatory under the Plan. Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must by paid to satisfy the requirements of
the New Jersey Business Corporation Act, no consideration other than services
may be required for the grant (but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of
Stock purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall not be less than the Fair
Market Value of a share of Stock on the date of grant of such Option
except as provided under Section 7(a) hereof.
(ii) Time and Method of Exercise. The Committee shall
determine the time or times at which or the circumstances under which
an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements),
the methods by which such exercise price may be paid or deemed to be
paid, the form of such payment, including, without limitation, cash,
Stock, other Awards or awards granted under other plans of the Company
or any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be delivered or
deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the
Plan shall comply in all respects with the provisions of Section 422 of
the Code. Anything in the Plan to the contrary notwithstanding, no term
of the Plan relating to ISOs (including any SAR in tandem therewith)
shall be interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be exercised, so as to disqualify
either the Plan or any ISO under Section 422 of the Code unless the
Participant has first requested the change that will result in such
disqualification.
(c) Stock Appreciation Rights. The Committee is authorized to
grant SARs to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the
Participant to whom it is granted a right to receive, upon exercise
thereof, the excess of (A) the Fair Market Value of one share of Stock
on the date of exercise (or, in the case of a "Limited SAR," the Fair
Market Value determined by reference to the Change in Control Price, as
defined under Section 9(c) hereof) over (B) the grant price of the SAR
as determined by the Committee.
(ii) Other Terms. The Committee shall determine at
the date of grant or thereafter, the time or times at which and the
circumstances under which a SAR may be exercised in whole or in part
(including based on achievement of performance goals and/or future
service requirements), the method of exercise, method of settlement,
form of consideration payable in settlement, method by or forms in
which Stock will be delivered or deemed to be delivered to
Participants, whether or not a SAR shall be in tandem or in combination
with any other Award, and any other terms and conditions of any SAR.
Limited SARs that may only be exercised in connection with a Change in
Control or other event as specified by the Committee may be granted on
such terms, not inconsistent with this Section 6(c), as the Committee
may determine. SARs and Limited SARs may be either free-standing or in
tandem with other Awards.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be
subject to such restrictions on transferability, risk of forfeiture and
other restrictions, if any, as the Committee may impose, which
restrictions may lapse separately or in combination at such times,
under such circumstances (including based on achievement of performance
goals and/or future service requirements), in such installments or
otherwise, as the Committee may determine at the date of grant or
thereafter. Except to the extent restricted under the terms of the Plan
and any Award agreement relating to the Restricted Stock, a Participant
granted Restricted Stock shall have all of the rights of a shareholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee). During the restricted
period applicable to the Restricted Stock, subject to Section 10(b)
hereof, the Restricted Stock may not be sold, transferred, pledged,
hypothecated, margined or otherwise encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment during the applicable
restriction period, Restricted Stock that is at that time subject to
restrictions shall be forfeited and reacquired by the Company; provided
that, the Committee may provide, by rule or regulation or in any Award
agreement, or may determine in any individual case, that restrictions
or forfeiture conditions relating to Restricted Stock shall be waived
in whole or in part in the event of terminations resulting from
specified causes, and the Committee may in other cases waive in whole
or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock
granted under the Plan may be evidenced in such manner as the Committee
shall determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require
that such certificates bear an appropriate legend referring to the
terms, conditions and restrictions applicable to such Restricted Stock,
that the Company retain physical possession of the certificates, and
that the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the
grant of an Award of Restricted Stock, the Committee may require that
any cash dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee, Stock distributed in connection with a
Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to
the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant
Deferred Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to the
following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award
of Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee (or, if permitted by
the Committee, as elected by the Participant). In addition, Deferred
Stock shall be subject to such restrictions (which may include a risk
of forfeiture) as the Committee may impose, if any, which restrictions
may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals
and/or future service requirements), separately or in combination, in
installments or otherwise, as the Committee may determine. Deferred
Stock may be satisfied by delivery of Stock, cash equal to the Fair
Market Value of the specified number of shares of Stock covered by the
Deferred Stock, or a combination thereof, as determined by the
Committee at the date of grant or thereafter.
(ii) Forfeiture. Except as otherwise determined by
the Committee, upon termination of employment during the applicable
deferral period or portion thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the Deferred Stock), any
Deferred Stock that is at that time subject to deferral (other than a
deferral at the election of the Participant) shall be forfeited;
provided that the Committee may provide, by rule or regulation or in
any Award agreement, or may determine in any individual case, that
restrictions or forfeiture conditions relating to Deferred Stock shall
be waived in whole or in part in the event of terminations resulting
from specified causes, and this Committee may in other cases waive in
whole or in part the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise
determined by the Committee at date of grant, Dividend Equivalents on
the specified number of shares of Stock covered by an Award of Deferred
Stock shall be either (A) paid with respect to such Deferred Stock at
the dividend payment date in cash or in shares of unrestricted Stock
having a Fair Market Value equal to the amount of such dividends, or
(B) deferred with respect to such Deferred Stock and the amount or
value thereof automatically deemed reinvested in additional Deferred
Stock, other Awards or other investment vehicles, as the Committee
shall determine or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The
Committee is authorized to grant Stock as a bonus, or to grant Stock or other
Awards in lieu of Company obligations to pay cash or deliver other property
under the Plan or under other plans or compensatory arrangements, provided that,
in the case of Participants subject to Section 16 of the Exchange Act, the
amount of such grants remains within the discretion of the Committee to the
extent necessary to ensure that acquisitions of Stock or other Awards are exempt
from liability under Section 16(b) of the Exchange Act. Stock or Awards granted
hereunder shall be subject to such other terms as shall be determined by the
Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant, entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
tandem with another Award. The Committee may provide that Dividend Equivalents
shall be paid or distributed when accrued or shall be deemed to have been
reinvested in additional Stock, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized,
subject to limitations under applicable law, to grant to Participants such other
Awards that may be denominated or payable in, valued in whole or in part by
reference to, or otherwise based on, or related to, Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Stock, purchase rights for Stock, Awards with
value and payment contingent upon performance of the Company or any other
factors designated by the Committee, and Awards valued by reference to the book
value of Stock or the value of securities of or the performance of specified
subsidiaries. The Committee shall determine the terms and conditions of such
Awards. Stock delivered pursuant to an Award in the nature of a purchase right
granted under this Section 6(h) shall be purchased for such consideration, paid
for at such times, by such methods, and in such forms, including, without
limitation, cash, Stock, other Awards, or other property, as the Committee shall
determine. Cash awards, as an element of or supplement to any other Award under
the Plan, may also be granted pursuant to this Section 6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards.
Awards granted under the Plan may, in the discretion of the Committee, be
granted either alone or in addition to, in tandem with, or in substitution or
exchange for, any other Award or any award granted under another plan of the
Company, any subsidiary, or any business entity to be acquired by the Company or
a subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee should require the surrender
of such other Award or award in consideration for the grant of the new Award. In
addition, Awards may be granted in lieu of cash compensation, including in lieu
of cash amounts payable under other plans of the Company or any subsidiary, in
which the value of Stock subject to the Award is equivalent in value to the cash
compensation (for example, Deferred Stock or Restricted Stock), or in which the
exercise price, grant price or purchase price of the Award in the nature of a
right that may be exercised is equal to the Fair Market Value of the underlying
Stock minus the value of the cash compensation surrendered (for example, Options
granted with an exercise price "discounted' by the amount of the cash
compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such
period as may be determined by the Committee; provided that in no event shall
the term of any Option or SAR exceed a period of ten years (or such shorter term
as may be required in respect of an ISO under Section 422 of the Code).
(c) Form and Timing of Payment under Awards; Deferrals.
Subject to the terms of the Plan and any applicable Award agreement, payments to
be made by the Company or a subsidiary upon the exercise of an Option or other
Award or settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events (in addition to
a Change in Control). Installment or deferred payments may be required by the
Committee (subject to Section 10(e) hereof, including the consent provisions
thereof in the case of any deferral of an outstanding Award not provided for in
the original Award agreement) or permitted at the election of the Participant on
terms and conditions established by the Committee. Payments may include, without
limitation, provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of Dividend
Equivalents or other amounts in respect of installment or deferred payments
denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent
of the Company that the grant of any Awards to or other transaction by a
Participant who is subject to Section 16 of the Exchange Act shall be exempt
under Rule 16b-3 (except for transactions acknowledged in writing to be
non-exempt by such Participant). Accordingly, if any provision of this Plan or
any Award agreement does not comply with the requirements of Rule 16b-3 as then
applicable to any such transaction, such provision shall be construed or deemed
amended to the extent necessary to conform to the applicable requirements of
Rule 16b-3 that such Participant shall avoid liability under Section 16(b).
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and the timing thereof,
may be subject to such performance conditions as may be specified by the
Committee. The Committee may use such business criteria and other measures of
performance as it may deem appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the amounts
payable under any Award subject to performance conditions, except as limited
under Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual
Incentive Award intended to qualify under Section 162(m) of the Code.
(b) Performance Awards Granted to Designated Covered
Employees. If the Committee determines that a Performance Award to be granted to
an Eligible Person who is designated by the Committee as likely to be a Covered
Employee should qualify as "performance-based compensation" for purposes of
Section 162(m) of the Code, the grant, exercise and/or settlement of such
Performance Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or more business
criteria and a targeted level or levels of performance with respect to
each of such criteria, as specified by the Committee consistent with
this Section 8(b). Performance goals shall be objective and shall
otherwise meet the requirements of Section 162(m) of the Code and
regulations thereunder (including Regulation Section 1.162-27 and
successor regulations thereto), including the requirement that the
level or levels of performance targeted by the Committee result in the
achievement of performance goals being "substantially uncertain." The
Committee may determine that such Performance Awards shall be granted,
exercised and/or settled upon achievement of any one performance goal
or that two or more of the performance goals must be achieved as a
condition to grant, exercise and/or settlement of such Performance
Awards. Performance goals may differ for Performance Awards granted to
any one Participant or to different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis, and/or for
specified subsidiaries or business units of the Company (except with
respect to the total shareholder return and earnings per share
criteria), shall be used by the Committee in establishing performance
goals for such Performance Awards: (1) earnings per share; (2)
revenues; (3) cash flow; (4) cash flow return on investment; (5) return
on assets, return on investment, return on capital, return on equity;
(6) economic value added; (7) operating margin; (8) net income; pretax
earnings; pretax earnings before interest, depreciation and
amortization; pretax operating earnings after interest expense and
before incentives, service fees, and extraordinary or special items;
operating earnings; (9) total shareholder return; and (10) any of the
above goals as compared to the performance of a published or special
index deemed applicable by the Committee including, but not limited to,
the Standard & Poor's 500 Stock Index. One or more of the foregoing
business criteria shall also be exclusively used in establishing
performance goals for Annual Incentive Awards granted to a Covered
Employee under Section 8(c) hereof.
(iii) Performance Period; Timing for Establishing
Performance Goals. Achievement of performance goals in respect of such
Performance Awards shall be measured over a performance period of up to
ten years, as specified by the Committee. Performance goals shall be
established not later than 90 days after the beginning of any
performance period applicable to such Performance Awards, or at such
other date as may be required or permitted for "performance-based
compensation" under Section 162(m) of the Code.
(iv) Performance Award Pool. The Committee may
establish a Performance Award pool, which shall be an unfunded pool,
for purposes of measuring Company performance in connection with
Performance Awards. The amount of such Performance Award pool shall be
based upon the achievement of a performance goal or goals based on one
or more of the business criteria set forth in Section 8(b)(ii) hereof
during the given performance period, as specified by the Committee in
accordance with Section 8(b)(iii) hereof. The Committee may specify the
amount of the Performance Award pool as a percentage of any of such
business criteria, a percentage thereof in excess of a threshold
amount, or as another amount which need not bear a strictly
mathematical relationship to such business criteria.
(v) Settlement of Performance Awards, Other Terms.
Settlement of such Performance Awards shall be in cash, Stock, other
Awards or other property, in the discretion of the Committee. The
Committee may, in its discretion, reduce the amount of a settlement
otherwise to be made in connection with such Performance Awards, but
may not exercise discretion to increase any such amount payable to a
Covered Employee in respect of a Performance Award subject to this
Section 8(b). The Committee shall specify the circumstances in which
such Performance Awards shall be paid or forfeited in the event of
termination of employment by the Participant prior to the end of a
performance period or settlement of Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered
Employees. If the Committee determines that an Annual Incentive Award to be
granted to an Eligible Person who is designated by the Committee as likely to be
a Covered Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant, exercise and/or settlement of such
Annual Incentive Award shall be contingent upon achievement of preestablished
performance goals and other terms set forth in this Section 8(c).
(i) Annual Incentive Award Pool. The Committee may
establish an Annual Incentive Award pool, which shall be an unfunded
pool, for purposes of measuring Company performance in connection with
Annual Incentive Awards. The amount of such Annual Incentive Award pool
shall be based upon the achievement of a performance goal or goals
based on one or more of the business criteria set forth in Section
8(b)(ii) hereof during the given performance period, as specified by
the Committee in accordance with Section 8(b)(iii) hereof. The
Committee may specify the amount of the Annual Incentive Award pool as
a percentage of any of such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later
than the end of the 90th day of each fiscal year, or at such other date
as may be required or permitted in the case of Awards intended to be
"performance-based compensation" under Section 162(m) of the Code, the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive Awards. In the case of individual Annual
Incentive Awards intended to qualify under Section 162(m) of the Code,
the amount potentially payable shall be based upon the achievement of a
performance goal or goals based on one or more of the business criteria
set forth in Section 8(b)(ii) hereof in the given performance year, as
specified by the Committee; in other cases, such amount shall be based
on such criteria as shall be established by the Committee. In all
cases, the maximum Annual Incentive Award of any Participant shall be
subject to the limitation set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the
end of each fiscal year, the Committee shall determine the amount, if
any, of (A) the Annual Incentive Award pool, and the maximum amount of
potential Annual Incentive Awards payable to each Participant in the
Annual Incentive Award pool, or (B) the amount of potential Annual
Incentive Awards otherwise payable to each Participant. The Committee
may, in its discretion, determine that the amount payable to any
Participant as a final Annual Incentive Award shall be increased or
reduced from the amount of his or her potential Annual Incentive Award,
including a determination to make no final Award whatsoever, but may
not exercise discretion to increase any such amount in the case of an
Annual Incentive Award intended to quality under Section 162(m) of the
Code. The Committee shall specify the circumstances in which an Annual
Incentive Award shall be paid or forfeited in the event of termination
of employment by the Participant prior to the end of a fiscal year or
settlement of such Annual Incentive Award.
(d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals, the amount of any
Performance Award pool or potential individual Performance Awards and as to the
achievement of performance goals relating to Performance Awards under Section
8(b) hereof, and the amount of any Annual Incentive Award pool or potential
individual Annual Incentive Awards and the amount of final Annual Incentive
Awards under Section 8(c) hereof, shall be made in writing in the case of any
Award intended to quality under Section 162(m) of the Code. The Committee may
not delegate any responsibility relating to such Performance Awards or Annual
Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards under
Section 162(m) of the Code. It is the intent of the Company that Performance
Awards and Annual Incentive Awards under Sections 8(b) and 8(c) hereof granted
to persons who are designated by the Committee as likely to be Covered Employees
within the meaning of Section 162(m) of the Code and regulations thereunder
(including Regulation 1.162-27 and successor regulations thereto) shall, if so
designated by the Committee, constitute "performance-based compensation" within
the meaning of Section 162(m) of the Code and regulations thereunder.
Accordingly, the terms of Sections 8(b), (c), (d) and (e) hereof, including the
definitions of Covered Employee and other terms used therein, shall be
interpreted in a manner consistent with Section 162(m) of the Code and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the term
Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan as in effect on the date of adoption or any agreements
relating to Performance Awards or Annual Incentive Awards that are designated as
intended to comply with Section 162(m) of the Code does not comply or is
inconsistent with the requirements of Section 162(m) of the Code or regulations
thereunder, such provision shall be construed or deemed amended to the extent
necessary to conform to such requirements.
9. Change In Control.
(a) Effect of "Change in Control." In the event of a "Change
in Control," as defined in Section 9(b) hereof, the following provisions shall
apply unless otherwise provided in the Award agreement:
(i) Any Award carrying a right to exercise that was
not previously exercisable and vested shall become fully exercisable
and vested as of the time of the Change in Control and shall remain
exercisable and vested for the balance of the stated term of such Award
without regard to any termination of employment by the Participant,
subject only to applicable restrictions set forth in Section 10(a)
hereof;
(ii) Any optionee who holds an Option shall be
entitled to elect, during the 60-day period immediately following a
Change in Control, in lieu of acquiring the shares of Stock covered by
such Option, to receive, and the Company shall be obligated to pay, in
cash the excess of the Change in Control Price over the exercise price
of such Option, multiplied by the number of shares of Stock covered by
such Option;
(iii) The restrictions, deferral of settlement, and
forfeiture conditions applicable to any other Award granted under the
Plan shall lapse and such Awards shall be deemed fully vested as of the
time of the Change in Control, except to the extent of any waiver by
the Participant and subject to applicable restrictions set forth in
Section 10(a) hereof, and
(iv) With respect to any outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and
to the extent so provided by the Committee in the Award agreement
relating to such Award.
(b) Definition of Change in Control. A "Change in Control"
shall mean (i) the approval by a majority of the public holders of the voting
stock of the Company of a merger, reorganization or consolidation as a result of
which the shareholders of the Company immediately prior to such approval do not,
immediately after the consummation of such transaction own more than 50% of the
voting stock of the surviving entity; (ii) the liquidation or dissolution of the
Company, if and solely to the extent the Company has engaged in a substantial
business following the Effective Date or, if the Company shall then be engaged
in a business, upon the sale of all or substantially all of the Company's
assets; (iii) the acquisition, other than from the Company directly, by any
Person or group, within the meaning of Section 13(d) or 14(d) of the Exchange
Act, of beneficial ownership of fifty percent (50%) or more of the outstanding
common stock of the Company; or (iv) if the individuals who serve on the Board
as of the Effective Date no longer constitute a majority of the members of the
Board; provided, however, that any person who becomes a director subsequent to
the Effective Date who is elected to fill a vacancy by a majority of the
individuals then serving on the Board shall be considered as if such person was
a member prior to the Effective Date.
(c) Definition of Change in Control Price. The "Change in
Control Price" means an amount in cash equal to the higher of (i) the amount of
cash and fair market value of property that is the highest price per share paid
(including extraordinary dividend) in any transaction of stock triggering the
Change in Control under Section 9(b) hereof or any liquidation of stock
following a sale of substantially all of the assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the twenty-day period
preceding and twenty-day period following the Change in Control.
10. General Provisions.
(a) Compliance with Legal and Other Requirements. The Company
may, to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award until
completion of such registration or qualification of such Stock or other required
action under any federal or state law, rule or regulation, listing or other
required action with respect to any stock exchange or automated quotation system
upon which the Stock or other Company securities are listed or quoted, or
compliance with any other obligation of the Company, as the Committee may
consider appropriate in connection with the issuance or delivery of Stock or
payment of other benefits in compliance with applicable law, rules, and
regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall take
or cause to be taken no action, and shall undertake to permit to arise no legal
or contractual obligation, that results or would result in any issuance or
delivery of Stock or Payment of benefit under any Award or the imposition of any
other conditions on such issuance, delivery or payment, to the extent that such
postponement or other condition would represent a greater burden on a
Participant than existed on the 90th day preceding the Change in Control.
(b) Limits on Transferability; Beneficiaries. No Award or
other right or interest of a Participant under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party (other than the Company or a
subsidiary), or assigned or transferred by such Participant otherwise than by
will or the laws of descent and distribution or to a Beneficiary upon the death
of a Participant, and such Awards or rights that may be exercisable shall be
exercised during the lifetime of the Participant only by the Participant or his
or her guardian or legal representative, except that Awards and other rights
(other then ISOs and SARs in tandem therewith) may be transferred to one or more
Beneficiaries or other transferee during the lifetime of the Participant, and
may be exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers are permitted by the Committee
pursuant to the express terms of an Award agreement (subject to any terms and
conditions which the Committee may impose thereon). A Beneficiary, transferee,
or other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and any
Award agreement applicable to such Participant except as otherwise determined by
the Committee, and to any additional terms and conditions deemed necessary or
appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that an adjustment is determined by the Committee to be appropriate under
the Plan, then the Committee shall, in such manner as it may deem equitable,
adjust any or all of (i) the number and kind of shares of Stock which may be
delivered in connection with Awards granted thereafter, (ii) the number and kind
of shares of Stock by which annual per-person Award limitations are measured
under Section 5 hereof, (iii) the number and kind of shares of Stock subject to
or deliverable in respect of outstanding Awards, and (iv) the exercise price,
grant price or purchase price relating to any Award and/or make provision for
payment of cash or other property in respect of any outstanding Award. In
addition, the Committee is authorized to make adjustments in the terms and
conditions of, and the criteria included in, Awards (including Performance
Awards and performance goals, and Annual Incentive Awards and any Annual
Incentive Award pool or performance goals relating thereto) in recognition of
unusual or nonrecurring events (including, without limitation, events described
in the preceding sentence, as well as acquisitions and dispositions of
businesses and assets) affecting the Company, any subsidiary or any business
unit, or the financial statements of the Company or any subsidiary, or in
response to changes in applicable laws, regulations, accounting principles, tax
rates and regulations or business conditions or in view of the Committee's
assessment of the business strategy of the Company, any subsidiary or business
unit thereof, performance of comparable organizations, economic and business
conditions, personal performance of a Participant, and any other circumstances
deemed relevant; provided that no such adjustment shall be authorized or made if
and to the extent that such authority or the making of such adjustment would
cause Options, SARs, Performance Awards granted under Section 8(b) hereof or
Annual Incentive Awards granted under Section 8(c) hereof to Participants
designated by the Committee as Covered Employees and intended to qualify as
"performance-based compensation" under Section 162(m) of the Code and
regulations thereunder to otherwise fail to qualify as "performance-based
compensation" under Section 162(m) of the Code and regulations thereunder.
(d) Taxes. The Company and any subsidiary are authorized to
withhold from any Award granted, any payment relating to an Award under the
Plan, including from a distribution of Stock, or any payroll or other payment to
a Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments with respect thereof in satisfaction of a Participant's tax
obligations, either on a mandatory or elective basis in the discretion of the
Committee.
(e) Changes to the Plan and Awards. The Board may amend,
alter, suspend, discontinue or terminate the Plan or the Committee's authority
to grant Awards under the Plan without the consent of shareholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to approval of the Company's shareholders not later than the annual
meeting next following such Board action if such shareholder approval is
required by any federal or state law or regulation or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to shareholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may waive any conditions
or rights under, or amend, after, suspend, discontinue or terminate any Award
theretofore granted and any Award agreement relating thereto, except as
otherwise provided in the Plan; provided that, without the consent of an
affected Participant, no such Committee action may materially and adversely
affect the rights of such Participant under such Award. Notwithstanding anything
in the Plan to the contrary, if any right under this Plan would cause a
transaction to be ineligible for pooling of interest accounting that would, but
for the right hereunder, be eligible for such accounting treatment, the
Committee may modify or adjust the right so that pooling of interest accounting
shall be available, including the substitution of Stock having a Fair Market
Value equal to the cash otherwise payable hereunder for the right which caused
the transaction to be ineligible for pooling of interest accounting.
(f) Limitation on Rights Conferred under Plan. Neither the
Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person or
Participant or in the employ or service of the Company or a subsidiary, (ii)
interfering in any way with the right of the Company or a subsidiary to
terminate any Eligible Person's or Participant's employment or service at any
time, (iii) giving an Eligible Person or Participant any claim to be granted any
Award under the Plan or to be treated uniformly with other Participants and
employees, or (iv) conferring on a Participant any of the rights of a
shareholder of the Company unless and until the Participant is duly issued or
transferred shares of Stock in accordance with the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with the
consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the
Plan by the Board nor its submission to the shareholders of the Company for
approval shall be construed as creating any limitations on the power of the
Board or a committee thereof to adopt such other incentive arrangements as it
may deem desirable including incentive arrangements and awards which do not
qualify under Section 162(m) of the Code.
(i) Payments in the Event of Forfeitures; Fractional Shares.
Unless otherwise determined by the Committee, in the event of a forfeiture of an
Award with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration. No
fractional shares of Stock shall be issued or delivered pursuant to the Plan or
any Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j) Governing Law. The validity, construction and effect of
the Plan, any rules and regulations under the Plan, and any Award agreement
shall be determined in accordance with New Jersey Law, without giving effect to
principles of conflicts of laws, and applicable federal law.
(k) Plan Effective Date and Shareholder Approval. The Plan has
been adopted by the Board with the consent of the shareholders of the Company
and shall become effective as of July 1, 2000.
