SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
CAREADVANTAGE, INC.
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
......................................................................
2) Aggregate number of securities to which transaction applies:
......................................................................
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):
......................................................................
4) Proposed maximum aggregate value of transaction:
......................................................................
5) Total fee paid:
......................................................................
[ ] Fee paid previously with preliminary materials.
[ ] 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:
..................................................................
2) Form, Schedule or Registration Statement No.:
..................................................................
3) Filing Party:
..................................................................
4) Date Filed:
..................................................................<PAGE>
CAREADVANTAGE, INC.
-------------------
INFORMATION STATEMENT
-------------------
GENERAL INFORMATION
GENERAL
This Information Statement (the "Information Statement") is furnished
to the holders of Common Stock, $0.001 par value per share (the "Common
Stock"), of CareAdvantage, Inc. (the "Company") in connection with certain
actions taken by a Written Consent of Stockholders in Lieu of Special
Meeting dated August 23, 1996 (the "Written Consent"). WE ARE NOT ASKING
YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
This
Information Statement is being provided pursuant to the requirements of
Rule 14c-2 promulgated under Section 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), to inform holders of Common Stock
entitled to vote or give an authorization or consent in regard to the
actions authorized by the Written Consent, of the actions having been
taken by the Written Consent.
By executing and delivering the Written Consent to the Company,
stockholders holding no less than a majority of the outstanding shares of
the Company's Common Stock (the "Majority Stockholders") authorized the
following actions taken by the Board of Directors of the Company (the
"Board") on June 6, 1996 and July 24, 1996: (i) the Board authorized an
amendment (the "Charter Amendment") to the Company's Restated Certificate
of Incorporation (the "Certificate of Incorporation") to (x) effect a
one-for-six reverse split of the outstanding shares of Common Stock, (y)
reduce the Company's authorized number of shares of Common Stock to
90,000,000 and (z) create a new class of "blank check" preferred stock,
$0.10 par value per share (the "Preferred Stock"), consisting of
10,000,000 shares; and (ii) the Board adopted the 1996 Stock Option Plan,
as amended, and the 1996 Director Stock Option Plan, as amended
(collectively, the "Stock Plans").
RECORD DATE
On August 23, 1996 (the "Effective Date"), there were 65,149,464
shares of Common Stock outstanding and entitled to one vote upon each of
the matters approved by the Written Consent. On the Effective Date, the
Majority Stockholders owned or had the right to vote 33,719,204 shares of
Common Stock constituting approximately 52% of the Company's outstanding
Common Stock. All of the shares of Common Stock,
<PAGE>
<PAGE>
of which the Majority Stockholders owned or had the right to vote on the
Effective Date, consented to the actions authorized or taken by the
Written Consent. Only stockholders of record of the Company at the close
of business on the Effective Date are entitled to receive this Information
Statement.
ITEM 1. INFORMATION REQUIRED BY
ITEMS OF SCHEDULE 14A
1. Date, time and place information:
(a) The Written Consent was executed effective August 23, 1996 and
delivered by the Majority Stockholders to the Company's principal
executive offices at 485-C Route 1 South, Iselin, New Jersey 08830.
6. Voting Securities and Principal Holders Thereof:
(a) As of August 23, 1996, there were (i) 65,149,464 outstanding
shares of Common Stock, each entitled to one vote on the matters
authorized pursuant to the Written Consent, (ii) Warrants outstanding to
purchase 1,300,000 shares of Common Stock and (iii) options outstanding to
purchase 17,867,500 shares of Common Stock.
(b) Holders of Common Stock and entitled to vote were calculated, as
of the Effective Date, to determine the number of shares constituting a
majority of the outstanding shares of Common Stock (required to approve
the Written Consent).
(d) The following table sets forth certain information regarding the
beneficial ownership of the Common Stock by (i) all persons known to the
Company who own more than 5% of the outstanding Common Stock, (ii) each
Director, (iii) each executive officer named in the Summary Compensation
Table, and (iv) all executive officers, and Directors as a group, in each
case, as of August 23, 1996. Unless otherwise indicated, the persons named
in the table below have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
PAGE
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP OF COMMON STOCK BY
CERTAIN STOCKHOLDERS AND MANAGEMENT
Name Number of Shares Percent of
- ---- Beneficially Owned<F1> Ownership<F2>
--------------------- ------------
</CAPTION>
<S> <C> <C>
Blue Cross and Blue Shield of
New Jersey, Inc. <F3><F4><F5> 80,250,496 55.2%
CW Ventures II, L.P.<F5><F6><F7> 81,519,184 66.1%
John J. Petillo<F8><F9> 11,100,000 16.6%
Vincent M. Achilarre<F10><F11> 100,000 *
David W. Bouda, M.D.<F12><F17> 233,333 *
Robert J. Ailes, M.D.<F13><F17> 750,000 *
David Kass<F6><F14> __ __
William J. Marino<F3><F15> 2,000 *
Robert J. Pures<F3><F15> __ __
Eric Schlesinger<F6><F14> __ __
Walter Channing<F5><F6><F16> 81,519,184 66.1%
Charles Hartman<F5><F6><F16> 81,519,184 66.1%
Barry Weinberg<F5><F6><F16> 81,519,184 66.1%
Thomas Riley<F17> __ __
Richard J. Strobel<F17><F18> 666,666 __
Stephan Deutsch, M.D.<F17><F19> 333,333 *
Current Directors and Executive Officers as
a Group<F18><F20> (six persons) 668,666 *
_______________________________
* Less than one percent.
<FN>
<F1> Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission, which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting or
investment power with respect to those securities. Includes outstanding
shares and shares subject to options exercisable within 60 days. Unless
otherwise indicated, the options indicated as owned by the persons named
above are exercisable within 60 days.
<F2> The percent beneficially owned by any person or group who held options
exercisable within 60 days of August 23, 1996 has been calculated assuming
all such options have been exercised in full and adding the number of shares
subject to such options to the total number of shares issued and
outstanding.
<F3> The business address of such person or entity is 3 Penn Plaza East,
Newark, New Jersey 07105.
<F4> Includes the 80,250,496 shares of Common Stock issuable upon exercise
of the EHC Exchangeable Notes. BCBSNJ, as the sole shareholder of EHC, may
be deemed to beneficially own such shares. In the event that the Services
Agreement is terminated by BCBSNJ, CW Ventures II, L.P. (CW Ventures")
will have the right to purchase such shares in accordance with the terms of the
Stockholders' Agreement.
<F5> BCBSNJ and EHC may be deemed members of a "group," as such term
is used in Section 13(d) of the Exchange Act, with CW Ventures, CW Partners III,
L.P., the general partner of CW Ventures ("CW Partners"), and Walter Channing,
Charles Hartman and Barry Weinberg, the general partners of CW
Partners. Each of BCBSNJ and EHC, on the one hand, and CW Ventures, CW
Partners and Messrs. Channing, Hartman and Weinberg, on the other, disclaim
membership in a group for the purpose of Section 13(d) of the Exchange Act or for any
other purpose.
<F6> The business address of such person or entity is 1041 Third Avenue,
New York, New York 10021.
<F7> Includes 1,700,000 shares of Common Stock subject to the Company
Proxy, the 23,419,204 shares directly owned by CW Ventures and 46,799,980 shares
and 1,000,000 shares of Common Stock issuable upon exercise of the CW
Exchangeable Notes and the CW Warrants, respectively.
<F8> The address of such person is 616 S. Orange Avenue PH3, Maplewood, N.J.
<F9> Includes 2,500,000 shares issuable upon exercise of currently exercisable
non-qualified stock options.
<F10> The address of such person is 47 Treadwell Avenue, Madison, NJ 07940.
<F11> Includes 100,000 shares issuable upon exercise of currently exercisable
non-
qualified stock options. Does not include options for 20,000 shares that
have been cancelled due to the Board's cancellation of the 1995
Comprehensive Incentive Plan.
<F12> Consists of shares issuable upon exercise of currently exercisable
incentive stock options. Does not include options in 300,000 shares which Dr. Bouda
and the Company have agreed to cancel. Does not include options in 966,667
shares granted on July 24, 1996, none of which are currently exercisable.
<F13> Includes 750,000 shares issuable upon the exercise of currently
exercisable stock options. Does not include options in 350,000 shares that have been
cancelled due to the Board's cancellation of the 1995 Comprehensive
Incentive Plan or options in 2,700,000 shares granted on June 6, 1996, none of which
are currently exercisable.
<F14> Does not include the following shares beneficially owned by CW
Ventures: 1,700,000 shares of Common Stock subject to the Company Proxy, the
23,419,204 shares directly owned by CW Ventures and 46,799,980 shares and 1,000,000
shares of Common Stock issuable upon exercise of the CW Exchangeable Notes
and the CW Warrants, respectively. Messrs. Kass and Schlesinger are each
Vice President of CW Group, the management company of CW Ventures and CW
Partners, and Mr. Kass holds other positions with CW Ventures and other
related entities. Messrs. Kass and Schlesinger disclaim beneficial ownership
of such shares.
<F15> Does not include the 80,250,496 shares of Common Stock issuable upon exercise
of the EHC Exchangeable Notes. Messrs. Marino and Pures, the President and
Chief Executive Officer and the Senior Vice President-Administration, Chief
Financial Officer and Treasurer, respectively, of BCBSNJ, the sole
shareholder of EHC, disclaim beneficial ownership of such shares.
<F16> Includes 1,700,000 shares of Common Stock subject to the Company Proxy, the
23,419,204 shares directly owned by CW Ventures and 46,799,980 shares and
1,000,000 shares of Common Stock issuable upon exercise of the CW
Exchangeable Notes and the CW Warrants, respectively. Messrs. Channing,
Hartman and Weinberg are the general partners of CW Partners, and as such may
be deemed to beneficially own such shares. Messrs. Channing, Hartman and
Weinberg disclaim beneficial ownership of such shares except to the extent
of their respective direct and indirect partnership interests in CW Ventures.
<F17> The business address of such person is 485-C Route 1 South, Iselin, NJ
08830-3037.
<F18> Does not include options granted to Mr. Strobel on July 24, 1996 to purchase
1,733,334 shares, none of which are currently exercisable.
<F19> Consists of shares issuable upon exercise of currently exercisable incentive
stock options. Does not include options in 1,166,667 shares granted on July
24, 1996, none of which are currently exercisable.
<F20> Does not include the following shares beneficially owned by CW Ventures or BCBSNJ,
as the case may be: 1,700,000 shares of Common Stock subject to the Company Proxy, the
23,419,204 shares directly owned by CW Ventures and 46,799,980 shares and 1,000,000 shares of
Common Stock issuable upon exercise of the CW Exchangeable Notes and the CW Warrants,
respectively, and 80,250,496 shares of Common Stock issuable upon exercise of the EHC Exchangeable
Notes. Includes an aggregate of 570,000 shares issuable upon the exercise of currently
exercisable stock options.
</FN>
</TABLE>
<PAGE>
(e) Change of Control Transactions
On February 22, 1996, the Company completed a series of transactions
with CW Ventures II, L.P. ("CW Ventures") and with Blue Cross and Blue
Shield of New Jersey, Inc. ("BCBSNJ") which resulted in control of the
Company being transferred to CW Ventures and BCBSNJ. CW Ventures is a New
York limited partnership operating as a venture capital fund and managed
by a general partner, CW Partners III, L.P. ("CW Partners").
The transactions included the sale to CW Ventures pursuant to a
$150,000 loan extended by CW Ventures on February 6, 1996 (the "Bridge
Financing") of a $150,000 promissory note (the "Bridge Note") and the
subsequent sale to CW Ventures on February 22, 1996 for an additional
$2,850,000 in cash payments by CW Ventures (less $75,000 of CW Ventures'
expenses reimbursed by the Company) and in exchange for and in
cancellation of the Bridge Note; of 23,419,204 shares of the Company's
Common Stock (at a purchase price of $0.0427 per share) and a $2,000,000
principal amount 8% Exchangeable Note maturing on June 30, 1998 (the "CW
Note") issued by CareAdvantage Health Systems, Inc., a wholly-owned
subsidiary of the Company ("CAHS"), pursuant to a securities purchase
agreement (the "Purchase Agreement"). The CW Note, which is guaranteed by
the Company and CHCM (as such term is defined infra.), and which is
secured by substantially all of the assets of the Company and its
subsidiaries, is exchangeable into that number of shares of Common Stock
as would equal approximately 23 1/3% of the outstanding shares on a fully
diluted basis so that the 23,419,204 shares issued to CW Ventures together
with the shares issuable upon exchange of the CW Note would comprise
approximately 35% of the outstanding shares of Common Stock on a fully
diluted basis. In addition, in connection with the Bridge Financing, the
Company issued to CW Ventures for nominal consideration, five-year
warrants (the "CW Warrants") exercisable to purchase 1,000,000 shares of
Common Stock with an exercise price per share equal to $0.16.
Concurrently with the February 22, 1996 closing of the Purchase
Agreement, CAHS purchased all of the outstanding capital stock of
Contemporary HealthCare Management, Inc. ("CHCM") from a wholly- owned
BCBSNJ subsidiary, Enterprise Holding Company, Inc. ("EHC") pursuant to a
stock acquisition agreement (the "Acquisition Agreement"). The CHCM stock
was acquired in exchange for CAHS' $3,600,000 principal amount 8%
Exchangeable Note maturing on June 30, 1998 (the "EHC Note"), guaranteed
by the Company and CHCM and secured by substantially all of the assets of
the Company and its subsidiaries.
<PAGE>
<PAGE>
The EHC Note is exchangeable into that number of shares of Common
Stock as would equal approximately 40% of the outstanding shares on a
fully diluted basis.
At the closing of the Acquisition Agreement, CHCM executed an
approximately seven-year services agreement terminating on December 31,
2002 (the "Services Agreement") providing for the continued rendering of
cost containment services by CHCM to BCBSNJ. The Services Agreement
required BCBSNJ to pay a monthly "interim payment" of $833,333 (subject to
recoupment under certain circumstances) to CHCM with respect to each
service month in calendar 1996 and in subsequent years, to pay a monthly
service fee reduced by a "trailing monthly adjustment" based on
performance. As a result of the Company's inability to meet certain
performance goals defined in the Services Agreement, however, it is likely
that approximately $2,000,000 will be returned to BCBSNJ during calendar year
1997. At the closing, BCBSNJ paid an aggregate $731,679 to CHCM
representing the balance of the outstanding intercompany payables as of
January 31, 1996. The Services Agreement permits BCBSNJ to terminate same
with or without cause, on 90 days' prior notice. In the event of
termination without cause prior to January 1, 2001, BCBSNJ is required to
pay liquidated damages to CHCM equal to (i) 40% of the fair market value
of the Company as of such termination date after giving effect to BCBSNJ's
required payments, plus (ii) the present value of the future valuation of
the Services Agreement over the remainder of the first five years of the
Services Agreement, plus (iii) the present value of the future valuation
of any third party contract that the Company can establish was lost due to
such termination without cause. Although generally, CW Ventures on the
one hand and EHC and BCBSNJ on the other have equal rights to the
collateral securing the obligations pursuant to the CW Note and the EHC
Note, the parties have executed an inter-creditor agreement which
provides, among other items, that (i) CW Venture's security interest
asserted against any such collateral shall be subordinate to BCBSNJ's
rights under a certain section of the Services Agreement (which provides
BCBSNJ with certain rights upon termination of the Services Agreement by
BCBSNJ with or without cause), (ii) BCBSNJ's and EHC's security interests
in such collateral other than receivables and cash proceeds therefrom
shall be subordinate to CW Venture's rights to such collateral except to
the extent necessary to permit BCBSNJ to effect the terms of a certain
section of the Services Agreement, and (iii) EHC and BCBSNJ agree to take
no action to enforce their rights respecting such collateral unless either
the Services Agreement is terminated by BCBSNJ or CW Ventures has
attempted to enforce any of its rights respecting such collateral.
Because the Company does not have a sufficient number of authorized
but unissued shares of Common Stock to permit issuance of the required
number of shares upon exchange of the CW Note and the EHC Note, the
Company agreed to submit and, pursuant to action taken at the June 6, 1996
Board of Directors meeting of the Company, did approve for submission to
its stockholders the Charter Amendment. The Charter Amendment was
approved by the Majority Stockholders on August 23, 1996. Upon the
effectiveness of such Charter Amendment and upon compliance with certain
other conditions, the EHC Note will be automatically exchanged into
approximately 40% of the outstanding shares of Common Stock on a fully
diluted basis.
<PAGE>
<PAGE>
In the event that the Charter Amendment does not become effective
prior to September 30, 1996, CW Ventures will be entitled to be paid a
$500,000 fee by the Company.
With respect to the CW Note, the holder has the right, at its option,
at any time and from time to time until the June 30, 1998 maturity date,
to exchange the CW Note in whole or in part, for additional shares of
Common Stock. On the maturity date, assuming the Charter Amendment has
been duly adopted, the Services Agreement is in full force and effect and
certain other conditions are complied with, the remaining principal
balance of the CW Note will be automatically exchanged into shares of
Common Stock. Exchange by CW Ventures of the entire principal amount of
the CW Note for shares of Common Stock, together with the 23,419,204
shares of Common Stock previously issued to CW Ventures as described
above, will result in CW Ventures owning approximately 35% of the
outstanding shares of Common Stock on a fully diluted basis.
The percentage ownership interests of CW Ventures and of BCBSNJ
(through EHC) in the Company's Common Stock are subject to increase if the
Company fails to realize at least $15 million in net revenues for its
fiscal year ending October 31, 1996 or fails to realize at least $1
million in adjusted earnings before income tax ("EBIT") in such period
(with respect to the EHC Note) or at least $2 million in EBIT (with
respect to the CW Note). Failure by the Company to realize at least $15
million in net revenues for such period will result in an increase in CW
Ventures' and BCBSNJ's equity interests in the Company to approximately
45% each (on a fully diluted basis). Failure by the Company to realize at
least $1 million in EBIT for such period will result in an increase in
BCBSNJ's equity ownership in the Company on a fully diluted basis based
upon the difference between the actual EBIT and $1 million varying from 2%
(to 42%) to 5% (to 45%). Similarly, failure by the Company to realize at
least $2 million in EBIT for such period will result in an increase in CW
Ventures' equity ownership in the Company on a fully diluted basis based
upon the difference between the actual EBIT and $2 million varying from 3%
(to 38%) to 10% (to 45%). No increase in percentage ownership is required
in either case if the Company realizes at least $15 million in net
revenues and at least $1 million in EBIT for the period (with respect to
the EHC Note) and at least $2 million in EBIT for the period (with respect
to the CW Note). Based upon the level of revenues and results of
operations to date and anticipated results for the balance of the current
fiscal year, management does not expect the aforementioned revenue and
income thresholds to be met. As a result, it is likely that additional
shares of the Company's Common Stock will be issued to CW Ventures and
EHC, resulting in further dilution of ownership of other shareholders.
In connection with the investment by CW Ventures and CAHS'
acquisition of CHCM, CW Ventures, EHC and the Company have entered into a
stockholders' agreement (the "Stockholders' Agreement") relating to the
future governance of the Company. Pursuant to the Stockholders'
Agreement, CW Ventures and EHC have agreed to vote their shares of Common
Stock to maintain a seven-person Board of Directors to be comprised of the
following members: (i) two designees of CW Ventures, (ii) two designees of
EHC, (iii) two members of the Company's management acceptable to
<PAGE>
<PAGE>
CW Ventures and EHC, and (iv) one non- employee director acceptable to CW
Ventures and EHC.
The Stockholders' Agreement also prohibits the Company from taking
certain actions without the consent of CW Ventures and its designees to
the Board of Directors and also provides CW Ventures and EHC with pro rata
rights of first refusal with respect to any proposed issuance by the
Company of its debt or equity securities (other than pursuant to a
registered public offering). In addition, CW Ventures and EHC each have
a right of first refusal with respect to any proposed transfer of Common
Stock by the other party which exceeds 1% of the Company's then total
outstanding Common Stock, other than with respect to public sales and
distributions of shares of Common Stock by CW Ventures to its partners in
the ordinary course of business. The Stockholders' Agreement also
provides CW Ventures with the right to purchase EHC's shares of Common
Stock in the event that the Services Agreement is terminated by BCBSNJ.
The Company is also prohibited from taking certain actions without the
consent of EHC or EHC's designees to the Board of Directors. The rights
granted by the Company to CW Ventures described above terminate on the
later to occur of (i) February 22, 1998 and (ii) the date the CW Note is
exchanged for Common Stock, provided that such rights will terminate
earlier if the Company realizes net income of at least $400,000 in any
consecutive full four (4) fiscal quarters. In the event that CW Ventures'
approval rights terminate and it holds at least 5% of the outstanding
Common Stock, CW Ventures will possess the same approval rights granted to
EHC for as long as EHC possesses such rights. The Stockholders' Agreement
itself terminates on the later to occur of (i) each of EHC and CW Ventures
having less than 5% of the outstanding Common Stock, (ii) the termination
of the Services Agreement and (iii) February 22, 1998.
In connection with its investment, CW Ventures obtained proxies to
vote a total of 10,300,000 shares of Common Stock, subject to certain
limitations. John Petillo, former Chairman of the Board of Directors and
Chief Executive Officer, granted CW Ventures a proxy dated February 22,
1996 with respect to 8,600,000 shares of Common Stock owned by him (the
"Petillo Proxy"), which terminated on June 30, 1996, and the Company
granted CW Ventures a proxy dated February 22, 1996 with respect to
1,700,000 shares of Common Stock over which the Board has voting power
(the "CAI Proxy"), which terminated upon the adoption of the Charter
Amendment in accordance with the terms of the Separation Agreement dated
April 20, 1995 between the Company and Primedex Health Systems, Inc. (a
copy of which is filed as an exhibit to the Company's Registration
Statement on Form S-1 (file No. 33-89176)). Since the Petillo Proxy
expired on June 30, 1996, CW Ventures did not have the power to vote the
shares of Common Stock subject to the Petillo Proxy in connection with the
adoption of the Charter Amendment by the Majority Stockholders.
Pursuant to a registration rights agreement dated as of February 22,
1996 among the Company, CW Ventures, and EHC, the Company is required to
file a "shelf" registration statement with the Securities and Exchange
Commission on or prior to June 30, 1996, and to use its best efforts to
have such registration statement declared
<PAGE>
<PAGE>
effective as soon thereafter as possible, covering the shares of Common
Stock issued to CW Ventures and the shares issuable upon exchange of the
CW Notes and the EHC Note, so as to permit the public offering and
distribution of such shares. There is no requirement that any of such
shares will be distributed pursuant to such registration statement. The
Company has secured from each of CW Ventures and EHC a waiver to file such
registration statement until August 30, 1996 and the Company expects to
secure a further waiver until September 30, 1996.
8. COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth information concerning the compensation
paid or accrued by the Company for the fiscal year ended October 31, 1995
to the individual performing the function of Chief Executive Officer
during such periods and each of the next four most highly compensated
executive officers. None of the named individuals was employed by the
Company prior to the 1995 fiscal year.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
OTHER ALL
ANNUAL NUMBER OF RESTRICTED OTHER
YEAR COMPEN- OPTIONS STOCK LTIP COMPEN-
ENDED SALARY BONUS SATION <F6> SARS(#) AWARDS PAYOUTS SATION
</CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John J. Petillo, Ph.D. <F1>
Former Chairman, President
and Chief Executive Officer 1995 $516,832 - $50,773 2,500,000 - - $4,206<F7>
Vincent M. Achilarre <F2>
Vice President, Chief Financial
Officer and Treasurer 1995 202,563 80,000 5,769 120,000<F8> - 34,620<F8>
David W. Bouda, M.D. <F3>
Senior Medical Director 1995 94,153 125,000 - 300,000 - - -
Robert Ailes, M.D. <F4>
President and Chief Executive
Officer (CAHS) 1995 250,000 - - 350,000
Stephan D. Deutsch, M.D. <F5>
Senior Vice President and Chief
Medical Director 1995 76,293 38,461 - 100,000 - - -
_____________________________
<FN>
<F1> Dr. Petillo resigned his positions as Chairman of the Board, President and
Chief Executive Officer effective February 22, 1996. Dr. Petillo has been retained by the Company as a consultant. See
"-Employment Agreements, Consulting Agreements, Termination of Employment and Change-In-Control Arrangements."
<F2> Mr. Achilarre resigned his positions as Vice President, Chief Financial
Officer and Treasurer effective May 23, 1996. Mr. Achilarre was subsequently retained by the Company for a period of two
months as a consultant.
<F3> Dr. Bouda joined the Company on April 26, 1995, and is paid an annual
salary of $240,000 under the terms of his employment agreement.
<F4> Dr. Ailes joined the Company, as President and Chief Executive Officer of
CAHS, effective June 1, 1995, and is paid an annual salary of $265,000 under the terms of his amended employment
agreement.
<F5> Dr. Deutsch joined the Company on July 1, 1995, and is paid an annual
salary of $250,000 under the terms of his employment agreement.
<F6> Other Annual Compensation includes taxable fringe benefits and unused
accrued vacation days that were paid.
<F7> Represents Company matching contributions to a 401(k) profit sharing/savings plan.
<F8> Options for 20,000 shares have been cancelled pursuant to the Board's
cancellation of the 1995 Comprehensive Stock Incentive Plan.
<F9> Includes forgiveness of a loan in the amount of $30,000 and Company
matching contributions to a 401(k) profit sharing/savings plan in the amount of $4,620.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Option Grants in Fiscal Year Ended October 31, 1995
NUMBER OF % OF TOTAL EXERCISE
SHARES OPTIONS PRICE
UNDERLYING GRANTED TO PER EXPIRATION
NAME OPTIONS GRANTED EMPLOYEES(1) SHARE
DATE
</CAPTION>
<S> <C> <C> <C> <C>
John J. Petillo(2) 2,500,000 48% $0.4714 01/27/2005
Vincent M. Achilarre(3) 120,000 2% $0.47 09/07/2005
David W. Bouda 300,000 6% $0.22 10/27/2005
Robert Ailes(4) 350,000
_____________________
<FN>
<F1> The Company granted, subject to stockholder approval, a total of 558,800 qualified options to its employees pursuant to
its 1995 Comprehensive Incentive Plan and 6,567,500 nonqualified options to its employees, consultants and directors in
fiscal 1995 for an aggregate of 7,126,300 qualified and nonqualified stock options of which a total of 5,176,300 were
issued to employees. On June 6, 1996, the Company cancelled those option grants and adopted the Stock Plans whereby
an aggregate of 12% of the Company's authorized Common Stock has been reserved, subject to adjustment, for the issuance
upon exercise of options pursuant to such Plans. As of the date of this Information Statement, Incentive and
Non-Incentive Stock Options under the Stock Plans have been granted to senior executive officers of the Company and its
subsidiaries as follows: (a) Richard J. Strobel - 2,400,000 shares of Common Stock; (b) Dr. Robert J. Ailes - 3,450,000
shares of Common Stock; and (c) David W. Bouda - 1,200,000 shares of Common Stock.
<F2> Option price has since been reset to $.28.
<F3> Options for 20,000 shares have been cancelled pursuant to the Board's cancellation of the 1995
Comprehensive Stock Incentive Plan. Pursuant to a severance agreement, the exercise price of
the remaining options has been re-priced at $0.24.
<F4> Effective June 6, 1996, Dr. Ailes was awarded options to purchase 3,450,000 shares of Common
Stock (replacing options to purchase 350,000 shares) at an exercise price of $0.25 per share.
Options to purchase 750,000 shares are currently exercisable and the remaining options vest over
a three year period based on the achievement of certain defined goals.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF VALUE OF
SHARES UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
SHARES TO BE OCTOBER 31, 1995 OCTOBER 31, 1995
ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE(#) REALIZED UNEXERCISABLE UNEXERCISABLE <F1>
</CAPTION>
<S> <C> <C> <C> <C>
John J. Petillo 2,500,000 0 0/2,500,000 $0/0
Vincent M. Achilarre<F2> 120,000 0 0/120,000 0/0
David W. Bouda 300,000 0 0/300,000 0/0
Robert Ailes<F3> 350,000
________________
<FN>
<F1> Based upon the average Bid and Asked prices on the OTC Bulletin
Board of the Company's Common Stock on October 31, 1995.
<F2> Options for 20,000 shares have been cancelled pursuant to the Board's
cancellation of the 1995 Comprehensive Stock Incentive Plan. Pursuant to a severance agreement,
the exercise price of the remaining options has been re-priced at $0.24.
<F3> Effective June 6, 1996, Dr. Ailes was awarded options to purchase
3,450,000 shares of Common Stock (replacing options to purchase 350,000 shares) at an exercise price of
$0.25 per share. Options to purchase 750,000 shares are currently exercisable and the
remaining options vest over a three year period based on the achievement of certain defined goals.
</FN>
</TABLE>
STOCK OPTIONS - During 1994 the Board of Directors adopted, subject
to stockholder approval, a stock incentive plan known as the "1995
Comprehensive Incentive Plan" and reserved an aggregate of 4,000,000
shares of Common Stock for direct issuance of incentive stock options,
nonqualified stock options, and for other stock-based awards which may be
granted under the 1995 Comprehensive Incentive Plan. In fiscal 1995,
558,800 qualified stock options were awarded, subject to stockholder
approval, to the Company's employees. The 1995 Comprehensive Incentive
Plan and the grants made thereunder were never submitted to the Company's
stockholders for their approval. All options granted thereunder have been
cancelled and replaced, where applicable, with options granted pursuant to
the 1996 Stock Option Plan of the Company, which has been adopted by the
Board of Directors and was affirmed and adopted by the execution of the
Written Consent.
COMPENSATION OF NON-EMPLOYEE DIRECTORS. Through October 31,
1995,
the Company paid an annual directors' fee of $8,000 plus a fee of $1,000
per meeting to each Director who was not an employee of, or consultant to,
the Company. The Directors waived such fees beginning in June 1995
through the balance of fiscal 1995. The Company paid each of Messrs.
Lloyd and McQueeny a fee of $2,000 for the period from November 1, 1995
through December 31, 1995.
On September 7, 1995, the Board of Directors authorized the issuance
of nonqualified stock options to each of Messrs. Lloyd, McQueeny and Leon
Smith, the three outside directors on such date, to purchase 75,000 shares
of the Common Stock at a price equal to $0.47 per share, the fair market
value of a share at the date of grant. Such options became fully
exercisable upon the consummation of the Change of Control Transactions.
EMPLOYMENT AGREEMENTS, CONSULTING AGREEMENTS,
TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS. Effective October
31, 1995, Dr. Petillo waived his rights under his employment agreement and fee
agreement (providing for additional compensation to Dr. Petillo in the
event of an acquisition of the Company or any subsidiary or a portion of
their business or assets not in the ordinary course of business during his
employment). Dr. Petillo agreed to continue to serve as President of the
Company without compensation effective November 1, 1995 through the
closing of the transactions with CW Ventures and BCBSNJ. In consideration
thereof, the Board of Directors agreed to reduce the exercise price of his
nonqualified stock options to purchase 2,500,000 shares of Common Stock
granted on January 27, 1995 from $0.4714 to an exercise price of $0.28 per
share, and to make all such options immediately exercisable through June
30, 2000.
The Company and Dr. Petillo entered into a consulting agreement dated
as of February 22, 1996 for a term of one year. The consulting agreement
provides that the Company shall pay a fee to Dr. Petillo for each services
contract that is entered into by the Company or any affiliate and a
customer introduced to the Company by Dr. Petillo that contemplates at
least $1,000,000 in revenues to the Company. The amount of such fee will
be between $25,000 and $75,000 depending upon the size of the services
contract. The consulting agreement may be terminated by Company at any
time without cause upon 30 days notice.
The Company and Dr. Paul Shoffeitt agreed to the terms of an
employment contract effective December 23, 1994 through December 23, 1996.
Dr. Shoffeitt agreed to serve as Director of Strategic Planning and
Professional Services. The Company agreed to pay Dr. Shoffeitt an annual
salary of $425,000 plus annual increases based upon increases in the
consumer price index and include Dr. Shoffeitt in the Company's various
employee benefit programs. On January 24, 1995 in connection with the
amendment of his employment contract and his release of PMDX from its
guarantee of the salary payable under his employment contract, Dr.
Shoffeitt was granted a fifteen year immediately exercisable option to
purchase an aggregate 1,500,000 shares of Common Stock at an exercise
price of $0.50 per share. Although his employment contract has not been
formally amended, Dr. Shoffeitt is presently working on a part- time basis
at reduced compensation. Due to the resetting of the exercise price of
Dr. Petillo's options to $0.28 per share in late 1995, pursuant to the
terms of the amendment of Dr. Shoffeitt's employment agreement on January
24, 1995, the exercise price for Dr. Shoffeitt's options has been reset to
$0.28 per share.
CAHS entered a three year employment agreement effective June 1,
1995, as amended effective June 6, 1996, with Robert Ailes, M.D.,
employing Dr. Ailes as President and Chief Executive Officer of CAHS at an
annual salary of $265,000 (with the new salary to be effective as of
November 1, 1995). In addition, Dr. Ailes is entitled to receive up to
$100,000 as a special bonus upon the attainment of certain defined revenue
levels by the Company. In the event that Dr. Ailes is reassigned to
another position within CAHS in lieu of termination, his salary may be
reduced to $210,000. On the second anniversary of the effective date of
the agreement, and on each anniversary thereafter, the term of the
agreement shall be extended for one year unless CAHS shall have notified
Dr. Ailes that the term has not been so extended. In the event that Dr.
Ailes is terminated without cause, CAHS is required to pay Dr. Ailes one
year of his base salary and to continue to provide him with health and
other benefits for a period of one year. Dr. Ailes was also awarded
3,450,000 new options to purchase Common Stock (replacing options to
purchase 350,000 shares of Common Stock) which have an exercise price of
$0.25 per share (the market price on June 6, 1996). Options to purchase
750,000 shares are immediately exercisable and the remaining options vest
over a three year period based on the achievement of certain defined
goals.
CAHS entered into a three year employment agreement effective April
28, 1995 with David W. Bouda, M.D., employing Dr. Bouda as Senior Medical
Director at an annual salary of $240,000 with a one time signing bonus of
$125,000. The agreement further required the Company to set aside and
establish an escrow fund in the amount of $235,000 as partial security for
payment of Dr. Bouda's salary for eighteen months less the $125,000
signing bonus. Effective October 27, 1995 the employment agreement with
Dr. Bouda was amended deleting the provision to establish an escrow fund,
removing the $1,000 limit on reimbursement of licensing fees and
subscription charges and adding a provision that either party shall have
the right to terminate the agreement by giving sixty (60) days written
notice to the other party. On the second anniversary of the effective
date of the agreement, and on each anniversary thereafter, the term of the
agreement shall be extended for one year unless CAHS shall have notified
Dr. Bouda that the term has not been so extended. In consideration for
these amendments, on October 31, 1995, Dr. Bouda was awarded options to
purchase 300,000 shares of Common Stock at an exercise price of $0.22 per
share, which Dr. Bouda and the Company have agreed to cancel. Dr. Bouda
was awarded options to purchase 1,200,000 shares of Common Stock, which
vest over two years and have an exercise price of $.13 per share.
CAHS entered into a three year employment agreement effective July 1,
1995 with Stephan D. Deutsch, M.D. as Senior Vice President and Chief
Medical Officer of CAHS at an annual salary of $250,000. During the third
year of employment Dr. Deutsch's basic salary will be $300,000. In
accordance with this agreement, Dr. Deutsch is entitled to receive no less
than 50% of his basic salary as a guaranteed minimum short term bonus
during his initial employment year and no less than 40% during his second
year of employment. The short term bonus for the third year of employment
shall be established in accordance with the short term bonus percentages
awarded in that year based upon CAHS' profitability. On the second
anniversary of the effective date of the agreement, and on each
anniversary thereafter, the term of the agreement shall be extended for
one year unless CAHS shall have notified Dr. Deutsch that the term has not
been so extended. The agreement also provides Dr. Deutsch a $20,000
commutation expense allowance for his initial year of employment and a
lump sum payment of $50,000 in the event Dr. Deutsch is required to
relocate outside of Maryland. In the event Dr. Deutsch is terminated
without cause, CAHS is required to pay Dr. Deutsch his full salary for one
year (if terminated during the first employment year) or for six months
(if terminated during the second employment year). Dr. Deutsch was also
awarded options to purchase a total of 100,000 shares, one-half of which
vest on the first and second anniversaries of the employment dates, at an
exercise price of $2.00 per share. On July 24, 1996, Dr. Freeman was
awarded options to purchase 1,500,000 shares of Common Stock, which vest
over two years and have an exercise price of $.13 per share.
On August 7, 1996, the Company entered into an employment agreement
with Richard Strobel to act as Vice President, Treasurer, Secretary and
Chief Financial Officer of the Company for a term of four (4) years. Mr.
Strobel shall receive annual compensation of $175,000 plus options to
purchase 2,400,000 shares of Common Stock of the Company at the then
market value of the Company's Common Stock on July 24, 1996 when the
Company's Board of Directors granted such options to Mr. Strobel, which
market price was $.13 per share.
On July 24, 1996, the Company extended an employment package to
Thomas Riley to act as President and Chief Executive Officer of the
Company. Pursuant to such package, Mr. Riley is compensated on a per diem
basis at a rate of $1,200 per day.
REPORT ON REPRICING OF OPTIONS/SARS - At a special meeting of the
Board of Directors on December 19, 1995, Dr. Petillo waived his rights
under his employment agreement and fee agreement effective October 31,
1995. As consideration for the waiver and his continuing to serve as
President of the Company without compensation effective November 1, 1995
through the closing of the contemplated transactions with CW Ventures and
BCBSNJ, the Company canceled the 2,500,000 nonqualified stock options
granted January 27, 1995 at an exercise price of $0.4714 per share, and
reissued 2,500,000 nonqualified stock options to Dr. Petillo, exercisable
in whole or in part, at $0.28 per share with an expiration date of June
30, 2000. The new exercise price represented the average of the bid and
asked prices of the Common Stock on the date the options were repriced.
Dr. Schoffeitt is entitled to this repricing.
10. COMPENSATION PLANS:
Stock Plans
On June 6, 1996 and July 24, 1996, the Board of Directors of the
Company adopted and amended (i) the 1996 Stock Option Plan (the "1996
Plan") and (ii) the 1996 Director Stock Option Plan (the "Director Plan"
and, together with the 1996 Plan, the "Stock Plans"). The Stock Plans
were approved and ratified by the Majority Stockholders pursuant to the
Written Consent. The key features of the Stock Plans are summarized
below. This summary is subject, in all respects, to the provisions of the
Stock Plans, which are attached hereto as Exhibit B.
On June 6, 1996, the Board cancelled all options granted under the
Company's 1995 Comprehensive Stock Incentive Plan. As of April 30, 1996,
options to purchase 558,800 shares of Common Stock had been granted under
the Company's 1995 Comprehensive Incentive Plan. The Company believes
that the 1996 Plan offers flexibility to the Company in the granting of
options and that adoption of the 1996 Plan is necessary to aid the Company
in attracting, retaining and motivating officers and employees who are in
a position to contribute materially to the successful conduct of the
Company's business and affairs. The 1996 Plan is intended to furnish
additional incentives whereby present and future officers and employees
may be encouraged to acquire, or to increase their holdings of, the
Company's Common Stock.
A total of 11,600,000 options have been granted and are outstanding
under the Stock Plans. The table below indicates grants of options that
have been granted, to the named persons and to the indicated groups of
persons. Other awards under the Stock Plans are not yet determinable.<PAGE>
<TABLE>
<CAPTION>
NEW PLAN
BENEFITS GRANTED TO DATE
1996 STOCK
PLANS
Number
Dollar of
Name and Position Value($)<F1> Options
</CAPTION>
<S> <C> <C>
Dr. Robert J. Ailes, President and Chief $0 3,450,000
Executive Officer of CareAdvantage Health
Systems, Inc. ("CAHS")
Dr. David W. Bouda, Senior Medical Director $18,000 1,200,000
Dr. Stephan Deutsch, Senior Vice President $22,500 1,500,000
and Chief Medical Officer of CAHS
Mr. Richard Strobel, Vice President, Chief $36,000 2,400,000
Financial Officer, Treasurer and Secretary
<FN>
<F1> The closing bid price of the Common Stock on the OTC Bulletin Board on
August 9, 1996 was $0.145. The dollar value listed is the excess, if any, of the
closing price of the Common Stock on August 9, 1996 over the exercise price of
the options.
</FN>
</TABLE>
Description of the Stock Plans
The 1996 Plan is administered by the Board of Directors of the
Company. Pursuant to the terms of the 1996 Plan, the Board will select
persons to be granted options and will determine: (i) whether the
respective option is to be a non-statutory, non-qualified option or an
incentive option; (ii) the number of shares of the Company's Common Stock
purchasable under such option; (iii) the time or times when the option
becomes exercisable, except that no incentive or non-statutory,
non-qualified option shall be exercised and sold by the recipient prior to
six (6) months from the date of grant; (iv) the exercise price cannot be
less than 100% of the fair market value of the Common Stock on the date of
grant (110% of such fair market value for incentive options granted to a
person who owns or who is considered to own stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company;
and (v) the duration of the option, which cannot exceed ten (10) years.
Incentive Options may only be granted to employees (including officers) of
the Company and/or any of its subsidiaries. Non-statutory, non-qualified
Options may be granted to any employees (including employees who have been
granted Incentive Options) and other persons who the Board of Directors
may select. Under the 1996 Plan, an aggregate of 10% of the Company's
authorized number of shares of Common Stock (which, after the Charter
Amendment has become effective upon its filing with the Delaware Secretary
of State, shall be equal to 9,000,000 shares of Common Stock) has been
reserved for issuance pursuant to the 1996 Plan.
The Director Plan is also administered by the Board of Directors of
the Company. Pursuant to the terms of the Director Plan, the Board may
select non- employee individual Directors to be granted options. Each
such option grant shall be (i) in the amount to purchase 1,000,000 shares
of Common Stock; (ii) at an exercise price which cannot be less than 100%
of the fair market value of the Common Stock on the date of grant; (iii)
immediately exercisable, and (iv) for a duration of five (5) years from
the date of grant. Options under the Director Plan may be granted only to
Directors of the Company. Under the Director Plan, an aggregate of 2% of
the Company's authorized number of shares of Common Stock (which, after
the Charter Amendment has become effective upon its filing with the
Delaware Secretary of State, shall be equal to 1,800,000 shares of Common
Stock) has been reserved for issuance pursuant to the Director Plan. No
current member of the Board of Directors currently qualifies for the Director
Plan.
All options granted under the 1996 Plan and the Director Plan are
exercisable during the option holder's lifetime only by the option holder
(or his or her legal representative) and only while such option holder is
in the Company's employ or is a Company director. With respect to both
the 1996 Plan and the Director Plan, in the event of termination of
employment or of his or her directorship, such person shall have three (3)
months from such date to exercise such option to the extent the option was
exercisable as at the date of termination, but in no event subsequent to
the option's expiration date. With respect to the 1996 Plan, in the event
of termination of employment due to death or disability of the option
holder, such person shall have twelve (12) months from such date to
exercise such option to the extent the option was exercisable as at the
date of termination, but in no event subsequent to the option's expiration
date. With respect to the Director Plan, in the event of termination of
the option holder's directorship due to death, such person shall have
twelve (12) months from such date to exercise such option to the extent
the option was exercisable as at the date of termination, but in no event
subsequent to the options' expiration date.
Both the 1996 Plan and the Director Plan contain customary
anti-dilution provisions which provide that, in the event of any change in
the Company's outstanding capital stock by reason of stock dividend,
recapitalization, stock split, combination, exchange of shares or merger
or consolidation, the Board shall adjust the aggregate number of shares of
the Common Stock reserved for issuance under both plans. In addition, the
aggregate number of outstanding options and the exercise price per share
under both plans shall be proportionately adjusted by the Board whose
determination shall be conclusive.
The Board of Directors has the authority to terminate both the 1996
Plan and the Director Plan as well as to make changes in and additions to
such plans. However, with respect to the 1996 Plan, the Board may not,
unless approved by the stockholders of the Company, change the aggregate
number of shares subject to the 1996 Plan, terminate, modify or amend such
plan so as to adversely affect the rights of option holders previously
granted under such plan, change the requirements of eligibility to such
plan or materially increase the benefits accruing to participants under
such plan. With respect to the Director Plan, the Board may not, unless
the option holder thereof consents, materially impair the rights of such
option holder under such plan.
Federal Income Tax Consequences
A summary of the federal income tax consequences of the Stock Plans
is set forth below. The discussion is not, and should not be relied on
as, a comprehensive analysis of the tax issues arising from or related to
the Stock Plans. Also, the specific state tax consequences to each
participant under the Stock Plans may vary, depending upon the laws of the
various states and the individual circumstances of each participant.
(a) Non-Statutory, Non-Qualified Stock Options
No taxable income is recognized by the option holder upon the grant
of a non-statutory, non-qualified stock option under either the 1996 Plan
or the Director Plan. Generally, the option holder will recognize
ordinary income in the year in which the option is exercised in the amount
by which the fair market value of the purchased shares on the date of
exercise exceeds the exercise price. Such fair market value will
constitute the tax basis of the purchased shares for computing gain or
loss on any subsequent sale. Any gain or loss recognized by the option
holder upon the subsequent disposition of the shares will be treated as
capital gain or loss and will qualify as long- term capital gain or loss
if the shares are held for more than twelve (12) months prior to
disposition.
Generally, the Company will be entitled to a business expense
deduction equal to the amount of ordinary income recognized by the option
holder at the date of exercise. The income recognized by the option
holder will be treated as compensation income and will be subject to
income tax withholding by the Company.
Long-term capital gain is currently taxed to individuals at the
maximum rate of 28%, while items of ordinary income are currently taxed to
individuals at the maximum rate of 39.6%.
b. Incentive Stock Options
As in the case of non-statutory, non-qualified stock options, the
grant of incentive stock options will not result in any taxable income to
the grantee. However, unlike non-statutory, non-qualified stock options,
no taxable income will be recognized by the option holder upon exercise of
an incentive stock option granted under the 1996 Plan and no expense
deduction will be available to the Company.
Generally, if the option holder holds shares acquired upon the
exercise of incentive stock options for at least two (2) years from the
date of grant of the option and for at least one (1) year from the date of
exercise, any gain on a subsequent sale of such shares will be considered
as long-term capital gain. The gain recognized upon the sale of the
shares is equal to the excess of the selling price of the shares over the
exercise price. Therefore, the federal income tax effect on the holders
of incentive stock options is to defer, until the shares are sold,
taxation of any increase in the value of the shares from the date of grant
and to treat such gain, at the time of sale, as capital gain rather than
ordinary income. However, in general, if the option holder sells the
shares prior to expiration of either the two-year or one-year period,
referred to as "disqualifying disposition," the option holder will
recognize taxable income at ordinary tax rates in an amount equal to the
lesser of: (i) the value of the shares on the date of exercise less the
exercise price; or (ii) the amount realized on the date of sale in excess
of the exercise price, and the Company will receive a corresponding
business expense deduction. The balance of the gain recognized on the
disqualifying disposition will be long-term or short-term capital gain
depending upon the holding period of the optioned shares. The two-year
and one-year holding period rules do not apply to optioned shares which
are disposed of by the option holder's estate or a person who acquired
such shares by reason of the death of the option holder.
Long-term capital gain is currently taxed to individuals at a
maximum rate of 28%, while items of ordinary income are currently taxed to
individuals at a maximum rate of 39.6%.
An employee may be subject to alternative minimum tax upon exercise
of an incentive stock option since the excess of the fair market value of
the optioned stock at the date of exercise over the exercise price must be
included in alterative maximum taxable income unless the optioned stock
disposed of in a disqualifying disposition in the year the option was
exercised.
Under Section 162(m) of the Internal Revenue Code, certain
compensation payments in excess of $1 million are subject to a limitation
on deductibility for the Company. The limitation on deductibility applies
with respect to that portion of a compensation payment for a taxable year
in excess of $1 million to either the Company's Chief Executive Officer or
any one of the Company's other four most highly compensated executive
officers. Certain performance-based compensation is not subject to the
limitation on deductibility. Options can qualify for this
performance-based exception, but only if they are granted at fair market
value, the total number of shares that can be granted to an executive for
a specified period is stated, and shareholder and Board of Directors
approval is obtained. The Stock Plans have not been drafted to comply
with those performance-based criteria, and, accordingly, the compensation
attributable to such options will be subject to the deductibility
limitations contained in Section 162(m) of the Internal Revenue Code.
12. MODIFICATION OR EXCHANGE OF SECURITIES:
The Reverse Split which will affect the outstanding shares of
Common Stock of the Company. Additionally, the creation of the "blank
check" Preferred Stock may affect such Common Stock.
13. FINANCIAL AND OTHER INFORMATION:
See the accompanying annual report of the Company on Form 10-K/A
for the fiscal year ending October 31, 1995.
19. AMENDMENT OF CHARTER, BY-LAWS OR OTHER DOCUMENTS:
GENERAL
The Board of Directors, believing it to be in the best
interests of the Company and its stockholders to amend the Company's
Restated Certificate of Incorporation to (i) effect a reverse split (the
"Reverse Split") of one new share of Common Stock (a "New Share") for six
shares of the Company's issued and outstanding Common Stock, (ii) reduce
the Company's authorized number of shares of Common Stock to 90,000,000
shares and (iii) create a new class of "blank check" preferred stock (the
"Preferred Stock") consisting of 10,000,000 shares, on June 6, 1996 voted
to file an appropriate Certificate of Amendment to the Restated
Certificate of Incorporation (the "Charter Amendment") to effect the
Reverse Stock Split and the creation of the Preferred Stock (collectively,
the "Charter Amendment Transactions"). The Charter Amendment,
substantially in the form of Exhibit A to this Information Statement, was
approved by the Majority Stockholders by the Written Consent, dated August
23, 1996.
BACKGROUND OF AND REASONS FOR THE CHARTER AMENDMENT TRANSACTIONS
Reverse Stock Split
In connection with the Change of Control Transactions, the Company
desired to use shares of its Common Stock for the purpose of raising
capital from CW Ventures and as consideration for the consummation of the
CHCM Acquisition. However, the number of shares of Common Stock of the
Company required to raise the necessary funds from CW Ventures and to
consummate the CHCM Acquisition exceeded the total number of authorized
shares of Common Stock of the Company available for issuance. Thus, the
Company caused CAHS, its wholly owned subsidiary, to issue to CW Ventures
and EHC notes exchangeable for shares of Common Stock of the Company.
Upon the filing of the Charter Amendment, the EHC Exchangeable Notes will
be automatically exchanged for shares of Common Stock of the Company
(subject to certain conditions), and the holder of the CW Exchangeable
Notes will have the option to exchange such notes into shares of Common
Stock of the Company until June 30, 1998, at which time the CW
Exchangeable Note will be automatically exchanged for Common Stock of the
Company. Each of the CW Purchase Agreement and the EHC Acquisition
Agreement require the Company to call a special meeting of its
stockholders for the purpose of, inter alia, seeking approval of a reverse
split of the Common Stock. The reverse split was one of several options
considered by the Company to increase the number of authorized shares of
Common Stock of the Company available for issuance. In lieu of such
meeting, the Written Consent was executed.
On June 6, 1996, following prior discussions among the Board of
Directors of the Company, the Board adopted resolutions approving the
Charter Amendment, and directing that the Charter Amendment be submitted
to the Stockholders for approval via written consent. The primary
objectives of the Board in effecting the Reverse Stock Split are to permit
the exchangeable notes issued by CAHS to CW Ventures and EHC to be
exchanged for shares of Common Stock in accordance with their respective
terms and to increase the number of shares of Common Stock that the Board
of Directors may issue without further stockholder approval. Under the
terms of the Letter of Intent, as amended, in the event that the Charter
Amendment does not become effective prior to September 30, 1996, CW Ventures
will be entitled to receive a $500,000 fee from the Company.
After giving effect to the proposed one-for-six reverse stock
split, the Company will have approximately 35,277,907 shares of Common
Stock outstanding after giving effect to the automatic issuance of
13,375,083 post-split shares of Common Stock in exchange for the EHC
Exchangeable Notes (subject to certain conditions), issuance of shares of
Common Stock pursuant to outstanding options, warrants and the CW
Exchangeable Notes and 54,722,093 post-split shares of Common Stock
available for issuance without further stockholders approval.
Creation of "Blank Check" Preferred Stock
The Board of Directors also adopted a resolution unanimously
approving and recommending to the Stockholders for their approval by
written consent, an amendment to the Certificate of Incorporation to
provide therein for the creation of 10,000,000 shares of "Blank Check"
Preferred Stock. The text of the amendment is included in Exhibit A
attached hereto.
The Charter Amendment provides for the creation of the Preferred
Stock, which the Board of Directors believes is in the best interests of
the Company and its stockholders and believes it advisable to authorize
such shares to have them available for, among other things, possible
issuance in connection with such activities as public or private offerings
of shares for cash, dividends payable in stock of the Company,
acquisitions of other companies or businesses, and otherwise.
The term "Blank Check" Preferred Stock refers to stock for which
the designations, preferences, conversion rights, cumulative, relative,
participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof (collectively, the
"Limitations and Restrictions") are determined by the board of directors
of a company. As such, the Board of Directors of the Company will be
entitled to authorize the creation and issuance of 10,000,000 shares of
Preferred Stock in one or more series with such Limitations and
Restrictions as may be determined in the Board's sole discretion, with no
further authorization by stockholders required for the creation and
issuance thereof.
The Board of Directors is required to make any determination to
issue shares of Common Stock or Preferred Stock based on its judgment as
to the best interests of the stockholders and the Company. Although the
Board of Directors has no present intention of doing so, it could issue
shares of Common Stock or Preferred Stock that may, depending on the terms
of such series, make more difficult or discourage an attempt to obtain
control of the Company by means of a merger, tender offer, proxy contest
or other means. When, in the judgment of the Board of Directors, this
action will be in the best interest of the stockholders and the Company,
such shares could be used to create voting or other impediments or to
discourage persons seeking to gain control of the Company. Such shares
could be privately placed with purchasers favorable to the Board of
Directors in opposing such action. In addition, the Board of Directors
could authorize holders of a series of Common or Preferred Stock to vote
either separately as a class or with the holders of the Company's Common
Stock, on any merger, sale or exchange of assets by the Company or any
other extraordinary corporate transaction. The existence of the
additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares also could be
used to dilute the stock ownership of a person or entity seeking to obtain
control of the Company should the Board of Directors consider the action
of such entity or person not to be in the best interest of the
stockholders and the Company.
While the Company may consider effecting an equity offering of
Common or Preferred Stock in the proximate future for purposes of raising
additional working capital or otherwise, the Company, as of the date
hereof, has no agreements or understandings with any third party to effect
any such offering, to purchase any shares offered in connection therewith,
and no assurances are given that any offering will in
fact be effected.
EFFECTS OF THE REVERSE SPLIT
Effect on Common Stock. The Restated Certificate of Incorporation
of the Company authorizes the Company to issue 100,000,000 shares of
capital stock, all of which is designated Common Stock. The effect of the
Charter Amendment is to (i) decrease the number of authorized shares of
Common Stock of the Company from 100,000,000 to 90,000,000, (ii) to create
a new class of "blank check" Preferred Stock, the authorized number of
shares of which shall be 10,000,000, and (iii) decrease the number of
issued and outstanding shares from 65,149,464 shares of Common Stock to
approximately 10,858,244 shares based on share information as of August
23, 1996.
The following table illustrates the principal effects of the
Reverse Stock Split on the Common Stock based on Common Stock authorized,
issued and outstanding as of August 23, 1996.
<PAGE>
Prior to After a 1-for-6
Reverse Reverse
Number of Shares Stock Split Stock Split
Common Stock Authorized 100,000,000 90,000,000
Outstanding 65,149,464 10,858,244
Available for Future Issuance 24,850,536 79,141,756
Effect on Market for Common Stock. On August 9, 1996, the closing
bid price of the Common Stock as reported on the OTC Bulletin Board was
$0.145 per share. By decreasing the number of shares of Common Stock
outstanding without altering the aggregate economic interest in the
Company represented by such shares, the Board of Directors believes that
the trading price will be increased to a price that may be appealing to
more potential investors.
Effect on Legal Ability to Pay Dividends. The holders of shares of
the Common Stock are entitled to receive distributions of cash or other
property, if any, that may be declared from time to time by the Company's
Board of Directors in its discretion from funds legally available
therefor, subject to the dividend priority of the holders of preferred
stock of the Company, if any. The Reverse Stock Split will not affect
potential distributions to the Company's stockholders. The Company,
however, has never paid cash dividends on the Common Stock and has no
plans to pay cash dividends in the foreseeable future. The current policy
of the Company's Board of Directors is to retain all available earnings
for use in the operation and expansion of the Company's business. Any
future dividends will depend upon the Company's earnings, capital
requirements, financial condition and other relevant factors. Pursuant to
the CW Exchangeable Notes and the EHC Exchangeable Notes, the Company is
prohibited from paying dividends on its capital stock without the consent
of CW Ventures and EHC, respectively.
FEDERAL INCOME TAX CONSEQUENCES
A summary of the federal income tax consequences of the Reverse
Stock Split as contemplated in the Charter Amendment is set forth below.
The discussion is based on the present federal income tax law. The
discussion is not, and should not be relied on as, a comprehensive
analysis of the tax issues arising from or relating to the proposed
Charter Amendment. ACCORDINGLY, STOCKHOLDERS ARE URGED TO
CONSULT THEIR TAX ADVISORS FOR AN ANALYSIS OF THE EFFECT OF THE CHARTER
AMENDMENT ON THEIR RESPECTIVE TAX SITUATIONS.
The transactions contemplated by the Charter Amendment constitute
a "recapitalization" to the Company and its stockholders to the extent
that issued shares of Common Stock are exchanged for a reduced number of
shares of Common Stock. Therefore, neither the Company nor its
stockholders will recognize any gain or loss for federal income tax
purposes as a result thereof. However, if a stockholder receives cash in
lieu of any fractional New Share of Common Stock, such stockholder will be
treated as having received the cash in redemption of its fractional share
interest. Depending on the stockholder's retained stock interest (taking
into account constructive ownership under applicable attribution rules),
such redemption will be treated as either (i) a dividend to the extent of
the Company's current and accumulated earnings and profits with any excess
first applied against the stockholder's adjusted tax basis allocable to
the fractional share interest ("Basis") and the remainder treated as gain
from the sale or exchange of the fractional shares or (ii) gain or loss
from the sale or exchange of the fractional shares in an amount equal to
the difference, if any, between the cash received and the stockholder's
Basis.
The shares of Common Stock to be issued to each stockholder will
have an aggregate basis, for computing gain or loss, equal to the
aggregate basis of the shares of Common Stock held by such stockholder
immediately prior to the Effective Date, less any basis allocable to the
fractional shares redeemed, if any, to the extent such redemption is
treated as a sale or exchange as described in the preceding paragraph. A
stockholder's holding period for the shares of Common Stock to be issued
will include the holding period for the shares of Common Stock held
thereby immediately prior to the Effective Date provided that such shares
of Common Stock were held by the stockholder as capital assets on the
Effective Date.
EXCHANGE OF SHARES; NO FRACTIONAL SHARES
No fractional shares of Common Stock will be issued in connection
with the proposed Reverse Stock Split. A stockholder who would otherwise
be entitled to receive a fractional share of Common Stock will receive, in
lieu thereof, one share of Common Stock. Management believes that the
issuance of a full share will be fair to all of the stockholders whose
fractional interests are retired, the other stockholders of the Company
and the Company. As of August 4, 1996, the Company had approximately
15,000 stockholders.
The Company will appoint American Stock Transfer & Trust Company
(the "Exchange Agent") as Exchange Agent to act for the holders of the
Common Stock in connection with the Charter Amendment.
On or after the Effective Date, the Company will mail to each
stockholder a letter of transmittal. A stockholder will be able to
receive his New Shares only by transmittal to the Exchange Agent of such
stockholder's stock certificate(s) for shares of Common Stock that were
issued prior to the Reverse Stock Split, together with the properly
executed and completed letter of transmittal and such evidence of
ownership of such shares as the Company may require. Stockholders will
not receive certificates for New Shares unless and until the certificates
representing their shares of Common Stock that were issued prior to the
Reverse Stock Split are surrendered. Stockholders should not forward
their certificates to the Exchange Agent until the letter of transmittal
is received and should surrender their certificates only with such letter
of transmittal.
There will be no service charges payable by the stockholders of the
Company in connection with the exchange of their certificates. These
costs will be borne by the Company.
MISCELLANEOUS
Pursuant to Section 242(c) of the General Corporation Law of the
State of Delaware, the Board of Directors reserves the right,
notwithstanding stockholder approval and without further action by the
stockholders, not to proceed with the Reverse Split, if, at any time prior
to filing the Charter Amendment with the Secretary of State of the State
of Delaware, the Board of Directors, in its sole discretion, determines
that the Reverse Split is no longer in the best interests of the Company
and its stockholders. The Board of Directors may consider a variety of
factors in determining whether or not to proceed with the Reverse Stock
Split including, but not limited to, overall trends in the stock market,
recent changes and anticipated trends in the per share market price of the
Common Stock, business developments and the Company's actual and projected
financial performance.
By Order of the Board of Directors
Richard J. Strobel
Secretary
Dated: September __, 1996
<PAGE>
"FOURTH: (A) Authorized Capital Stock. The total
number of shares of all classes of stock which the Corporation
shall have authority to issue is One Hundred Million
(100,000,000) shares, consisting of Ninety Million (90,000,000)
shares of Common Stock, $.001 par value per share (the "Common
Stock") and Ten Million (10,000,000) shares of Preferred Stock,
$.10 par value per share (the "Preferred Stock").
(B) Preferred Stock. Shares of the Preferred Stock may
be issued from time to time in one or more series as may from
time to time be determined by the Board of Directors. Each
series shall be distinctly designated. All shares of any one
series of the Preferred Stock shall be alike in every particular
event except that there may be different dates from which
dividends thereon, if any, shall be cumulative, if made
cumulative. The powers, preferences and relative participating,
optional and other rights of each series, and the
qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding. Subject to the provisions of subparagraph (4) of
Paragraph (D) of this Article FOURTH, the Board of Directors of
the Corporation is hereby expressly granted authority to fix by
resolution or resolutions adopted prior to the issuance of any
shares of each particular series of Preferred Stock, the
designation, powers, preferences and relative participating,
optional and other rights, if any, and the qualifications,
limitations and restrictions thereof, if any, of such series,
including dividend rights, conversion rights, voting rights,
redemption and sinking fund rights, and rights upon liquidation,
merger or winding up of the business of the Corporation. No
right, power or preference of any series of the Preferred Stock
shall be implied; any such right must be expressly set forth in
the resolutions of the Board of Directors adopted with respect
to said shares.
(C) Common Stock.
(1) After the requirements with respect to preferential
dividends on Preferred Stock (fixed in accordance with the
provisions of Paragraph (B) of this Article FOURTH), if any,
shall have been met and after the Corporation shall have
complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase
accounts (fixed in accordance with the provisions of Paragraph
(B) of this Article FOURTH) and subject further to any other
conditions which may be fixed in accordance with the provisions
of Paragraph (B) of this Article FOURTH, then but not otherwise,
the holders of Common Stock shall be entitled to receive such
dividends, if any, as may be declared from time to time by the
Board of Directors.
(2) After distribution in full of the preferential
amount (fixed in accordance with the provisions of Paragraph (B)
of this Article FOURTH), if any, to be distributed to the holders
of Preferred Stock in the event of voluntary or involuntary
liquidation, distribution or sale of assets, dissolution or
winding up of the Corporation, the holders of the Common Stock
shall be entitled to receive all the remaining assets of the
Corporation, tangible or intangible, of whatever kind available
for distribution to stockholders, ratably in proportion to the
number of shares of the Common Stock held by each.
(3) Except as otherwise may be required by law, this
Certificate of Incorporation or the provisions of the resolution
or resolutions as may be adopted by the Board of Directors
pursuant to Paragraph (B) of this Article FOURTH, each holder of
Common Stock shall have one (1) vote in respect of each share of
Common Stock held by such holder on each matter voted upon by
the stockholders.
(D) Other Provisions.
(1) The relative powers, preferences and rights of each
series of Preferred Stock in relation to the powers, preferences
and rights of each other series of Preferred Stock shall, in
each case, be as fixed from time to time by the Board of
Directors in the resolution or resolutions adopted pursuant to
authority granted in Paragraph (B) of this Article FOURTH, and
the consent, by class or series vote or otherwise, of the
holders of the Preferred Stock of such series of the Preferred
Stock as are from time to time outstanding shall not be required
for the issuance by the Board of Directors of any other series
of Preferred Stock whether the powers, preferences and rights of
such other series shall be fixed by the Board of Directors as
senior to, or on a parity with, the powers, preferences and
rights of such outstanding series, or any of them, provided,
however, that the Board of Directors may provide in such
resolution or resolutions adopted with respect to any series of
Preferred Stock that the consent of the holders of a majority
(or such greater portion as shall be therein fixed) of the
outstanding shares of such series voting thereon shall be
required for the issuance of any or all other shares of
Preferred Stock.
(2) Subject to the provisions of subparagraph (1) of
this paragraph, shares of any series of Preferred Stock may be
issued from time to time as the Board of Directors shall
determine and on such terms and for such consideration as shall
be fixed by the Board of Directors.
(3) Shares of Common Stock may be issued from time to
time as the Board of Directors shall determine and on such terms
and for such consideration as shall be fixed by the Board of
Directors.
(4) No holder of any of the shares of any class or
series of stock or of options, warrants or other rights to
purchase shares of any class or series of stock or of other
securities of the Corporation shall have any preemptive rights to
purchase or subscribe for any unissued stock of any class or
series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock
of the Corporation of any class or series, or bonds, certificates
of indebtedness, debentures or other securities convertible into
or exchangeable for stock of the Corporation of any class or
series, or carrying any right to purchase stock of any class or
series."
<PAGE>
EXHIBIT B
STOCK PLANS
1996 DIRECTOR STOCK OPTION PLAN
OF
CAREADVANTAGE, INC.
AS AMENDED, JULY 24, 1996
1. Purpose of Plan.
---------------
The purpose of this 1996 Director Stock Option Plan (the "Plan")
is to provide incentives to directors of CareAdvantage, Inc. (the
"Company") who are not full-time employees of the Company ("Non-Employee
Directors") to advance the interests of the Company by giving them an
opportunity to participate in an increase in the market value of shares of
the Company's Common Stock, $.001 par value ("Common Stock"). The options
to purchase Common Stock under the Plan shall not qualify under Section 422
of the Internal Revenue Code of 1986, as amended. Option grants under the
Plan are intended to comply with the formula award provision of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
2. Administration.
--------------
(a) The Plan shall be administered by the Board of Directors
(the"Board") of the Company.
(b) The Board shall have the authority to (i) exercise all of
the powers granted to it under the Plan, (ii) to construe, interpret
and implement the Plan and any Stock Option Agreements, which
shall be substantially in the form attached hereto as Exhibit A,
executed pursuant to Section 6 hereof, (iii) to prescribe, amend
and rescind rules and regulations relating to the Plan, (iv) to
make all determinations necessary or advisable in administering
the Plan and (v) to correct any defect, supply any omission and
reconcile any inconsistency in the Plan.
(c) The determination of the Board on all matters relating to
the Plan or any Stock Option Agreement shall be final, binding and
conclusive.
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(d) No member of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any award
thereunder.
(e) The Board may authorize the Company's Stock Option Committee
to administer the Plan and perform all or any portion of the duties of the
Board hereunder.
3. Eligibility.
-----------
Individuals who are non-employee directors of the Company (other
than William J. Marino, Robert J. Pures, David J. Kass and Eric
Schlesinger) shall be eligible to participate in the Plan. Each
Non-Employee Director to whom an option is granted hereunder is referred
to as an "Optionee."
4. Shares Subject to the Plan.
Subject to adjustment as provided in Section 6 hereof, the
maximum aggregate number of shares of Common Stock as to which options may
at any time be granted to all Optionees is 2% of the Company's authorized
Common Stock, which shares may, at the discretion of the Board, be either
authorized but unissued shares or shares previously issued and reacquired
by the Company. Shares subject to options under the Plan which remain
unpurchased on the expiration or termination of an option shall again be
available for options to be granted under the Plan.
5. Granting of Options; Effective Date
----------------------------------
Subject to adjustment as provided in Section 6 hereof, upon the
election of a Non-Employee Director to the Board, the Board shall grant to
such Director an option to purchase 1,000,000 shares of Common Stock, at
an exercise price equal to the "Fair Market Value" of the Common Stock on
the date of grant (as such term is hereinafter defined), each such option
to be for a term of five (5) years from the date of grant. Such Option
shall be exercisable over three (3) years from the date of grant, subject
to earlier termination as hereinafter provided, as follows: From the date
of grant, 1/36 per month of the total shares subject to the Option shall
vest.
6. Terms and Conditions of Options
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<PAGE>
All options granted under the Plan shall be evidenced by a
written Stock Option Agreement in the form attached hereto as Exhibit A
signed by the Chief Executive Officer of the Company and the Optionee. All
options shall be granted subject to the following terms and conditions:
(a) Fair Market Value. The term "fair market value" shall mean
the closing price of the Common Stock on the date the option is granted (if
such Common Stock is listed on a national securities exchange), or the
representative closing bid and ask price in the over-the-counter market as
reported by NASDAQ or as quoted by the Bureau or a recognized dealer in the
Common Stock on the date of grant (if a public market exists for such
Common Stock and such Common Stock is not listed on such an exchange);
provided, however, that if no bid or ask prices shall have been made within
the ten (10) business days preceding such relevant date, or if deemed
appropriate by the Board for any other reason, the fair market value of
such shares of Common Stock shall be as determined by the Board. In no
event shall the fair market value of any share of Common Stock be less than
its par value.
(b) Option term. Each option shall be granted for a term
determined from time to time by the Board, but in no event shall an option
be granted for a term of more than ten (10) years and each option may
be made subject to earlier termination in the event of death or
voluntary or involuntary termination of the Non-Employee Director
as set forth herein.
(c) Exercise of Options.
-------------------
i) Except as provided in Section 6(g) hereof, each option
shall be exercisable only by the Optionee during his lifetime. ii) No
option shall be exercisable after the tenth anniversary of the date of
grant.
(d) Notice of Exercise; Payment; Stockholders' Rights.
-------------------------------------------------
An Optionee electing to exercise an option shall give
written notice of exercise in such form as the Board may prescribe,
addressed to the Chief Executive Officer of the Company and
indicating the number of shares of Common Stock to be purchased,
and shall tender payment therefore in full (i) in cash, or (ii) by
check. Upon exercise, no fractional shares of Common Stock shall
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be issued or transferred and no payments shall be made in lieu of
fractional shares. No shares shall be issued or delivered until
full payment therefor has been made. An Optionee shall have none
of the rights of a stockholder, in respect of the shares of Common
Stock subject to an option, until such shares are issued or
transferred to him or her.
(e) Purchase for Investment; Restrictions of Shares. If the
shares of Common Stock subject to an option have not been registered under
the Securities Act of 1933, as amended (the "Act"), the Board shall have
the right to require, as a condition to any exercise of the option, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of the Act, including but not limited to the
representation that any and all shares of Common Stock purchased upon
exercise of the option will be purchased for investment and not with a view
to the distribution or resale thereof and to agree that such shares will
not be sold except in accordance with such restrictions or
limitations as may be set forth in the Stock Option Agreement or
as may be imposed by law. The Board may also place other
restrictions on the transferability of such shares, provided,
however, that such restrictions are set forth in the Stock Option
Agreement executed by the Optionee. (f) Death or Voluntary or Involuntary
Termination. In the event of death of the Optionee or voluntary or
involuntary termination of directorship with the Company of the Optionee,
such option may, subject to the provisions of the Plan and any restrictions
or limitations as are determined by the Board, be exercised as to
those optioned shares in respect of which such option has not
previously been exercised, but only to the extent that such option
could be exercised by the Optionee on the date of such death or
voluntary or involuntary termination of directorship with the
Company (whichever is the applicable case): i) In the event of the death
of the Optionee, then by his or her executor or administrator, or by the
person or persons to whom the Option is transferred by will or the
applicable laws of descent and distribution, within
twelve (12) months from the date of death, but in no
event subsequent to the expiration date of the option;
and
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ii) In the event of the Optionee's voluntary or
involuntary termination of directorship with the Company, then by the
Optionee within three (3) months from the date of termination, but in no
event subsequent to the expiration date of the option.
(g) Non-transferability. The rights and interests of each
Optionee shall not be transferable or alienable by assignment or in any
manner whatsoever, otherwise than by will or the laws of descent and
distribution.
7. Adjustment in Event of Changes in Capitalization.
------------------------------------------------
In the event of a recapitalization, stock split, stock dividend,
combination, exchange of shares, merger, consolidation, rights offering,
separation, reorganization, liquidation or other change in the corporate
structure of the Company, the Board shall make such equitable adjustments,
designed to protect against dilution, as it may deem appropriate in the
number and kind of shares subject to the Plan and, with respect to
outstanding options, in the number and kind of shares covered thereby and
in the exercise price.
8. Termination or Amendment of Plan.
The Board may, at any time, terminate the Plan with respect to
any shares of Common Stock not at the time subject to an option, and may
from time to time alter or amend the Plan or any part thereof, provided,
however, that no change in any option theretofore granted may be made which
would materially impair the rights of the Optionee without his or her
consent.
9. Issuance of Shares.
The shares of Common Stock, when issued and paid for pursuant to
the options granted hereunder, shall be issued as fully paid and
non-assessable shares.
10. Withholding Taxes.
Whenever under the Plan shares are to be issued in satisfaction
of the exercise of options granted thereunder, the Company shall have the
right to require the recipient to remit to the Company an amount sufficient
to satisfy federal, state and local withholding tax requirements prior to
the delivery of any certificate or certificates for such shares.
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<PAGE>
11. Adoption of Plan; Duration of Plan.
The Plan, which was adopted by the Board on June 6, 1996, and
amended by the Board on July 24, 1996, is subject to approval by the
shareholders of the Company, within twelve (12) months after adoption by
the Board. The Plan shall terminate on June 6, 2006 and no option shall
be granted under the Plan after such date. The Board may at any time prior
to such date terminate the Plan or make such modifications or amendments
thereto as it shall deem advisable; provided, however, that, unless
otherwise approved by the shareholders of the Company:
i) no change shall be made in the aggregate number of shares subject
to the Plan;
ii) no termination, modification or amendment shall adversely affect
the rights of a holder of an option previously granted under the Plan;
iii) no material modification shall be made to the requirements of
eligibility for participation in the Plan; and
iv) no material increase shall be made in the benefits accruing to
participants under the Plan.
12. No Right to Continued Directorship.
Nothing contained in this Plan or in any Stock Option Agreement
shall confer upon any Non-Employee Director any right to continue as a
director of the Company.
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<PAGE>
EXHIBIT A
CAREADVANTAGE, INC.
DIRECTOR STOCK OPTION AGREEMENT
---------------------------------------
To:
We are pleased to notify you that pursuant to the terms of the
1996 Director Stock Option Plan, as amended (the "Plan"), of CareAdvantage,
Inc. (the "Company"), and subject to Section 8 hereof, a non-qualified
stock option to purchase 1,000,000 shares of the Company's common stock,
$.001 par value (the "Common Stock"), at a price of [$ ] per share, has
this [ ] day of [ ] been granted to you under the Plan. This
option may be exercised only upon the terms and conditions set forth below.
1. Purpose of Option.
The purpose of the Plan under which this non-qualified stock
option has been granted is to further the growth and development of the
Company and its subsidiaries by encouraging non-employee directors who
contribute and are expected to contribute materially to the Company's
success to obtain a proprietary interest in the Company through the
ownership of stock, thereby providing such persons with an added incentive
to promote the best interests of the Company, and affording the Company a
means of attracting to its service persons of outstanding ability.
Awards under the Plan are intended to comply with the formula award
provision of Rule 16b-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
2. Acceptance of Option Agreement.
------------------------------
Your execution of this non-qualified stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms;
it imposes no obligation upon you to purchase any of the shares subject to
the option. Your obligation to purchase shares can arise only upon your
exercise of the option in the manner set forth in Section 4 hereof.
3. When Option May Be Exercised.
----------------------------
The option granted hereunder shall be exercisable over three (3)
years from the date of grant, subject to earlier termination as hereinafter
provided, as follows: From the date of grant, 1/36 per month of the total
shares subject to the Option shall vest.
7
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This option may not be exercised for less than ten (10) shares at
any one time (or the remaining shares then purchasable if less than ten)
and expires at the end of five (5) years from the date of grant whether or
not it has been duly exercised, unless sooner terminated as provided in
Section 5 or 6 hereof.
4. How Option May Be Exercised.
---------------------------
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your election
to exercise the option. The notice must state the number of shares of
Common Stock as to which your option is being exercised, must contain a
statement by you (in a form acceptable to the Company) that such shares are
being acquired by you for investment and not with a view to their
distribution or resale (unless a Registration Statement covering the shares
purchased has been declared effective by the Securities and Exchange
Commission) and must be accompanied by cash or a check to the order of the
Company for the full purchase price of the shares being purchased, plus
such amount, if any, as is required for withholding taxes.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the
exercise of this option, the submission to the Company of appropriate proof
of the right of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be required
to issue or deliver a certificate for any shares until it has complied with
all requirements of the Securities Act of 1933, the Exchange Act, any stock
exchange on which the Company's Common Stock may then be listed and all
applicable state laws in connection with the issuance or sale of such
shares or the listing of such shares on said exchange. Until the issuance
of the certificate for such shares, you or such other person as may be
entitled to exercise this option shall have none of the rights of a
stockholder with respect to shares subject to this option.
5. Termination of Directorship.
---------------------------
In the event that you cease to be a director of the Company for
any reason other than by death, you may exercise, within three (3) months
from the date of such termination, that portion of this option which was
exercisable by you at the date of such termination.
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6. Death.
-----
If you die while a director of the Company, that portion of this
option which was exercisable by you at the date of your death may be
exercised by your legatee or legatees under your Will, or by your personal
representatives or distributees, within twelve (12) months from the date
of your death, but in no event after the expiration date of this option.
7. Non-Transferability of Option.
-----------------------------
This option shall not be transferable except by Will or the laws
of descent and distribution, and may be exercised during your lifetime only
by you.
8. Adjustments upon Changes in Capitalization.
------------------------------------------
In the event of a recapitalization, stock split, stock dividend,
combination, exchange of shares, merger, consolidation, rights offering,
separation, reorganization, liquidation or other change in the corporate
structure of the Company, the Board shall make such equitable adjustments,
designed to protect against dilution, as it may deem appropriate in the
number and kind of shares covered by your options and, with respect to
outstanding options, in the number and kind of shares covered thereby and
in the exercise price.
9. Subject to Terms of the Plan.
----------------------------
This Director Stock Option Agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan, the decision of
the Board shall be conclusive.
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10. Tax Status.
----------
This option does not qualify as an "incentive stock option" under
the provisions of Section 422A of the Internal Revenue Code of 1986, as
amended, and the income tax implications of your receipt of a non-qualified
stock option and your exercise of such an option should be discussed with
your tax counsel.
Sincerely yours,
CAREADVANTAGE, INC.
By: ________________________________
Name:
Title:
Agreed to and accepted this
day of , 199.
Signature of Optionee
10
<PAGE>
1996 STOCK OPTION PLAN
OF
CAREADVANTAGE, INC.
AS AMENDED, JULY 24, 1996
1. PURPOSE OF PLAN.
The purpose of this Stock Option Plan ("Plan") is to further the
growth and development of CareAdvantage, Inc. ("Company") and any
subsidiaries thereof by encouraging selected employees and other persons
who contribute and are expected to contribute materially to the Company's
success to obtain a proprietary interest in the Company through the
ownership of stock, thereby providing such persons with an added incentive
to promote the best interests of the Company and affording the Company a
means of attracting to its service persons of outstanding ability.
2. STOCK SUBJECT TO THE PLAN.
An aggregate of 10% of the Company's authorized common stock,
$.001 par value ("Common Stock") subject, however, to adjustment or change
pursuant to paragraph 12 hereof, shall be reserved for issuance upon the
exercise of options which may be granted from time to time in accordance
with the Plan ("Options"). Such shares, in whole or in part, may be
authorized but unissued shares or issued shares which have been reacquired
by the Company, as the Committee (as such term is hereinafter defined)
shall from time to time determine. If, for any reason, an Option shall
lapse, expire or terminate without having been exercised in full, the
unpurchased shares covered thereby shall again be available for
purposes of the Plan.
3. ADMINISTRATION.
(a) For purposes of the Plan, the "Committee" shall be defined
as two or more Directors of the Company's Board of Directors (the "Board")
who shall be "disinterested persons" as defined by Regulation 240.16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and "outside directors" as defined in regulations under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code").
Such Committee shall have and may exercise any and all of the powers
relating to the administration of the Plan and the grant of Options
thereunder as are set forth in subparagraph 3(b)
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hereof as the Board shall confer and delegate. The Board shall have power
at any time to fill vacancies in, to change the membership of, or to
discharge such Committee. The Committee shall select one of its
members as its chairman and shall hold its meetings at such times and at
such places as it shall deem advisable. A majority of such Committee
shall constitute a quorum and such majority shall determine its
action. Any action may be taken without a meeting by written consent of
all the members of the Committee. The Committee shall keep minutes of its
proceedings and shall report the same to the Board
at the meeting next succeeding.
(b) The Committee shall administer the Plan and, subject to the
provisions of the Plan, shall have authority, along with the Board, to
determine the persons to whom, and the time or times at
which, Options shall be granted, the number of shares to be subject to
each such Option and whether all or any portion of such Options shall be
incentive stock options ("Incentive Options") qualifying under
Section 422A of the Code or stock options which do not so qualify
("Non-Qualified Options"). Both Incentive Options and Non-Qualified
Options may be granted to the same person at the same time provided
each type of Option is clearly designated. In making such determinations,
the Committee may take into account the nature of the services rendered by
such persons, their present and potential contribution to the
Company's success and such other factors as the Committee in its sole
discretion may deem relevant. Subject to the express provisions of the
Plan, the Committee shall also have authority to interpret the Plan,
to prescribe, amend and rescind rules and regulations relating thereto, to
determine the terms and provisions of the respective Option Agreements,
which shall be substantially in the forms attached hereto as Exhibit A and
Exhibit B, and to make all other determinations necessary or advisable for
the administration of the Plan, all of which determinations shall be
conclusive and not subject to review. The Committee may delegate, in its
sole discretion, to any officer or manager of the Company the authority
to perform administrative functions under the Plan.
4. ELIGIBILITY FOR RECEIPT OF OPTIONS.
(a) Incentive Options. Incentive Options may be granted only
to employees (including officers) of the Company and/or any of its
subsidiaries. Further, Incentive Options may not be granted to any person
who, at the time the Incentive Option is granted, owns (or is considered
as owning within the meaning of Section 425(d) of the Code) stock
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any subsidiary (10% Owner), unless at the time
the Incentive Option is granted to the 10% Owner, the option price is at
least 110% of the fair market value of the Common Stock subject thereto
and such Incentive Option by its terms is not exercisable subsequent
to five years from the date of grant.
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(b) NON-QUALIFIED OPTIONS. NON-QUALIFIED OPTIONS MAY BE
GRANTED TO ANY EMPLOYEES (INCLUDING employees who have been granted
Incentive Options) and other
persons whom the Board (or Committee) determines will contribute to the
Company's success.
5. OPTION PRICE.
The purchase price of the shares of Common Stock under each
Option shall be determined by the Committee, which determination shall be
conclusive and not subject to review, but in no event shall the purchase
price be less than 100% of the fair market value of the Common Stock on
the date of grant in the case of either Incentive Options or Non-Qualified
Options (110% of fair market value in the case of Incentive Options
granted to a 10% Owner).
In determining fair market value, the Committee shall consider
the closing price of the Common Stock on the date the Option is granted
(if such Common Stock is listed on a national securities exchange), the
representative closing bid and ask price in the over-the-counter market as
reported by NASDAQ or as quoted by the National Quotation Bureau or a
recognized dealer in the Common Stock on the date of grant (if a public
market exists for such Common Stock and such Common Stock is not listed
on such an exchange) and such other factors as the Committee shall deem
appropriate.
For purposes of the Plan, the date of grant of an Option shall
be the date on which the Board or the Committee shall by resolution duly
authorize such Option.
6. TERM OF OPTIONS.
The term of each Incentive Option and Non-Qualified Option shall
be such number of years as the Committee shall determine, subject to
earlier termination as herein provided, but in no event more than ten (10)
years from the date such Incentive Option or Non-Qualified Option is
granted.
7. EXERCISE OF OPTIONS.
(a) The aggregate fair market value (determined as of the time
an Incentive Option is granted) of the shares of the Company's Common
Stock purchasable thereunder exercisable for the first
time by an employee during any calendar year may not exceed $100,000.
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(b) Each Incentive Option and Non-Qualified Option shall be
exercisable to the extent determined by the Committee, but in no event
shall the shares of the Company's Common Stock underlying either an
Incentive Option or a Non-Qualified Option, once exercised, be held for
less than six (6) months from the date of grant.
(c) An Option may not be exercised for fractional shares of the
Company's Common Stock.
(d) Except as provided in paragraphs 9, 10 and 11 hereof, no
Option shall be exercisable unless the holder thereof shall have been an
employee or other person employed by or engaged in performing services for
the Company and/or a subsidiary continuously from the date of grant to the
date of exercise.
(e) The exercise of an Option shall be contingent upon receipt
from the holder thereof of a written representation that at the time of
such exercise it is the optionee's then present intention to acquire the
Option shares for investment and not with a view to the distribution or
resale thereof (unless a Registration Statement covering the shares
purchasable upon exercise of the Options shall have been declared
effective by the Securities and Exchange Commission) and upon receipt by
the Company of cash, or a check to its order, for the full purchase price
of such shares.
(f) The holder of an Option shall have none of the rights of a
stockholder with respect to the shares purchasable upon exercise of the
Option until a certificate for such shares shall have been
issued to the holder upon due exercise of the Option.
(g) The proceeds received by the Company upon exercise of an
Option shall be added to the Company's working capital and be available
for general corporate purposes.
8. NON-TRANSFERABILITY OF OPTIONS.
No Option granted pursuant to the Plan shall be transferable
otherwise than by will or the laws of descent or distribution and an
Option may be exercised during the lifetime of the holder only by
such holder.
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9. TERMINATION OF EMPLOYMENT OR ENGAGEMENT.
In the event the employment of the holder of an Option shall be
terminated by the Company or a subsidiary for any reason other than by
reason of death or disability, or the engagement of a non-
employee holder of a Non-Qualified Option shall be terminated by the
Company or a subsidiary for any reason, such holder may, within three (3)
months from the date of such termination, exercise such Option
to the extent such Option was exercisable by such holder at the date of
such termination. Notwithstanding the foregoing, no Option may be
exercised subsequent to the date of its expiration. Absence on leave
approved by the Company shall not be considered an interruption of
employment for any purpose under the Plan.
Nothing in the Plan or in any Option Agreement granted hereunder
shall confer upon any holder of an Option any right to continue in the
employ of the Company or any subsidiary or obligate the
Company or any subsidiary to continue the engagement of any holder of an
Option or interfere in any way with the right of the Company or any such
subsidiary to terminate the holder's of such Option employment
or engagement at any time.
10. DISABILITY OF HOLDER OF OPTION.
If the employment of the holder of an Option shall be terminated
by reason of such holder's disability as determined in accordance with
Section 22(e)(3) of the Code, such holder may, within twelve
(12) months from the date of such termination, exercise such option to the
extent such Option was exercisable by such holder at the date of such
termination. Notwithstanding the foregoing, no Option may
be exercised subsequent to the date of its expiration.
11. DEATH OF HOLDER OF OPTION.
If the holder of any Option shall die while in the employ of, or
while performing services for, the Company or one or more of its
subsidiaries (or within six (6) months following termination of
employment due to disability), the Option theretofore granted to such
person may be exercised, but only to the extent such Option was
exercisable by the holder at the date of death (or, with respect to
employees, the date of termination of employment due to disability) by the
legatee or legatees of such person under
such person's Last Will, or by such person's personal representative or
distributees, within twelve (12) months from the date of death, but in no
event subsequent to the expiration date of the Option.
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12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If at any time after the date of grant of an Option, the Company
shall, by stock dividend, split-up, combination, reclassification or
exchange, or through merger or consolidation or otherwise, change its
shares of Common Stock into a different number or kind or class of shares
or other securities or property, then the number of shares covered by such
Option and the price per share thereof shall be proportionately adjusted
for any such change by the Committee or the Board whose determination
thereon shall be conclusive. Upon the dissolution or liquidation of the
Company, or upon a reorganization, merger or consolidation of the Company
as a result of which the outstanding securities of the class then subject
to Options hereunder are changed into or exchanged for cash or property or
securities not of the Company's issue, or upon a sale of substantially all
of the property of the Company to, or the acquisition of stock
representing more than eighty percent (80%) of the voting power of the
stock of the Company then outstanding by, another corporation or person,
the Plan shall terminate, and all Options theretofore granted hereunder
shall terminate, unless provision be made in writing in connection with
such transaction for the continuance of the Plan or for the assumption of
Options theretofore granted, or the substitution for such Options of
options covering the stock of a successor employer corporation, or a
parent or a subsidiary thereof, with appropriate adjustments as to the
number and kind of shares and prices, in which event the Plan and Options
theretofore granted shall continue in the manner and under the terms so
provided. The Committee or the Board shall have the discretion to provide
at the time of granting any Option hereunder that in the event the Plan
and Options then outstanding shall terminate upon the effective date of
any of the transactions described in the foregoing sentence, the vesting
of the then unexercisable portion of such holder's Option shall be
accelerated, in whole or in part as determined by the Committee or the
Board, so that such holder prior to the consummation of the transaction
shall be entitled to exercise such Option (to the extent thereby
exercisable) prior to consummation of such transaction. In the event that
a fraction of a share results from an adjustment pursuant to this
paragraph 12, said fraction shall be eliminated and the price per share of
the remaining shares subject to the Option adjusted accordingly.
13. VESTING OF RIGHTS UNDER OPTIONS.
Neither anything contained in the Plan nor in any resolution
adopted or to be adopted by the Committee, the Board or the stockholders
of the Company shall constitute the vesting of any rights under any
Option. The vesting of such rights shall take place only when a written
Option Agreement, substantially in the form of the Incentive Stock Option
Agreement attached hereto as Exhibit A or the Non-Qualified Stock Option
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Agreement attached hereto as Exhibit B, shall be duly executed and
delivered by and on behalf of the Company and the person to whom the
Option shall be granted.
14. TERMINATION AND AMENDMENT.
The Plan, which was adopted by the Board on June 6, 1996, as
amended by the Board on July 24, 1996, is subject to approval by the
shareholders of the Company, within twelve (12) months after adoption by
the Board. The Plan shall terminate on June 6, 2006 and no Option shall
be granted under the Plan after such date. The Board may at any time
prior to such date terminate the Plan or make such modifications or
amendments thereto as it shall deem advisable; provided, however, that,
unless otherwise approved by the shareholders of the Company:
i) no change shall be made in the aggregate number of shares
subject to the Plan or the number of shares which may be optioned to any
employee;
ii) no termination, modification or amendment shall adversely affect
the rights of a holder of an Option previously granted under the Plan;
iii) no material modification shall be made to the requirements of
eligibility for participation in the Plan; and
iv) no material increase shall be made in the benefits accruing to
participants under the Plan.
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EXHIBIT A
CAREADVANTAGE, INC.
INCENTIVE STOCK OPTION AGREEMENT
----------------------
To:
We are pleased to notify you that by the determination of the
Board of Directors (the "Board") and/or the Stock Option Plan Committee
(the "Committee") an incentive stock option to purchase
shares of the Common Stock of CareAdvantage, Inc. (the "Company")
at a price of $ per
share has this day of been granted to you under
the Company's 1996 Stock Option Plan
(the "Plan"). This option may be exercised only upon the terms and
conditions set forth below.
1. PURPOSE OF OPTION.
The purpose of the Plan under which this incentive stock option
has been granted is to further the growth and development of the Company
and its subsidiaries by encouraging key employees and other persons who
contribute and are expected to contribute materially to the Company's
success to obtain a proprietary interest in the Company through the
ownership of stock, thereby providing such persons with an added incentive
to promote the best interests of the Company, and affording the Company
a means of attracting to its service persons of outstanding ability.
2. ACCEPTANCE OF OPTION AGREEMENT.
Your execution of this incentive stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms;
it imposes no obligation upon you to purchase any of the shares subject to
the option. Your obligation to purchase shares can arise only upon your
exercise of the option in the manner set forth in paragraph 4 hereof.
3. WHEN OPTION MAY BE EXERCISED.
(a) The option granted you hereunder may be exercised only as
follows: [set forth terms and expiration date of option, but in no event
shall the shares of the Company's Common Stock underlying the Option, once
exercised, be held for less than six (6) months from the date of
grant.]
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This option may not be exercised for less than ten (10) shares
at any one time (or the remaining shares then purchasable if less than
ten) and expires at the end of ten (10) years from the date
of grant whether or not it has been duly exercised, unless sooner
terminated as provided in paragraphs 5,
6 or 7 hereof.
4. HOW OPTION MAY BE EXERCISED.
---------------------------
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your
election to exercise the option. The notice must state the number of
shares of Common Stock as to which your option is being exercised, must
contain a statement by you (in a form acceptable to the Company) that such
shares are being acquired by you for investment and not with a view to
their distribution or resale (unless a Registration Statement covering the
shares purchasable has been declared effective by the Securities and
Exchange Commission) and must be accompanied by cash or a check to the
order of the Company for the full purchase price of the shares being
purchased.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the
exercise of this option, the submission to the Company of appropriate
proof of the right of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be
required to issue or deliver a certificate for any shares until it has
complied with all requirements of the Securities Act of 1933, the
Securities Exchange Act of 1934, any stock exchange on which the Company's
Common Stock may then be listed and all applicable state laws in
connection with the issuance or sale of such shares or the listing of such
shares on said exchange. Until the issuance of the certification for such
shares, you or such other person as may be entitled to exercise this
option shall have none of the rights of a stockholder with respect to
shares subject to this option.
5. TERMINATION OF EMPLOYMENT.
If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death or disability, you may
exercise, within three (3) months from the date of such termination, that
portion of the option which was exercisable by you at the date of such
termination, provided, however, that such exercise occurs within ten (10)
years from the date this option was granted to you.
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6. DISABILITY.
If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability, you may exercise, within twelve
(12) months from the date of such termination, that portion of this option
which was exercisable by you at the date of such termination, provided,
however, that such exercise occurs within ten (10) years from the date
this option was granted to you.
7. DEATH.
If you die while employed by the Company (or a subsidiary
thereof) or within six (6) months after termination of your employment due
to disability, that portion of this option which was exercisable by you at
the date of your death may be exercised by your legatee or legatees under
your Will, or by your personal representatives or distributees, within
twelve (12) months from the date of your death, but in no event after ten
(10) years from the date this option was granted to you.
8. NON-TRANSFERABILITY OF OPTION.
This option shall not be transferable except by Will or the laws
of descent and distribution, and may be exercised during your lifetime
only by you.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassification
or exchange, or through merger or consolidation, or otherwise, change its
shares of Common Stock into a different number or kind or class of shares
or other securities or property, then the number of shares covered by this
option and the price of each such share shall be proportionately adjusted
for any such change by the Board or the Committee, whose determination
shall be conclusive. Upon the dissolution or liquidation of the Company,
or upon a reorganization, merger or consolidation of the Company as a
result of which the outstanding securities of the class then subject to
options hereunder are changed into or exchanged for cash or property or
securities not of the Company's issue, or upon a sale of substantially all
the property of the Company to, or the acquisition of stock representing
more than eighty percent (80%) of the voting power of the stock of the
Company then outstanding by, another corporation or person, this option
shall terminate, unless provision be made in writing in connection with
such transaction for the continuance of the assumption of this option, or
the substitution for this option of an option covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and purchase
price, in which event this option shall continue in the manner and under
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the terms set forth herein. Any fraction of a share resulting from any
adjustment shall be eliminated and the price per share of the
remaining shares subject to this option adjusted accordingly.
10. SUBJECT TO TERMS OF THE PLAN.
This incentive stock option agreement shall be subject in all
respects to the terms and conditions of the Plan and in the event of any
question or controversy relating to the terms of the Plan,
the decision of the Committee shall be conclusive.
Sincerely yours,
CAREADVANTAGE, INC.
By:
Name:
Title:
Agreed to and accepted this
day of , 199 .
Signature of Optionee
4
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EXHIBIT B
CAREADVANTAGE, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
---------------------------------------
To:
We are pleased to notify you that by the determination of the
Board of Directors (the "Board") and/or the Stock Option Plan Committee
(the "Committee") a non-qualified stock option to purchase shares of
the Common Stock of CareAdvantage, Inc. (the "Company") at a price of $
per share has this day of been granted to you under
the Company's 1996 Stock Option Plan (the "Plan"). This option may be
exercised only upon the terms and conditions set forth below.
1. PURPOSE OF OPTION.
-----------------
The purpose of the Plan under which this non-qualified stock
option has been granted is to further the growth and development of the
Company and its subsidiaries by encouraging key employees and other
persons who contribute and are expected to contribute materially to the
Company's success to obtain a proprietary interest in the Company through
the ownership of stock, thereby providing such persons with an added
incentive to promote the best interests of the Company, and affording the
Company a means of attracting to its service persons of outstanding
ability.
2. ACCEPTANCE OF OPTION AGREEMENT.
------------------------------
Your execution of this non-qualified stock option agreement will
indicate your acceptance of and your willingness to be bound by its terms;
it imposes no obligation upon you to purchase any of the shares subject to
the option. Your obligation to purchase shares can arise only upon your
exercise of the option in the manner set forth in paragraph 4 hereof.
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3. WHEN OPTION MAY BE EXERCISED
----------------------------
The option granted you hereunder shall be exercisable as
follows: [set forth terms and expiration date of option, but in no event
shall the shares of the Company's Common Stock underlying the Option, once
exercised, be held for less than six (6) months from the date of grant.]
This option may not be exercised for less than ten (10) shares
at any one time (or the remaining shares then purchasable if less than
ten) and expires at the end of ten (10) years from the date of grant
whether or not it has been duly exercised, unless sooner terminated as
provided in paragraphs 5, 6 or 7 hereof.
4. HOW OPTION MAY BE EXERCISED.
This option is exercisable by a written notice signed by you and
delivered to the Company at its executive offices, signifying your
election to exercise the option. The notice must state the number of
shares of Common Stock as to which your option is being exercised, must
contain a statement by you (in a form acceptable to the Company) that such
shares are being acquired by you for investment and not with a view to
their distribution or resale (unless a Registration Statement covering the
shares purchased has been declared effective by the Securities and
Exchange Commission) and must be accompanied by cash or a check to the
order of the Company for the full purchase price of the shares being
purchased, plus such amount, if any, as is required for withholding taxes.
If notice of the exercise of this option is given by a person or
persons other than you, the Company may require, as a condition to the
exercise of this option, the submission to the Company of appropriate
proof of the right of such person or persons to exercise this option.
Certificates for shares of the Common Stock so purchased will be
issued as soon as practicable. The Company, however, shall not be
required to issue or deliver a certificate for any shares until it has
complied with all requirements of the Securities Act of 1933, the
Securities Exchange Act of 1934, any stock exchange on which the Company's
Common Stock may then be listed and all applicable state laws in
connection with the issuance or sale of such shares or the listing of such
shares on said exchange. Until the issuance of the certificate for such
shares, you or such other person as may be entitled to exercise this
option shall have none of the rights of a stockholder with respect to
shares subject to this option.
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5. TERMINATION OF EMPLOYMENT OR ENGAGEMENT.
If your employment with the Company (or a subsidiary thereof) is
terminated for any reason other than by death or disability, or if a
non-employee your engagement by the Company (or a subsidiary) is
terminated for any reason, you may exercise, within three (3) months from
the date of such termination, that portion of this option which was
exercisable by you at the date of such termination, provided, however,
that such exercise occurs prior to the expiration date of this option set
forth in paragraph 3 hereof.
6. DISABILITY.
If your employment with the Company (or a subsidiary thereof) is
terminated by reason of your disability, you may exercise, within twelve
(12) months from the date of such termination, that portion of this option
which was exercisable by you at the date of such termination, provided,
however, that such exercise occurs prior to the expiration date of this
option set forth in paragraph 3 hereof.
7. DEATH.
If you die while employed by the Company (or a subsidiary
thereof) or within six (6) months after termination of your employment due
to disability, that portion of this option which was exercisable by you at
the date of your death may be exercised by your legatee or legatees under
your Will, or by your personal representatives or distributees, within
twelve (12) months from the date of your death, but in no event after the
expiration date of this option.
8. NON-TRANSFERABILITY OF OPTION.
This option shall not be transferable except by Will or the laws
of descent and distribution, and may be exercised during your lifetime
only by you.
9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If at any time after the date of grant of this option, the
Company shall, by stock dividend, split-up, combination, reclassification
or exchange, or through merger or consolidation, or otherwise, change its
shares of Common Stock into a different number or kind or class of shares
or other securities or property, then the number of shares covered by this
option and the price of each such share shall be proportionately adjusted
for any such change by the Committee, whose determination shall be
conclusive. Upon the dissolution or liquidation of the Company, or upon
a reorganization, merger or consolidation of the Company as a result of
which the outstanding securities of the class then subject to options
hereunder
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are changed into or exchanged for cash or property or securities not of
the Company's issue, or upon a sale of substantially all the property of
the Company to, or the acquisition of stock representing more than eighty
percent (80%) of the voting power of the stock of the Company then
outstanding by, another corporation or person, this option shall
terminate, unless provision be made in writing in connection with such
transaction for the continuance of the assumption of this option, or the
substitution for this option of an option covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and purchase
price, in which event this option shall continue in the manner and under
the terms set forth herein. Any fraction of a share resulting from any
adjustment shall be eliminated and the price per share of the remaining
shares subject to this option adjusted accordingly.
10. SUBJECT TO TERMS OF THE PLAN.
This non-qualified stock option agreement shall be subject in
all respects to the terms and conditions of the Plan and in the event of
any question or controversy relating to the terms of the Plan, the
decision of the Board or the Committee shall be conclusive.
11. TAX STATUS.
This option does not qualify as an "incentive stock option"
under the provisions of Section 422A of the Internal Revenue Code of 1986,
as amended, and the income tax implications of your receipt of a
non-qualified stock option and your exercise of such an option should be
discussed with your tax
counsel.
Sincerely yours,
CAREADVANTAGE, INC.
By:
Name:
Title:
Agreed to and accepted this
day of , 199 .
Signature of Optionee
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