-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OYVEGeRgyw3O9iEe+8KEXOnDRbYDFC+887hZM70rQ6/J+bMqNVEI6epyBASNtvny iF0CUAfluE/TK1uCKRDTRg== 0000950150-98-001199.txt : 19980717 0000950150-98-001199.hdr.sgml : 19980717 ACCESSION NUMBER: 0000950150-98-001199 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19980716 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INCOMNET INC CENTRAL INDEX KEY: 0000353356 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 952871296 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: SEC FILE NUMBER: 005-34858 FILM NUMBER: 98667106 BUSINESS ADDRESS: STREET 1: 21031 VENTURA BLVD STREET 2: STE 1100 CITY: WOODLAND HILLS STATE: CA ZIP: 91364 BUSINESS PHONE: 8188873400 MAIL ADDRESS: STREET 1: 21031 VENTURA BLVD STREET 2: SUITE 1100 CITY: WOODLAND HILLS STATE: CA ZIP: 91364 FORMER COMPANY: FORMER CONFORMED NAME: INTELLIGENT COMMUNICATIONS NETWORKS INC DATE OF NAME CHANGE: 19860805 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CASEY JOHN P CENTRAL INDEX KEY: 0001059260 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: 10220 RIVER RD STREET 2: STE 115 CITY: POTOMAC STATE: MD ZIP: 20854 BUSINESS PHONE: 3019835000 SC 13D/A 1 AMENDMENT #6 TO SCHEDULE 13D 1 --------------------------- OMB APPROVAL --------------------------- OMB Number: 3235-0145 Expires: October 31, 1994 Estimated average burden hours per response...14.90 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 6)* INCOMNET, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK - -------------------------------------------------------------------------------- (Title of Class of Securities) 453365207 ---------------------------------------------- (CUSIP Number) John P. Casey, 10220 River Road, Suite 115, Potomac, MD 20854 (301) 983-5000 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 15, 1998 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box [ ]. NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d- 7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). 2 SCHEDULE 13D - --------------------------- ------------------------- CUSIP NO. 453365207 PAGE 2 OF 5 PAGES - --------------------------- ------------------------- - ------------------------------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON JOHN P. CASEY - SS# ###-##-#### - ------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - ------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS 00 - ------------------------------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(E) [ ] - ------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States - ------------------------------------------------------------------------------------------------------- 7 SOLE VOTING POWER 5,485,104* -------------------------------------------------------------------------------- NUMBER OF 8 SHARED VOTING POWER SHARES BENEFICIALLY 102,000 (children's trust; 1/3 voting trustee) OWNED BY EACH REPORTING PERSON WITH -------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 5,485,104* -------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 102,000 (children's trust; 1/3 voting trustee) - ------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,587,104* - ------------------------------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [X] * - ------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 27.94% (See Item 5)* - ------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON IN - -------------------------------------------------------------------------------------------------------
* Does not include shares of common stock issuable on the conversion of 725.473 shares of Series A Convertible Preferred Stock of Incomnet and 872.738 shares of Series B Convertible Preferred Stock of Incomnet (collectively, the "Preferred Shares") which Mr. Casey has an option (the "Option") to purchase, exercisable at any time prior to October 14, 1998. Although the Preferred Shares are convertible at any time, and the current owners of the Preferred Shares attempted to convert them in June 1998, Incomnet does not currently have sufficient authorized but unissued shares of common stock to effect the conversion of the Preferred Shares into common stock and uncertainties exist as to the number of shares of common stock into which the Preferred Shares are convertible. Thus, there is no assurance as to whether or when the conversion of the Preferred Shares can actually be effected. See Items 4 and 5. 3 This Statement is the sixth Amendment to the Statement on Schedule 13D filed on April 7, 1998 (as previously amended, the "Statement") with the Securities and Exchange Commission by Mr. John P. Casey in connection with his beneficial ownership of shares (the "Shares") of common stock of Incomnet, Inc. ("Incomnet" or the "Issuer"). All capitalized terms used and not defined in this Amendment No. 6 have the meanings given to them in the Statement. Item 2. Identity and Background By virtue of the voting arrangements in the Option Agreement described in Item 6, Mr. Casey may be deemed to be a member of a group with the Sellers (as defined below). Reference is made to the Sellers' Statement on Schedule 13D filed on June 19, 1998 for information on the identity and background of the Sellers. Mr. Casey disclaims the existence of any group of which he is a member other than as a result of the voting arrangements referred to above. Item 3. Source and Amount of Funds or Other Consideration. On July 15, 1998, Mr. Casey purchased the Option from Robert Cohen, Stefanie Rubin, Allyson Cohen, Jeffrey Cohen, Alan Cohen, Lenore Katz, Broadway Partners and Meryl Cohen, individually and as custodian for Gabrielle Cohen, Jaclyn Cohen, Erica Cohen and Nicole Cohen (collectively, the "Sellers") to purchase all of the Preferred Shares owned by the Sellers. Mr. Casey will pay $300,000 using funds from the Credit Facility referenced in Amendment No. 5 to Mr. Casey's Statement on Schedule 13D for the Option, of which $150,000 was paid on July 15, 1998 and the balance of $150,000 is payable on August 14, 1998. Item 4. Purpose of Transaction. On July 15, 1998, Mr. Casey purchased the Option from the Sellers. The background of his decision to purchase the Option and his purposes in doing so are described below. In June 1998, the Sellers delivered to Incomnet a notice of conversion of the Preferred Shares into common stock and tendered the Preferred Shares for conversion. Based on the average conversion prices in effect at the time the conversion notices were delivered, Mr. Casey believes that the Preferred Shares might have been converted into approximately 27% of the post-conversion outstanding shares of common stock. Because Incomnet had insufficient authorized but unissued common stock to honor the conversion, it could not deliver the common stock issuable on the conversion to the Sellers. Pursuant to the terms of the Preferred Shares applicable if Incomnet has not delivered common stock certificates within three days of the conversion notice, the Sellers withdrew their Preferred Shares. After the attempted conversion of Preferred Shares by the Sellers, Incomnet announced that it would seek shareholder approval of a six-for-one reverse stock split in which each shareholder of Incomnet would receive one share of common stock for each six shares held before the reverse stock split was effected. The effect of the reverse stock split would be to reduce the issued and outstanding common stock from approximately 20 million shares to approximately 3.33 million shares, thereby leaving approximately 16.67 million authorized but unissued shares, some of which could be issued on conversion of the Preferred Shares and on the exercise of various outstanding options and warrants and the To-Be-Issued Common. If the Preferred Shares were thereafter converted at the conversion price (approximately $.19 per share of common stock) which Mr. Casey believes to have been in effect at the date of the conversion notices, as adjusted for the reverse stock split, the Sellers would have acquired approximately 27% of the post-conversion outstanding common stock, and his own holdings would have been reduced from approximately 28% to approximately 18%. Mr. Casey purchased the Option to give himself the opportunity (should he decide to exercise the Option) to remove a potential concentrated block of common stock and preserve the voting power of his own common stock and his ability to influence the future direction of Incomnet. Although Incomnet has the right to redeem the Preferred Shares at any time that the market price of the common stock is below $2 per share, Mr. Casey believes that the Company's current financial condition might well preclude the Company from legally doing so even though such course might be in the best interests of the holders of common stock. If Mr. Casey exercises the Option (which he may or may not do), he currently intends to request that Incomnet file with the Securities and Exchange Commission a registration statement pursuant to which he would offer the securities received on the exercise of the Option to all of the holders of Incomnet common stock of record as of August 1, 1998 pro rata according to their holdings, after reserving for himself his pro rata portion of such securities based on his ownership as of August 1, 1998. Mr. Casey would offer the securities for an aggregate offering price equal to his cost (including expenses) of purchasing and offering the securities, less the cost attributable to the pro rata portion of the securities he retains. He believes that such an offering would effectively disperse a large block of stock and further would permit all of the holders of Incomnet common stock, including himself, to participate in the economic benefits of the Preferred Stock on a pro rata basis. 4 Item 5. Interest in Securities of the Issuer. (a) Mr. Casey is the beneficial owner of 5,587,104 Shares. Mr. Casey may also be deemed to be the beneficial owner of the common stock issuable on the conversion of the Preferred Shares by reason of his right to acquire the Preferred Shares on the exercise of the Option. If Mr. Casey were to exercise the Option and convert the Preferred Shares (assuming Incomnet had taken action to make available sufficient authorized shares of Common Stock to effect the conversion), Mr. Casey believes he would own approximately 44% of the common stock outstanding after giving effect to the conversion and to the issue of the To-Be-Issued Common to holders of Series A and Series B Stock who did not rescind their conversions. This percentage assumes (which has not been determined) that Mr. Casey would be able to convert at the price per share (approximately $.19 per share of Common) which Mr. Casey believes to have been in effect when the Sellers attempted to convert in June, 1998. (b) Mr. Casey has sole power to vote, direct the vote of, dispose of, and direct the disposition of 5,485,104 of the Shares described in (a) above. Mr. Casey has shared power to vote, direct the vote of, dispose of, and direct the disposition of, 102,000 of the Shares described in (a) above. (c) Not applicable. (d) Not applicable. (e) Not applicable. The following is a summary of certain terms of the Option Agreement referred to below, a copy of which is filed as an exhibit to this Amendment to Schedule 13D and is incorporated herein by reference. This summary is qualified in its entirety by reference to the full text of the Option Agreement. Mr. Casey and the Sellers have entered into an Option Agreement dated July 15, 1998 (the "Option Agreement"), pursuant to which the Sellers have granted Mr. Casey the Option to purchase all of the Preferred Shares of Incomnet currently owned by them and any shares of common stock of Incomnet received by them on conversion of the Preferred Shares (collectively, the "Option Shares"). The price for the Option is $300,000 (the "Option Price"), of which $150,000 was paid on July 9, 1998 and the balance is to be paid on August 15, 1998. The Option is exercisable by Mr. Casey commencing 2:00 p.m. (Pacific Time) on July 15, 1998 and terminating at 11:59 p.m. (Pacific Time) on October 14, 1998 (the "Option Term"). The purchase price for the Option Shares is $2,300,000, less the Option Price, with an adjustment for any dividends that accrue on the Preferred Stock from July 15, 1998 to the delivery of the purchase price. If Mr. Casey elects to exercise the Option, then at the closing of the purchase of the Option Shares, the Sellers are to assign and transfer to Mr. Casey all of their rights, entitlements, claims and causes of action against all persons, including Incomnet, in respect of the Option Shares, including any claims or causes of action arising from Incomnet's failure to honor the Sellers' attempted conversion. Mr. Casey's obligation to purchase the Option Shares is subject to various conditions, including the absence of proceedings to prevent or interfere with the transactions contemplated by the Option Agreement and the receipt of all required consents, including governmental consents, if any, required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Sellers have agreed with Mr. Casey that, among other things, they (i) will not sell, transfer, pledge or otherwise encumber any of the Option Shares, (ii) will not take any action to convert the Preferred Shares without Mr. Casey's consent, (iii) will make all filings required to consummate sale of the Option Shares and (iv) take all reasonable actions to preserve their rights as holders of the Preferred Shares and underlying common stock. During the Option Term, the Sellers are entitled to vote their Preferred Shares, provided they give Mr. Casey five business days prior notice specifying how they intend to vote. If Mr. Casey exercises the Option during that period, the Sellers agree to vote as directed by Mr. Casey and to deliver an irrevocable proxy whereby Mr. Casey shall be entitled to vote such shares. Mr. Casey has agreed that for nine months from the date of the Option he will vote the shares of common stock he owns as directed by the Sellers (if any directions are given) on any proposal regarding an increase in the authorized shares of Incomnet's common stock or a reverse stock split that will enable Incomnet to honor the conversion of the Preferred Shares. Item 7. Material to be Filed as Exhibits. Option Agreement dated July 15, 1998 between John P. Casey and Robert Cohen, Stefanie Rubin, Allyson Cohen, Jeffrey Cohen, Alan Cohen, Lenore Katz, Broadway Partners and Meryl Cohen, individually and as custodian for Gabrielle Cohen, Jaclyn Cohen, Erica Cohen and Nicole Cohen 5 After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. /s/ JOHN P. CASEY Date: July 15, 1998 ------------------------------------------ John P. Casey EX-99 2 OPTION AGREEMENT 1 EXHIBIT 99 OPTION AGREEMENT AMONG JOHN P. CASEY, ROBERT COHEN, STEFANIE RUBIN, ALLYSON COHEN, JEFFREY COHEN, ALAN COHEN, LENORE KATZ, BROADWAY PARTNERS AND MERYL COHEN, INDIVIDUALLY AND AS CUSTODIAN FOR GABRIELLE COHEN, JACLYN COHEN, ERICA COHEN AND NICOLE COHEN DATED JULY 15, 1998 2 OPTION AGREEMENT This Option Agreement ("Agreement") is made as of July 15, 1998 by John P. Casey, an individual resident in Maryland ("Buyer"), Robert Cohen, an individual resident in New York, Stefanie Rubin, an individual resident in New York, Allyson Cohen, an individual resident in New York, Jeffrey Cohen, an individual resident in New York, Alan Cohen, an individual resident in New York, Lenore Katz, an individual resident in Florida, Broadway Partners, a general partnership, and Meryl Cohen, an individual resident in New York and custodian for Gabrielle Cohen, Jaclyn Cohen, Erica Cohen and Nicole Cohen (collectively, the "Sellers"). RECITALS Sellers desire to grant, and Buyer desires to acquire, an option to purchase all of Sellers' Series A and Series B Preferred stock set forth on Schedule A hereto ("Preferred Stock") of Incomnet, Inc., a California corporation (the "Company"), for the consideration and on the terms set forth in this Agreement. Now therefore, the parties, intending to be legally bound, agree as follows: 1. PURCHASE AND SALE OF OPTION; CLOSING. 1.1 The Option. Subject to the terms and conditions of this Agreement, Sellers hereby grant and transfer to Buyer and Buyer hereby acquires from Sellers an irrevocable option to purchase during the Option Term (as defined below) (the "Option") the aggregate number of shares of Preferred Stock as set forth in Schedule A, with each Seller being obligated to deliver to Buyer, upon exercise of the Option, the number of shares of Preferred Stock set forth opposite such Seller's name on Schedule A to this Agreement, together with an Assignment (as defined below) and any and all Common Stock of the Company received by Sellers in respect of any conversion of the Preferred Stock at the Purchase Price (as defined below). 1.2 Term of the Option. The term during which the Option may be exercised ("Option Term") commenced at 2:00 p.m. (Pacific Time) on July 15, 1998 and shall terminate at 11:59 p.m. (Pacific Time) on October 14, 1998. 3 1.3 Option Price. The purchase price for the Option will be $300,000 (the "Option Price") payable in two installments. The first installment shall be $150,000, paid on July 15, 1998, the receipt of which is hereby acknowledged, and the balance of $150,000 shall be delivered on August 15, 1998. If Buyer fails to pay the second installment under this Agreement, this Agreement shall automatically terminate and Sellers shall be entitled to keep the first installment and no party shall have any further obligations under the terms of this Agreement other than the continuing covenant under Section 5.2 of this Agreement and Buyer continues to be obligated to pay the second installment. The Option Price shall be paid by check made payable to Camhy Karlinsky & Stein LLP (the "Camhy Firm"). Sellers shall cause the Camhy Firm to disburse the funds representing the Option Price to the Sellers in proportion to the number of shares of Preferred Stock owned by Sellers. Buyer shall have no responsibility for such disbursement and, upon receipt of Buyer's checks representing the Option Price by the Camhy Firm, Buyer shall be deemed to have performed Buyer's obligation to deliver the Option Price. The Option Price shall be credited in full against the Purchase Price as described below. If Buyer does not exercise the Option during the Option Term, then this Agreement shall automatically terminate and Sellers shall be entitled to retain all funds representing the Option Price and no party shall have any obligation to the other pursuant to this Agreement other than the continuing covenant set forth in Section 5.2 of this Agreement. 1.4 Exercise of Option. At any time during the Option Term, Buyer may exercise the Option, in whole only, by notifying Sellers in writing of Buyer's intention to exercise the Option (the "Exercise Notice"). The Exercise Notice shall provide that, upon satisfaction of all conditions set forth in Section 6 hereof, Buyer shall purchase the Preferred Stock set forth in Schedule A (or the underlying Common Stock) for a total purchase price of $2,300,000, less an amount equal to the Option Price (or portion thereof) paid through the date of the Exercise Closing (as defined below) plus an additional amount owed to reflect the unpaid dividends and penalties that accrue on the Preferred Stock from July 9, 1998 to and until the Exercise Closing (the "Purchase Price"). If the Company shall pay to Sellers accrued dividends or penalties in respect of the Preferred Stock during the Option Term for the period prior to July 9, 1998, such payments shall be credited against the Purchase Price. 1.5 Closing of Exercise of Option. The closing for the exercise of the Option and purchase of the Preferred Stock (or underlying Common Stock) shall take place at the offices of Buyer's counsel at 601 South Figueroa Street, Los Angeles, California 90017, at such time as is mutually agreed upon by the parties, but in any event not later than three business days after satisfaction of the conditions set forth in Section 6 of this Agreement (the "Exercise Closing"). At the Exercise Closing, Buyer shall deliver by wire transfer or certified 2 4 check, the Purchase Price and Sellers shall deliver the stock certificates representing the Preferred Stock, (or in the event of a conversion, the Common Stock received in respect of the Preferred Stock) set forth opposite their names on Schedule A. Sellers shall immediately undertake and use their best efforts to obtain certificates evidencing their shares of Preferred Stock. Sellers shall also deliver at the Exercise Closing such opinions of their counsel required by the Company pursuant to the Certificate of Determination and Stock Purchase Agreements signed by Sellers in connection with the purchase of the Preferred Stock. At the Exercise Closing, Sellers shall all execute an assignment in form and substance reasonably satisfactory to Buyer and his counsel whereby Sellers assign and transfer to Buyer all of Sellers' assignable rights, entitlements, claims and causes of action against all persons, including the Company, whenever accrued, in respect of the Preferred Stock and the Common Stock of the Company into which the Preferred Stock is convertible and specifically including any claim or cause of action arising from or relating to the Company's failure to honor Sellers' attempted conversion of the Preferred Stock on June 10 and 11, 1998 (the "Assignment"). 2. REPRESENTATIONS AND WARRANTIES OF SELLERS Each of the Sellers represents and warrants to Buyer as follows with respect to such Seller: 2.1 Authority, No Conflict. This Agreement constitutes the legal, valid and binding obligations of such Seller, enforceable against such Seller in accordance with its terms. Such Seller has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and to perform the obligations under this Agreement. Neither the execution and delivery of this Agreement nor the consummation and performance of any of the transactions contemplated by this Agreement will: (i) to the actual knowledge of such Seller without any duty of inquiry, directly or indirectly contravene, conflict with, or result in the violation of any provision of the organizational documents of the Company; (ii) contravene, conflict with or result in the violation of or give any governmental body or any other person the right to challenge the contemplated transaction or to exercise any remedy or obtain any relief under any order to which such Seller or, to the actual knowledge of such Seller without any duty of inquiry, the Company or any of the assets owned or used by the Company, may be subject; or (iii) contravene, conflict with or result in a violation or breach of any agreement or any provision of any agreement to which such Seller is a party or give any person the right to declare a default or exercise any remedy under, or accelerate the 3 5 maturity or performance of or to cancel, terminate or modify any agreement to which such Seller is a party. 2.2 Ownership of Preferred Stock; Legends and Restrictions on Transfer. Such Seller is the sole, true, lawful, record and beneficial owner of the Preferred Stock listed opposite such Seller's name on Schedule A, free and clear of all encumbrances and without restrictions on voting rights or rights of disposition other than pursuant to this Agreement. Such Seller's shares of Preferred Stock are such Seller's sole and separate property, and the execution of a spousal consent to the transactions contemplated by this Agreement is not required. There are no legends or encumbrances on any Preferred Stock other than a securities legend that is substantially identical to the securities legend set forth in Section 4.1 of the Stock Purchase Agreement dated July 29, 1997 under which Stefanie Rubin purchased 134 shares of the Preferred Stock. Except for this Agreement, such Seller has not entered into any contract relating to the issuance, sale, or transfer of any equity securities or securities of the Company. At the Exercise Closing, Buyer will convey good and valid title to such Seller's Preferred Stock or underlying Common Stock being purchased free and clear of any and all claims, liens, charges, encumbrances and security interests. 3. REPRESENTATIONS AND WARRANTIES OF THE BUYER. 3.1 Authority. This Agreement constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Buyer has the absolute and unrestricted right, power, authority and capacity to execute and deliver this Agreement and to perform his obligations under this Agreement. 3.2 Investment Representation. Buyer is a sophisticated investor. If Buyer exercises the Option, Buyer will acquire the Preferred Stock (or underlying Common Stock) for his own account for investment and will not engage in a distribution thereof, except transfers exempt from registration requirements of the Securities Act of 1993, as amended, or pursuant to an effective registration statement. 3.3 Review of Public Filings. Buyer has had an opportunity to review the public filings of the Company and to the extent that there may be any omission or misstatement in such filings made by the Company, Buyer may not use the fact of such misstatement or omission as the basis for any recission of the Option. 4 6 4. COVENANTS OF SELLERS. 4.1 No Sales, Transfers, Pledges or Encumbrances. During the Option Term, none of the Sellers shall sell, transfer, pledge or otherwise encumber any of the Preferred Stock or Common Stock issuable on conversion of the Preferred Stock other than pursuant to this Agreement and none of the Sellers shall take any actions to convert the Preferred Stock into Common stock of the Company without the prior written consent of Buyer. Sellers agree to take all reasonable actions to preserve their rights as holders of the Preferred Stock (and underlying Common Stock), provided that such actions are not otherwise inconsistent with the express terms of this Agreement. 4.2 Voting of Preferred During Option Term. During the Option Term, Sellers shall be entitled to vote their shares of Preferred Stock (and any Common Stock underlying the Preferred Stock), provided that they give Buyer written notice at least five business days prior to the date that they intend to vote such Preferred Stock (the "Voting Notice Period"). Such notice must specify the Sellers' intention as to how they intend to vote their respective Preferred Stock (or underlying Common Stock). If Buyer delivers an Exercise Notice during the Voting Notice Period, upon receipt of such Exercise Notice Sellers shall, without further action hereunder become obligated to vote their shares of Preferred Stock (and any Common Stock received upon conversion of such Preferred Stock) that they are entitled to vote in a manner as directed by Buyer and Sellers shall deliver an irrevocable proxy to Buyer whereby Buyer shall be entitled to vote all of Sellers' Preferred Stock. 4.3 Required Filings. As promptly as practicable after the date of the Exercise Notice, Sellers will make, and will cause each of their affiliates to make, all filings, if any, required by legal requirements to be made by them to consummate the sale of the Preferred Stock set forth on Schedule A (or underlying Common Stock). 4.4 Legend. Sellers agree to use their best efforts to immediately cause a legend to be placed on each certificate evidencing Preferred Stock which legend reflects the existence of this Agreement (the "Option Legend") and to promptly provide to Buyer copies of all such Preferred Stock certificates bearing the Option Legend. 5 7 5. COVENANTS OF BUYER. 5.1 Required Filings. As promptly as practicable after the date of Exercise Notice, Buyer will make all required filings, if any, to be made by him to consummate the purchase of the Preferred Stock set forth on Schedule A, including all filings under the HSR Act. 5.2 Covenant of Buyer Regarding Authorized Stock of the Company. During the period from July 15, 1998 through April 14, 1999, Buyer agrees to vote the shares of Common Stock currently owned by Buyer as directed by Sellers in connection with any proposal by the Company to increase in the authorized shares of the Company's Common Stock or in favor of a reverse stock split that will enable the Company to honor the conversion of the Preferred Stock. 6. CONDITIONS TO PURCHASE OF SHARES. Buyer's obligation to purchase the Preferred Stock or the Common Stock following an Exercise Notice shall be conditioned upon (i) there being no proceedings involving a challenge or seeking damages or relief in connection with this Agreement or the transactions contemplated hereby or that might have the effect of preventing, delaying, making illegal or otherwise interfering with any of the transactions contemplated by this Agreement; (ii) receipt of an opinion of counsel addressed to the Company confirming the validity of an exemption from securities registration relating to the transfer from Sellers to Buyer; (iii) Sellers' ability to deliver stock certificates representing the Preferred Stock free and clear of all liens and encumbrances; (iv) delivery by Sellers of an Assignment in form and substance reasonably acceptable to Buyer and his counsel; and (v) receipt of all required consents, if any, including governmental consents required under the HSR Act. 7. GENERAL PROVISIONS. 7.1 Expenses. Each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby, including all fees and expenses of agents, representatives, counsel and accountants. 6 8 7.2 Notices. All notices, consents, waivers and other communications pursuant to or in connection with this Agreement shall be in writing and will be deemed to have been duly given when (i) delivered by hand (with written confirmation of receipt); (ii) sent by telecopier (with confirmation received), or (iii) received by the addressee if sent by a nationally recognized overnight delivery service (receipt requested); in each case to the appropriate address and telecopier number set forth below, or such other addresses and telecopier numbers as a party may designate by notice to the other parties. SELLERS: Robert Cohen 1500 Hempstead Turnpike East Meadow, New York 11554 Facsimile: (516) 390-2220 Stefanie Rubin 111 Deer Run Roslyn Heights, New York 11577-1969 Facsimile: (516) 390-2220 Allyson Cohen 1500 Hempstead Turnpike East Meadow, New York 11554 Facsimile: (516) 390-2220 Jeffrey Cohen 1500 Hempstead Turnpike East Meadow, New York 11554 Facsimile: (516) 390-2220 Alan Cohen 1500 Hempstead Turnpike East Meadow, New York 11554 Facsimile: (516) 390-2220 Meryl Cohen (individually and as custodian for Gabrielle Cohen, Jaclyn Cohen, Erica Cohen and Nicole Cohen) 3 Surrey Lane Old Westbury, New York 11568 Facsimile: (516) 390-2220 7 9 Lenore Katz 1350 99th Street Bay Harbor, Florida 33154 Facsimile: (516) 390-2220 Broadway Partners Jeffrey Cohen, Partner 1500 Hempstead Turnpike East Meadow, New York 11554 Facsimile: (516) 390-2220 Copy (which shall not constitute notice) to: Robert S. Matlin, Esq. Camhy Karlinsky & Stein LLP 1740 Broadway, 16th Floor New York, New York 10019 Facsimile: (212) 977-8389 BUYER: Jack P. Casey c/o Meridian 10220 River Road, Suite 115 Potomac, Maryland 20854 Facsimile No.: (301) 983-9012 7.3 Further Assurances. The parties agree to furnish upon request to each other such further information, to execute and deliver to each other such other documents, and to do such acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents and transactions contemplated by this Agreement. 7.4 Entire Agreement and Modification. This Agreement constitutes a complete and exclusive statement of the terms of the contractual relationships of the parties with respect to the subject matter. This Agreement may not be amended except by written agreement executed by the party to be charged with the amendment. The parties may not assign any of their rights under this Agreement without the prior written consent of the other party or parties, except that this restriction shall not be deemed to prevent Buyer from selling, assigning, or otherwise transferring any of the Preferred Stock or Common Stock underlying such Preferred Stock, provided that Buyer has complied with his investment representations under 8 10 Section 3.2 of this Agreement. Subject to the preceding sentence, this Agreement will apply to and be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any person other than the parties to this Agreement any legal or equitable right, remedy or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties and their successors and assigns. 7.5 Severability. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid and unenforceable only in part or degree will remain and full force and effect to the extent not held invalid or unenforceable. 7.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. 7.7 Termination. Notwithstanding any other provisions of this Agreement, in the event that the Company asserts, by not later than 11:59 p.m. (Pacific Time) on July 17, 1998 (the "July 17 Time"), the position that the grant of the Option to Buyer or Buyer's exercise of the Option would trigger any type of shareholder rights plan (or so called "poison pill") that the Company might purport to adopt or to have adopted and either Buyer chooses (in his sole discretion) not to contest such assertion or is unsuccessful in challenging such assertion, then upon notice by Buyer to Sellers on or before the July 17 Time, this Agreement shall terminate and Sellers shall immediately return to Buyer such portion of the Option Price paid to Sellers as of the date of such notice. 7.8 Headings. Section and other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9 11 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement as of the date first above written. BUYER: /s/ John P Casey -------------------------------------------- John P. Casey SELLERS: /s/ Robert Cohen -------------------------------------------- Robert Cohen /s/ Stefanie Rubin -------------------------------------------- Stefanie Rubin /s/ Allyson Cohen -------------------------------------------- Allyson Cohen /s/ Jeffrey Cohen -------------------------------------------- Jeffrey Cohen /s/ Alan Cohen -------------------------------------------- Alan Cohen 10 12 /s/ Lenore Katz -------------------------------------------- Lenore Katz BROADWAY PARTNERS By /s/ Jeffrey Cohen --------------------------------------- Jeffrey Cohen, Partner /s/ Meryl Cohen -------------------------------------------- Meryl Cohen /s/ Meryl Cohen -------------------------------------------- Meryl Cohen as custodian for Gabrielle Cohen /s/ Meryl Cohen -------------------------------------------- Meryl Cohen as custodian for Jaclyn Cohen /s/ Meryl Cohen -------------------------------------------- Meryl Cohen as custodian for Erica Cohen /s/ Meryl Cohen -------------------------------------------- Meryl Cohen as custodian for Nicole Cohen 11 13 SCHEDULE A
Number of Shares of Name of Seller Preferred Stock - -------------- ----------------------- Robert Cohen Series A 416.373 Series B 100.738 Stefanie Rubin Series A 5.0 Series B 172.0 Allyson Cohen Series B 100.0 Jeffrey Cohen Series B 100.0 Alan Cohen Series B 100.0 Meryl Cohen Series B 100.0 Gabrielle Cohen Series A 50.0 Jaclyn Cohen Series A 50.0 Erica Cohen Series A 50.0 Nicole Cohen Series A 50.0 Lenore Katz Series A 104.1 Broadway Partners Series B 200.0 --------- TOTAL 1,598.211
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