-----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, UX/69pwjNtSi1GW9pmqMRxy3cjGrYwGrKe5VI3jwKJNPvPmGsOXofnpspeR483jD 7G8bhQDAneJaEQmrYQD1Fw== 0000950136-96-000729.txt : 19960928 0000950136-96-000729.hdr.sgml : 19960928 ACCESSION NUMBER: 0000950136-96-000729 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960814 ITEM INFORMATION: Other events FILED AS OF DATE: 19960821 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CARE GROUP INC CENTRAL INDEX KEY: 0000847935 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 112962027 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17821 FILM NUMBER: 96618728 BUSINESS ADDRESS: STREET 1: ONE HOLLOW LANE CITY: LAKE SUCCESS STATE: NY ZIP: 11042 BUSINESS PHONE: 5168698383 MAIL ADDRESS: STREET 1: ONE HOLLOW LANE CITY: LAKE SUCESS STATE: NY ZIP: 11042 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) AUGUST 14, 1996 --------------------------- THE CARE GROUP, INC. - --------------------------------------------------------------------------- (Exact name of registrant as specified in charter) DELAWARE 0-17821 11-2962027 - -------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 1 HOLLOW LANE, LAKE SUCCESS, NEW YORK, N.Y. 11042 - --------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (516) 869-8383 ------------------------- N.A. - --------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Item 5. Other Events - ------ ------------ See attached press release. Exhibits - -------- 10.1 Form of Subscription Agreement, dated August 14, 1996. 10.2 Form of Redeemable Common Stock Purchase Warrants. 20 Confidential Term Sheet dated, August 6, 1996. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. The Care Group, Inc. (Registrant) By: /s/ Randolph J. Mittasch ------------------------------------- Name: Randolph J. Mittasch Title: Secretary Dated: August 21, 1996 NEWS THE CARE GROUP, INC. - ------------------------------------------------------------------------------ One Hollow Lane, Suite 110, Lake Success, New York 11042--(516) 869-8383 CONTACT: PAT CELLI-Chief Financial Officer (516) 869-8383 FOR IMMEDIATE RELEASE THE CARE GROUP CLOSES FIRST STAGE OF FINANCING Reports $8.8 Million Non-cash Charge in Second Quarter of 1996 New Board Members and Management Team Announced LAKE SUCCESS, NY, August 14, 1996 - The Care Group, Inc. (NASDAQ:CARE) announced today that it has closed on the first stage of a private placement of units of Common Stock and Warrants. The Company sold 42 units at a price of $50,000 per unit. Each unit consists of 40,000 shares of Common Stock and a Stock Purchase Warrant to purchase up to 40,000 additional shares of common stock. The net proceeds to the Company, after expenses, were approximately $1,970,000. The Company will use the proceeds from the Private Placement to repay existing indebtedness and for general corporate purposes. The Company expects to place an additional 58 units, of gross proceeds of $2,600,000, upon receiving shareholder approval. In connection with the Private Placement, John Pappajohn and Derace Lan Schaffer, M.D. have been appointed as members of the Company's Board of Directors. Ann Mittasch, Chairperson, said "We are extremely pleased that Mr. Pappajohn and Dr. Schaffer are joining our board as they bring a wealth of experience and a highly successful track record to The Care Group". Mr. Pappajohn is a leading health care investor and serves as a director of many public companies. Dr. Schaffer is a practicing radiologist and serves as Chairperson and President of the Ide Radiology Group. Ms. Mittasch also said that "a new management team is currently being formed to better capitalize on the outstanding reputation The Care Group has earned as a health care provider". She added "The members of this new management team are expected to be announced shortly". The Company also announced today that it has evaluated certain of its goodwill and other assets and, as a result, will reduce such assets by a non-recurring charge to operations in the June quarter of approximately $3,500,000. In addition, as part of its previously announced restructuring plan, the Company has reevaluated its accounts receivable and has identified certain accounts that will be given to collection agencies for follow-up and they expect that the majority of such accounts will be written-off. THe Company recorded a non-cash charge of approximately $5,300,000 in June, of which approximately $4,500,000 was recorded as an allowance for doubtful accounts and approximately $800,000 represented direct write-offs. The Company reported a net loss of $5,815,000 or $.70 per share on net revenues of $9,545,000 for the quarter ended June 30, 1996 as compared to net income of $328,000 or $.04 per share on net revenues of $11,899,000 for the same quarter last year. Care Group--Page 2 For the six months ended June 30, 1996, the Company reported a net loss of $5,754,000 of $.68 per share on net revenues of $19,188,000 versus net income of $469,000 or $.06 per share on net revenues of $24,486,000 for the six months ended June 30, 1995. The revenue reduction related to the increasing effect of managed care as well as the decrease in patient population in our New York and Dallas offices. The net loss was primarily due to the write-offs mentioned above. The Care Group is a leading full service provider of alternate site health care that includes mail order pharmaceuticals and medical supplies, home medical equipment, patient services, nursing, paraprofessionals and infusion therapy. The Care Group's branch offices are located in New York City and Nassau County, NY; Houston, Dallas and Austin, TX; Los Angeles, CA; and Roswell and Marietta, GA. SELECTED FINANCIAL DATA 000's Omitted Except For Per Share Data Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------- 1996 1995 1996 1995 ---- ---- ---- ---- Net Revenues $ 9,545 $11,900 $19,188 $24,486 Net Income $(5,815) $ 328 $(5,754) $ 469 Net Income Per Share $ (.70) $ .04 $ (.68) $ .06 Weighted Average Common and Common Equivalent Shares Outstanding 8,311 8,414 8,463 8,402 This press release contains forward-looking statements. All forward-looking statements involve risk and uncertainties, including, without limitations, the risks detailed in the Company's filings and reports with the Securities and Exchange Commission. Such statements are only predictions and actual events or results may differ materially. EX-10.1 2 FORM OF SUBSCRIPTION AGREEMENT THE CARE GROUP, INC. SUBSCRIPTION AGREEMENT made as of this 14th day of August, 1996 between The Care Group, Inc., a Delaware corporation with its principal offices at One Hollow Lane, Lake Success, New York (the "Company") and the undersigned (the "Subscriber"). WHEREAS, the Company desires to issue a minimum of forty-two (42) and a maximum of one hundred (100) Units in a private placement solely to "accredited investors" as such term is defined in Rule 501(a) under the Securities Act of 1933, as amended, each Unit consisting of forty thousand (40,000) shares (the "Shares") of the Company's Common Stock, $.001 par value (the "Common Stock"), and forty thousand (40,000) Common Stock Purchase Warrants (the "Warrants") in the form attached hereto as Exhibit A on the terms and conditions hereinafter set forth and the Subscriber desires to acquire that number of Units set forth on the signature page hereof; NOW, THEREFORE, for and in consideration of the promises and the mutual covenants hereinafter set forth, the parties hereto do hereby agree as follows: I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY AND COVENANTS OF SUBSCRIBER 1.1 Subject to the terms and conditions hereinafter set forth, the Subscriber hereby subscribes for and agrees to purchase from the Company such number of Units as is set forth upon the signature page hereof at a price equal to $50,000 per Unit, and the Company agrees to sell such Units to the Subscriber for said purchase price subject to the Company's right to sell to the Subscriber such lesser number of Units as it may, in its sole discretion, deem necessary or desirable. The purchase price is payable by certified or bank check made payable to United States Trust Company of New York, as escrow agent (the "Escrow Agent"), by wire transfer to an account maintained by the Escrow Agent, or by surrender of convertible debentures of the Company in the principal amount of $250,000, contemporaneously with the execution and delivery of this Subscription Agreement. The Warrants and certificates for the Shares will be delivered by the Company within ten (10) days following the Termination Date as defined in Article III hereof. The Subscriber understands however, that this purchase of Units is contingent upon the Company making sales of a minimum of 42 Units prior to the Termination Date and the approval of sales of Units in excess of 42 Units by the Company's stockholders. 1.2 The Subscriber recognizes that the purchase of Units involves a high degree of risk including, but not limited to, (i) the Company has recently experienced a decline in revenues and operating income and working capital shortages; (ii) an investment in the Company is highly speculative and only investors who can afford the loss of their entire investment should consider investing in the Company and the Units; (iii) an investor may not be able to liquidate his investment; (iv) transferability of the securities comprising the Units is extremely limited; (v) in the event of a disposition, an investor could sustain the loss of his 1 entire investment; (vi) the Company is currently in default of its Credit Agreement with The Chase Manhattan Bank, N.A.; (vii) the Company expects to record a net charge to its earnings for the second quarter ended June 30, 1996 of $5,300,000 which may reduce or eliminate net income during such quarter; (viii) the Company has not paid any dividends since inception and does not anticipate the payment of dividends in the foreseeable future; (ix) the Company is authorized to issue up to 1,000,000 shares of preferred stock the issuance of which could have a depressive effect on the price of its Common Stock and (x) the Company is primarily reimbursed for its services by insurance companies, managed care companies, Medicare/Medicaid programs or other third-party payors, which may result in delayed or denied reimbursement, as well as other risk factors as more fully set forth herein and the Confidential Term Sheet dated August 6, 1996 (the "Term Sheet"). 1.3 The Subscriber represents that he is an "accredited investor" as such term in defined in Rule 501 of Regulation D promulgated under the United States Securities Act of 1933, as amended (the "Act"), as indicated by his responses to the Confidential Purchaser Questionnaire, and that he is able to bear the economic risk of an investment in the Units. 1.4 The Subscriber acknowledges that he has prior investment experience, including investment in non-listed and non-registered securities, or he has employed the services of an investment advisor, attorney or accountant to read all of the documents furnished or made available by the Company both to him and to all other prospective investors in the Units and to evaluate the merits and risks of such an investment on his behalf, and that he recognizes the highly speculative nature of this investment. 1.5 The Subscriber acknowledges receipt and careful review of the Term Sheet and the attachments thereto (the "Offering Documents") and hereby represents that he has been furnished by the Company during the course of this transaction with all information regarding the Company which he had requested or desired to know; that he has been afforded the opportunity to ask questions of and receive answers from duly authorized officers or other representatives of the Company concerning the terms and conditions of the offering, and any additional information which he had requested. 1.6 The Subscriber acknowledges that this offering of Units may involve tax consequences, including but not limited to the possible need to recognize interest income relating to the Warrants, and that the contents of the Offering Documents do not contain tax advice or information. The Subscriber acknowledges that he must retain his own professional advisors to evaluate the tax and other consequences of an investment in the Units. 1.7 The Subscriber acknowledges that this offering of Units has not been reviewed by the United States Securities and Exchange Commission ("SEC") because of the Company's representations that this is intended to be a nonpublic offering pursuant to Sections 4(2) or 3(b) of the Act. The Subscriber represents that the Shares and 2 Warrants comprising his Units are being purchased for his own account, for investment and not for distribution or resale to others. The Subscriber agrees that he will not sell or otherwise transfer such securities unless they are registered under the Act or unless an exemption from such registration is available. 1.8 The Subscriber understands that the Shares and Warrants comprising the Units have not been registered under Act by reason of a claimed exemption under the provisions of the Act which depends, in part, upon his investment intention. In this connection, the Subscriber understands that it is the position of the SEC that the statutory basis for such exemption would not be present if his representation merely meant that his present intention was to hold such securities for a short period, such as the capital gains period of tax statutes, for a deferred sale, for a market rise, assuming that a market develops, or for any other fixed period. The Subscriber realizes that, in the view of the SEC, a purchase now with an intent to resell would represent a purchase with an intent inconsistent with his representation to the Company, and the SEC might regard such a sale or disposition as a deferred sale to which such exemptions are not available. 1.9 The Subscriber understands that Rule 144 (the "Rule") promulgated under the Act requires, among other conditions, a two year holding period prior to the resale (in limited amounts) of securities acquired in a non-public offering without having to satisfy the registration requirements under the Act. The Subscriber understands that the Company makes no representation or warranty regarding its fulfillment in the future of any reporting requirements under the Securities Exchange Act of 1934, as amended, or its dissemination to the public of any current financial or other information concerning the Company, as is required by the Rule as one of the conditions of its availability. The Subscriber understands and hereby acknowledges that the Company is under no obligation to register the securities comprising the Units under the Act, with the exception of certain registration rights set forth in Article IV herein. The Subscriber consents that the Company may, if it desires, permit the transfer of the securities comprising the Units or issuable upon either the exercise or conversion thereof out of his name only when his request for transfer is accompanied by an opinion of counsel reasonably satisfactory to the Company that neither the sale nor the proposed transfer results in a violation of the Act or any applicable state "blue sky" laws (collectively "Securities Laws"). The Subscriber agrees to hold the Company and its directors, officers and controlling persons and their respective heirs, representatives, successors and assigns harmless and to indemnify them against all liabilities, costs and expenses incurred by them as a result of any misrepresentation made by him contained herein or in the Confidential Purchaser Questionnaire or any sale or distribution by the undersigned Subscriber in violation of any Securities Laws. 1.10 The Subscriber consents to the placement of a legend on any certificate or other document evidencing the Shares and Warrants comprising his Units and the Common Stock issuable upon exercise of such Warrants (collectively, the "Warrant Shares") stating that they have not been registered under the Act and setting forth or referring to the restrictions on transferability and sale thereof. 3 1.11 The Subscriber hereby represents that the address of Subscriber furnished by him at the end of this Subscription Agreement is the undersigned's principal residence if he is an individual or its principal business address if it is a corporation or other entity. 1.12 The Subscriber acknowledges that if he is a Registered Representative of an NASD member firm, he must give such firm the notice required by the NASD's Rules of Fair Practice, receipt of which must be acknowledged by such firm on the signature page hereof. 1.13 The Subscriber acknowledges that at such time, if ever, as his Shares and Warrant Shares are registered, sales of such securities will be subject to state securities laws, including those of New Jersey which require any securities sold in New Jersey to be sold through a registered broker-dealer or in reliance upon an exemption from registration. 1.14 The Subscriber will not, upon the completion of this offering, own 10% or more of the Company's outstanding Common Stock, measured on an "as-converted" basis, nor is the Subscriber aware of any other Subscriber in this offering who will own 10% or more of the Company's outstanding Common Stock, measured on an "as-converted" basis. 1.15 The Subscriber will not, upon the exercise of Warrants held by him, own 10% or more of the Company's outstanding Common Stock, nor is the Subscriber aware of any other Subscriber in this offering who will own 10% or more of the Company's outstanding Common Stock upon the exercise of their Warrants. 1.16 The Subscriber has not entered into any voting agreement or any other agreement or understanding, whether oral or written, whereby he has agreed to vote his Common Stock with any other Subscriber nor has the Subscriber given another Subscriber power of attorney to vote his shares of Common Stock. 1.17 The Subscriber is purchasing the Units with his own assets and is not acting as nominee for any company or other Subscriber. 1.18 The Subscriber understands that if he is found to be in violation of the representations set forth in 1.14 through 1.17 above, the Company may be subject to penalties from the Department of Health of the State of New York, including, but not limited to, imposition of fines and loss of its license. II. REPRESENTATIONS BY THE COMPANY 4 The Company represents and warrants to the Subscriber that prior to the consummation of this offering and at the Closing Date: (a) The Company is a corporation duly organized, existing and in good standing under the laws of the State of Delaware and has the corporate power to conduct the business which it conducts and proposes to conduct and is qualified to do business in New York. (b) The execution, delivery and performance of this Subscription Agreement by the Company will have been duly approved by the Board of Directors of the Company and all other actions required to authorize and effect the offer and sale of the Units and the securities contained therein will have been duly taken and approved. (c) The Shares and Warrants comprising the Units have been duly and validly authorized and when issued and paid for in accordance with the terms hereof, will be valid and binding obligations of the Company enforceable in accordance with their respective terms. (d) The Company will at all times during the term of the Warrants have authorized and reserved a sufficient number of shares of Common Stock to provide for exercise of the Warrants. (e) The Company has obtained, or is in the process of obtaining, all licenses, permits and other governmental authorizations necessary to the conduct of its business; such licenses, permits and other governmental authorizations obtained are in full force and effect; and the Company is in all material respects complying therewith. (f) The Company knows of no pending or threatened legal or governmental proceedings to which the Company is a party which could materially adversely affect the business, property, financial condition or operations of the Company other than as set forth in the Offering Documents. (g) The Company is not in violation of or default under, nor will the execution and delivery of this Subscription Agreement, the issuance of the Shares or the Warrants, and the incurrence of the obligations herein and therein set forth and the consummation of the transactions herein or therein contemplated, result in a violation of, or constitute a default under, the certificate of incorporation or by-laws, in the performance or observance of any material obligations, agreement, covenant or condition contained in any bond, debenture, note or other evidence of indebtedness or in any material contract, indenture, mortgage, loan agreement, lease, joint venture or other agreement or instrument to which the Company is a party or by which it or any of its properties may be bound or in violation of any material order, rule, regulation, writ, injunction, or decree of any government, governmental instrumentality or court, domestic or foreign, except for violations and defaults under the Company's Revolving Credit Agreement with The Chase Manhattan 5 Bank, N.A. ("Chase") dated as of February 14, 1994 and amended as of November 16, 1995 and June 5, 1996 which violations and defaults will be waived by Chase on or before the Closing Date. (h) The financial information contained in the Offering Documents previously furnished by the Company to the Subscriber presents fairly the financial condition of the Company as of the date and for the periods indicated. III. TERMS OF SUBSCRIPTION 3.1 The subscription period will begin as of August 6, 1996 and will terminate at 11:59 PM Eastern Daylight Savings Time on September 30, 1996, unless extended by the Company and the Placement Agent until the first to occur of (i) the expiration of an additional sixty (60) days or (ii) the sale of all one hundred (100) Units offered by the Company (the "Termination Date"). Of the Units, 42 will be offered on an all or none basis and the remaining 58 Units will be offered on a "best efforts" basis as more particularly set forth in the Term Sheet. The minimum subscription per subscriber shall be one Unit ($50,000), provided, however, that smaller investments may be accepted at the discretion of the Placement Agent and the Company. 3.2 Placement of the Units will be made by Royce Investment Group, Inc. (the "Placement Agent"), which will receive (i) a placement fee in the amount of 4.5% of the purchase price of the Units placed; (ii) a non-accountable expense allowance of 1.5% of the purchase price of the Units placed; and (iii) a unit purchase option to purchase 7.5% of the Units sold in this offering. 3.3 Pending the sale of the Units, all funds paid hereunder shall be deposited by the Company in escrow with United States Trust Company of New York. If the Company shall not have obtained subscriptions (including this subscription) for purchases of 42 Units for an aggregate purchase price of $2,100,000 on or before the Termination Date, then this subscription shall be void and all funds paid hereunder by the Subscriber, without interest, shall be promptly returned to the Subscriber, subject to paragraph 3.5 hereof. If 42 Units are sold at or prior to the Termination Date, then all subscription proceeds shall be paid over to the Company within ten (10) days of the earlier of such date or the date on which the Company's Stockholders approve this offering thereafter. In such event, placements of additional Units may continue until the Termination Date, with subsequent releases of funds to be at the mutual consent of the Company and the Placement Agent. 3.4 The Subscriber hereby authorizes and directs the Company to deliver the securities to be issued to such Subscriber pursuant to this Subscription Agreement either (a) to the residential or business address indicated in the Confidential Purchaser Questionnaire or (b) directly to the Subscriber's account maintained by the Placement Agent, 6 if any. (If the Subscriber does not desire the securities to be delivered to such account, the Subscriber should delete Subsection (b) of this Section 3.4.) 3.5 The Subscriber hereby authorizes and directs the Company to return any funds for unaccepted subscriptions to the same account from which the funds were drawn, including any customer account maintained with the Placement Agent. IV. REGISTRATION RIGHTS 4.1 Demand Registration. If at any time after three (3) months following the Termination Date, but not more than six (6) years from the Termination Date, the Company shall receive a written request therefor (the "Demand Notice") from any record holder or holders of an aggregate of more than 50% of the Shares and Warrant Shares (the "Requesting Holders"), the Company will use its best efforts to promptly prepare and file with the SEC a registration statement under the Act covering the Shares and the Warrant Shares (collectively, the "Registrable Securities") which are the subject of such request and shall use its best efforts to cause such registration statement to become effective. In addition, upon the receipt of such request, the Company shall promptly give written notice to all other record holders of the Registrable Securities that such registration is to be effected. The Company shall include in such registration statement such Registrable Securities for which it has received written requests to register by such other record holders within twenty (20) days after the delivery of the Company's written notice to such other record holders. The obligation of the Company under this Section 4.1 shall be limited to one registration statement. The Company shall pay the expenses described in Section 4.4 for the registration statement filed pursuant to this Section 4.1, except for underwriting discounts and commissions and legal fees of the Requesting Holders, which shall be borne by the Requesting Holders. 4.2 "Piggyback" Registration Rights. From and after three (3) months following the Termination Date, but not more than six (6) years from the Termination Date, if the Company shall determine to proceed with the actual preparation and filing of a registration statement under the Act in connection with the proposed offer and sale of any of its securities by it or any of its security holders (other than a registration statement on Form S-4, S-8 or other limited purpose form), the Company will give written notice of its determination to all record holders of the Registrable Securities. Upon the written request from the Requesting Holders, (as defined in Section 4.1) within twenty (20) days after receipt of any such notice from the Company, the Company will, except as herein provided, cause all such Registrable Securities to be included in such registration statement, all to the extent requisite to permit the sale or other disposition by the prospective seller or sellers of the Registrable Securities to be so registered; provided, further, that nothing herein shall prevent the Company from, at any time, abandoning or delaying any registration. If any registration pursuant to this Section 4.2 shall be underwritten in whole or in part, the Company may require that the Registrable Securities requested for inclusion pursuant to this 7 Section 4.2 be included in the underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. In the event that the Registrable Securities requested for inclusion pursuant to this Section 4.2 together with any other shares which have similar piggyback registration rights (such shares and the Registrable Securities being collectively referred to as the "Requested Stock") would constitute more than 15% of the total number of shares to be included in a proposed underwritten public offering, or if in the good faith judgment of the managing underwriter of such public offering the inclusion of all of the Requested Stock originally covered by a request for registration would reduce the number of shares to be offered by the Company or interfere with the successful marketing of the shares of stock offered by the Company, the number of shares of Requested Stock otherwise to be included in the underwritten public offering may be reduced pro rata (by number of shares) among the holders thereof requesting such registration or excluded in their entirety if so required by the underwriter. To the extent only a portion of the Requested Stock is included in the underwritten public offering, those shares of Requested Stock which are thus excluded from the underwritten public offering shall be withheld from the market by the holders thereof for a period, not to exceed 120 days, which the managing underwriter reasonably determines is necessary in order to effect the underwritten public offering. 4.3 Registration Procedures. If and whenever the Company is required by the provisions of Section 4.1 or 4.2 to effect the registration of Registrable Securities under the Act, the Company will: (a) prepare and file with the SEC a registration statement with respect to such securities, and use its best efforts to cause such registration statement to become and remain effective for such period as may be reasonably necessary to effect the sale of such securities, not to exceed nine months; (b) prepare and file with the SEC such amendments to such registration statement and supplements to the prospectus contained therein as may be necessary to keep such registration statement effective for such period as may be reasonably necessary to effect the sale of such securities, not to exceed nine months; (c) furnish to the security holders participating in such registration and to the underwriters of the securities being registered such reasonable number of copies of the registration statement, preliminary prospectus, final prospectus and such other documents as such underwriters may reasonably request in order to facilitate the public offering of such securities; (d) use its best efforts to register or qualify the securities covered by such registration statement under such state securities or blue sky laws of such jurisdictions as such participating holders may reasonably request in writing within twenty (20) days following the original filing of such registration statement, except that the Company shall not for any purpose be required to execute a general consent to service of 8 process or to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified; (e) notify the security holders participating in such registration, promptly after it shall receive notice thereof, of the time when such registration statement has become effective or a supplement to any prospectus forming a part of such registration statement has been filed; (f) notify such holders promptly of any request by the SEC for the amending or supplementing of such registration statement or prospectus or for additional information; (g) prepare and file with the SEC, promptly upon the request of any such holders, any amendments or supplements to such registration statement or prospectus which, in the opinion of counsel for such holders (and concurred in by counsel for the Company), is required under the Act or the rules and regulations thereunder in connection with the distribution of Common Stock by such holder; (h) prepare and promptly file with the SEC and promptly notify such holders of the filing of such amendment or supplement to such registration statement or prospectus as may be necessary to correct any statements or omissions if, at the time when a prospectus relating to such securities is required to be delivered under the Act, any event shall have occurred as the result of which any such prospectus or any other prospectus as then in effect would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; and (i) advise such holders, promptly after it shall receive notice or obtain knowledge thereof, of the issuance of any stop order by the SEC suspending the effectiveness of such registration statement or the initiation or threatening of any proceeding for that purpose and promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such stop order should be issued. 4.4 Expenses. (a) With respect to the registration requested pursuant to Section 4.1 hereof, and with respect to each inclusion of Registrable Securities in a registration statement pursuant to Section 4.2 hereof, all fees, costs and expenses of and incidental to such registration, inclusion and public offering (as specified in paragraph (b) below) in connection therewith shall be borne by the Company, provided, however, that any security holders participating in such registration shall bear their pro rata share of the underwriting discount and commissions and transfer taxes. (b) The fees, costs and expenses of registration to be borne by the Company as provided in paragraph (a) above shall include, without limitation, all 9 registration, filing, and NASD fees, printing expenses, fees and disbursements of counsel and accountants for the Company, and all legal fees and disbursements and other expenses of complying with state securities or blue sky laws of any jurisdictions in which the securities to be offered are to be registered and qualified (except as provided in 4.4(a) above). Fees and disbursements of counsel and accountants for the selling security holders and any other expenses incurred by the selling security holders not expressly included above shall be borne by the selling security holders. 4.5 Indemnification. (a) The Company will indemnify and hold harmless each holder of Registrable Securities which are included in a registration statement pursuant to the provisions of Sections 4.1 or 4.2 hereof, its directors and officers, and any underwriter (as defined in the Act) for such holder and each person, if any, who controls such holder or such underwriter within the meaning of the Act, from and against, and will reimburse such holder and each such underwriter and controlling person with respect to, any and all loss, damage, liability, cost and expense to which such holder or any such underwriter or controlling person may become subject under the Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading; provided, however, that the Company will not be liable in any such case to the extent that any such loss, damage, liability, cost or expenses arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission so made in conformity with information furnished by such holder, such underwriter or such controlling person in writing specifically for use in the preparation thereof. (b) Each holder of Registrable Securities included in a registration pursuant to the provisions of Sections 4.1 or 4.2 hereof will indemnify and hold harmless the Company, its directors and officers, any controlling person and any underwriter from and against, and will reimburse the Company, its directors and officers, any controlling person and any underwriter with respect to, any and all loss, damage, liability, cost or expense to which the Company or any controlling person and/or any underwriter may become subject under the Act or otherwise, insofar as such losses, damages, liabilities, costs or expenses are caused by any untrue statement or alleged untrue statement of any material fact contained in such registration statement, any prospectus contained therein or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was so made in reliance upon and in strict 10 conformity with written information furnished by or on behalf of such holder specifically for use in the preparation thereof. (c) Promptly after receipt by an indemnified party pursuant to the provisions of paragraph (a) or (b) of this Section 4.5 of notice of the commencement of any action involving the subject matter of the foregoing indemnity provisions such indemnified party will, if a claim thereof is to be made against the indemnifying party pursuant to the provisions of said paragraph (a) or (b), promptly notify the indemnifying party of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than hereunder. In case such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party shall have the right to participate in, and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party, provided, however, if the defendants in any action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or in addition to those available to the indemnified party, or if there is a conflict of interest which would prevent counsel for the indemnifying party from also representing the indemnified party, the indemnified party or parties have the right to select separate counsel to participate in the defense of such action on behalf of such indemnified party or parties. After notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party pursuant to the provisions of said paragraph (a) or (b) for any legal or other expense subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation, unless (i) the indemnified party shall have employed counsel in accordance with the provisions of the preceding sentence, (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after the notice of the commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party. 4.6 "Market Stand-Off". The Subscriber hereby agrees that, during the period specified by the Company and an underwriter of securities of the Company, which period shall not exceed 90 days following the effective date of a registration statement of the Company filed under the Act, it shall not (i) publicly sell the Units, Shares or Warrant Shares acquired hereunder or (ii) privately sell the Units, Shares or Warrant Shares acquired hereunder unless the purchaser of such Units, Shares or Warrant Shares in such private sale agrees to be bound by the provisions of this Section 4.6; provided, however, that: (a) such agreement shall be applicable only to the first such registration statement of the Company which covers securities to be sold on its behalf to the public in an underwritten offering during the two year period following the date of this Agreement. 11 (b) all officers and directors of the Company and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements. In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Units, Shares or Warrant Shares of the Subscriber (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period. Notwithstanding the foregoing, the obligations described in this Section 4.6 shall not apply to a registration statement on Form S-4 or S-8 or other limited purpose form. V. MISCELLANEOUS 5.1 Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified mail, return receipt requested, addressed to the Company, at its registered office, 1 Hollow Lane, Lake Success, New York 11042 , Attention: Ms. Ann T. Mittasch, President and Chairman, and to the Subscriber at his address indicated on the last page of this Subscription Agreement. Notices shall be deemed to have been given on the date of mailing, except notices of change of address, which shall be deemed to have been given when received. 5.2 This Subscription Agreement shall not be changed, modified or amended except by a writing signed by the parties to be charged, and this Subscription Agreement may not be discharged except by performance in accordance with its terms or by a writing signed by the party to be charged. 5.3 This Subscription Agreement shall be binding upon and inure to the benefit of the parties hereto and to their respective heirs, legal representatives, successors and assigns. This Subscription Agreement sets forth the entire agreement and understanding between the parties as to the subject matter thereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them. 5.4 Notwithstanding the place where this Subscription Agreement may be executed by any of the parties hereto, the parties expressly agree that all the terms and provisions hereof shall be construed in accordance with and governed by the laws of the State of New York. The parties hereby agree that any dispute which may arise between them arising out of or in connection with this Subscription Agreement shall be adjudicated before a court located in New York City and they hereby submit to the exclusive jurisdiction of the courts of the State of New York located in New York, New York and of the federal courts in the Southern District of New York with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this 12 Subscription Agreement or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, in care of the address set forth below or such other address as the undersigned shall furnish in writing to the other. 5.5 This Subscription Agreement may be executed in counterparts. Upon the execution and delivery of this Subscription Agreement by the Subscriber, this Subscription Agreement shall become a binding obligation of the Subscriber with respect to the purchase of Units as herein provided; subject, however, to the right hereby reserved to the Company to enter into the same agreements with other subscribers and to add and/or to delete other persons as subscribers. 5.6 The holding of any provision of this Subscription Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Subscription Agreement, which shall remain in full force and effect. 5.7 It is agreed that a waiver by either party of a breach of any provision of this Subscription Agreement shall not operate, or be construed, as a waiver of any subsequent breach by that same party. 5.8 The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Subscription Agreement. VI. BLUE SKY LEGENDS Connecticut The undersigned acknowledges that the Securities have not been registered under the Connecticut Uniform Securities Act, as amended (the "Act") and are subject to restrictions on transferability and sale of securities as set forth herein. The undersigned hereby agrees that such Securities will not be transferred or sold without registration under the Act or exemption therefrom. Maine These securities are being sold pursuant to an exemption from registration with the bank superintendent of the State of Maine under Section 10502(2)(r) of Title 32 of the Maine revised statutes. These securities may be deemed restricted securities and as such the holder may not be able to resell the securities unless pursuant to registration under state or federal securities laws or unless an exemption under such laws exists. Missouri The undersigned acknowledges that the Securities have not been registered under the Missouri Uniform Securities Act, as amended (the "Act") and are subject to restrictions on transferability and sale of securities as set forth herein. The 13 undersigned hereby acknowledges that such Securities may be disposed of only through a licensed broker-dealer. It is a felony to sell securities in violation of the Missouri Securities Act. Pennsylvania The undersigned hereby acknowledges that the Issuer is relying upon the exemption from registration of securities set forth in Section 203(d) of the Pennsylvania Securities Act of 1972, as amended (the "Pennsylvania Act") in connection with the sale of the Securities to the undersigned. In accordance with the requirements of Section 203(d) of the Pennsylvania Act, the undersigned hereby agrees not to sell his Securities within twelve (12) months from the date of purchase except pursuant to Section 204.01 of the Blue Sky Regulations of the Pennsylvania Securities Act of 1972. Additionally, the undersigned is aware of the right of withdrawal under Section 207(m) of the Act described in the cover pages of the Memorandum. Texas The undersigned hereby acknowledges that the Securities cannot be sold unless they are subsequently registered under the Securities Act of 1933, as amended, and the Texas Securities Act, or an exemption from registration is available. The undersigned further acknowledges that because the Securities are not readily transferable, he must bear the economic risk of his investment for an indefinite period of time. 14 IN WITNESS WHEREOF, the parties have executed this Subscription Agreement as of the day and year first written above. - ------------------------------ ------------------------------------ Signature of Subscriber(s) - ------------------------------ ------------------------------------ Name of Subscriber(s) [please print] - ------------------------------ ------------------------------------ Address of Subscriber(s) - ------------------------------ ------------------------------------ Social Security or Taxpayer Identification Number of Subscriber(s) - ------------------------------ Number of Units Subscribed For *IF SUBSCRIBER IS A REGISTERED REPRESENTATIVE WITH AN NASD MEMBER FIRM, HAVE THE FOLLOWING ACKNOWLEDGEMENT SIGNED BY THE APPROPRIATE PARTY: The undersigned NASD member firm acknowledges receipt of the notice required by Article 3, Sections 28(a) Subscription Accepted: and (b) of the Rules of Fair Practice. THE CARE GROUP, INC. By: - ------------------------------ --------------------------------- Name of NASD Member Firm Ann Mittasch, President By --------------------------- Authorized Officer 15 EX-10.2 3 FORM OF REDEEMABLE COMMON STOCK PURCHASE WARRANTS ************************************************************************ COMMON STOCK PURCHASE WARRANT To Purchase Common Stock of THE CARE GROUP, INC. ************************************************************************ Void after 5:00 p.m. New York Time, on __________, 2001. Warrant to Purchase ______ Shares of Common Stock. WARRANT TO PURCHASE COMMON STOCK OF THE CARE GROUP, INC. This is to Certify That, FOR VALUE RECEIVED, , or assigns ("Holder"), is entitled to purchase, subject to the provisions of this Warrant, from The Care Group, Inc., a Delaware corporation ("Company"), _______ fully paid, validly issued and nonassessable shares of Common Stock, par value $.001 per share, of the Company ("Common Stock") at a cash price per share equal to $_____ [the greater of (i) $2.50 or (ii) book value per share as reflected in the Company's 10-Q for the period ended June 30, 1996 plus $.10.] The number of shares of Common Stock to be received upon the exercise of this Warrant and the price to be paid for each share of Common Stock may be adjusted from time to time as hereinafter set forth. The shares of Common Stock deliverable upon such exercise, and as adjusted from time to time, are hereinafter sometimes referred to as "Warrant Shares" and the exercise price of a share of Common Stock in effect at any time and as adjusted from time to time is hereinafter sometimes referred to as the "Exercise Price". This Warrant, together with warrants of like tenor, constituting in the aggregate warrants (the "Warrants") to purchase up to 4,000,000 shares of Common Stock, was originally issued in connection with a private placement (the "Private Placement") through Royce Investment Group, Inc., as placement agent, pursuant to a Confidential Term Sheet dated August __, 1996. (a) EXERCISE OF WARRANT. This Warrant may be exercised in whole or in part at any time or from time to time on or after ______________, 1996 and until ___________, 2001 (the "Exercise Period"), subject to the provisions of Section (i) hereof; provided, however, that if either such day is a day on which banking institutions in the State of New York are authorized by law to close, then on the next succeeding day which shall not be such a day. This Warrant may be exercised by presentation and surrender hereof to the Company at its principal office, or at the office of its stock transfer agent, if any, with the Purchase Form annexed hereto duly executed and accompanied by payment of the Exercise Price for the number of Warrant Shares specified in such form. As soon as practicable after each such exercise of the warrants, but not later than seven (7) days from the date of such exercise, the Company shall issue and deliver to the Holder a certificate or certificate for the Warrant Shares issuable upon such exercise, registered in the name of the Holder or its designee. If this Warrant should be exercised in part only, the Company shall, upon surrender of this Warrant for cancellation, execute and deliver a new Warrant evidencing the rights of the Holder thereof to purchase the balance of the Warrant Shares purchasable thereunder. Upon receipt by the Company of this Warrant at its office, or by the stock transfer agent of the Company at its office, in proper form for exercise, the Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be physically delivered to the Holder. (b) RESERVATION OF SHARES. The Company shall at all times reserve for issuance and/or delivery upon exercise of this Warrant such number of shares of its Common Stock as shall be required for issuance and delivery upon exercise of the Warrants. (c) FRACTIONAL SHARES. No fractional shares or script representing fractional shares shall be issued upon the exercise of this Warrant. With respect to any fraction of a share called for upon any exercise hereof, the Company shall pay to the Holder an amount in cash equal to such fraction multiplied by the current market value of a share, determined as follows: (1) If the Common Stock is listed on a national securities exchange or admitted to unlisted trading privileges on such exchange or listed for trading on the Nasdaq National Market, the current market value shall be the last reported sale price of the Common Stock on such exchange or market on the last business day prior to the date of exercise of this Warrant or if no such sale is made on such day, the average closing bid and asked prices for such day on such exchange or market; or (2) If the Common Stock is not so listed or admitted to unlisted trading privileges, but is traded on the Nasdaq Small Cap Market, the current market value shall be the average of the closing bid and asked prices for such day on such market and if the Common Stock is not so traded, the current market value shall be the mean of the last reported bid and asked prices reported by the National Quotation Bureau, Inc. on the last business day prior to the date of the exercise of this Warrant; or (3) If the Common Stock is not so listed or admitted to unlisted trading privileges and bid and asked prices are not so reported, the current market value shall be an amount, not less than book value thereof as at the end of the most recent fiscal year of the Company ending prior to the date of the exercise of the Warrant, determined in such reasonable manner as may be prescribed by the Board of Directors of the Company. 2 (d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This Warrant is exchangeable, without expense, at the option of the Holder, upon presentation and surrender hereof to the Company or at the office of its stock transfer agent, if any, for other warrants of different denominations entitling the holder thereof to purchase in the aggregate the same number of shares of Common Stock purchasable hereunder. Upon surrender of this Warrant to the Company at its principal office or at the office of its stock transfer agent, if any, with the Assignment Form annexed hereto duly executed and funds sufficient to pay any transfer tax, the Company shall, without charge, execute and deliver a new Warrant in the name of the assignee named in such instrument of assignment and this Warrant shall promptly be cancelled. This Warrant may be divided or combined with other warrants which carry the same rights upon presentation hereof at the principal office of the Company or at the office of its stock transfer agent, if any, together with a written notice specifying the names and denominations in which new Warrants are to be issued and signed by the Holder hereof. The term "Warrant" as used herein includes any Warrants into which this Warrant may be divided or exchanged. Upon receipt by the Company of evidence satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Warrant, if mutilated, the Company will execute and deliver a new Warrant of like tenor and date. Any such new Warrant executed and delivered shall constitute an additional contractual obligation on the part of the Company, whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at any time enforceable by anyone. (e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue hereof, be entitled to any rights of a stockholder in the Company, either at law or equity, and the rights of the Holder are limited to those expressed in the Warrant and are not enforceable against the Company except to the extent set forth herein. (f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time and the number and kind of securities purchasable upon the exercise of the Warrants shall be subject to adjustment from time to time upon the happening of certain events as follows: (1) In case the Company shall (i) declare a dividend or make a distribution on its outstanding shares of Common Stock in shares of Common Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into a greater number of shares, or (iii) combine or reclassify its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect at the time of the record date for such dividend or distribution or of the effective date of such subdivision, combination or reclassification shall be adjusted so that it shall equal the price determined by multiplying the Exercise Price by a fraction, the denominator of which shall be the number of shares of Common Stock outstanding after giving effect to such action, and the numerator of which shall be the number of shares of Common Stock 3 outstanding immediately prior to such action. Such adjustment shall be made successively whenever any event listed above shall occur. (2) In case the Company shall fix a record date for the issuance of rights or warrants to all holders of its Common Stock entitling them to subscribe for or purchase shares of Common Stock (or securities convertible into Common Stock) at a price (the "Subscription Price") (or having a conversion price per share) less than the current market price of the Common Stock (as defined in Subsection (8) below) on the record date mentioned below, the Exercise Price shall be adjusted so that the same shall equal the price determined by multiplying the Exercise Price in effect immediately prior to the date of such issuance by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding on the record date mentioned below and the number of additional shares of Common Stock which the aggregate offering price of the total number of shares of Common Stock so offered (or the aggregate conversion price of the convertible securities so offered) would purchase at such current market price per share of the Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding on such record date and the number of additional shares of Common Stock offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such rights or warrants are issued and shall become effective immediately after the record date for the determination of stockholders entitled to receive such rights or warrants; and to the extent that shares of Common Stock are not delivered (or securities convertible into Common Stock are not delivered) after the expiration of such rights or warrants the Exercise Price shall be readjusted to the Exercise Price which would then be in effect had the adjustments made upon the issuance of such rights or warrants been made upon the basis of delivery of only the number of shares of Common Stock (or securities convertible into Common Stock) actually delivered. (3) In case the Company shall hereafter distribute to the holders of its Common Stock evidences of its indebtedness or assets (excluding cash dividends or distributions and dividends or distributions referred to in Subsection (1) above) or subscription rights or warrants (excluding those referred to in Subsection (2) above), then in each such case the Exercise Price in effect thereafter shall be determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the total number of shares of Common Stock outstanding multiplied by the current market price per share of Common Stock (as defined in Subsection (8) below), less the fair market value (as determined by the Company's Board of Directors) of said assets or evidences of indebtedness so distributed or of such rights or warrants, and the denominator of which shall be the total number of 4 shares of Common Stock outstanding multiplied by such current market price per share of Common Stock. Such adjustment shall be made successively whenever such a record date is fixed. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date for the determination of shareholders entitled to receive such distribution. (4) In case the Company shall issue shares of its Common Stock excluding shares issued (i) in any of the transactions described in Subsection (1) above, (ii) upon exercise of options granted to the Company's employees under a plan or plans adopted by the Company's Board of Directors and approved by its shareholders, if such shares would otherwise be included in this Subsection (4), (but only to the extent that the aggregate number of shares excluded hereby and issued after the date hereof, shall not exceed 10% of the Company's Common Stock outstanding at the time of any issuance) (iii) upon exercise of options and warrants outstanding at ______, 1996 and this Warrant (iv) to stockholders of any corporation which merges into the Company in proportion to their stock holdings or option holdings of such corporation immediately prior to such merger, upon such merger, (v) issued in a bona fide public offering pursuant to a firm commitment underwriting (vi) issued in connection with a corporate partnering transaction, but only if no adjustment is required pursuant to any other specific subsection of this Section (f) (without regard to Subsection (9) below) with respect to the transaction giving rise to such rights for a consideration per share (the "Offering Price") less than the current market price per share as defined in Subsection (8) below on the date the Company fixes the offering price of such additional shares, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such additional shares and the number of shares of Common Stock which the aggregate consideration received determined as provided in Subsection (7) below for the issuance of such additional shares would purchase at such current market price per share of Common Stock, and the denominator of which shall be the number of shares of Common Stock outstanding immediately after the issuance of such additional shares Such adjustment shall be made successively whenever such an issuance is made. (5) In case the Company shall issue any securities convertible into or exchangeable for its Common Stock excluding securities issued in transactions described in Subsections (2) and (3) above for a consideration per share of Common Stock (the "Conversion Price") initially deliverable upon conversion or exchange of such securities determined as provided in Subsection (7) below less than the current market price per share as defined in 5 Subsection (8) below in effect immediately prior to the issuance of such securities, the Exercise Price shall be adjusted immediately thereafter so that it shall equal the price determined by multiplying the Exercise Price in effect immediately prior thereto by a fraction, the numerator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to the issuance of such securities and the number of shares of Common Stock which the aggregate consideration received (determined as provided in Subsection (7) below) for such securities would purchase at such current market price per share of Common Stock, and the denominator of which shall be the sum of the number of shares of Common Stock outstanding immediately prior to such issuance and the maximum number of shares of Common Stock of the Company deliverable upon conversion of or in exchange for such securities at the initial conversion or exchange price or rate. Such adjustment shall be made successively whenever such an issuance is made. (6) Whenever the Exercise Price payable upon exercise of each Warrant is adjusted pursuant to Subsections (1), (2), (3), (4) and (5) above, the number of Shares purchasable upon exercise of this Warrant shall simultaneously be adjusted by multiplying the number of Shares initially issuable upon exercise of this Warrant by the Exercise Price in effect on the date hereof and dividing the product so obtained by the Exercise Price, as adjusted. (7) For purposes of any computation respecting consideration received pursuant to Subsections (4) and (5) above, the following shall apply: (A) in the case of the issuance of shares of Common Stock for cash, the consideration shall be the amount of such cash, provided that in no case shall any deduction be made for any commissions, discounts or other expenses incurred by the Company for any underwriting of the issue or otherwise in connection therewith; (B) in the case of the issuance of shares of Common Stock for a consideration in whole or in part other than cash, the consideration other than cash shall be deemed to be the fair market value thereof as determined in good faith by the Board of Directors of the Company (irrespective of the accounting treatment thereof), whose determination shall be conclusive; and (C) in the case of the issuance of securities convertible into or exchangeable for shares of Common Stock, the aggregate consideration received therefor shall be deemed to be the consideration received by the 6 Company for the issuance of such securities plus the additional minimum consideration, if any, to be received by the Company upon the conversion or exchange thereof (the consideration in each case to be determined in the same manner as provided in clauses (A) and (B) of this Subsection (7)). (8) For the purpose of any computation under Subsections (2), (3), (4) and (5) above, the current market price per share of Common Stock at any date shall be determined in the manner set forth in Section (c) hereof except that the current market price per share shall be deemed to be the average of the prices for 30 consecutive business days immediately preceding such date. (9) No adjustment in the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least five cents in such price; provided, however, that any adjustments which by reason of this Subsection (9) are not required to be made shall be carried forward and taken into account in any subsequent adjustment required to be made hereunder. All calculations under this Section (f) shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be. Anything in this Section (f) to the contrary notwithstanding, the Company shall be entitled, but shall not be required, to make such changes in the Exercise Price, in addition to those required by this Section (f), as it shall determine, in its sole discretion, to be advisable in order that any dividend or distribution in shares of Common Stock, or any subdivision, reclassification or combination of Common Stock, hereafter made by the Company shall not result in any Federal income tax liability to the holders of Common Stock or securities convertible into Common Stock (including Warrants). (10) Whenever the Exercise Price is adjusted, as herein provided, the Company shall promptly, cause a notice setting forth the adjusted Exercise Price and adjusted number of Shares issuable upon exercise of each Warrant, and, if requested, information describing the transactions giving rise to such adjustments, to be mailed to the Holders at their last addresses appearing in the Warrant Register, and shall cause a certified copy thereof to be mailed to its transfer agent, if any. The Company may retain a firm of independent certified public accountants selected by the Board of Directors (who may be the regular accountants employed by the Company) to make any computation required by this Section (f), and a certificate signed by such firm shall be conclusive evidence of the correctness of such adjustment. (11) In the event that at any time, as a result of an adjustment made pursuant to Subsection (1) above, the Holder of this Warrant thereafter shall become entitled to receive any shares of the Company, other than Common Stock, thereafter the number of such other shares so receivable upon exercise of this Warrant shall be subject to adjustment from time to time in a manner 7 and on terms as nearly equivalent as practicable to the provisions with respect to the Common Stock contained in Subsections (1) to (9), inclusive above. (12) Irrespective of any adjustments in the Exercise Price or the number or kind of shares purchasable upon exercise of this Warrant, Warrants theretofore or thereafter issued may continue to express the same price and number and kind of shares as are stated in the similar Warrants initially issuable pursuant to this Agreement. (g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be adjusted as required by the provisions of the foregoing Section, the Company shall forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with its stock transfer agent, if any, an officer's certificate showing the adjusted Exercise Price determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment, including a statement of the number of additional shares of Common Stock, if any, and such other facts as shall be necessary to show the reason for and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by the holder or any holder of a Warrant executed and delivered pursuant to Section (a) and the Company shall, forthwith after each such adjustment, mail a copy by certified mail of such certificate to the Holder or any such holder. (h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be outstanding, (i) if the Company shall pay any dividend or make any distribution upon the Common Stock or (ii) if the Company shall offer to the holders of Common Stock for subscription or purchase by them any share of any class or any other rights or (iii) if any capital reorganization of the Company, reclassification of the capital stock of the Company, consolidation or merger of the Company with or into another corporation, sale, lease or transfer of all or substantially all of the property and assets of the Company to another corporation, or voluntary or involuntary dissolution, liquidation or winding up of the Company shall be effected, then in any such case, the Company shall cause to be mailed by certified mail to the Holder, at least fifteen days prior the date specified in (x) or (y) below, as the case may be, a notice containing a brief description of the proposed action and stating the date on which (x) a record is to be taken for the purpose of such dividend, distribution or rights, or (y) such reclassification, reorganization, consolidation, merger, conveyance, lease, dissolution, liquidation or winding up is to take place and the date, if any is to be fixed, as of which the holders of Common Stock or other securities shall receive cash or other property deliverable upon such reclassification, reorganization, consolidation, merger, conveyance, dissolution, liquidation or winding up. (i) RECLASSIFICATION, REORGANIZATION OR MERGER. Subject to the provisions of Section (k)(2) hereof, in case of any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the Company, or in case of any consolidation or merger of the Company with or into another corporation 8 (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) or in case of any sale, lease or conveyance to another corporation of the property of the Company as an entirety, the Company shall, as a condition precedent to such transaction, cause effective provisions to be made so that the Holder shall have the right thereafter by exercising this Warrant at any time prior to the expiration of the Warrant, to purchase the kind and amount of shares of stock and other securities and property receivable upon such reclassification, capital reorganization and other change, consolidation, merger, sale or conveyance by a holder of the number of shares of Common Stock which might have been purchased upon exercise of this Warrant immediately prior to such reclassification, change, consolidation, merger, sale or conveyance. Any such provision shall include provision for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Warrant. The foregoing provisions of this Section (i) shall similarly apply to successive reclassifications, capital reorganizations and changes of shares of Common Stock and to successive consolidations, mergers, sales or conveyances. In the event that in connection with any such capital reorganization or reclassification, consolidation, merger, sale or conveyance, additional shares of Common Stock shall be issued in exchange, conversion, substitution or payment, in whole or in part, for a security of the Company other than Common Stock, any such issue shall be treated as an issue of Common Stock covered by the provisions of Subsection (1) of Section (f) hereof. (j) REGISTRATION UNDER THE SECURITIES ACT OF 1933. The Holder of this Warrant shall have the registration rights set forth in Section IV of the subscription agreement dated August __, 1996 between the Holder and the Company relating to the Private Placement. (k) REDEMPTION. (1) Commencing _________, 1997, on notice (the "Redemption Notice") to the Holder, the Warrants may be redeemed, at the option of the Company, at a redemption price of $.05 per Warrant, provided the Market Price of the Common Stock equals or exceeds $7.00 per share (the "Target Price"), subject to adjustment as set forth in Section (k)(6), below. For purposes of this Section (k), "Market Price" shall mean (i) the average closing bid price of the Common Stock, for thirty (30) consecutive business days ending on the Calculation Date as reported by Nasdaq, if the Common Stock is traded on the Nasdaq SmallCap Market, or (ii)the average last reported sale price of the Common Stock, for thirty (30) consecutive business days ending on the Calculation Date, as reported by the primary exchange on which the Common Stock is traded, if the Common Stock is traded on a national securities exchange, or by Nasdaq, if the Common Stock is traded on the Nasdaq National Market. For purposes of this Section (k), the Calculation 9 Date shall mean a date within five days of the mailing of the Redemption Notice. (2) In case of the consummation of any consolidation, merger or sale of all or substantially all of the Common Stock of the Company (a "Sale Event") with or into another corporation (the "Successor Corporation") which has been consummated prior to ____________, 2001 (other than a merger with a subsidiary in which merger the Company is the continuing corporation and which does not result in any reclassification, capital reorganization or other change of outstanding shares of Common Stock of the class issuable upon exercise of this Warrant) which results in consideration being paid to the Company's stockholders of at least $7.00 per share (the "Transaction Price"), the Warrants may be redeemed, at the option of the Successor Corporation, at a redemption price of $.05 per Warrant. (3) If the conditions set forth in Section (k)(1) or (2) are met, and the Company or the Successor Corporation, as applicable, desires to exercise its right to redeem the Warrants, it shall mail a Redemption Notice to each of the Registered Holders of the Warrants to be redeemed, first class, postage prepaid, not later than the thirtieth day before the date fixed for redemption, at their last address as shall appear on the records maintained by the Company or the Successor Corporation, as applicable. Such Redemption Notice may only be mailed by a Successor Corporation after consummation of the Sale Event. Any notice mailed in the manner provided herein shall be conclusively presumed to have been duly given whether or not the Registered Holder receives such notice. The date fixed for redemption of the Warrants is referred to herein as the "Redemption Date." (4) The Redemption Notice shall specify (i) the redemption price, (ii) the Redemption Date, (iii) the place where the Warrant shall be delivered, (iv) that Royce Investment Group, Inc. will assist each Registered Holder of a Warrant in connection with the exercise thereof and (v) that the right to exercise the Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption Date. No failure to mail such notice nor any defect therein or in the mailing thereof shall affect the validity of the proceedings for such redemption except as to a Registered Holder (a) to whom notice was not mailed or (b) whose notice was defective. An affidavit of the Warrant Agent or of the Secretary or an Assistant Secretary of the Company or the Successor Corporation, as applicable, that notice of redemption has been mailed shall, in the absence of fraud, be prima facie evidence of the facts stated therein. (5) Any right to exercise a Warrant shall terminate at 5:00 P.M. (New York time) on the business day immediately preceding the Redemption 10 Date. In the event of a Sale Event and a Holder of this Warrant exercises this Warrant prior to the Redemption Date, the Holder of this Warrant shall receive upon exercise from the Successor Corporation the same per share consideration received by the holders of the Company's Common Stock in the Sale Event (calculated as if the Holder of this Warrant had exercised this Warrant and held Common Stock immediately prior to the Sale Event). On and after the Redemption Date, Registered Holders of the Warrants shall have no further rights except to receive, upon surrender of the Warrant, the Redemption Price. (6) From and after the Redemption Date, the Company or the Successor Corporation, as applicable, shall, at the place specified in the Redemption Notice, upon presentation and surrender to the Company or the Successor Corporation, as applicable, by or on behalf of the Registered Holder thereof of one or more Warrant Certificates evidencing Warrants to be redeemed, deliver or cause to be delivered to or upon the written order of such Registered Holder a sum in cash equal to the redemption price of each such Warrant. From and after the Redemption Date and upon the deposit or setting aside by the Company or the Successor Corporation, as applicable, of a sum sufficient to redeem all the Warrants called for redemption, such Warrants shall expire and become void and all rights hereunder and under the Warrant Certificates, except the right to receive payment of the redemption price, shall cease. (7) If the shares of the Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, the Target Price or Transaction Price shall be proportionally adjusted by the ratio which the total number of shares of Common Stock outstanding immediately prior to such event bears to the total number of shares of Common Stock to be outstanding immediately after such event. THE CARE GROUP, INC. By ------------------------------------- Ann Mittasch, President [SEAL] Dated: , 1996 ------------- 11 Attest: - ----------------------------- Randolph Mittasch, Secretary 12 PURCHASE FORM Dated ____________, 19 The undersigned hereby irrevocably elects to exercise the within Warrant to the extent of purchasing _______ shares of Common Stock and hereby makes payment of _______ in payment of the actual exercise price thereof. ---------------- INSTRUCTIONS FOR REGISTRATION OF STOCK Name ________________________________ (Please typewrite or print in block letters) Address ______________________________ Signature _____________________________ ASSIGNMENT FORM FOR VALUE RECEIVED, ______________ hereby sells, assigns and transfers unto Name _____________________________ (Please typewrite or print in block letters) Address ____________________________ the right to purchase Common Stock represented by this Warrant to the extent of ______ shares as to which such right is exercisable and does hereby irrevocably constitute and appoint ___________ as attorney, to transfer the same on the books of the Company with full power of substitution in the premises. Date ____________, 19__ Signature ___________________ EX-20 4 TERM SHEET DATED AUGUST 6, 1996 THE CARE GROUP, INC. CONFIDENTIAL TERM SHEET -------------------------------------------- Term Sheet for Private Placement of a minimum of 42 and a maximum of 100 Units (as hereinafter defined) of The Care Group, Inc., a Delaware corporation (the "Company"). -------------------------------------------- Investment in the Units offered hereby is highly speculative. Prospective investors should retain their own professional advisors to review and evaluate the economic, tax and other consequences of investment in a private offering (the Offering" or the "Private Placement") and are not to construe the contents of this Term Sheet, or any other information finished by the Company, as legal or tax advice. SECURITIES Units consisting of shares of Common Stock, $.001 par value BEING OFFERED: (the "Common Stock"), and redeemable Common Stock Purchase Warrants (the "Warrants"). Each Unit will consist of 40,000 shares of Common Stock and 40,000 Warrants, each of which is exercisable to purchase 1 share of Common Stock (the "Warrant Shares"). OFFERING PRICE: $50,000 per Unit MINIMUM NUMBER 42 Units (gross proceeds of $2,100,000) OF UNITS OFFERED: MAXIMUM NUMBER 100 Units (gross proceeds of $5,000,000) OF UNITS OFFERED: MINIMUM $50,000 (1 Unit), provided that smaller subscriptions may SUBSCRIPTION: be accepted at the discretion of Royce Investment Group, Inc. (the "Placement Agent") and the Company. TERMS OF 42 Units (the "Minimum Offering") are being offered on an THE OFFERING: "all-or-none" basis and the remaining 58 Units are being offered on a "best efforts" basis. After the Minimum Offering is sold, an interim closing (the date of which is referred to herein as the "Initial Closing Date") will be held. The Offering will continue until September 30, 1996, unless extended by the Company and the Placement Agent until the first to occur of (i) the expiration of an additional sixty (60) days (the "Termination Date"), or (ii) the sale of all the Units offered hereby. The sale of any Units in excess of the Minimum Offering is contingent upon the Company obtaining stockholder approval of the additional issuances at its Annual Meeting of Stockholders scheduled to be held on or about September 15, 1996. Stockholder approval of any sales in excess of the Minimum Offering is required by the rules of The Nasdaq National Market. Assuming the requisite stockholder approval is obtained, the final closing will be held within ten (10) days after the Termination Date. Ten (10) of the Units included in the Minimum Offering will be purchased upon conversion of $500,000 principal amount of outstanding debentures (the "Investor Debentures") held by two investors, including John Pappajohn. The Placement Agent and its affiliates have reserved the right to purchase Units in this private placement. PLACEMENT AGENT: Royce Investment Group, Inc. is acting as Placement Agent in the sale of the securities offered hereby and will receive (i) a placement fee equal to 4 and one half percent (4.5%) of the proceeds from this private placement; (ii) a non-accountable expense allowance equal to one and one half percent (1.5%) of the proceeds from this private placement; and (iii) a unit purchase option to purchase a number of Units equal to seven and one half percent (7.5%) of the Units sold in this private placement. In addition, the Placement Agent will receive indemnification for liabilities arising out of this private placement and registration rights with respect to the shares of Common Stock underlying its Unit purchase option. ESCROW ACCOUNT: All funds paid for the Units shall be deposited in escrow at United States Trust Company of New York. If the Company shall not have received subscriptions for purchases aggregating $2,100,000 of Units on or before the Termination Date, all funds paid will be returned to the subscribers without interest. THE SUBSCRIPTION The investment shall be made pursuant to a subscription AGREEMENT: agreement (the "Subscription Agreement"), which Subscription Agreement will contain, among other things, customary representations and warranties by the Company, covenants of the Company reflecting the provisions set forth herein, investment representations by the investors as may be required by the Securities Act of 1933, as amended (the "Act") and applicable state Blue Sky laws, and appropriate conditions to closing which shall include, among other things, qualifications of the Units under applicable state Blue Sky laws. 2 TERMS OF Each of the Warrants will be exercisable through the fifth WARRANTS: anniversary of the Initial Closing Date to purchase 1 share of Common Stock at a price per share of Common Stock (the "Exercise Price") equal to the greater of (i) $2.50 or (ii) the book value of a share of Common Stock as reflected in the Company's Quarterly Report on Form 1O-Q for the period ended June 30, 1996 plus $.10 (subject to adjustment). The Exercise Price and the number of shares purchasable upon exercise thereof will be subject to anti-dilution adjustments in the event of future sales of securities by the Company below fair market value. At the sole discretion of the Company, commencing one year from the final closing, the Warrants may be redeemed by the Company at a redemption price of $.05 per Warrant, upon no less than thirty (30) days' prior notice, provided the closing bid price of the Common Stock exceeds $7.00 (subject to adjustment) on each of the thirty consecutive (30) trading days ending not more than 5 days prior to the notice of redemption. REGISTRATION Upon request of at least 50% of the shares of Common Stock RIGHTS: and Warrant Shares offered pursuant to this private placement, purchasers in this private placement will have one demand registration right and unlimited piggyback registration rights with respect to the shares of Common Stock and the Warrant Shares underlying the Units. Such registration rights will be exercisable between three months and six years after the final closing of this private placement. USE OF PROCEEDS: Upon completion of this private placement, the Company will receive net proceeds of between $1,974,000 and $4,700,000 of which (i) $1,000,000 will be used to temporarily place the Company in compliance with its credit facility with The Chase Manhattan Bank, N.A. ("Chase") and (ii) the balance will be used for working capital and general corporate purposes. See "Risk Factors - Security Interest in Assets; Restriction in Credit Facility," "Risk Factors - Charge Against Earnings; Anticipated Losses" and "Financial Data." REDEMPTION OF The Warrants are subject to redemption by the Company under THE WARRANTS: certain circumstances as described above in the section "Terms of Warrants." Redemption of the Warrants could force the holders to exercise the Warrants and pay the exercise price at a time when it may be disadvantageous for the holders to do so, to sell the Warrants at the current market price when they might otherwise wish to hold the Warrants, or to accept the redemption price, which 3 is likely to be substantially less than the market value of the Warrants at the time of redemption. 4 -----END PRIVACY-ENHANCED MESSAGE-----