THE CARE GROUP, INC.
AGENCY AGREEMENT
Royce Investment Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
August 14, 1996
Gentlemen:
The Care Group, Inc., a Delaware corporation (the "Company"),
proposes to offer (the "Offering") for sale to "accredited investors", in a
private placement, units ("Units"), each Unit consisting of 40,000 shares of
the Company's Common Stock, $.001 par value ("Common Stock"), and 40,000
redeemable Common Stock Purchase Warrants, each of which is exercisable to
purchase 1 share of Common Stock ("Warrants"). A minimum of forty-two (42)
Units ("Minimum Offering") and a maximum of one hundred (100) Units ("Maximum
Offering") will be sold in the offering at $50,000 per Unit. The Units will be
offered pursuant to those terms and conditions acceptable to you as reflected
in the Confidential Term Sheet (the "Term Sheet"). Of the ▇▇▇▇▇, ▇▇ will be
offered on an "all-or-none basis" and 58 Units will be offered on a "best
efforts" basis. The Units are being offered pursuant to the Term Sheet and
related documents in accordance with Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act") and Regulation D promulgated
thereunder.
Royce Investment Group, Inc. is sometimes referred to herein as the
"Placement Agent." The Term Sheet (including the exhibits thereto), as it may
be amended from time to time, and the form of proposed subscription agreement
between the Company and each subscriber (the "Subscription Agreement") and the
exhibits which are part of the Term Sheet and/or Subscription Agreement are
collectively referred to herein as the "Offering Documents."
The Company will prepare and deliver to the Placement Agent a
reasonable number of copies of the Offering Documents in form and substance
satisfactory to counsel to the Placement Agent.
Each prospective investor subscribing to purchase Units
("Subscriber") will be required to deliver, among other things, a Subscription
Agreement and a confidential purchaser questionnaire ("Questionnaire") in the
form to be provided to offerees. Capitalized terms used herein, unless
otherwise defined or unless the context otherwise indicates, shall have the
same meanings provided in the Offering Documents.
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1. Appointment of Placement Agent.
(a) You are hereby appointed exclusive Placement Agent of the
Company (subject to your right to have Selected Dealers, as defined in Section
1(c) hereof, participate in the Offering) during the Offering Period herein
specified for the purposes of assisting the Company in finding qualified
Subscribers pursuant to the offering (the "Offering") described in the
Offering Documents. The Offering Period shall commence on the day the Offering
Documents are first made available to you by the Company for delivery in
connection with the offering for sale of the Units and shall continue until
the earlier to occur of (i) the sale of all of the Maximum Offering or (ii)
September 30, 1996 (unless extended for a period of up to 60 days under
circumstances specified in the Term Sheet). If the Minimum Offering is not
sold prior to the end of the Offering Period, the Offering will be terminated
and all funds received from Subscribers will be returned, without interest and
without any deduction. The day that the Offering Period terminates is
hereinafter referred to as the "Termination Date."
(b) Subject to the performance by the Company of all of its
obligations to be performed under this Agreement and to the completeness and
accuracy of all representations and warranties of the Company contained in
this Agreement, Royce Investment Group, Inc. hereby accepts such agency and
agrees to use its best efforts to assist the Company in finding qualified
subscribers pursuant to the Offering described in the Offering Documents. It
is understood that the Placement Agent has no commitment to sell the Units.
Your agency hereunder is not terminable by the Company except upon termination
of the Offering Period.
(c) You may engage other persons, selected by you in your
discretion, that are members of the National Association of Securities
Dealers, Inc., ("NASD") and that have executed a Private Placement Selling
Agreement substantially in the form attached hereto as Schedule A, to assist
you in the Offering (each such person being hereinafter referred to as a
"Selected Dealer") and you may allow such persons such part of the
compensation and payment of expenses payable to you hereunder as you shall
determine. Each Selected Dealer shall be required to agree in writing to
comply with the provisions of, and to make the representations, warranties and
covenants contained in, this Section 1.
(d) Subscriptions for Units shall be evidenced by the execution
by Subscribers of a Subscription Agreement. No Subscription Agreement shall be
effective unless and until it is accepted by the Company. Until the Closing,
all subscription funds received shall be held as described in the Subscription
Agreement. The Placement Agent shall not have any obligation to independently
verify the accuracy or completeness of any information contained in any
Subscription Agreement or the authenticity, sufficiency, or validity of any
check delivered by any prospective investor in payment for Units.
(e) The Placement Agent and its affiliates may purchase Units
sold in the Offering.
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2. Representations and Warranties of the Company. The Company
represents and warrants to the Placement Agent and each Selected Dealer, if
any, as follows:
(a) Securities Law Compliance. The Offering Documents conform in
all respects with the requirements of Section 4(2) of the Securities Act and
Regulation D promulgated thereunder and with the requirements of all other
published rules and regulations of the Securities and Exchange Commission (the
"Commission") currently in effect relating to "private offerings" to
"accredited investors" of the type contemplated by the Company. The Offering
Documents will not contain an untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances in which they were made, not misleading. If at any
time prior to the completion of the Offering or other termination of this
Agreement any event shall occur as a result of which it might become necessary
to amend or supplement the Offering Documents so that they do not include any
untrue statement of any material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances then existing, not misleading, the Company will promptly notify
you and will supply you with amendments or supplements correcting such
statement or omission. The Company will also provide the Placement Agent for
delivery to all offerees and purchasers and their representatives, if any, any
information, documents and instruments which the Placement Agent deems
necessary to comply with applicable state and federal law.
(b) Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to own and lease its
properties, to carry on its business as currently conducted and as proposed to
be conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement, as appropriate and is duly
licensed or qualified to do business as a foreign corporation in each
jurisdiction in which the conduct of its business or ownership or leasing of
its properties requires it to be so qualified and where the failure to be
qualified would have a material adverse effect on the Company.
(c) Capitalization. The authorized, issued and outstanding
capital stock of the Company prior to the consummation of the transactions
contemplated hereby is as set forth in the Offering Documents. All issued and
outstanding shares of the Company are validly issued, fully paid and
nonassessable and have not been issued in violation of the preemptive rights
of any stockholder of the Company. All prior sales of securities of the
Company were either registered under the Act and applicable state securities
laws or exempt from such registration, and no security holder has any
rescission rights with respect thereto.
(d) Warrants, Preemptive Rights, Etc. Except for the warrants to
purchase Shares to be issued to you or your designees in consideration for
your acting as Placement Agent hereunder (the "Agent's Warrants"), and except
as set forth in or contemplated by the Term Sheet, there are not, nor will
there be immediately after the Closing (as hereinafter defined), any
outstanding warrants, options, agreements, convertible securities, preemptive
rights
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to subscribe for or other commitments pursuant to which the Company is, or may
become, obligated to issue any shares of its capital stock or other securities
of the Company and this offering will not cause any anti-dilution adjustments
to such securities or commitments except as reflected in the Term Sheet.
(e) Subsidiaries and Investments. Except for the subsidiaries
set forth on Schedule E hereto (the "Subsidiaires"), the Company has no
subsidiaries and the Company does not own, directly or indirectly, any capital
stock or other equity ownership or proprietary interests in any other
corporation, association, trust, partnership, joint venture or other entity.
The Subsidiaries are corporations duly organized and validly existing under
the laws of the state of their respective incorporation. The Company owns all
of the capital stock of each of the Subsidiaries free and clear of all liens,
security interests and encumbrances.
(f) Financial Statements. The financial information contained in
the Offering Documents is accurate in all material respects. The Company's
Form 10-Q for the period ended March 31, 1996 contains the Company's (i)
Balance Sheets at December 31, 1995 and at March 31, 1996 (hereinafter, March
31, 1996 being referred to as the "Balance Sheet Date"), (ii) Statements of
Operations for the three months ended March 31, 1995 and 1996 and (iii)
Statements of Cash Flows for the three months ended March 31, 1995 and 1996
(such financial statements attached to the Offering Documents hereinafter
referred to collectively as the "Financial Statements"). The Financial
Statements have been prepared in conformity with generally accepted accounting
principles consistently applied and show all material liabilities, absolute or
contingent, of the Company required to be recorded thereon and present fairly
the financial position and results of operations of the Company as of the
dates and for the periods indicated.
(g) Absence of Changes. Except as set forth on Exhibit G hereto,
since the Balance Sheet Date, the Company has not incurred any liabilities or
obligations, direct or contingent, not in the ordinary course of business, or
entered into any transaction not in the ordinary course of business, which is
material to the business of the Company other than as set forth in the Term
Sheet, and, except as set forth in Schedule G to this Agreement there has not
been any change in the capital stock of, or any incurrence of long-term debt
by, the Company, or any issuance of options, warrants or other rights to
purchase the capital stock of the Company, or any adverse change or any
development involving, so far as the Company can now reasonably foresee, a
prospective adverse change in the condition (financial or otherwise), net
worth, results of operations, business, key personnel or properties which
would be material to the business or financial condition of the Company, and
the Company has not become a party to, and neither the business nor the
property of the Company has become the subject of, any material litigation
whether or not in the ordinary course of business.
(h) Title. Except as set forth on Schedule H hereto, the Company
has good and marketable title to all properties and assets, owned by it, free
and clear of all liens, charges, encumbrances or restrictions, except such as
are not materially significant or important
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in relation to the Company's business; all of the material leases and
subleases under which the Company is the lessor or sublessor of properties or
assets or under which the Company holds properties or assets as lessee or
sublessee are in full force and effect, and the Company is not in default in
any material respect with respect to any of the terms or provisions of any of
such leases or subleases, and no material claim has been asserted by anyone
adverse to rights of the Company as lessor, sublessor, lessee or sublessee
under any of the leases or subleases mentioned above, or affecting or
questioning the right of the Company to continued possession of the leased or
subleased premises or assets under any such lease or sublease. The Company
owns or leases all such properties as are necessary to its operations as now
conducted and to be conducted, as presently planned.
(i) Proprietary Rights. Except as set forth in Schedule I
hereto, the Company owns or possesses adequate and enforceable rights to use
all patents, patent applications, trademarks, service marks, copyrights, trade
secrets, processes, formulations, technology or know-how used or proposed to
be used in the conduct of its business as described in or contemplated by the
Term Sheet (the "Proprietary Rights"). The Company has not received any notice
of any claims, nor does it have any actual knowledge of any threatened claims,
and knows of no facts which the Company believes would form the basis of any
claim, asserted by any person to the effect that the sale or use of any
product or process now used or offered by the Company or proposed to be used
or offered by the Company infringes on any patents or infringes upon the use
of any such Proprietary Rights of another person and, to the best of the
Company's knowledge, no others have infringed the Company's Proprietary
Rights.
(j) Litigation. There is no material action, suit,
investigation, customer complaint, claim or proceeding at law or in equity by
or before any arbitrator, governmental instrumentality or other agency now
pending or, to the knowledge of the Company, threatened against the Company
(or basis therefore known to the Company) the adverse outcome of which would
materially adversely affect the Company's business or prospects. The Company
is not subject to any judgment, order, writ, injunction or decree of any
Federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign which would materially
adversely affect the Company's business or prospects.
(k) Non-Defaults; Non-Contravention. Except as set forth in
Schedule K hereto, the Company is not in violation of or default under, nor
will the execution and delivery of this Agreement or any of the Offering
Documents or the Agent's UPO (as defined herein) or consummation of the
transactions contemplated herein or therein result in a violation of or
constitute a default in the performance or observance of any obligation (i)
under its Certificate of Incorporation, or its By-laws, or any indenture,
mortgage, contract, material purchase order or other agreement or instrument
to which the Company is a party or by which it or its property is bound or
affected or (ii) with respect to any material order, writ, injunction or
decree of any court of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, and there exists no condition, event or act which
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constitutes, nor which after notice, the lapse of time or both, could
constitute a default under any of the foregoing, which in either case would
have a material adverse effect on the business, financial condition or
prospects of the Company.
(l) Taxes. The Company has filed all Federal, state, local and
foreign tax returns which are required to be filed by it and all such returns
are true and correct in all material respects. The Company has paid all taxes
pursuant to such returns or pursuant to any assessments received by it or
which it is obligated to withhold from amounts owing to any employee, creditor
or third party. The Company has properly accrued all taxes required to be
accrued. The tax returns of the Company have never been audited by any state,
local or Federal authorities. The Company has not waived any statute of
limitations with respect to taxes or agreed to any extension of time with
respect to any tax assessment or deficiency.
(m) Compliance With Laws; Licenses, Etc. The Company has not
received notice of any violation of or noncompliance with any Federal, state,
local or foreign, laws, ordinances, regulations and orders applicable to its
business which has not been cured, the violation of, or noncompliance with
which, would have a materially adverse effect on the business or operations of
the Company. The Company has all licenses and permits and other governmental
certificates, authorizations and permits and approvals (collectively,
"Licenses") required by every Federal, state and local government or
regulatory body for the operation of its business as currently conducted and
the use of its properties, except where the failure to be licensed would not
have a material adverse effect on the business of the Company. The Licenses
are in full force and effect and no violations are or have been recorded in
respect of any License and no proceeding is pending or threatened to revoke or
limit any thereof.
(n) Authorization of Agreement, Etc. This Agreement has been
duly and validly authorized, executed and delivered by the Company and the
execution, delivery and performance by the Company of this Agreement, the
Subscription Agreement and the Warrant Agreements have been duly authorized by
all requisite corporate action by the Company and when delivered, constitute
or will constitute the legal, valid and binding obligations of the Company,
enforceable in accordance with their respective terms.
(o) Authorization of Shares and Warrants Etc. The issuance, sale
and delivery of the Shares and Warrants and the Agent's UPO have been duly
authorized by all requisite corporate action of the Company. When so issued,
sold and delivered, the Shares and Warrants will be duly executed, issued and
delivered and will constitute valid and legal obligations of the Company
enforceable in accordance with their respective terms and, in each case, will
not be subject to preemptive or any other similar rights of the stockholders
of the Company or others which rights shall not have been waived prior to the
Initial Closing.
(p) Authorization of Reserved Shares. The issuance, sale and
delivery by the Company of the shares of Common Stock issuable upon conversion
of the Shares and exercise of the Warrants, including those underlying the
Agent's UPO (the "Reserved Shares")
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have been duly authorized by all requisite corporate action of the Company,
and the Reserved Shares have been duly reserved for issuance upon conversion
of all or any of the Shares and exercise of the Warrants and when so issued,
sold, paid for and delivered, the Reserved Shares will be validly issued and
outstanding, fully paid and nonassessable, and not subject to preemptive or
any other similar rights of the stockholders of the Company or others which
rights shall not have been waived prior to the Initial Closing.
(q) Exemption from Registration. Assuming (i) the accuracy of
the information provided by the respective Subscribers in the Subscription
Documents and (ii) that the Placement Agent has complied in all material
respects with the provisions of Regulation D promulgated under the Securities
Act, the offer and sale of the Units pursuant to the terms of this Agreement
are exempt from the registration requirements of the Securities Act and the
rules and regulations promulgated thereunder (the "Regulations"). The Company
is not disqualified from the exemption under Regulation D by virtue of the
disqualifications contained in Rule 505(6)(2)(iii) or Rule 507 promulgated
thereunder.
(r) Registration Rights. Except with respect to holders of the
Units and the Agent's UPO, and except as set forth in the Term Sheet and
Schedule R hereto, no person has any right to cause the Company to effect the
registration under the Securities Act of any securities of the Company.
(s) Brokers. Neither the Company nor any of its officers,
directors, employees or stockholders has employed any broker or finder in
connection with the transactions contemplated by this Agreement other than the
Placement Agent.
(t) Title to Units. When certificates representing the
securities comprising the Units and/or the Reserved Shares shall have been
duly delivered to the purchasers and payment shall have been made therefor,
the several purchasers shall have good and marketable title to the Shares and
Warrants and/or the Reserved Shares free and clear of all liens, encumbrances
and claims whatsoever (with the exception of claims arising or through the
acts of the purchasers and except as arising from applicable Federal and state
securities laws), and the Company shall have paid all taxes, if any, in
respect of the original issuance thereof.
(u) Securities Exchange Act Compliance. The Company has filed
with the Securities and Exchange Commission ("SEC") on a timely basis all
filings required of a company whose securities have been registered under the
Securities Exchange Act of 1934, as amended ("Exchange Act"). All information
contained in such filings is true, accurate and complete in all material
respects. The Company covenants to maintain the registration of its Common
Stock under the Exchange Act and to make all filings thereunder on a timely
basis. For the purpose of this paragraph, filings pursuant to Rule 12b-25 of
the Exchange Act shall be deemed timely.
8
3. Closing; Placement and Fees.
(a) Closing. Provided the Minimum Offering shall have been
subscribed for and funds representing the sale thereof shall have cleared, a
closing (the "Initial Closing") shall take place at the offices of the
Placement Agent, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ within three (3)
business days after the Minimum Offering has been subscribed for and the funds
have been cleared (which date (the "Closing Date") may be accelerated or
adjourned by agreement between the Company and the Placement Agent). At the
Initial Closing, payment for the Units issued and sold by the Company shall be
made against delivery of certificates representing the Shares and Warrants
comprising such Units. In addition, at any time after stockholder approval of
the Offering is obtained in accordance with (b)(i) herein, subsequent closings
will be scheduled at the discretion of the Company and Placement Agent, each
of which shall be deemed a "Closing" hereunder.
(b) Conditions to Placement Agent's Obligations. The obligations
of the Placement Agent hereunder will be subject to the accuracy of the
representations and warranties of the Company herein contained as of the date
hereof and as of each Closing Date, to the performance by the Company of its
obligations hereunder and to the following additional conditions:
(i) Stockholder Approval. The Company will have obtained,
prior to the closing of any sale of Units in excess of the Minimum Offering,
stockholder approval of such sale at a meeting of stockholders to be held on
or about September 15, 1996.
(ii) Due Qualification or Exemption. (A) The offering
contemplated by this Agreement will become qualified or be exempt from
qualification under the securities laws of the several states pursuant to
Section 4(e) below not later than the Closing Date, and (B) at the Closing
Date no stop order suspending the sale of the Units shall have been issued,
and no proceeding for that purpose shall have been initiated or threatened;
(iii) No Material Misstatements. Neither the Blue Sky
qualification materials or the Term Sheet, or any supplement thereto, will
contain an untrue statement of a fact which in the opinion of the Placement
Agent is material, or omits to state a fact, which in the opinion of the
Placement Agent is material and is required to be stated therein, or is
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading;
(iv) Compliance with Agreements. The Company will have
complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to each Closing;
(v) Corporate Action. The Company will have taken all
necessary corporate action, including, without limitation, obtaining the
approval of the
8
Company's board of directors, for the execution and delivery of this
Agreement, the performance by the Company of its obligations hereunder and the
offering contemplated hereby;
(vi) Opinion of Counsel. The Placement Agent shall receive
the opinion of ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP dated the Closing(s),
substantially to the effect that:
(A) The Shares included in the Units have been duly
authorized, validly issued, fully paid and nonassessable and no personal
liability will attach to the ownership thereof. The Reserved Shares have been
duly reserved, and when issued in accordance with the terms of the Shares and
the Warrants, including those underlying the Agent's UPO, will be validly
issued, fully paid and nonassessable and not subject to preemptive or any
other similar rights and no personal liability will attach to the ownership
thereof;
(B) assuming (i) the accuracy of the information
provided by the Subscribers in the Subscription Documents including, without
limitation, that all Subscribers are "Accredited Investors," (ii) that the
Placement Agent has complied in all material respects with the requirements of
Section 4(2) of the Securities Act (and the provisions of Regulation D
promulgated thereunder), and (iii) that there has been no general solicitation
or advertising within the meaning of Rule 502 of the Securities Act, the
issuance and sale of the Units is exempt from registration under the
Securities Act and Regulation D promulgated thereunder;
(vii) The Placement Agent shall receive a copy of a letter
written to the Company by ▇▇▇▇▇▇▇▇▇, Will & ▇▇▇▇▇ ("MWE"), special regulatory
counsel to the Company, dated the Closing(s), in form and substance
satisfactory to counsel for the Placement Agent, detailing MWE's discussions
with ▇▇▇▇▇ ▇▇▇▇▇, counsel to the Department of Health and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇,
Asst. Director for the Bureau of Home Health Care Services, DOH regarding the
Offering.
(viii) The Placement Agent shall receive a certificate of
the Company, signed by the President and Secretary thereof, that the
representations and warranties contained in Section 2 hereof are true and
accurate in all material respects at such Closing with the same effect as
though expressly made at such Closing.
(ix) The Placement Agent shall receive a copy of a duly
executed escrow agreement in the form previously delivered to you with United
States Trust Company of New York.
(x) Within five days after the Closing, the Placement
Agent shall receive copies of all letters from the Company to the investors
transmitting the Shares and Warrants and shall receive a letter from the
Company confirming transmittal of the securities to the investors.
9
(c) Blue Sky. A summary blue sky survey shall be prepared by
counsel to the Placement Agent stating the extent to which and the conditions
upon which offers and sales of the Units may be made in certain jurisdictions.
It is understood that such survey may be based on or rely upon (i) the
representations of each Subscriber set forth in the Subscription Agreement
delivered by such Subscriber, (ii) the representations, warranties and
agreements of the Company set forth in Section 2 of this Agreement, (iii) the
representations and warranties of the Placement Agent, and (iv) the
representations of the Company set forth in the certificate to be delivered at
the Closing pursuant to paragraph (iii) of Section 3(b).
(d) Placement Fee and Expenses. Simultaneously with payment for
and delivery of the Units at each Closing as provided in Section 3(a) above,
the Company shall at such Closing pay to the Placement Agent (i) a commission
equal to 4.5% of the aggregate purchase price of the Units sold and (ii) a
non-accountable expense allowance equal to 1.5% of the aggregate purchase
price of the Units sold. The Company shall also pay all expenses in connection
with the qualification of the Units under the securities or Blue Sky laws of
the states which the Placement Agent shall designate. The Company will, at
each Closing, issue to you or your designees (which may include any Selected
Dealer or any officer of the Placement Agent or a Selected Dealer) a unit
purchase option (the "Agent's UPO") in the form annexed hereto as Exhibit 1 to
purchase 7.5% of the Units sold in the Offering. The Agent's UPO will be
exercisable for a period of five years from the first Closing of the Offering.
(e) Bring-Down Opinions and Certificates. If there is more than
one Closing, then at each such Closing there shall be delivered to the
Placement Agent updated opinions and certificates as described in (vi), (vii)
and (viii) of Section 3(b) above, respectively.
(f) No Adverse Changes. There shall not have occurred, at any
time prior to the Closing or, if applicable, any additional Closing, (i) any
domestic or international event, act or occurrence which has materially
disrupted, or in the Placement Agent's opinion will in the immediate future
materially disrupt, the securities markets; (ii) a general suspension of, or a
general limitation on prices for, trading in securities on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market;
(iii) any outbreak of major hostilities or other national or international
calamity; (iv) any banking moratorium declared by a state or federal
authority; (v) any moratorium declared in foreign exchange trading by major
international banks or other persons; (vi) any material interruption in the
mail service or other means of communication within the United States; (vii)
any material adverse change in the business, properties, assets, results of
operations, or financial condition of the Company; or (viii) any change in the
market for securities in general or in political, financial, or economic
conditions which, in the Placement Agent's reasonable judgment, makes it
inadvisable to proceed with the offering, sale, and delivery of the Units.
10
4. Covenants of the Company.
(a) Use of Proceeds. The net proceeds of the Offering will be
used by the Company substantially as set forth in the Term Sheet. The Company
shall not use any of the proceeds from the Offering to repay any indebtedness
to any current executive officers, directors or principal stockholders of the
Company.
(b) Expenses of Offering. The Company shall be responsible for,
and shall bear all expenses directly incurred in connection with, the proposed
Offering including, but not limited to, legal fees (but not including those of
counsel to the Placement Agent) relating to the costs of preparing the
Offering Documents and all amendments, supplements and exhibits thereto;
preparing and delivering all placement agent and selling documents, including,
but not limited to, the Agency Agreement with the Placement Agent and the blue
sky memorandum; Share and Warrant certificates, Reserved Share certificates;
blue sky fees, filing fees and the fees and disbursements of counsel in
connection with blue sky matters (the "Company Expenses"). Such expenses shall
not include the cost of the Placement Agent's mailing, telephone, telegraph,
travel, due diligence meeting and other similar expenses (the "Placement Agent
expenses") which are covered by the 1.5% non-accountable expense allowance
payable by the Company to the Placement Agent.
(c) Reservation of Common Stock. The Company shall reserve and
keep available that maximum number of its authorized but unissued shares of
Common Stock which are issuable upon conversion of the Shares and exercise of
the Warrants, including the Shares and Warrants underlying the Agent's UPO.
(d) Notification. The Company shall notify the Placement Agent
immediately, and in writing, (A) when any event shall have occurred during the
period commencing on the date hereof and ending on the later of the last
Closing or the Termination Date as a result of which the Offering Documents
would include any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) of the receipt of any notification
with respect to the modification, rescission, withdrawal or suspension of the
qualification or registration of the Units, or of any exemption from such
registration or qualification, in any jurisdiction. The Company will use its
best efforts to prevent the issuance of any such modification, rescission,
withdrawal or suspension and, if any such modification, rescission, withdrawal
or suspension is issued and you so request, to obtain the lifting thereof as
promptly as possible.
(e) Blue Sky. The Company will use its best efforts to qualify
or register the Units for offering and sale under, or establish an exemption
from such qualification or registration under, the securities or "blue sky"
laws of such jurisdictions as you may reasonably request; provided however,
that the Company will not be obligated to qualify as a dealer in securities in
any jurisdiction in which it is not so qualified. The Company will not
11
consummate any sale of Units in any jurisdiction in which it is not so
qualified or in any manner in which such sale may not be lawfully made.
(f) Form D Filing. The Company shall file five copies of a
Notice of Sales of Securities on Form D with the Securities and Exchange
Commission (the "Commission") no later than 15 days after the first sale of
the Units. The Company shall file promptly such amendments to such Notices on
Form D as shall become necessary and shall also comply with any filing
requirement imposed by the laws of any state or jurisdiction in which offers
and sales are made. The Company shall furnish the Placement Agent with copies
of all such filings.
(g) Press Releases, Etc. The Company shall not, during the
period commencing on the date hereof and ending on the later of the last
Closing and the Termination Date, issue any press release or other
communication, or hold any press conference with respect to the Company, its
financial condition, results of operations, business, properties, assets, or
liabilities, or the Offering, without the prior consent of the Placement
Agent, which consent shall not be unreasonably withheld.
(h) Form 10-Q The Company will provide to the Placement Agent,
promptly upon the filing thereof with the Commission (and in any event no
later than 5 days of such filing), a copy of its Quarterly Report in Form 10-Q
for the six months ended June 30, 1996.
(i) Restrictions on Issuance of Securities. Prior to the last
Closing Date, the Company will not, without the prior written consent of the
Placement Agent, issue additional shares of Common Stock or grant any
warrants, options or other securities of the Company.
(j) Voting Agreement. The Company will cause ▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇ ▇. ▇▇▇▇▇ to vote their shares
in favor of (i) the sale of the Maximum Offering by the Company and (ii) the
Board Designees chosen in the manner set forth in Section 4(n) below during
the period commencing on the date of the Initial Closing and ending on the
Termination Date.
(k) Consultant. The Company shall hire an independent consultant
designated by the Placement Agent to perform an analysis of the Company. The
fees of such consultant shall not exceed $15,000.
(l) Key-Man Insurance. The Company will obtain "key-man" life
insurance in the amount of at least $2,000,000 on the life of a new Chief
Executive Officer to be hired as soon as practicable after the Initial
Closing. Such policy will be kept in for at least three years from the First
Closing Date or the term of the employment agreement with such officer,
whichever period is longer.
12
(m) Executive Compensation. The compensation of the current
executive officers of the Company shall not increase from the date of this
Agreement until 13 months from the Termination Date other than pursuant to
existing employment agreements.
(n) Board Designees. The Company shall, for a period of three
years following the Initial Closing Date, at the Placement Agent's option,
nominate two designees of the Placement Agent and at Equity Dynamics option,
two designees of Equity Dynamics, to the Company's Board of Directors.
5. Indemnification.
(a) The Company agrees to indemnify and hold harmless the
Placement Agent and each Selected Dealer, if any, and their respective
shareholders, directors, officers, agents and controlling persons (an
"Indemnified Party") against any and all loss, liability, claim, damage and
expense whatsoever (and all actions in respect thereof), and to reimburse the
Placement Agent for legal fees and related expenses as incurred (including,
but not limited to the costs of giving testimony or furnishing documents in
response to a subpoena or otherwise, and the costs of investigating, preparing
or defending any such action or claim whether or not in connection with
litigation in which the Placement Agent is a party), arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Documents or the omission or alleged omission therefrom of a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(b) The Company agrees to indemnify and hold harmless an
Indemnified Party to the same extent as the foregoing indemnity, against any
and all loss, liability, claim, damage and expense whatsoever directly arising
out of the exercise by any person of any right under the Securities Act or the
Exchange Act or the securities or Blue Sky laws of any state on account of
violations of the representations, warranties or agreements set forth in
Section 2 hereof.
(c) Promptly after receipt by a person entitled to
indemnification pursuant to the foregoing subsection (a) or (b) (an
"indemnified party") under this Section of notice of the commencement of any
action, the indemnified party will, if a claim in respect thereof is to be
made against the Company under this Section, notify in writing the Company of
the commencement thereof; but the omission so to notify the Company will not
relieve it from any liability which it may have to the indemnified party
otherwise than under this Section. In case any such action is brought against
an indemnified party, and it notifies the Company of the commencement thereof,
the Company will be entitled to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, subject to the provisions herein stated, with counsel
reasonably satisfactory to the indemnified party, and after notice from the
Company to the indemnified party of its election so to assume the defense
thereof, the Company will not be liable to the indemnified party under this
13
Section for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
Company if the Company has assumed the defense of the action with counsel
reasonably satisfactory to the indemnified party; provided that the fees and
expenses of such counsel shall be at the expense of the Company if (i) the
employment of such counsel has been specifically authorized in writing by the
Company or (ii) the named parties to any such action (including any impleaded
parties) include both the indemnified party or parties and the Company and, in
the judgment of the indemnified party, it is advisable for the indemnified
party or parties to be represented by separate counsel (in which case the
Company shall not have the right to assume the defense of such action on
behalf of the indemnified party or parties, it being understood, however, that
the Company shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys for the
indemnified party or parties. No settlement of any action against an
indemnified party shall be made without the consent of the indemnified party,
which shall not be unreasonably withheld in light of all factors of importance
to the indemnified party.
6. Contribution.
To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Section (5)
but it is found in a final judicial determination, not subject to further
appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such case, or
(ii) any indemnified or indemnifying party seeks contribution under the
Securities Act, the Exchange Act, or otherwise, then the Company (including
for this purpose any contribution made by or on behalf of any officer,
director, employee or agent for the Company, or any controlling person of the
Company), on the one hand, and the Placement Agent and any Selected Dealers
(including for this purpose any contribution by or on behalf of an indemnified
party), on the other hand, shall contribute to the losses, liabilities,
claims, damages, and expenses whatsoever to which any of them may be subject,
in such proportions as are appropriate to reflect the relative benefits
received by the Company, on the one hand, and the Placement Agent and the
Selected Dealers, on the other hand; provided, however, that if applicable law
does not permit such allocation, then other relevant equitable considerations
such as the relative fault of the Company and the Placement Agent and the
Selected Dealers in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. In no
case shall the Placement Agent or a Selected Dealer be responsible for a
portion of the contribution obligation in excess of the compensation received
by it pursuant to Section 3 hereof or the Selected Dealer Agreement, as the
case may be. No person guilty of a fraudulent misrepresentation shall be
entitled to contribution from any person who is not guilty of such fraudulent
misrepresentation. For purposes of this Section 6, each person, if any, who
controls
14
the Placement Agent or a Selected Dealer within the meaning of Section 15 of
the Securities Act or Section 20(a) of the Exchange Act and each officer,
director, stockholder, employee and agent of the Placement Agent or a Selected
Dealer, shall have the same rights to contribution as the Placement Agent or
the Selected Dealer, and each person, if any who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20(a) of the
Exchange Act and each officer, director, employee and agent of the Company,
shall have the same rights to contribution as the Company, subject in each
case to the provisions of this Section 6. Anything in this Section 6 to the
contrary notwithstanding, no party shall be liable for contribution with
respect to the settlement of any claim or action effected without its written
consent. This Section 6 is intended to supersede any right to contribution
under the Securities Act, the Exchange Act, or otherwise.
7. Miscellaneous.
(a) Survival. Any termination of the Offering without
consummation thereof shall be without obligation on the part of any party
except that the indemnification provided in Section 5 hereof and the
contribution provided in Section 6 hereof shall survive any termination and
shall survive the Closing for a period of five years.
(b) Representations, Warranties and Covenants to Survive
Delivery. The respective representations, warranties, indemnities, agreements,
covenants and other statements of the Company as of the date hereof shall
survive execution of this Agreement and delivery of the Units and the
termination of this Agreement.
(c) No Other Beneficiaries. This Agreement is intended for the
sole and exclusive benefit of the parties hereto and their respective
successors and controlling persons, and no other person, firm or corporation
shall have any third-party beneficiary or other rights hereunder.
(d) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York without regard
to conflict of law provisions.
(e) Counterparts. This Agreement may be signed in counterparts
with the same effect as if both parties had signed one and the same
instrument.
(f) Notices. Any communications specifically required hereunder
to be in writing, if sent to the Placement Agent, will be mailed, delivered
and confirmed to it at Royce Investment Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇ ▇▇▇▇▇▇▇, with a copy to Bachner, Tally,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇
▇▇▇▇▇▇▇, Esq. and if sent to the Company, will be mailed, delivered or
telegraphed and confirmed to it at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
15
11042, Att: ▇▇▇ ▇▇▇▇▇, with a copy to ▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP, 1301
Avenue of the ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Att: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, Esq.
(g) Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the matters herein referred and
supersedes all prior agreements and understandings, written and oral, between
the parties with respect to the subject matter hereof. Neither this Agreement
nor any term hereof may be changed, waived or terminated orally, but only by
an instrument in writing signed by the party against which enforcement of the
change, waiver or termination is sought.
If you find the foregoing is in accordance with our understanding,
kindly sign and return to us a counterpart hereof, whereupon this instrument
along with all counterparts will become a binding agreement between us.
Very truly yours,
THE CARE GROUP, INC.
By:
---------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇, President
Each of the undersigned hereby
accepts and agrees to be bound by
the provisions set forth in
Section 4 (j) hereof:
----------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇ ▇. ▇▇▇▇▇
Agreed:
16
ROYCE INVESTMENT GROUP, INC.
By:
-------------------------------
Authorized Officer
17
SCHEDULE A
THE CARE GROUP, INC.
PRIVATE PLACEMENT SELLING AGREEMENT
-----------------------------------
New York, New York
, 1996
Dear Sirs:
1. The Care Group, Inc. ("Company") is offering for sale a maximum
of 100 Units, each unit consisting of 40,000 shares of the Company's Common
Stock, $.001 par value ("Common Stock"), and 40,000 Redeemable Common Stock
Purchase Warrants, each of which is exercisable to purchase 1 share of Common
Stock ("Units"). The Units and the terms under which they are to be offered
for sale by the Company are more particularly described in the Confidential
Term Sheet dated August 6, 1996 (the "Term Sheet") and the form of
subscription agreement between the Company and each subscriber (the
"Subscription Agreement"), the exhibits to the Term Sheet and the Subscription
Agreement, and any other documents delivered to subscribers (herein,
collectively the "Offering Documents"). Royce Investment Group, Inc. (the
"Placement Agent") has agreed to act as exclusive placement agent to the
Company for the purpose of assisting the Company in finding subscribers who
satisfy the requirements set forth in the Offering Documents and more
particularly in the Subscription Agreement (herein, "Qualified Subscribers")
pursuant to the offering ("Private Placement") described in the Offering
Documents.
2. The Units are to be offered to a limited number of subscribers by
the Company at the price per Unit set forth in the Offering Documents (the
"Subscription Price"), in accordance with the terms of offering thereof set
forth in the Offering Documents.
3. We are extending the right, subject to the terms and conditions
hereof, to assist the Company in finding Qualified Subscribers to purchase a
portion of the Units, to certain dealers who are actually engaged in the
investment banking or securities business and who are members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") (such
dealers who shall agree to assist in locating Qualified Subscribers for Units
hereunder being herein called "Selected Dealers"), at the Subscription Price,
for which they will receive a commission of ___% of the Subscription Price for
Units purchased by Qualified Subscribers presented to the Company by them. The
Selected Dealers have agreed to comply with the
provisions of all applicable Rules of Fair Practice of the NASD. We may be
included among the Selected Dealers.
4. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the Private Placement of the
Units.
5. If you desire to present to the Company any Qualified Subscribers
for units, your application should reach us promptly by telephone or telegraph
at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇
▇▇▇▇▇▇▇, Sr., telephone number ▇▇▇-▇▇▇-▇▇▇▇. We reserve the right to reject
subscriptions in whole or in part, to make allotments and to close the
subscription books at any time without notice. The Units allotted to the
Qualified Subscribers presented by you will be confirmed, subject to the terms
and conditions of this Agreement.
6. The privilege of assisting the Company in finding Qualified
Subscribers for the Units is extended to you only so long as the Company may
lawfully sell the Units to residents in the state in which any such Qualified
Subscribers reside pursuant to the terms of the Offering Documents.
7. Any Units offered under the terms of this Agreement and the
Offering Documents may only be offered and sold subject to the securities or
blue sky laws of the various states or other jurisdictions.
You agree to advise us from time to time, upon request, of the number
of sets of Offering Documents delivered to qualified subscribers by you
hereunder at the time of such request.
No expenses shall be charged to Selected Dealers.
Neither you nor any other person is or has been authorized to give
any information or to make any representation in connection with the offer or
sale of the Units other than as contained in the Offering Documents.
8. On becoming a Selected Dealer, and in assisting the Company in
finding Qualified Subscribers for the Units, you agree to comply with all the
applicable requirements of the Securities Act of 1933, as amended (the "1933
Act") specifically with respect to the requirements of Regulation D
thereunder. You confirm that you are familiar with Rules 501 and 502 under the
1933 Act relating to the limitations on the manner in which a private
placement may be conducted pursuant to Regulation D under the 1933 Act.
9. Upon request, you will be informed as to the states and other
jurisdictions in which we have been advised that the Units have been qualified
or are exempt from registration requirements for offer and sale under the
respective securities or blue sky laws of such states and other jurisdictions,
but we do not assume any obligation or responsibility as to the right of any
2
Selected Dealer to offer the Units in any state or other jurisdiction or as to
the eligibility of the Units for sale therein. We will, if requested, file a
Further State Notice in respect of the Units pursuant to Article 23-A of the
General Business Law of the State of New York.
10. No Selected Dealer is authorized to act as our agent or an agent
of the Company or otherwise to act on our behalf in assisting the Company in
finding Qualified Subscribers or otherwise or to furnish any information or
make any representation except as contained in the Offering Documents.
11. Nothing will constitute the Selected Dealers an association or
other separate entity or partners with us, or with each other, but you will be
responsible for your share of any liability or expense based on any claim to
the contrary. We shall not be under any liability for or in respect of value,
validity or form of the components of the Units or the delivery of the shares
and warrants comprising the Units or the performance by anyone of any
agreement on its part, or the qualification of the Units for offer or sale
under the laws of any jurisdiction, or for or in respect of any other matter
relating to this Agreement, except for lack of good faith and for obligations
expressly assumed by us in this Agreement and no obligation on our part shall
be implied herefrom. The foregoing provisions shall not be deemed a waiver of
any liability imposed under the federal securities laws.
12. Payment for the Units subscribed for hereunder is to be made by
Qualified Subscribers at the Subscription Price during the term of the Private
Placement set forth in the Offering Documents at the office of Royce
Investment Group, Inc., ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, by
a certified or official bank check, payable to the order of United States
Trust Company of New York: Special Account Re: The Care Group, Inc.
13. Notice to us should be addressed to Royce Investment Group, Inc.,
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇▇▇▇▇▇▇,
Sr. Notices to you shall be deemed to have been duly given if mailed to you at
the address to which this letter is addressed.
14. If you desire to assist the Company in finding Qualified
Subscribers pursuant to the terms set forth above, please confirm your
application by signing and returning to
3
us your confirmation on the duplicate copy of this letter enclosed herewith,
even though you may have previously advised us thereof by telephone or
telegraph. Our signature hereon may be by facsimile.
Very truly yours,
ROYCE INVESTMENT GROUP, INC.
By:
--------------------------------
Authorized Officer
4
Royce Investment Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
We hereby present to The Care Group, Inc. (the "Company") Qualified
Subscribers for Units in accordance with the terms and conditions stated in
the foregoing letter. We hereby acknowledge receipt of the Offering Documents
referred to in the first paragraph thereof relating to said Units. We confirm
that we are a dealer actually engaged in the investment banking or securities
business and that we are a member in good standing of the National Association
of Securities Dealers, Inc. (the "NASD"). We hereby agree to comply with all
of the applicable provisions of the Rules of Fair Practice of the NASD.
[NAME]
By:
--------------------------------
Authorized Officer
Address:
Dated:
----------------------------
Schedule E
----------
The Care Group, Inc.
The Care Group of New York, Inc.
The Care Group of Georgia, Inc.
The Care Group of Texas, Inc.
The Care Group of Los Angeles, Inc.
Careline of New York, Inc.
Careline of Dallas, Inc.
Careline of Georgia, Inc.
Careline of Houston, Inc.
Mail Order Meds, Inc.
Commonwealth Certified
Home Care, Inc.
Schedule K
----------
The Company is not in compliance with terms of its Revolving Credit Agreement,
as amended, (the "Agreement") with The Chase Manhattan Bank, N.A. ("Chase").
Schedule R
----------
A holder of 150,000 shares of Common Stock has the right to demand that the
Company register its shares on a Form S-3 commencing September 2, 1996.
Holders of an additional 450,000 shares of Common Stock have the right to
demand that the Company register their shares commencing November 25, 1996.
Exhibit 1
Agent's UPO
-----------