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As filed with the Securities and Exchange Commission on March 4, 1998
Registration No.333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
____________________________
HOME HEALTH CORPORATION OF AMERICA, INC.
(Exact name of Registrant as specified in its charter)
Pennsylvania 23-2224800
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization Identification No.)
HOME HEALTH CORPORATION OF AMERICA, INC.
2200 RENAISSANCE BOULEVARD--SUITE 300
KING OF PRUSSIA, PENNSYLVANIA 19406-2755
(610) 272-1717
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
____________________________
BRUCE J. FELDMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
HOME HEALTH CORPORATION OF AMERICA, INC.
2200 RENAISSANCE BOULEVARD--SUITE 300
KING OF PRUSSIA, PENNSYLVANIA 19406-2755
(610) 272-1717
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
____________________________
COPIES TO:
SOL GENAUER, ESQUIRE
MICHAEL MEDVECKUS, ESQUIRE
BLANK ROME COMISKY & MCCAULEY
ONE LOGAN SQUARE
PHILADELPHIA, PENNSYLVANIA 19103
(215) 569-5335
____________________________
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
________________________________________________________________________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed maximum
Title of each class Amount to be maximum offering aggregate offering Amount of
of securities to be registered registered(1) price per share(2) price(2) registration fee
------------------------------ ----------------- ------------------- -------------------- ------------------
<S> <C> <C> <C> <C>
Common Stock, no par
value............... 380,048 shares $ 4.00 per share $1,520,192 $448.46
</TABLE>
________________________________________________________________________________
(1) This Registration Statement covers shares owned by certain selling
stockholders which shares may be offered from time to time by the selling
stockholders until the date on which all of the Shares included in the
Registration Statement have been sold or are permitted to be sold under
Rule 144.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) under the Securities Act of 1933, as amended,
based upon the last sale price of the Common Stock as reported by Nasdaq on
February 27, 1998.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
---------------
PROSPECTUS
---------------
HOME HEALTH CORPORATION OF AMERICA, INC.
380,048 SHARES OF COMMON STOCK
The shares offered hereby (the "Shares") consist of 380,048 shares of
common stock, no par value (the "Common Stock"), of Home Health Corporation of
America, Inc., a Pennsylvania corporation (the "Company"), which are owned by
the selling stockholders listed herein under "Selling Stockholders"
(collectively, the "Selling Stockholders"). The Shares may be offered from time
to time by the Selling Stockholders until all the Shares have been sold or are
permitted to be sold under Rule 144. Each Selling Stockholder is responsible
for paying all expenses relating to the sale of the Shares including any
commissions, discounts or other fees payable to broker-dealers and any attorney
fees or other expenses incurred by such Selling Stockholder. The Selling
Stockholders have also agreed to pay the fees and expenses incident to the
registration of the Common Stock, including, without limitation, the filing of
the Registration Statement of which this Prospectus is a part, and including all
registration and filing fees, fees and expenses of compliance with state
securities or "blue sky" laws, printing expenses, messenger and delivery
expenses, fees and disbursements of counsel for the Company and all independent
certified public accountants retained by the Company. The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Stockholders.
The Selling Stockholders have not advised the Company of any specific plans
for the distribution of the Shares covered by this Prospectus, but it is
anticipated that the Shares will be sold from time to time primarily in
transactions (which may include block transactions) on the Nasdaq National
Market System ("Nasdaq") at the market price then prevailing, although sales may
also be made in negotiated transactions or otherwise. The Selling Stockholders
and the brokers and dealers through whom sale of the Shares may be made may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"), and their commissions or discounts and other
compensation may be regarded as underwriters' compensation. See "Plan of
Distribution."
SEE "RISK FACTORS" BEGINNING AT PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
The Company's Common Stock is quoted on Nasdaq under the symbol "HHCA." On
February 27, 1998, the last reported closing price of the Common Stock was $4.00
per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE DATE OF THIS PROSPECTUS IS MARCH 4, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 under the Securities Act
(the "Registration Statement") with respect to the registration of the Shares.
This Prospectus constitutes a part of the Registration Statement and, in
accordance with the rules of the Commission, omits certain of the information
contained in the Registration Statement. For such information, reference is made
to the Registration Statement and the exhibits thereto.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Registration Statement, as well as such reports, proxy
statements and other information, can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60621, and at 75 Park Place, 14th Floor, New York, New York 10007. Copies of
such material also can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such materials and other information concerning the Company are also
filed electronically with the commission and are accessible via the Worldwide
Web at http://www.sec.gov. The Company's Common Stock is quoted on Nasdaq
under the symbol "HHCA," and such reports, proxy statements and other in
formation can also be inspected at the office of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents and portions of documents filed by the Company with
the Commission are hereby incorporated by reference into this Prospectus and
made a part hereof: (i) the Annual Report on Form 10-K/A for the year ended June
30, 1997, (ii) the Quarterly Reports on Form 10-Q/A, for the quarters ended
December 31, 1997 and September 30, 1997, (iii) the Current Reports on Form 8-K
filed October 7, 1997 and March 3, 1998, and (iv) the description of the
Common Stock contained under the heading "Description of Securities" in the
Registration Statement on Form 8-A dated October 5, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus shall be deemed to
be incorporated by reference herein and to be a part hereof from the date of
filing thereof. Any statement contained herein or in any document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document that also is or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall
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not be deemed to constitute a part of this Prospectus, except as so modified or
superseded.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the information that has been incorporated by reference in this Prospectus (not
including exhibits to such information unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or oral requests for such copies should be directed to
Home Health Corporation of America, Inc., 2200 Renaissance Boulevard, Suite 300,
King of Prussia, Pennsylvania 19406-2755, Attention: Corporate Secretary,
telephone (610) 272-1717.
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains and incorporates by reference certain "forward-
looking statements" within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act with respect to results of operations and
businesses of the Company. All statements, other than statements of historical
facts, included in this Prospectus, including those regarding market trends, the
Company's financial position, business strategy, projected costs, and plans and
objectives of management for future operations, are forward-looking statements.
In general, such statements are identified by the use of forward-looking words
or phrases including, but not limited to, "intended," "will," "should," "may,"
"expects," "expected," "anticipates," and "anticipated" or the negative thereof
or variations thereon or similar terminology. These forward-looking statements
are based on the Company's current expectations. Although the Company believes
that the expectations reflected in such forward looking statements are
reasonable, there can be no assurance that such expectations will prove to be
correct. Because forward-looking statements involve risks and uncertainties,
the Company's actual results could differ materially. Important factors that
could cause actual results to differ materially from the Company's expectations
("Cautionary Statements") are disclosed under "Risk Factors," and elsewhere in
this Prospectus including, without limitation, in conjunction with the forward-
looking statements included in this Prospectus. These forward-looking
statements represent the Company's judgment as of the date of this Prospectus.
All subsequent written and oral forward-looking statements attributable to the
Company or persons acting on behalf of the Company are expressly qualified in
their entirety by the Cautionary Statements. The Company disclaims, however,
any intent or obligation to update its forward-looking statements.
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THE COMPANY
The Company is a leading provider of comprehensive home health care
services and products, delivering nursing and related patient services,
respiratory therapy, infusion therapy and durable medical equipment. The
Company currently operates 57 branch locations in Florida, Pennsylvania,
Delaware, New Jersey, Maryland, Massachusetts, New Hampshire, Texas and
Illinois. The Company provides a "one-stop-shop" of cost effective,
comprehensive home health care services and products. The Company operates
regional "Coordinated Care Centers" which serve as focal points for managed care
organizations, hospitals, physicians, discharge planners and other health care
providers to efficiently arrange for the Company's services and products.
At December 31, 1997, the Company had consolidated assets of approximately
$140.2 million and consolidated shareholders' equity of approximately $28.9
million and employed approximately 3,100 full- and part-time persons.
The Company's offices are located at 2200 Renaissance Boulevard, Suite 300,
King of Prussia, Pennsylvania 19406, and its telephone number at that address is
(610) 272-1717.
Additional information concerning the Company is included in documents
previously filed by the Company with the Commission and which are incorporated
by reference in this Prospectus. See "Available Information" and "Incorporation
of Documents by Reference."
RISK FACTORS
In addition to the other information to this Prospectus, the following
should be considered carefully by potential investors. Statements made herein
should be considered as "forward-looking information." See "Cautionary Note
Regarding Forward-Looking Statements."
Medicare Reimbursement. Currently, Medicare reimburses participating
Medicare-certified home health agencies for the reasonable costs incurred to
provide covered visits to eligible beneficiaries, subject to certain cost limits
which vary according to geographic regions of the country. The Company operates
eleven Medicare-certified home health agencies, of which seven receive periodic
interim payments ("PIP") from the Medicare program for services provided. PIPs
are biweekly payments, the amounts of which are reviewed quarterly to reflect
increases or decreases in the volume of nursing services provided. Because PIPs
are paid biweekly, the arrangement has a substantially more favorable effect on
the Company's cash flow than other payment arrangements. The Medicare program
is scheduled to discontinue PIPs effective for the Company's cost reporting
period beginning July 1, 2000. This change could result in a material adverse
effect on the Company's cash flow.
The Balanced Budget Act of 1997 (the "Budget Act"), enacted by Congress in
1997,
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mandated changes in the system of Medicare reimbursement for home health
agencies. The Budget Act requires the Health Care Financing Administration
("HCFA") to implement a prospective payment system ("PPS") for home health
agencies by October 1, 1999, with up to a four-year phase-in period.
Prospective rates determined by the Department of Health and Human Services
("HHS") would reflect a 15% reduction to the cost limits and per-patient limits
in place as of September 30, 1999. In the event the implementation deadline is
not met, the reduction will be applied to the reimbursement system then in
place. The impact of such a change, if implemented, on the Company's results of
operations cannot be predicted with any level of certainty at this time and
would depend, to a large extent, on the reimbursement rates for home nursing
services established on an interim basis and under the PPS. There can be no
assurances that such reimbursement rates, if enacted, would cover the costs
incurred by the Company to provide home nursing services.
Until PPS takes effect on October 1, 1999, the Budget Act established an
interim payment system (the "IPS") that provides for the lowering of
reimbursement limits for home health visits. As amended, cost limit increases
for fiscal 1995 and 1996 were eliminated. In addition, for cost reporting
periods beginning on or after October 1, 1997, Medicare-reimbursed home health
agencies will have their cost limits determined as the lesser of (i) actual
costs (ii) 105% of median costs of freestanding home health agencies, or (iii)
an agency-specific per-patient cost limit, based on 98% of 1994 costs adjusted
for inflation. The new IPS cost limits will apply to the Company for the cost
reporting period beginning July 1, 1998, except for the Company's Medicare-
certified nursing agency located in Texas, for which the new cost limits apply
for the cost reporting period beginning January 1, 1998.
On the basis of various regulations and interpretations of the Budget Act
which were published during the three months ended December 31, 1997, management
estimated that the impact of the new IPS cost limits on the Company's
reimbursement for home health visits at certain of the Company's Medicare-
certified nursing agencies could exceed $5.0 million. After giving effect to the
restructuring discussed below, management estimates that the aggregate impact of
the new IPS cost limits on the Company's reimbursement will be between $2.0
million to $4.5 million, assuming no additional cost reductions are made during
the remainder of fiscal 1998 or during fiscal 1999. Despite implementation by
the Company of its restructuring plan, there can be no assurance that the new
IPS cost limits will not have a material adverse effect on the Company's
business, financial condition or results of operations.
The Budget Act also provided for a 25% reduction in home oxygen
reimbursement from the 1997 fee schedule effective January 1, 1998 and a further
reduction of 5% effective January 1, 1999. Compounding these reductions is a
freeze on consumer price index increases in oxygen reimbursement rates until the
year 2003. Approximately 5.8% of the Company's net revenues are derived from
reimbursement of oxygen services affected by the reduction in the fee schedule
which could materially impact the profitability of these services. This
reduction in oxygen reimbursement could have a material adverse effect on the
Company's business, financial condition or results of operations.
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During the three months ended December 31, 1997, the Company developed and
is implementing a restructuring plan to aggressively respond to reductions in
Medicare reimbursement by fundamentally reshaping the Company for long-term
growth in the changing reimbursement environment. This plan, as well as
management's assessment of the continuing value of goodwill under the changing
reimbursement environment, resulted in pre-tax accounting charges during the
three months ended December 31, 1997 aggregating $28.4 million which were
comprised of a writedown of goodwill of $23.5 million, restructuring costs of
$3.7 million and the write-off of deferred costs aggregating $1.2 million,
relating to the termination of a proposed acquisition. As part of its
restructuring plan, the Company, where appropriate, is closing offices and
reducing administrative personnel resulting in an expected annual reduction in
operating costs aggregating approximately $4 million, which includes
approximately $2 million related to the Medicare cost-reimbursed nursing
agencies. Management believes that this plan, which is expected to be
substantially implemented by the end of March 1998, will position the Company as
a lower cost provider under the Medicare prospective payment system that is
scheduled to be implemented October 1, 1999, as well as reduce the impact on the
Company of the reduction in Medicare reimbursement for oxygen services and the
IPS limits. However, despite implementation by the Company of its restructuring
plan, there can be no assurance that such plan will adequately reduce costs or
that the changes in reimbursement will not have a material adverse effect on the
Company's business, financial condition or results of operations.
Under the Budget Act, the Company is required to maintain surety bonds for
each Medicare-certified nursing agency and durable medical equipment company.
HCFA published final regulations on January 5, 1998, setting forth surety bond
requirements for Medicare-certified nursing agencies. The regulations require a
surety bond that is the greater of $50,000 or 15% of the Medicare revenues for
the previous year. A separate bond must be secured for each Medicare provider
number. Parallel requirements exist for each Medicaid provider. On January 20,
1998, HCFA published proposed regulations concerning surety bond requirements
for durable medical equipment providers. The proposed regulations require
durable medical equipment providers to maintain a surety bond that is the
greater of $50,000 or 15% of Medicare revenues, with a cap of $3,000,000.
The Company was required to have surety bonds in place no later than
February 27, 1998 for its Medicare-certified nursing agencies, and has complied
with these requirements. The aggregate cost of the required surety bonds was
less than $100,000 for coverage from January 1, 1998 to June 30, 1998. A date
has not been established for surety bond coverage for durable medical equipment
providers as the proposed rules for such providers have not been finalized yet.
Due to the nature of the surety bonds serving as a Medicare fraud and abuse
deterrent and the potential for insurers to have significant risk under the
bonds, many insurers are unwilling to provide surety bond coverage that complies
with all the specifications of the regulation. As a result although the Company
was able to obtain surety bond coverage that complies with the regulations,
there can be no assurance that such coverage will be adequate or available to
the Company in the future on satisfactory terms, if at all. Additionally, there
can be no assurance that any potential judgments, settlements or costs relating
to pending or future claims under these surety bonds will not have a material
adverse effect on the Company's
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results of operations or financial condition.
For cost reporting periods beginning on or after October 1, 1997, the
Budget Act requires a home health agency to submit claims for payment for home
health services only on the basis of the geographic location at which the
service was furnished. HCFA has publicly expressed concern that some home
health agencies are billing for services from administrative offices in
locations with higher per-visit cost limitations than the cost limitations in
effect in the geographic location of the home health agency furnishing the
service. The Company is unable to determine the effect of the reimbursement
impact resulting from payments for services based upon geographic location until
HCFA finalizes related regulatory guidance. Any resultant reduction in the
Company's cost limits could have a material adverse effect on the Company's
business, financial condition or results of operations. However, until
regulatory guidance is issued, the effect of such reductions cannot be predicted
with any level of certainty.
Various other provisions of the Budget Act may have an impact on the
Company's business and results of operations. Venipuncture will no longer be a
covered skilled nursing home care service unless it is performed in connection
with other skilled nursing services. Additionally, payments will be frozen for
durable medical equipment, excluding orthotic and prosthetic equipment, and
payments for certain reimbursable drugs and biologicals will be reduced.
Beginning with services furnished on or after January 1, 1998, coverage of home
health services will be gradually shifted over a period of six years from
Medicare Part A to Medicare Part B except for a maximum of 100 visits during a
spell of illness after a three-day hospitalization initiated within 14 days
after discharge or after receiving any covered services in a skilled nursing
facility initiated within 14 days after discharge, each of which will continue
to be covered under Medicare Part A and which is a reduction from the unlimited
number of visits currently covered. Another provision of the Budget Act would
reduce Medicare reimbursements to acute care hospitals for non-Medicare patients
who are discharged from the hospital after a very short inpatient stay to the
care of a home health agency. The impact of these reimbursement changes could
have a material adverse effect on the Company's business, financial condition or
results of operations. However, this impact cannot be predicted with any level
of certainty at this time.
In addition to the impact on health care reimbursement resulting from the
Budget Act, as a result of changes in a federal policy, branch offices are
required to be redesignated as separate providers and obtain separate licensure
and separate provider agreements, adding costs to the Company's operations.
There can be no assurance that these changes will not have a material adverse
effect on the Company's business, financial condition or results of operations.
Pricing Pressures. Medicare, Medicaid and other payors, including managed
care organizations and traditional indemnity insurers, are attempting to control
and limit increases in health care costs and, in some cases, are decreasing
reimbursement rates. While the Company's net revenues from managed care
organizations have increased and are expected by the Company to continue to
increase, payments per visit from managed care organizations typically have
been lower than cost-based reimbursement from Medicare and reimbursement from
other payors for nursing and
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related patient services, resulting in reduced profitability on such services.
In addition, payors and employer groups are exerting pricing pressure on home
health care providers, resulting in reduced profitability. Such pricing
pressures could have a material adverse effect on the Company's business,
financial condition or results of operations.
Collection and Adjustment of Accounts Receivable. The Company is paid for
its services by Medicare, Medicaid, managed care organizations and other third-
party payors. Reimbursement from Medicare and Medicaid for certain services is
subject to audit and retroactive adjustment. Retroactive adjustments made to
prior year cost reports could have a material adverse effect on the Company's
business, financial condition or results of operations. In addition, the home
health care industry is generally characterized by long collection cycles for
accounts receivable due to the complex and time consuming requirements for
obtaining reimbursement from private and governmental third party payors. At
June 30, 1997, approximately 38.7% of the Company's net revenues were derived
from managed care and other non-governmental payors. The Company is
experiencing an increase in the length of time required to collect receivables
owed by managed care organizations and other payors. The Company has
implemented stronger controls in the distribution of products and services and
has devoted increased resources to collection activities in an effort to obtain
timely payment for the Company's products and services. There can be no
assurance that these efforts will be successful. A continuation of the
lengthening of the amount of time required to collect accounts receivable from
managed care organizations and other payors could have a material adverse effect
on the Company's business, financial condition or results of operations.
Risks Associated with Managed Care Contracts. As an increasing percentage
of patients become members of managed care organizations, the Company believes
that it will be required to deliver its products and services to health
maintenance organizations ("HMOs"), employer groups and other private third
party payors on a capitated or other risk sharing basis. Under some of these
arrangements, a health care provider accepts a predetermined amount per member
per month in exchange for providing all covered services to beneficiaries of the
payor during the month. Such arrangements pass much of the economic risk of
providing care from the payor to the provider. To the extent that patients or
enrollees covered by such contracts require more frequent or extensive care than
is anticipated, additional costs would be incurred, resulting in a reduction in
margins. In the worst case, net revenues associated with risk-sharing contracts
or capitated provider networks would be insufficient to cover the costs of the
services provided. Any such insufficiency in reimbursement for such services
could have a material adverse effect on the Company.
Healthcare Reform. Political, economic and regulatory influences are
subjecting the health care industry in the United States to fundamental change.
The Company anticipates that Congress and state legislatures will continue to
review and assess alternative health care delivery and payment systems and will
continue to propose and adopt legislation effecting fundamental changes in the
health care delivery system in the future. Although the recently passed Budget
Act contains numerous changes in reimbursement to health care providers and is
expected to have a significant impact on the health care industry, additional
changes may occur in the future. The
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level of net revenues and profitability of the Company, like those of other
health care providers, will also be affected by the continuing efforts of other
payors to contain or reduce the costs of health care by lowering reimbursement
rates, slowing payment for services provided, increasing case management review
of services and negotiating reduced contract pricing and capitation
arrangements. The Company cannot predict the impact that present or future
regulations may have on operations of the Company or on its plan to expand
business activities.
Dependence on Relationships with Referral Sources. The growth and
profitability of the Company depends on its ability to establish and maintain
close working relationships with referral sources, including payors, hospitals,
physicians and other health care professionals. Managed care organizations,
which are exerting an increasing amount of influence over the health care
industry, have been consolidating to enhance their ability to impact the
delivery of health care services. As managed care organizations have increased
and continue to increase their market share in regions in which the Company
operates, these organizations have become and will continue to become
increasingly important to the Company as referral sources. From fiscal 1995 to
fiscal 1997, the Company's net revenues derived from managed care organizations
increased from 36.9% to 38.7%. There can be no assurance that the Company will
be able to successfully maintain existing referral sources or develop and
maintain new referral sources. During the three months ended December 31, 1997,
the Company terminated relationships with certain of its managed care
organization referral sources as a result of these managed care organizations
not timely paying for products and services delivered to their members. As a
result of these terminations and other factors which include a reduction in
reimbursement rates by certain managed care organizations, losing certain
contracts due to the Company's unwillingness to agree to rate reductions in
connection with certain managed care contracts and a decline in cross-selling of
these products and services to the Company's nursing patients during the
transition to certain of the Company's regional coordinated care centers, the
Company's internal growth rates during the three months ended December 31, 1997
declined to 4.2% from 14.5% for the comparable period in fiscal 1997. The loss
of any significant existing referral sources or the failure to develop any new
referral sources could have a material adverse effect on the Company's business,
financial condition or results of operations.
Potential Risks Associated with Acquisitions. The Company has followed a
strategy of seeking to establish and increase market share through acquisitions
in existing and new markets. During fiscal 1997, the Company entered the Texas
and New England regions with five acquisitions, expanding its operations into
Texas, Massachusetts, New Hampshire, Rhode Island and Maine. Additionally,
during fiscal 1997, the Company expanded its ongoing operations in Pennsylvania,
New Jersey, Maryland and the Tampa/St. Petersburg, Florida market with five
acquisitions, and also expanded into Illinois as a result of a merger
transaction. There were no acquisitions from July 1, 1997 through December 31,
1997. Since acquisitions involve numerous short-and long-term risks, including
loss of referral sources, diversion of management's attention, failure to retain
key personnel, loss of net revenues of the acquired companies, inability to
integrate acquisitions (particularly management information systems) without
material disruptions and unexpected expenses, the possibility of the acquired
businesses becoming subject to regulatory sanctions, potential undisclosed
liabilities and the continuing value of acquired intangible assets, there can be
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no assurance that the Company will be able to successfully integrate any such
acquisitions or effectively manage such risks without experiencing a material
adverse effect on the Company's business, financial condition or results of
operations.
As a result of the changing Medicare reimbursement environment, the Company
expects a slowing of growth through acquisition. In addition, the Company is
subject to restrictions in its senior credit facility which prohibits the
Company from borrowing for acquisitions until certain conditions are met.
Potential Risks Associated with Geographic Expansion. In connection with
its acquisitions, the Company has expanded its operations into new geographic
markets. In fiscal 1997 the Company entered the Texas and New England regions.
When entering new geographic markets, the Company needs to establish
relationships with new or additional referral sources and must rely on local
management, who have important relationships with local referral sources. As a
result, it is necessary for the Company to give a significant amount of autonomy
to local managers. In addition, the Company is required to comply with laws and
regulations of states that differ from those in which the Company operated prior
to the acquisitions, and may face competitors with greater knowledge of such
local markets. There can be no assurance that the Company will be able to
establish referral sources, realize management efficiencies or otherwise
establish a presence in these new geographic markets.
Need for Additional Financing. The Company's future capital requirements
will depend upon many factors, including the performance of the Company's
business, as well as other factors that are not within the Company's control,
including competitive conditions and regulatory or other government actions. In
the event that the Company's internally generated funds and funds from any
financings prove to be insufficient to fund the Company's growth and operations,
then some or all of the Company's development and expansion plans could be
delayed or abandoned, or the Company may be required to seek additional funds
earlier than currently anticipated. Under the terms of its senior credit
facility, the Company is prohibited from borrowing for acquisitions until
certain conditions are met. On February 28, 1998, the Company had $79.1 million
outstanding under its senior credit facility and $9.9 million available for
working capital purposes.
Risks Related to Goodwill. For the three months ended December 31, 1997
the Company wrote-off $23.5 million of goodwill recorded in connection with
acquisitions. At December 31, 1997, after recording this write-down, goodwill
resulting from acquisitions was approximately $48.1 million, or approximately
34.3% of total assets. Goodwill is the excess of cost over the fair value of
the net assets of businesses acquired. There can be no assurance that the
remaining balance of goodwill at December 31, 1997 will not be reduced for
possible impairments which may occur in the future as a result of changes in
reimbursement or other issues. This goodwill is being amortized on a straight-
line basis over 20 to 25 years. The Company evaluates on a regular basis whether
events and circumstances have occurred that indicate all or a portion of the
carrying amount of goodwill may no longer be recoverable, in which case an
additional charge to earnings would become necessary. Reimbursement regulations
have been issued related to reimbursement for certain mobile diagnostic
services. These regulations could eliminate payment for mobile diagnostic
services to the Company. Goodwill associated with mobile diagnostic services
acquisitions aggregates approximately
10
<PAGE>
$1.1 million at December 31, 1997. Although at December 31, 1997 the net
unamortized balance of goodwill is not considered to be impaired under
generally accepted accounting principles, any such future determination
requiring the write-off of a significant portion of unamortized goodwill could
have a material adverse effect on the Company's financial condition or results
of operations.
Internal Growth Rates. The Company's internal growth rate for the three
months ended December 31, 1997 decreased to 4.2% from 14.5% for the comparable
period in fiscal 1997. The Company may continue to experience a decrease in the
internal growth rate related to respiratory therapy services as a result of the
reduction on January 1, 1998 in Medicare reimbursement for oxygen services.
Additionally, the Company may experience a decrease in the internal growth rate
for its Medicare-certified nursing agencies when it is subject to the IPS.
Because of matters discussed herein that may be beyond the control of the
Company, there can be no assurance that the Company can increase or maintain the
internal growth rates at levels experienced in previous periods.
Management of Rapid Growth. The Company has experienced rapid growth in
its business and number of employees through acquisition and internal growth.
Continued rapid growth may impair the Company's ability to efficiently provide
its home health care services and products and to adequately manage its
employees. While the Company is taking steps to manage its rapid growth, the
Company's business, financial condition or future results of operations could be
materially adversely affected if it is unable to do so effectively.
Competition. The home health care industry is highly competitive and
includes national, regional and local providers. The Company competes with a
large number of companies in all areas in which its operations are located. The
Company's competitors include major national and regional companies, hospital-
based programs, numerous local providers and nursing agencies. Some current and
potential competitors have or may obtain significantly greater financial and
marketing resources than the Company. In addition, relatively few barriers to
entry exist in the home health care industry. Accordingly, other companies,
including managed care organizations, hospitals, long-term care providers and
health care providers that currently are not serving the home health care
market, may become competitors. As a result, the Company could encounter
increased competition in the future that may limit its ability to maintain or
increase its market share or otherwise materially adversely affect the Company's
business, financial condition or results of operations.
Regulatory Environment. As a provider of services under Medicare and
Medicaid, the Company is subject to extensive regulation at both the federal and
state level. At the federal level, such laws include (i) the anti-kickback
provisions of the Medicare Patient and Program Protection Act of 1987 (the
"Anti-kickback Statute"), which generally prohibit the offer, payment,
solicitation or receipt of any remuneration in return for the referral of items
or services paid for in whole or in part under the Medicare or Medicaid
programs, (ii) the Federal False Claims Act which prohibits the submission for
payment to the federal government of fraudulent claims, and (iii) the law known
as "Stark II," which generally prohibits referrals by a physician to providers
of "designated health services" where the physician has a financial relationship
with the provider. "Designated health
11
<PAGE>
services" under Stark II include home health care services and products
provided by the Company. Violations of these provisions may result in civil and
criminal penalties, loss of licensure and exclusion from participation in the
Medicare and Medicaid programs.
The federal government, private insurers and various state enforcement
agencies have increased their scrutiny of provider business practices and
claims, particularly in the areas of home health care and durable medical
equipment in an effort to identify and prosecute parties engaged in fraudulent
and abusive practices. In May 1995, the Clinton Administration instituted
Operation Restore Trust ("ORT"), a health care fraud and abuse initiative
focusing on nursing homes, home health care agencies and durable medical
equipment companies. ORT which initially focused on companies located in
California, Florida, Illinois, New York and Texas, the states with the largest
Medicare populations, has been expanded to all 50 states. While the Company
believes that it is in material compliance with such laws, there can be no
assurance that the practices of the Company, if reviewed, would be found to be
in full compliance with such laws, as such laws ultimately may be interpreted.
It is the Company's policy to monitor its compliance with such laws and to take
appropriate actions to ensure such compliance.
Many states have also adopted statutes and regulations in various forms
which prohibit provider referrals to an entity which the provider has a
financial interest, remuneration or fee-splitting arrangements between health-
care providers for patient referrals and other types of financial arrangements
with health care providers. Sanctions for violations of these state regulations
include loss of licensure and civil and criminal penalties.
Additionally, HCFA has implemented "Wedge Surveys" in at least 13 states,
including Connecticut, Florida, Tennessee, Illinois, Indiana, Massachusetts,
Minnesota, Ohio, Oklahoma, Texas, Utah, Virginia and Wyoming. In these surveys,
HCFA completes ORT-type surveys on a much smaller scale. Generally, HCFA
reviews a small, limited number of claims over a two-month period and
extrapolates the percentage which was paid in error to all claims paid for the
period under review. Assuming the reviewer uncovered nothing significant, the
home health agency then has the option to repay the amount determined by HCFA or
undergo a broader review of its claims. If the survey uncovers significant
problems, the matter may be referred for further review.
Permits and Licensure. The federal government and all states regulate
various aspects of the home health care industry. Such regulations include
federal and state laws covering the dispensing of drugs and the operation of
pharmacies, as well as state laws which may impose licensure requirements on
home health care agencies and on certain types of health care practitioners
employed by the Company. There can be no assurance that either the federal
government or the states will not change current interpretations of existing
regulations or impose additional regulations on the Company's activities which
also could materially adversely affect the Company's business, financial
condition or results of operations.
Geographic Concentration. Approximately $57.5 million, or 38.3%, of the
Company's net revenues in fiscal 1997 were derived from the Company's operations
in Florida and approximately
12
<PAGE>
$95.4 million, or 63.5%, of the Company's net revenues in fiscal 1997 were
derived from the Company's operations in Florida and Pennsylvania. Unless and
until the Company's operations become more diversified geographically (as a
result of acquisitions or internal expansion), adverse economic, regulatory, or
other developments in Florida or Pennsylvania could have a material adverse
effect on the Company's financial condition or results of operations.
Potential Volatility in Stock Price. The Company's stock price has been
subject to some volatility. If net revenues or earnings fail to meet
expectations of the investment community, or if the Company announces other
information that may be deemed to be negative by the investment community, such
as the issuance of additional common stock, or other changes in the Company's
capital structure, there could be an immediate and significant adverse impact on
the trading price for the Company's Common Stock. Regardless of the Company's
performance, broad market fluctuations and general economic or political
conditions as well as health care related market announcements from time to time
may also adversely affect the price of the Company's Common Stock. As a result,
changes in the Company's stock price can be sudden and unpredictable.
Seasonality. Results of operations for any quarter are not necessarily
indicative of results of operations for any future period or for a full fiscal
year. The Company has experienced and expects to continue to experience lower
same store net revenues during the first fiscal quarter which ends on September
30 as compared to the preceding quarter due to fewer referrals during the summer
months. The results for the first quarter of fiscal 1997 and 1998 do not
reflect this seasonality due to the growth in volume following acquisitions in
fiscal 1996 and 1997. Net income in the first quarter of fiscal 1997 and 1998
did not increase proportionately to net revenues as a result of duplicative
costs relating to the acquisitions which were not yet eliminated. The Company
anticipates that the effects of seasonality will continue for the foreseeable
future.
Dependence on Key Personnel. The Company's success is highly dependent on
its President, Chief Executive Officer and Chairman of the Board, Bruce J.
Feldman and a number of its other key management and professional personnel.
The loss of one or more of these personnel could have a material adverse effect
on the Company's business, financial condition or results of operations. The
Company's success will also depend in part on its ability to attract and retain
additional qualified management and professional personnel. Competition for
such personnel in the home health care industry is strong. There can be no
assurance that the Company will be successful in attracting or retaining the
personnel it requires.
Potential Liability. The Company could be subject to liability from
judgments, settlements or costs relating to legal proceedings arising in
connection with its business. While the Company maintains commercial general
liability and professional liability insurance policies with coverages and
limits it believes are adequate to cover the risks of its business, there can be
no assurance that any such insurance will be sufficient to cover any judgments,
settlements or costs relating to any legal proceedings or that any such
insurance will be available to the Company in the future on
13
<PAGE>
satisfactory terms, if at all. In addition, while health care professionals with
whom the Company has contracted must provide evidence that they carry at least
$1.0 million of insurance coverage, although there is no assurance that such
providers will continue to do so, or that such insurance is, or will continue to
be, adequate or available to protect the Company, or that the Company will not
have liability independent of that of such providers and/or their insurance
coverage. Any judgments, settlements or costs relating to pending or future
legal proceedings which are not covered by insurance could have a material
adverse effect on the Company's business, results of operations or financial
condition.
Potential Effect of Anti-Takeover Provisions; Issuance of Preferred Stock.
Certain provisions of the Pennsylvania Business Corporation Law, the Company's
Amended Articles of Incorporation and the Company's Restated Bylaws, such as a
staggered board of directors and limitations on stockholder actions and
proposals, may have the effect of discouraging, delaying or preventing a change
of control of the Company which could adversely affect the market price of the
Common Stock. In addition, the Board of Directors has the authority to issue
shares of preferred stock without shareholder approval and upon such terms as
the Board of Directors may determine. While the Company has no present plans to
issue any shares of preferred stock, the rights of the holders of the Company's
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any preferred stock that may be issued in the future.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
14
<PAGE>
SELLING STOCKHOLDERS
Common Stock being offered by the Selling Stockholders was acquired by
them as a result of the acquisition by the Company of Nahatan Drug, Inc. In
addition to the shares indicated in the table below, the Selling Stockholders
may be entitled to receive additional shares from the Company pursuant to a
Subscription Agreement, dated March 27, 1997, among the Selling Stockholders and
the Company (the "Subscription Agreement"). The Subscription Agreement provides
that if (i) the Selling Stockholders sell any of the Shares within twenty days
after the effectiveness of the Registration Statement, and (ii) the Fair Market
Value (as defined in the Subscription Agreement) of the Company's Common Stock
is less than $11.00 per share, then the Company must issue additional shares of
Common Stock to the Selling Stockholders. The aggregate number of additional
shares that must be issued to the Selling Stockholders would be obtained by
dividing (a) the product of 285,036 multiplied by the difference between the
Fair Market Value and $11.00, by (b) the Fair Market Value. By way of example,
if, after a sale of Common Stock by a Selling Stockholder within twenty days
after the effective date of the Registration Statement, the Fair Market Value is
determined to be $4.00, the last reported sale price on Nasdaq of the Common
Stock on February 27, 1998, then the Company would be obligated to issue to the
Selling Stockholders an additional 498,813 shares of Common Stock.
The Shares are being registered to permit public secondary trading in the
Shares and the Selling Stockholders may offer the Shares for resale from time to
time. See "Plan of Distribution."
The following table sets forth certain information as of the date of this
Prospectus regarding the ownership of shares of the Common Stock by each Selling
Stockholder and as adjusted to give effect to the sale of the shares offered
hereby.
<TABLE>
<CAPTION>
# OF SHARES
NAME OWNED # OF SHARES # OF SHARES % OF SHARES
OF BEFORE BEING OFFERED OWNED AFTER OWNED AFTER
SELLING STOCKHOLDER THE OFFERING FOR SALE THE OFFERING THE OFFERING
- --------------------- ---------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Joseph Falkson 182,423 182,423 --- ---
Susan Falkson 45,607 45,607 --- ---
Michael Falkson 76,009 76,009 --- ---
Peter Falkson 76,009 76,009 --- ---
</TABLE>
15
<PAGE>
PLAN OF DISTRIBUTION
The Shares offered hereby by the Selling Stockholders may be sold from time
to time by the Selling Stockholders, or by pledgees, donees, transferees or
other successors in interest. Such sales may be made from time to time, pursuant
to this Prospectus or Rule 144 under the Securities Act (or any other applicable
exemption from registration under the Securities Act), in the over-the-counter
market, on any exchange or quotation system on which the Common Stock may be
admitted for trading otherwise at prices and at terms then prevailing or at
prices related to the then-current market price, or in negotiated transactions.
The Shares may be sold by one or more of the following methods, without
limitation: (a) a block trade in which the broker-dealer so engaged will attempt
to sell the Shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction; (b) purchases by a broker or dealer
as principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers; and (d) face-to-face transactions between the
Selling Stockholders and purchasers without a broker-dealer. In effecting sales,
brokers or dealers engaged by the Selling Stockholders may arrange for other
brokers or dealers to participate. Such brokers or dealers may receive
commissions or discounts from the Selling Stockholders in amounts to be
negotiated immediately prior to the sale. Such brokers or dealers and any other
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act, in connection with such sales. In addition, any
securities covered by this Prospectus that qualify for sale pursuant to Rule 144
might be sold under Rule 144 rather than pursuant to this Prospectus.
Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker or dealer for the sale of Shares
through a block trade, special offering, exchange distribution or secondary
distribution or a purchase by a broker or dealer, a supplemented Prospectus will
be filed, if required, pursuant to Rule 424(c) under the Securities Act,
disclosing (a) the name of each such broker-dealer, (b) the number of Shares
involved, (c) the price at which such Shares were sold, (d) the commissions paid
or discounts or concessions allowed to such broker-dealer(s), where applicable,
(e) that such broker-dealer(s) did not conduct any investigation to verify the
information set out or incorporated by reference in this Prospectus, as
supplemented, and (f) other facts material to the transaction.
The Registration Statement shall remain effective until the date on which
all of the Shares included in the Registration Statement have been sold or are
permitted to be sold under Rule 144.
Approximately 142,518 shares (or 37.5%) of the 380,048 Shares being
registered under the Registration Statement are subject to an Escrow Agreement
dated as of March 27, 1997 among the Company, the Selling Stockholders and a
national bank serving as escrow agent (the "Escrow Agreement"). Such shares are
to be held by the escrow agent under the Escrow Agreement until January 2, 1999,
unless the Selling Stockholders deposit cash in lieu of such shares with the
escrow agent at the rate of $10.25 per share.
Each Selling Stockholder is required to pay all expenses relating to the
sale of the shares
16
<PAGE>
including any commissions, discounts or other fees payable to broker-dealers and
any attorney fees or other expenses incurred by such Selling Stockholder. In
addition, the Selling Stockholders are required to pay all expenses incident to
the registration of the Common Stock, including, without limitation, the filing
of this Registration Statement, including all registration and filing fees, fees
and expenses of compliance with state securities or "blue sky" laws, printing
expenses, messenger and delivery expenses, fees and disbursements of counsel for
the Company and all independent certified public accountants retained by the
Company.
The Company has agreed to indemnify the Selling Stockholders in certain
circumstances, against certain liabilities, including liabilities arising under
the Securities Act. Each Selling Stockholder has agreed to indemnify the Company
and its directors, and its officers who sign the Registration Statement against
certain liabilities, including liabilities arising under the Securities Act.
LEGAL MATTERS
An opinion has been rendered by the law firm of Blank Rome Comisky &
McCauley, LLP, One Logan Square, Philadelphia, Pennsylvania, to the effect that
the shares of Common Stock offered by the Selling Stockholders hereby are
legally issued, fully paid and non-assessable.
EXPERTS
The consolidated balance sheets as of June 30, 1997 and 1996 and the
consolidated statements of income, retained earnings and cash flows for each of
the three years in the period ended June 30, 1997, incorporated by reference in
this prospectus, have been incorporated herein in reliance upon the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
such firm as experts in accounting and auditing.
17
<PAGE>
No dealer, salesman or other person has been authorized to give any information
or to make any representations other than those contained in this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or the Selling Stockholders. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy to any person in any jurisdiction in which such offer or solicitation would
be unlawful or to any person to whom it is unlawful. Neither the delivery of
this Prospectus nor any offer or sale made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company or that information contained herein is correct as of any
time subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Available Information............................................ 2
Incorporation of Documents
by Reference.................................................... 2
Cautionary Notice Regarding Forward
Looking Statements.............................................. 3
The Company...................................................... 4
Risk Factors..................................................... 4
Use of Proceeds..................................................14
Selling Stockholders.............................................15
Plan of Distribution.............................................16
Legal Matters....................................................17
Experts..........................................................17
</TABLE>
380,048 SHARES
HOME HEALTH CORPORATION
OF AMERICA, INC.
Common Stock
___________
PROSPECTUS
___________
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table shows the estimated expenses of the issuance and
distribution of the securities offered hereby.
<TABLE>
<S> <C>
Registration expenses.................................... $ 450
Legal fees and expenses.................................. 8,000
Accounting fees and expenses............................. 10,000
Printing fees and expenses............................... 8,000
Miscellaneous............................................ 250
--------
Total.................................................... $ 26,700
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 1741 through 1750 of Subchapter D, Chapter 17, of the Pennsylvania
Business Corporation Law of 1988 (the "BCL") contain provisions for mandatory
and discretionary indemnification of a corporation's directors, officers and
other personnel, and related matters.
Under Section 1741, subject to certain limitations, a corporation has the
power to indemnify directors and officers under certain prescribed circumstances
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with an action or
proceeding, whether civil, criminal, administrative or investigative, to which
any of them is a party by reason of his being a representative, director or
officer of the corporation or serving at the request of the corporation as a
representative of another corporation, partnership, joint venture, trust or
other enterprise, if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
conduct was unlawful. Under Section 1743, indemnification is mandatory to the
extent that the officer or director has been successful on the merits or
otherwise in defense of any action or proceeding if the appropriate standards of
conduct are met.
Section 1742 provides for indemnification in derivative actions except in
respect of any claim, issue or matter as to which the person has been adjudged
to be liable to the corporation unless and only to the extent that the proper
court determines upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for the expenses that the court deems proper.
Section 1744 provides that, unless ordered by a court, any indemnification
under Section
<PAGE>
1741 or 1742 shall be made by the corporation only as authorized in the specific
case upon a determination that the representative met the applicable standard of
conduct, and such determination will be made by the board of directors (i) by a
majority vote of a quorum of directors not parties to the action or proceeding;
(ii) if a quorum is not obtainable, or if obtainable and a majority of
disinterested directors so directs, by independent legal counsel; or (iii) by
the shareholders. Section 1745 provides that expenses incurred by an officer,
director, employee or agent in defending a civil or criminal action or
proceeding may be paid by the corporation in advance of the final disposition of
such action or proceeding upon receipt of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the corporation.
Section 1746 provides generally that, except in any case where the act or
failure to act giving rise to the claim for indemnification is determined by a
court to have constituted willful misconduct or recklessness, the
indemnification and advancement of expenses provided by Subchapter 17D of the
BCL shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may be entitled under any bylaw,
agreement, vote of shareholders of disinterested directors or otherwise, both as
to action in his or her official capacity and as to action in another capacity
while holding that office.
Section 1747 also grants to a corporation the power to purchase and
maintain insurance on behalf of any director or officer against any liability
incurred by him or her in his or her capacity as officer or director, whether or
not the corporation would have the power to indemnify him or her against the
liability under Subchapter 17D of the BCL.
Section 1748 and 1749 extend the indemnification and advancement of
expenses provisions contained in Subchapter 17D of the BCL to successor
corporations in fundamental changes and to representatives serving as
fiduciaries of employee benefit plans.
Section 1750 provides that the indemnification and advancement of expense
provided by, or granted pursuant to, Subchapter 17D of the BCL, shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs and personal representative of such person.
The Company's Bylaws provide in general that the Company shall indemnify
its officers and directors to the fullest extent authorized by law.
The Company currently has directors' and officers' liability insurance
which covers certain liabilities, including liabilities to the Company and its
shareholders, in the amount of $5 million.
II-2
<PAGE>
ITEM 16. EXHIBITS.
NUMBER DOCUMENT
- ------ --------
5.1 Opinion of Blank Rome Comisky & McCauley LLP as to the validity of the
issuance of the shares of Common Stock to be registered.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Blank Rome Comisky & McCauley (included in Exhibit 5.1).
24.1 Power of attorney of certain signatories (included on the Signature
Page).
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this registration
statement as of the time it was declared effective.
(4) It will remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(5) It will include any material information with respect to the plan of
distribution by means of a post-effective amendment not previously disclosed in
this registration statement or any material change to such information in this
registration statement.
II-3
<PAGE>
(6) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in King of Prussia, Pennsylvania, on the date indicated.
HOME HEALTH CORPORATION OF AMERICA, INC.
Date: March 3, 1998
By: /s/ Bruce J. Feldman
___________________________________
Bruce J. Feldman
President and Chief Executive Officer
(Duly authorized as
Principal Accounting Officer)
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bruce J. Feldman, his true and lawful attorney-
in-fact and agent, with full power of substitution or resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments to this Registration Statement, and to file the same, with all
exhibits thereto, and other documentation in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ Bruce J. Feldman Chairman of the Board, March 3, 1998
- -------------------- President and
Bruce J. Feldman Chief Executive Officer
(Principal Executive Officer,
duly authorized as Principal
Accounting Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ G. Michael Bellenghi
__________________________ Director March 3, 1998
G. Michael Bellenghi
/s/ Harvey Machaver
__________________________ Director March 3, 1998
Harvey Machaver
/s/ Joseph Trustey
__________________________ Director March 4, 1998
Joseph Trustey
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
NUMBER DOCUMENT
- ------ --------
5.1 Opinion of Blank Rome Comisky & McCauley.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Blank Rome Comisky & McCauley LLP (included in Exhibit
5.1).
24.1 Power of attorney of certain signatories (included on the Signature
Page).
II-7
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EXHIBIT 5.1
BLANK ROME COMISKY & MCCAULEY LLP
COUNSELORS AT LAW
One Logan Square
Philadelphia, Pennsylvania 19103-6998
(215) 569-5500
Fax: (215) 569-5555
March 4, 1998
Home Health Corporation of America, Inc.
2200 Renaissance Boulevard
Suite 300
King of Prussia, PA 19406-2755
Ladies and Gentlemen:
We have acted as counsel to Home Health Corporation of America, Inc. (the
"Company") in connection with the preparation of the Registration Statement on
Form S-3 ("Registration Statement") to be filed by the Company with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to the registration of 380,048 shares of common stock, no par value
("Common Stock"), which have been included in the Registration Statement for the
respective accounts of the persons identified in the Registration Statement as
Selling Stockholders.
Although as counsel to the Company we have advised the Company in
connection with a variety of matters referred to us by it, our services are
limited to specific matters so referred. Consequently, we may not have knowledge
of many transactions in which the Company has engaged or its day-to-day
operations.
In rendering this opinion, we have examined the following documents: (i)
the Company's Articles of Incorporation and Bylaws, as amended and restated,
(ii) the Company's Minute Books; (iii) the Registration Statement; and (iv) a
certification from the Company's transfer agent. We have assumed and relied, as
to questions of fact and mixed questions of law and fact, on the truth,
<PAGE>
completeness, authenticity and due authorization of all documents and records
examined and the genuineness of all signatures.
We have not made any independent investigation in rendering this opinion
other than the document examination described. Our opinion is therefore
qualified in all respects by the scope of that document examination. We make no
representation as to the sufficiency of our investigation for your purposes.
This opinion is limited to the laws of the Commonwealth of Pennsylvania. In
rendering this opinion we have assumed (i) compliance with all other laws,
including federal laws and (ii) compliance with all Pennsylvania securities and
antitrust laws.
Based upon and subject to the foregoing, we are of the opinion that the
shares of Common Stock are legally issued, fully paid and non-assessable.
This opinion is given as of the date hereof. We assume no obligation to
update or supplement this opinion to reflect any facts or circumstances which
may hereafter come to our attention or any changes in laws which may hereafter
occur.
This opinion is strictly limited to the matters stated herein and no other
or more extensive opinion is intended, implied or to be inferred beyond the
matters expressly stated herein.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to us under "Item 5. Interests of Named Experts
and Counsel" in the Registration Statement.
Sincerely,
/s/ Blank Rome Comisky & McCauley LLP
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BLANK ROME COMISKY & McCAULEY LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Registration
Statement of Home Health Corporation of America, Inc. on Form S-3 of our report
dated August 29, 1997, except for Note 13, for which the date is September 26,
1997, on our audits of the consolidated financial statements and consolidated
financial statement schedule of Home Health Corporation of America, Inc. as of
June 30, 1997 and 1996 and for each of the three years in the period ended June
30, 1997 included in the Home Health Corporation of America, Inc. Annual Report
on Form 10-K/A for the fiscal year ended June 30, 1997 filed with the Securities
and Exchange Commission. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers and Lybrand L.L.P.
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2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 3, 1998
