SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-K/A
(Mark One)
|X| Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the fiscal year ended March 31, 1998
|_| Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For transition period from ___________________ to ____________________
Commission file No. 0-17292
ACCUHEALTH, INC.
(Exact name of registrant as specified)
New York 13-3176233
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1575 Bronx River Avenue, Bronx, New York 10460
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (718) 518-9511
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X NO__
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |_|
As of June 23, 1998, the aggregate market value of the Common Stock
held by non-affiliates of the registrant was approximately $5,922,309.
As of June 23, 1998, there were 3,644,498 shares of the Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement for the Annual Meeting of Stockholders to be held on October 22,
1998 in Part III of this Form 10-K.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Accuhealth, Inc. (the Company) is one of the largest integrated
providers of comprehensive home health care services based in the New York, New
Jersey and Connecticut area. Together with its wholly owned subsidiaries, the
Company provides comprehensive home health care services, including
administration of a wide array of infusion therapies, sales of oral medications
and sales and rentals of durable medical equipment ("DME") and related supplies
and home nursing. The Company has implemented a Regional Growth Strategy,
expanding from one location in one state in 1996, to five offices in two states
at June 30, 1998.
The Company was incorporated in the State of New York on August 25,
1983. Effective August 20, 1990, the present name, Accuhealth, Inc., was adopted
pursuant to an amendment to the Company's Certificate of Incorporation. The
Company's principal offices are located at 1575 Bronx River Avenue, Bronx, New
York 10460, and its telephone number is (718) 518-9511. Unless the context
otherwise requires, references herein to the "Company" include Accuhealth, Inc.
and all of its wholly owned subsidiaries.
On July 1, 1997, the Company consummated its acquisition of
ProHealthCare Infusion Services, Inc. ("PHCIS") pursuant to an agreement and
plan of merger, dated as of March 14, 1997, by and among the Company, ACH
Acquiring Corp., a New Jersey corporation and a subsidiary of the Company,
PHCIS, ProHealthCare, Inc., a Delaware corporation and the parent of PHCIS,
Thomas Laurita and David Brian Cohen (the "PHCIS Merger Agreement"). The Company
has determined that the initial merger consideration of 300,000 shares of
Company's Common Stock will be decreased by 59,386 shares of Company Common
Stock pursuant to certain merger consideration adjustment provisions of the
PHCIS Merger Agreement. The acquisition has been accounted for by the purchase
method of accounting. PHCIS, based in Springfield, New Jersey, specializes in
caring for complex HIV/AIDS patients and those suffering from cancer. PHCIS also
has a strong disease management capability in treating patients suffering from
congestive heart failure and cardiomyopathy.
On December 1, 1997, the Company and Healix Healthcare, Inc. ("Healix")
entered into an agreement and plan of merger (the "Merger Agreement") which
provided for the merger of Healix with and into the Company (the "Merger"), with
the Company being the surviving corporation. The Merger was consummated on April
9, 1998. In accordance with the Healix Merger Agreement, the shareholders of
Healix received .740721 shares of the Company's common stock for each share of
Healix common stock in a tax free exchange, with an aggregate of 1,488,850
shares of the Company's common stock issued in exchange for all of the issued
and outstanding common shares of Healix. The merger resulted in Healix becoming
a wholly owned subsidiary of Accuhealth, Inc. and will be accounted for as a
pooling of interests.
Healix, together with its wholly owned subsidiaries, provides a full
range of healthcare services to the alternate site including infusion therapy,
home medical equipment, renal dialysis, skilled nursing and home health
services. Healix is accredited by the JCAHO of Healthcare Organizations and
operates throughout New York and New Jersey.
The Company has diversified its business mix from approximately 61% of
home infusion therapy revenues in 1996 to 41% for the year ended March 31, 1998.
This shift reflects the addition and growth in institutional pharmacy management
services, and sales of home medical equipment and oral medications. The Company
expects that it will continue to shift its business mix towards home medical
equipment and institutional pharmacy services and oral medications. Home
infusion therapy however, will continue to represent an important part of the
Company's business mix.
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The Company believes its ability to offer a full range of integrated
home nursing, respiratory therapy, home medical equipment, oral medications, and
infusion therapy throughout its market creates an important competitive
advantage in obtaining patient referrals. Managed care organizations and other
referral sources generally favor home health care providers that offer
integrated health care services, because "one-stop shop" providers like the
Company provide superior coordination of care and reduce the administrative and
service quality complications of contracting with multiple providers. As an
integrated provider, the Company rarely engages subcontractors, which the
Company believes permits it to exercise greater control over quality of service
and to improve patient care.
INDUSTRY OVERVIEW
Home health care is among the fastest growing segments of the health
care industry with estimated annual expenditures of $36.1 billion in 1995, up
from an estimated $12.9 billion in 1990, representing a compounded annual growth
rate of approximately 23%. The underlying growth factors in the home health care
industry include: (i) the cost-effective nature of home health care; (ii) an
increasing number of patients due to growth in the elderly population; (iii)
technological advances that expand the range of home health care procedures; and
(iv) patient preference for treatment in the home.
The home health care industry is highly fragmented with more than
18,500 providers delivering home health care services in the United States. Many
of these companies are local providers that offer a limited scope of services in
a defined geographical area and lack the capital necessary to substantially
expand their operations. Managed care organizations and cost containment
initiatives by payors have driven the growth of home health care by emphasizing
lower cost alternatives to hospitals and skilled nursing facilities. These
organizations and payors seek coordinated, consistent quality home health care
across broad geographic areas in order to serve their patients more effectively.
BUSINESS STRATEGY
Accuhealth's business objective is to enhance its position as one of
the leading providers of comprehensive home health care services in New York,
Connecticut and New Jersey. Elements of the Company's strategy include:
PROVIDE ONE-STOP SHOP FOR HOME HEALTH CARE SERVICES. Accuhealth
provides payors, physicians and patients with fully integrated one-stop shop
home health care services. The integration of comprehensive home health care
services enhances the Company's appeal to managed care organizations and other
referral sources that increasingly prefer single-source providers of home health
care. The Company believes that full integration of services enables it to
provide highly coordinated patient care and enable it to increase revenues and
profitability by providing multiple services to an individual patient referral.
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FOCUS ON MANAGED CARE RELATIONSHIPS. The Company has intensified its
managed care marketing efforts in order to take advantage of the increased
market penetration of managed care organizations in the home health care market.
The Company is the sole or principal provider for a number of large managed care
plans, and the Company believes that its broad product offering, quality of
service and regional focus contribute to the Company's competitive advantage.
EXPAND THE MANAGEMENT SERVICES THE COMPANY PROVIDES ITS REFERRAL
SOURCES. The Company seeks to expand the services it currently provides to the
sources of its patient referrals to include the full range of patient care
coordination and the management of the network of providers used to service the
patient. As a cornerstone of this service strategy, the Company is implementing
enhanced financial and clinical management information systems. The Company
believes that these systems could improve profitability by efficiently servicing
increased volumes of managed care referrals, increase productivity gains, reduce
costs and provide outcomes data to payors.
SERVICES AND PRODUCTS
HOME INFUSION THERAPY. The Company offers comprehensive home infusion
therapies. Home infusion therapy involves the administration of nutrients,
antibiotics and other medications intravenously (into the vein), subcutaneously
(under the skin), intramuscularly (into the muscle), intrathecally or epidurally
(via spinal routes), or through feeding tubes into the digestive tract. Infusion
therapy often begins during hospitalization of a patient and continues in the
home. New patients are instructed in the administration of infusion therapy and
related services by a registered nurse who provides the patient's first home
treatment and continuing supervision of care. The Company's principal infusion
therapies follow:
ANTIBIOTIC THERAPY is the infusion of antibiotic medications into a
patient's bloodstream to treat a variety of infections and diseases.
ENTERAL NUTRITION is the infusion of essential nutrients through a
feeding tube, and is necessary for patients who are unable to orally ingest
adequate nutrients.
TOTAL PARENTERAL NUTRITION is the infusion of a nutrient solution to
restore and maintain electrolyte balance and nutritional function.
PAIN MANAGEMENT is provided to patients experiencing acute pain as a
result of traumatic injury, surgical procedures or other medical disorders. The
Company provides a comprehensive approach to pain management that includes a
thorough knowledge of available agents, routes of administration and appropriate
dosage levels as directed.
CHEMOTHERAPY is provided in the home or in other locations and allows
patients with cancer an alternative to frequent and expensive hospital stays.
PENTAMIDINE is an agent used specifically in the treatment of patients
with AIDS who have experienced one or more of pneumocystis carinii pneumonia.
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HOME NURSING. The Company provides a wide range of nursing services to
individuals with acute illness, long-term chronic conditions, permanent
disabilities, terminal illness or post-procedural needs. Primary care or
specialty physicians and managed care case managers typically refer patients to
the Company. After reviewing the patient's medical records and treatment plan, a
nurse, therapist or home health aide, where appropriate, provides care to the
patient in the home. The plan of care may require a few visits over a short
period of time or many visits over several years. The Company provides the
following home nursing services.
GENERAL NURSING care is the periodic assessment of the appropriateness
of home health care, the performance of clinical procedures, and
instruction of the patient and the family or other caregiver regarding
proper treatments. Registered nurses or licensed practical nurses
provide such care. Patients receiving such care typically include
stabilized postoperative patients, patients who are acutely ill but who
do not require hospitalization, and patients who are chronically or
terminally ill.
SPECIALTY NURSING care is the provision of specialized nursing services
such as geriatric, pediatric or neonatal nursing. Nurses provide such
care with the appropriate experience or certification in such
specialty. Specialty nursing care also involves the instruction of the
patient and the family or other caregiver in the self-administration of
certain procedures, such as wound care and infection control, emergency
procedures and the proper handling and usage of medication, medical
supplies and equipment.
THERAPY SERVICES consist of rehabilitation therapies such as physical,
occupational and speech therapy to patients recovering from strokes,
trauma or certain surgeries, services for high risk pregnancies,
postpartum care, AIDS therapy, various medical social services, and
case management services to insurance companies and self-insured
employers.
HOME HEALTH AIDE CARE is the provision of personal care services and
assistance with activities of daily living such as personal hygiene and
meal preparation. The Company's home health aides must pass certain
competency tests and are supervised by a registered nurse.
PRIMARY HOME HEALTH CARE is provided by the Company through state
administered programs that pay for unskilled homemaker services to the
elderly or the disabled, as ordered by a physician. A registered nurse
makes the initial assessment and assigns a homemaker to provide
housekeeping, shopping and limited personal care.
RESPIRATORY THERAPY/DURABLE MEDICAL EQUIPMENT. The Company provides a wide
variety of home respiratory, monitoring and medical equipment. Respiratory
therapists provide care to the patient according to the physician-directed plan
of care and educate the patient and the family or other care giver regarding
treatment requirements, use of equipment and self-care. The Company rents, sells
and services respiratory equipment for patient use in the home and supplies
patients with aerosol
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medications for use in respiratory therapy treatments. The Company's principal
respiratory services include:
OXYGEN SYSTEMS THAT ASSIST PATIENTS WITH BREATHING. The Company
provides three types of oxygen systems: (i) oxygen concentrators, which
are stationary units that filter ordinary air in order to provide a
continuous flow of oxygen and are generally the most cost effective
supply of oxygen for patients who require a continuous flow of
supplemental oxygen; (ii) liquid oxygen systems, which are containers
used for patients who require a continuous high flow of supplemental
oxygen; and (iii) high pressure oxygen cylinders, which provide an
ambulatory patient with the ability to obtain supplemental oxygen
outside of the home.
NEBULIZERS that deliver aerosol medications that are inhaled directly
by the patients. Nebulizers are used to treat patients with asthma,
chronic obstructive pulmonary disease, cystic fibrosis and
neurologically related respiratory problems, and patients with AIDS.
HOME VENTILATORS that mechanically sustain a patient's respiratory
function in cases of severe respiratory failure.
CONTINUOUS POSITIVE AIRWAY PRESSURE therapy that forces air through
respiratory passageways during sleep. This treatment is provided to
adults with sleep apnea, a condition in which a patient's normal
breathing patterns are disturbed during sleep. Monitoring services are
usually provided with this therapy.
DURABLE MEDICAL EQUIPMENT. The Company also leases and sells convalescent
equipment, in connection with the provision of its other services to patients in
the hone. Such equipment includes hospital beds, wheelchairs, walkers, and
patient lifts as well as medical and surgical supplies such as stethoscopes,
orthopedic supplies, urinary catheters, syringes, and needles. The Company is
able to increase revenues by providing durable medical equipment and supplies to
its patients who are also receiving nursing, respiratory therapy or infusion
therapy.
The Company has contracts with three hospices in New York City to
provide DME, on a non-exclusive basis to patients upon their discharge from the
hospices. The Company also has contracts to provide DME, on a non-exclusive
basis, to patients of seven nursing services whose trained personnel provide
outpatient care. In addition, the Company's name appears on "approved provider"
lists given to patients upon their discharge from approximately 30 hospitals in
the New York metropolitan area.
OTHER THERAPIES. Other therapies provided by the Company currently
represent a small percentage of its business. These therapies are dobutamine
therapy, blood components, IV gamma globulin, hydration therapy, tocolytic
therapy and aerosol pentamidine.
The Company also provides comprehensive pharmacy services to large
institutional pharmacy clients including sub-acute and long term care
facilities. These engagements typically
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involve the Company's managing and operating the pharmacy under contract with
the institution and providing the drugs, medication, biologicals and supplies
the patients require.
SALES AND MARKETING
The Company promotes its infusion therapy and durable medical equipment
products and services via contacts with physicians whose patients use these
services, hospital discharge planners, social workers and hospital nurses who
work with patients requiring these services. The Company also works closely with
nursing services and agencies that provide home care to patients. The Company
also markets its products and services to insurance companies, Health
Maintenance Organizations ("HMO's"), Preferred Provider Organizations ("PPO's")
and case management companies. Marketing efforts emphasize the quality of the
Company's services, cost containment and technological excellence offered by the
Company. In addition, the Company participates in clinics run by New York City
hospitals.
Because the Company can provide oral medications to its home health
care customers, the Company promotes itself as a "one-stop shop" for infusion
therapy, durable medical equipment and pharmaceuticals. The Company stocks
pharmaceuticals not widely used by the general population to meet the needs of
critically ill patients, including drugs used to treat AIDS and AIDS-related
diseases.
The Company has made special efforts to meet the needs of persons
afflicted with AIDS. The Company has a contract with a nursing service program
to supply DME for persons suffering from AIDS and provides special instructions
to employees who visit the homes of persons afflicted with AIDS and other
communicable diseases. The Company also markets to certain freestanding
AIDS-specific rehabilitation centers and hospitals. The Company currently
provides products and services to patients in two such facilities (Rivington
House and Phoenix House in Manhattan).
The Company believes that its ability to provide a full range of
services to clients in all of its market is a significant advantage in
developing relationships with managed care organizations. In addition, the
Company works with managed care organizations to meet their specialized demands
for services, pricing, billing and other matters.
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QUALITY ASSURANCE
The Company believes that quality of service is critical to its ability
to obtain referrals and increase revenues and profitability. To assure the
delivery of high-quality patient care, and to assure the overall quality of
service, the Company has a quality improvement program designed to integrate and
assess the quality improvement activities and processes across all services. The
cornerstone of this quality improvement program is the company's internal
compliance and quality improvement programs. These programs are designed to
routinely measure compliance with federal and state regulations, JCAHO
standards, and the Company's standards of care and practice. The survey process
includes review of clinical and billing documentation, interviews of clinical
personnel and observations of home visits performed by Company staff. Other
quality assurance initiatives include measuring customer satisfaction, reporting
adverse medical incidents monitoring risk management, and ensuring a safe and
appropriate working environment.
The Company is accredited by JCAHO and believes that managed care and
other third-party payors generally prefer this accreditation.
HUMAN RESOURCE MANAGEMENT
The Company continuously recruits, screens, trains and offers benefits
and other programs in an effort to attract and retain its personnel. Recruiting
is conducted primarily through advertising, personnel agencies, direct contact
with community groups and the use of bonuses.
The Company provides orientation and training to new employees and
continuing education for existing employees. The Company routinely develops and
distributes quality improvement in-service materials, manuals, and forms to its
nurses and has implemented an internal system of employee recognition and
rewards. In addition, skilled nurses are initially assigned to a nurse preceptor
until the Company believes that these new nurses have acquired a sufficient
degree of home health care knowledge and experience. The Company also has
implemented an infusion therapy verification program for skilled nurses.
The retention of qualified employees is a high priority for the
Company. As of March 31, 1998, the Company employed over 96 individuals.
Management believes that the Company's employee relations are good. None of the
Company's employees are represented by a labor union or other collective
bargaining organization.
REIMBURSEMENT FROM THIRD-PARTY PAYORS
The Company accepts assignment of Medicare claims, as well as claims
with respect to other third-party payors, on behalf of its patients whenever the
reimbursement coverage is adequate to ensure payment of the patient's
obligations. The Company processes its customers' claims, accepts payment at
prevailing and allowable rates and assumes the risks of delay for improperly
billed services or non-payment for services which are determined by the
third-party payor as being medically unnecessary. Although no assurance can be
given that a significant number of future requests for reimbursement will not be
denied, the Company's policies, procedures and prices are intended to minimize
this risk.
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The Company works closely with the patients it serves to properly
document and file claims for timely and direct reimbursement from third party
payors and governmental agencies. Generally, the Company contacts third-party
payors prior to the commencement of services or delivery of product in order to
determine the patient's coverage and the percentage of costs that the payor will
reimburse. The Company's reimbursement specialists carefully review such issues
as lifetime limits, pre-existing condition clauses, the availability of special
state programs and other reimbursement-related issues. The Company will often
negotiate with the third-party payor on the patient's behalf to help ensure that
coverage is available. In addition, the Company typically obtains an assignment
of benefits from the patient that enables the Company to file claims for its
services with the third-party payors. As a result, third-party payors pay the
Company directly for the reimbursable amounts of its charges. Once reimbursement
processing for a patient has been established by a third-party payor, claims
processing and reimbursement tend to become routine, subject to continued
patient eligibility and other coverage limitations.
Like other health care companies, the Company's revenues and
profitability are adversely affected by the continuing efforts of third-party
payors to contain or reduce the costs of health care by lowering reimbursement
rates, increasing case management review of bills for services and negotiating
reduced contract pricing. Home health care, which is generally less costly to
third party payors than hospital-based care, has benefited from such cost
containment objective. However, as expenditures in the home health care market
continue to grow, initiatives aimed at reducing costs of health care delivery at
non-hospital sites are increasing.
COMPETITION
The home infusion therapy market is highly competitive and the Company
anticipates that competition will intensify. There are many small local
providers, some of whom do not offer the variety of therapies provided by the
Company. There are also several large regional or national companies that offer
more therapies than the Company. The primary competitive factors are quality of
care, including responsiveness of service and quality of professional personnel;
ability to establish and maintain relationships with referring physicians,
hospitals, health maintenance organizations, clinics and nursing services; price
and breadth of infusion therapies offered; general reputation with physicians,
other referral sources and potential patients and the ability to function as a
"one-stop shop."
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The DME business is also very competitive. The Company competes with
national, regional and local specialty suppliers of medical equipment, chain
drugstores and local independent drugstores. Competitive factors in DME markets
generally track those stated above.
Many of the Company's competitors have greater name recognition,
broader geographic markets and substantially greater marketing, financial and
administrative resources than the Company. Some of the larger existing and
future competitors can be expected to expand the varieties of therapies offered.
JCAHO ACCREDITATION
The Company is accredited by JCAHO. Accreditation by JCAHO has become a
prerequisite for contracts from many hospices and hospitals, certified home
health agencies, insurance companies, HMO's and PPO's.
INSURANCE
Physicians, hospitals and other participants in the health care market
are routinely subject to lawsuits alleging malpractice, product liability or
related legal theories, many of which involve large claims and significant
defense costs. The Company has in force general liability insurance with
coverage limits of $1,000,000 per incident and $2,000,000 in the aggregate
annually, and professional liability insurance on each of its pharmacy employees
and professionals with coverage limits of $1,000,000 per claim and in the
aggregate annually. The Company has not experienced difficulty in obtaining
insurance in the past, and management believes that the Company's insurance
coverage is reasonable given its claims history.
The Company believes that the insurance that it maintains, in
relationship to the size of its business, is customary in the home health care
industry. However, there can be no assurance that any such insurance will be
adequate to cover the Company's liabilities.
CUSTOMERS
During the years ended March 31, 1998, 1997 and 1996, services provided
to Rivington House accounted for 15%, 19% and 16%, respectively, of the
Company's net sales for that year.
SUPPLIERS
The Company does not depend upon a limited number of suppliers for the
conduct of its continuing business and generally has second sources for all of
the materials and products used in its business. The Company purchases drugs,
solutions, medical equipment and other materials and leases certain equipment in
connection with the Company's business from many suppliers and distributors. The
Company is not currently experiencing and does not anticipate that it will
experience in the future any material difficulty in purchasing or leasing the
required products, supplies and equipment used in its business.
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In the event that existing suppliers or distributors are unable to or
should fail to deliver products, supplies and equipment to the Company,
management believes that alternate sources are available to adequately meet its
needs at comparable prices.
REGULATION
The Company's business is subject to extensive and increasing
regulation by federal, state and local government. Federal agencies which
regulate aspects of the Company's business include the Department of Health and
Human Services, Healthcare Finance Administration, the Office of the inspector
General, the Food and Drug Administration, the Department of Labor, the Drug
Enforcement Agency, and the Occupational Safety and Health Administration. In
most states, home health care providers are regulated by the state department of
health and board of pharmacy.
The Company is subject to federal laws regulating the repackaging and
dispensing of drugs and regulating interstate motor-carrier transportation and
state laws regulating pharmacies, nursing services and certain types of home
health agency activities. Under state laws, the Company's offices must be
licensed prior to commencing business and must renew their licenses
periodically. In addition, certain of the Company's employees are subject to
state laws and regulations governing the professional practice of respiratory
therapy, pharmacy and nursing. Failure to comply with regulatory laws could
expose the Company to criminal and civil penalties, and jeopardize the licensure
of one or more of its home health care agencies, or their participation in the
Medicare, Medicaid and other reimbursement programs.
As a provider of services under the Medicare and Medicaid programs, the
Company is subject to the various "anti-fraud and abuse" laws, including the
federal health care programs anti-kickback statute. This law prohibits any
offer, payment, solicitation or receipt of any form of remuneration to induce
the referral of business reimbursable under a federal health care program or in
return for the purchase, lease, order, arranging for, or recommendation of items
or services covered by any such program. Federal health care programs or any
health care plans or programs that are funded by the United States (other than
certain federal employee health insurance benefits) and certain state health
care programs that receive federal funds under various programs, such as
Medicaid. A related law forbids the offer or transfer of any item or service for
less than fair market value, or certain waivers of co-payment obligations, to a
beneficiary of Medicare or a state health care program that is likely to
influence the beneficiary's selection of health care providers. Violations of
the anti-fraud and abuse laws can result in the imposition of substantial civil
and criminal penalties and, potentially, exclusion from furnishing services
under any federal health care programs. In addition, the states in which the
Company operates generally have laws that prohibit certain direct or indirect
payments or fee-splitting arrangements between health care providers where they
are designed to obtain the referral of patients to a particular provider.
Congress adopted legislation in 1989, known as the "Stark" Law, that
generally prohibits a physician ordering clinical laboratory services for a
Medicare beneficiary where the entity providing that service has a financial
relationship (including direct or indirect ownership or compensation
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relationships) with the physician (or a member of his immediate family), and
prohibits such entity from billing for or receiving reimbursement for such
services, unless a specified exemption is available. Additional legislation
became effective as of January 1, 1993 known as "Stark II" that extends the
Stark Law prohibitions to services under state Medicaid programs, and beyond
clinical laboratory services to all "designated health services", including home
health services, durable medical equipment and supplies, outpatient prescription
drugs, and parenteral and enteral nutrients, equipment, and supplies. Violators
who are compensated by the Company are prohibited from making referrals to the
Company, and the Company will be prohibited from seeking reimbursement for
services rendered to such patients unless an exception applies. Several of the
states in which the Company conducts business have also enacted statutes similar
in scope and purpose to the federal fraud and abuse laws and the Stark Laws.
Various federal and state laws impose criminal and civil penalties for
making false claims for Medicare, Medicaid or other health care reimbursements.
The Company believes that it bills for its services under such programs
accurately. However, the rules governing coverage of, and reimbursements for,
the Company's services are complex. There can be no assurance that these rules
will be interpreted in a manner consistent with the Company's billing practices.
In May 1995, the federal government instituted Operation Restore Trust,
a health care fraud and abuse initiative focusing on nursing homes, home health
care agencies and durable medical equipment companies located in the five states
with the largest Medicare populations. New York, the Company's corporate base,
was one of the original targeted states. The purpose of this initiative is to
identify fraudulent and abusive practices such as billing for services not
provided, providing unnecessary services and making prohibited referral payments
to health care professionals. Operation Restore Trust has been responsible for
significant fines, penalties and settlements. Operation Restore Trust was
recently expanded to cover twelve additional states for the next two years. The
program was also expanded to include reviews of psychiatric hospitals, certain
independent laboratories and partial hospitalization benefits. Further, there
are plans to eventually apply the program's investigation techniques in all
fifty states and throughout the Medicare and Medicaid programs. One of the
results of the program has been increased auditing and inspection of the records
of health care providers and stricter interpretations of Medicare regulations
governing reimbursement and other issues. Specifically, the government plans to
double the number of comprehensive home health agency audits it performs each
year (from 900-1800) and also to increase the number of claims reviewed by 25.0%
(from 200,000 to 250,000). In general, the application of these anti-fraud and
abuse laws is evolving.
JCAHO has established written standards for home care services,
including standards for services provided by home infusion therapy companies.
Many payors use this criteria in order to select only the highest quality
providers. The Company's facility presently complies with JCAHO's standards and
has been accredited since February 1990. In addition, the Company received
approval in 1991 from the New York State Department of Health to provide nursing
services in New York State.
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CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade accounts receivable
include amounts due from third party payors, primarily governmental agencies
(Medicare and Medicaid). At March 31, 1998, gross Medicare and Medicaid
receivables aggregated $3,450,785.
EMPLOYEES
As at March 31, 1998, the Company employed 96 persons, of whom 87 were
full-time employees and 9 were part-time employees. The supply of qualified
staff is adequate and retainable in the New York City area. The Company
considers its relations with its employees to be satisfactory. As a result of
the Company's recent mergers, the number of employees has grown to approximately
150 full time employees as of June 25, 1998.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information in Items 1, 2, 3, 6,
7, and 8 of this Form 10-K include information that is forward looking, such as
the Company's opportunities to increase sales through, among other things,
increasing its number of patients, its anticipated liquidity and the Company's
ability to achieve significant cost savings or synergies from its recent
acquisition or other restructuring efforts. The matters referred to in
forward-looking statements could be affected by the risks and uncertainties
involved in the Company's business. These risks and uncertainties include, but
are not limited to, the effect of economic and market conditions, the impact of
the cost containment efforts of third-party payors and the Company's ability to
obtain and maintain required licenses, as well as certain other risks described
above in this Item under "Competition" and "Government Regulation," and in Item
7 in "Management's Discussion and Analysis of Financial Condition and Results of
Operations." Subsequent written and oral forward looking statements attributable
to the Company or persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph and elsewhere in this
Form 10-K.
ITEM 2. PROPERTIES
The Company's offices, pharmacies and warehousing are located in a
31,000 square-foot building (the "Facility") in the Bronx. The Company is lessee
under a ten-year capital lease dated as of April 1, 1989 with the New York City
Industrial Development Agency (the "IDA"), the lessor (the "Lease Agreement").
The IDA acquired the property in April 1989 by issuing an Industrial Development
Bond (the "Bond").
At the end of the term of the capital lease, April 1, 1999, the
Company, upon payment in full of the outstanding principal and interest on the
Bond, may purchase the Facility for one dollar plus any fees and expenses in
connection with the redemption of the Bond. The Company also has the option to
purchase the Facility at any time during the term of the lease for the amount
13
<PAGE>
necessary to redeem the outstanding Bond in accordance with the Indenture, plus
all expenses of redemption and one dollar.
The Company believes the Facility is in good condition and is adequate
to meet its needs in Fiscal 1999.
As a result of the Company's recent acquisitions (see Item 1.
Description of Business), the Company also leases the space previously occupied
by Healix Healthcare, Inc. in Valhalla, New York, Long Island City, New York,
and West Milford, New Jersey; and ProHealthCare Infusion Services, Inc.,
Springfield, New Jersey. Each of these facilities is separately leased under
terms ranging from 1-5 years with payments averaging from $1200 to $13,000 per
month over the life of each lease. Alternative uses for the space previously
occupied by Healix in Valhalla are currently under consideration.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET
The Company's common stock, par value $.01 per share (the "Common
Stock") trades on the over-the-counter Bulletin Board under the symbol AHLT.U.
The following table sets forth, for the periods indicated, the high and
low closing bid prices for the Common Stock as reported by the NASDAQ Stock
Market Trading and Market Services Department. Such over-the-counter market
quotations reflect inter-dealer prices, without retail mark-up, markdown or
commission and do not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Fiscal 1998 Fiscal 1997
----------- -----------
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
Quarter ended June 30 3-3/8 1-5/8 2 1
Quarter ended September 30 3-1/4 1-1/2 2 1-1/8
Quarter ended December 31 2-3/8 3/4 1-3/8 1-1/2
Quarter ended March 31 2-11/16 1-1/4 3-1/16 1-11/16
</TABLE>
14
<PAGE>
The Company's 6% Redeemable Cumulative Convertible Preferred Stock is
subject to significant restrictions on sale and does not have a public trading
market.
NUMBER OF SHAREHOLDERS
Management has been advised by the Company's transfer agent that there
were 65 holders of record of the Common Stock as of June 23, 1998. Since most
holders of the Company's stock have placed their shares in street name, this
figure is much lower than the actual number of beneficial holders of common
stock, which is estimated to be approximately 300 stockholders.
DIVIDENDS
To date, the Company has not paid any cash dividends on the Common
Stock. The payment of dividends, if any, in the future is within the discretion
of the Board of Directors and will depend upon the Company's earnings, its
capital requirements and financial condition and other relevant factors. The
Board does not intend to declare any dividends on the Common Stock in the
foreseeable future, but instead intends to retain all earnings, if any, for use
in the Company's business operations.
The Company is obligated to pay annual dividends of $.12 per share on
its 1,350,000 outstanding shares of 6% Redeemable Cumulative Convertible
Preferred Stock. Such dividends accrue daily, are payable each June 1 and
December 1 and, at the election of the Company, may be paid in shares of Common
Stock valued in accordance with the terms of such stock. Dividends on the
Company's 6% Redeemable Cumulative Convertible Preferred Stock are payable in
preference and priority to any payment of any dividends on the Common Stock.
The Company satisfied its liability payable at June 1, 1997 and at
December 1, 1997 by the issuance of 45,556 and 35,354 shares of the Company's
Common Stock issued July 18, 1997 and January 15, 1998, respectively.
The Company satisfied its liability payable at June 1, 1996 and at
December 1, 1996 by the issuance of 52,856 and 104,509 shares of the Company's
Common Stock issued July 8, 1996 and April 11, 1997, respectively.
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data have been derived from the
consolidated financial statements of Accuhealth, Inc. and its subsidiaries for
the years ended March 31, 1998, 1997, 1996, 1995 and 1994. The year ended March
31, 1998 was audited and reported upon by Marcum & Kliegman LLP, while years
ended March 31, 1997, 1996 and 1995 were audited and reported upon by Ernst &
Young LLP, and should be read in conjunction with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and the notes thereto included elsewhere
in this Form 10-K. The Company has not declared or paid any cash dividends on
the Common Stock.
15
<PAGE>
<TABLE>
<CAPTION>
Statement of Operations Data:
- -----------------------------
Fiscal Year
-----------
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales $ 18,603,823 $ 16,369,376 $ 15,112,071 $ 15,468,402 $ 15,380,043
Gross profit 8,045,292 6,770,120 6,931,649 7,211,622 6,920,977
Selling, general and administrative expenses 7,359,663 6,146,783 7,104,529 6,913,959 7,599,214
Interest expense 596,905 496,606 605,452 635,848 270,833
Recovery related to pre-investigation
management off book cash practices -- -- -- 525,820 (454,065)
Debt surrendered in settlement of claims -- -- -- 488,500 --
Write off of merger related costs (294,832)
Income (loss) from continuing operations before
income taxes (206,108) 126,731 (778,332) 676,135 (1,403,135)
Income (loss) from continuing operations (206,108) 126,731 (778,332) 676,135 (1,358,651)
Discontinued operations -- -- -- (278,733) (1,187,055)
Income (loss) before extraordinary item (206,108) 126,731 (778,332) 397,402 (2,545,706)
Extraordinary gain on debt surrendered
in settlement of claims -- -- -- 60,000 --
Net income (loss) (206,108) 126,731 (778,332) 457,402 (2,545,706)
Net income (loss) applicable to common stockholders $ (368,108) $ (35,269) $ (982,168) $ 350,555 $ (2,545,706)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
Weighted average common stock outstanding
Basic 1,754,342 1,400,423 1,273,274 1,410,153 1,410,153
Diluted 1,754,342 1,400,423 1,273,274 1,506,566 1,506,566
Earning (loss) per share data
Basic $(0.21) $(0.03) $(0.77) $0.25 $(1.81)
Diluted $(0.21) $(0.03) $(0.77) $0.23 $(1.69)
Balance Sheet Data
- ------------------
Total assets $ 12,193,591 $ 8,500,165 $ 7,650,957 $ 7,294,898 $ 7,823,526
Long-term liabilities 974,386 974,543 488,352 694,628 1,586,394
Total liabilities 10,539,091 7,078,786 6,356,309 5,277,090 8,242,117
Convertible Preferred Stock -- -- -- 2,710,164 --
Stockholders' equity (deficiency) 1,654,500 1,421,379 1,294,648 (692,356) (418,591)
</TABLE>
16
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis should be read in conjunction
with the consolidated financial statements of the Company and related notes
included elsewhere in this Form 10-K.
RESULTS OF OPERATIONS
Fiscal Year Ended March 31, 1998 as Compared to Fiscal Year ended March 31, 1997
- --------------------------------------------------------------------------------
Net sales for Fiscal 1998 increased approximately $2,234,800 to
$18,603,800 from the $16,369,000 reported in Fiscal 1997. The increase was the
result of an increase of approximately $1,221,200, $767,700, $124,100 and
$121,400 in the Company's oral medication revenues, institutional pharmacy
business, infusion services and durable medical equipment revenues respectively.
The Company completed its acquisitions of PHCIS on July 1, 1997. Included in the
increase in sales for the year were sales contributed by PHCIS of $862,000 for
the nine month period July 1, 1997 through March 31, 1998.
Gross profits for Fiscal 1998 were approximately $8.0 million and were
43.2 % of total net sales as compared to approximately $6.8 million or 41.4% for
Fiscal 1997. The increase in the gross profit percentage was due primarily to a
higher gross profit margin on ProHealthCare's portion of the increase in the
sales and an increase in managed care sales which carry margins that are greater
than the Company's institutional pharmacy sales.
Selling, general and administrative expenses increased approximately
$1.2 million to $7.3 million or 39.2% of sales for 1998 from $6.1 million or
37.6% for sales for fiscal 1997. The increase was primarily due to increases in
salaries ($478,000), consulting ($110,000), legal settlements ($108,000),
building repair and maintenance ($29,000), rent ($54,000) and other
administrative expenses including depreciation and amortization ($197,000).
Included in these amounts is approximately $720,000, which was contributed by
ProHealthCare, Infusion Services, Inc. for the period July 1, 1997 through March
31, 1998. The Company incurred expenses of $294,832 related to the merger with
Healix Healthcare, Inc. and subsidiaries.
Interest expense in Fiscal 1998 was $596,905 as compared to $496,606 in
fiscal 1997.
Fiscal Year Ended March 31, 1997 as Compared to Fiscal Year Ended March 31, 1996
- --------------------------------------------------------------------------------
Net sales for Fiscal 1997 increased approximately $1,257,000 to
$16,369,000 from the $15,112,000 reported in Fiscal 1996. The increase was the
result of an increase of approximately $2,143,000 and $81,000 in the Company's
institutional pharmacy business and oral medication revenues, respectively,
offset partially by decreases in the Company's infusion services and durable
medical equipment revenues of $853,000 and $114,000, respectively.
17
<PAGE>
The revenues from infusion services were lower than the previous fiscal
year services partially as a result of the Company's marketing shift away from
treating a small number of high revenue patients, primarily HIV/AIDS Medicaid
patients, to increased numbers of lower revenue patients referred to the Company
via insurance companies and HMO's. The strategy derived from two trends: the
HIV/AIDS population stabilizing and the downward pressure on Medicaid
reimbursements for infusion therapy services.
Gross profits for Fiscal 1997 were approximately $6.8 million and were
41.4 % of total net sales as compared to approximately $6.9 million or 45.9% for
Fiscal 1996. The decrease in gross profits reflects an overall shift in the
Company's mix of business, including expanded institutional pharmacy business
which carries lower margins.
Selling, general and administrative expenses were approximately $6.1
million or 37.6% of net sales for Fiscal 1997 as compared to $7.1 million or
47.0% for Fiscal 1996. The decrease was principally the result of reductions in
professional fees ($283,000), marketing costs ($190,000), certain clinical and
administrative salaries ($159,000), and other administrative costs ($368,000).
Interest expense in Fiscal 1997 was $496,606 as compared to $605,452 in
fiscal 1996.
LIQUIDITY AND FINANCIAL CONDITION
As of March 31, 1998, the Company had a working capital deficit of
approximately $1,283,000.
The Company's cash provided by financing activities of approximately
$1,180,000 was primarily attributable to the net proceeds of approximately
$1,606,000 under the Company's revolving credit facility and term loan offset by
principal payments on capital leases.
Accounts receivable include amounts due from third party payors,
primarily governmental agencies (Medicare and Medicaid). At March 31, 1998,
gross Medicare and Medicaid receivables aggregated $3,450,785.
On April 28, 1994, the Company obtained a $2.5 million maximum
commitment working capital facility from Rosenthal and Rosenthal ("Rosenthal")
and used funds borrowed under that facility to reduce its indebtedness. Assets
of the Company including its receivables, inventories, equipment and fixtures
secure the loan. The Company's ability to use this credit facility is dependent
upon the level of its eligible receivables as defined in the Loan and Security
Agreement between the Company and Rosenthal (the "Loan and Security Agreement").
Pursuant to the terms of a Loan and Security Agreement with Rosenthal, the
Company granted Rosenthal warrants to purchase 70,000 shares of the Company's
common stock.
Effective February 1, 1996, the Company agreed to an amendment of the
Loan and Security Agreement. The amendment extended the agreement through April
28, 1997 and allowed the Company to borrow, under certain conditions and terms,
18
<PAGE>
up to $3,500,000 at an interest rate of prime plus 3 7/8%. In addition, the
Company granted Rosenthal warrants to purchase 30,000 shares of the Company's
common stock.
Effective February 1, 1997, the Company agreed to an amendment of the
Loan and Security Agreement. This amendment extends the agreement through April
1, 1998 and allows the Company to borrow, under certain conditions, up to
$4,000,000 in the form of a term loan of $500,000 at an interest rate of prime
plus 5%, and a working capital facility of $3,500,000 at an interest rate of
prime plus 2 7/8%. In addition, the expiration date of the 100,000 warrants was
amended to be the later of April 1, 2001 or thirty-six months following the last
day of any term to which the loan commitment has been extended and the exercise
price for all warrants was restated to $2.00 per share.
Effective April 3, 1998, the Company agreed to an amendment of the Loan
and Security Agreement. The amendment extended the agreement through April 1,
2000 and allows the Company to borrow, under certain conditions and terms, up to
$9 million under a revolving loan agreement at an interest rate of prime plus 1
1/2%, as well as an overdraft line of $1,000,000 at prime plus 3%. The amendment
also increased the term loan available to the Company to $750,000. In addition,
the Company granted Rosenthal warrants to purchase 50,000 shares of the
Company's common stock.
At its meeting of the Board of Directors on June 25, 1998, the Company
approved the issuance of 12% Cumulative Convertible Subordinated Notes in the
face amount of $6,250,000. As a further component of this financing, the
Company's current 6% Cumulative Convertible Preferred Stock will be converted to
common stock in Accuhealth at a 15% discount to the original conversion price of
$2.00. Accordingly, an additional 202,500 shares will be issued upon the
conversion of the 1,350,000 preferred shares currently outstanding.
The Company operates under cash flow pressure primarily due to
insufficient working capital. Management is formulating certain planned actions
to strengthen the Company's working capital position and generate sufficient
cash to meet its operating needs through March 31, 1998 and beyond. The plans
include, among other actions, increasing the Company's borrowing capacity under
its revolving credit facility (Note 4), issuing additional equity or long term
debt, obtaining better terms and financing from vendors and reducing corporate
expenses. No assurances can be made that management will be successful in
achieving its plans.
During the year ended March 31, 1998, the Company adopted the provision
of statements of accounting standards No. 128 Earnings per Share ("SFAS No.
128"). SFAS No. 128 eliminates the presentation of primary and fully diluted
earnings per share ("EPS") and requires presentation of basic and diluted EPS.
Basic EPS is computed by dividing income (loss) available to common stockholders
by the weighted-average number of common shares outstanding for the period.
Diluted EPS is computed by dividing the weighted average number of common shares
and common stock equivalents outstanding at year end. Common stock equivalents
have been excluded from the weighted-average shares for 1998, 1997, 1996, as
inclusion is anti-dilutive. Potentially diluted securities, which consist of
stock options and warrants, may be potentially diluted in the future. All prior
period EPS data has been restated to conform to the new pronouncement.
19
<PAGE>
Like any other company, advances and changes in available technology
can significantly affect the business and operations of the Company. For
example, a challenging problem exists as many computer systems worldwide do not
have the capability of recognizing the year 2000 or years thereafter. No easy
technological "quick fix" has yet been developed for this problem. The Company
is expending approximately $500,000 to assure that its computer systems are
reprogrammed in time to effectively deal with transactions in the year 2000 and
beyond. This "Year 2000 Computer Problem" creates risk for the Company from
unforeseen problems in its own computer systems and from third parties with whom
the Company deals on financial transactions which are primarily governmental
agencies (Medicare and Medicaid). Such failures of the Company and/or third
parties' computer systems could have a material impact on the Company's ability
to conduct its business.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and financial statement schedules are included in
the Consolidated Financial Statements, as a separate section of this Report, set
forth on pages F-1 through F-25, attached hereto, and found immediately
following the signature pages of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
At a meeting held on March 5, 1998, the Board of Directors of the
Company approved the engagement of Marcum & Kliegman LLP as its independent
auditors for the fiscal year ending March 31, 1998 to replace the firm of Ernst
& Young LLP ("E&Y"), who were dismissed as auditors of the Company effective
April 15, 1998. The audit committee of the Board of Directors approved the
change in auditors on March 25, 1998.
The reports of E&Y on the Company's financial statements for the past
two fiscal years did not contain an adverse opinion or a disclaimer of opinion
and were not qualified or modified as to uncertainty, audit scope, or accounting
principles, except that E&Y's audit report for fiscal year 1996 was modified
with regard to the Company's ability to continue as a going concern.
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended March 31, 1997, there were no disagreements
with E&Y on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope and procedures which, if not resolved to
the satisfaction of E&Y would have caused E&Y to make reference to the matter in
their report.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Listed below are the executive officers and directors of the Company at
June 23, 1998:
<TABLE>
<CAPTION>
Annual meeting
Officer or at which
Name Director Since Age Position Term will Expire
- ---- -------------- --- -------- ----------------
<S> <C> <C> <C>
E. Virgil Conway 1994 68 Director 1999
Glenn C. Davis 1994 49 President, Chief 2000
Executive Officer and
Director
Stanley Goldstein 1994 62 Chairman and Director 1998
Donald B. Louria, MD 1994 69 Director 2000
Sally Hernandez-Pinero 1994 45 Director 2000
Corbett A. Price 1994 48 Director 1999
Jeffrey S. Freed, M.D. 1998 53 Executive Vice President ---
- Strategy
Mary Comerford 1998 43 Senior Vice President -
Chief Operating Officer ---
Prisco DeMercurio 1997 47 Senior Vice President -
Finance, Chief Financial ---
Officer
</TABLE>
Set forth below are brief summaries of the business experience of the
persons who were directors as of June 23, 1998:
E. VIRGIL CONWAY chairs the Company's Audit and Stock Option Committees
and was elected a director on April 29, 1994. Mr. Conway is a member of the
Executive and Compensation and Nominations Committees. Since May 16, 1995, he
has served as Chairman of the Board of the Metropolitan Transportation
Administration of the City of New York and, from 1989 to 1996, he served as
Chairman of the Audit Committee of the City of New York. From 1992 until July
1995, Mr. Conway served as Chairman of the Financial Accounting Standards
Advisory Council. From 1968 through 1988, Mr. Conway served as Chairman and
Chief Executive Officer and as a director of the Seamen's Bank for Savings, FSB.
From 1986 until 1989, Mr. Conway also served as Vice Chairman of Seamen's
Corporation. From 1967 to 1968, Mr. Conway served as an Executive Vice President
and Trustee at the Manhattan Savings Bank. From 1964 to 1967, Mr. Conway served
as First Deputy Superintendent of Banks of the State of New York and Secretary
21
<PAGE>
of the New York State Banking Board. Mr. Conway specializes in financial
consulting. Mr. Conway serves on several corporate boards, including Union
Pacific Corporation, Con Edison, Urstadt-Biddle, a real estate investment trust,
Trism, Inc., a specialized trucking firm, and mutual funds managed by Phoenix
Home Life.
GLENN C. DAVIS became President of Accuhealth Home Care, Inc. in
December 1993, and became a director, Chief Executive Officer and President of
the Company on February 3, 1994. Mr. Davis is a member of the Executive
Committee. Mr. Davis served as the Treasurer of the Company from April 29, 1994
until August 5, 1994. From June 1993 until June 30, 1995, Mr. Davis was a
general partner of Capstone Management Company, an investment partnership
engaged principally in the initiation, acquisition and management of businesses
in the health care industry. Mr. Davis is a certified public accountant. From
1980 until January 1993, Mr. Davis was a partner with Coopers & Lybrand, an
international accounting and consulting firm.
STANLEY GOLDSTEIN was elected Chairman of the Company's Board of
Directors on April 29, 1994. Mr. Goldstein has been a private investor from 1981
until the present. Mr. Goldstein is Chairman of the Executive Committee. From
June 1993 until June 30, 1995, Mr. Goldstein was a general partner of Capstone
Management Company, an investment partnership engaged principally in initiation,
acquisition and management of businesses in the health care industry. Mr.
Goldstein is a certified public accountant. From 1964 until 1981, Mr. Goldstein
was the founder and Managing Partner of Goldstein Golub Kessler & Company,
Certified Public Accountants. Mr. Goldstein serves on the boards of directors of
Security Mutual Life Insurance Company and Security Equity Life Insurance
Company.
DONALD B. LOURIA, M.D., M.A.C.P. was elected a director on April 29,
1994. He is a member of the Professional Conduct Committee. Dr. Louria has been
a Professor and Chairman of the Department of Preventive Medicine and Community
Health of the University of Medicine and Dentistry of New Jersey-New Jersey
Medical School from July 1969 until the present. Over the same period, among
other appointments, Dr. Louria has served as a consultant in Infectious Diseases
to Memorial Hospital for Cancer and Allied Diseases and, from 1971 until the
present, has served on the Consultant Medical Staff in Infectious Diseases at
St. Michael's Medical Center in Newark, New Jersey.
SALLY B. HERNANDEZ-PINERO was elected a director on September 20, 1994.
She chairs the Compensation and Nominations Committee and also serves on the
Professional Conduct Committee. Ms. Hernandez-Pinero is a member of the law firm
of Kalkines Arky Zall & Bernstein, where she is primarily engaged in public
finance, housing and economic development projects, low income tax credit
syndications and intergovernmental relations. Ms. Hernandez-Pinero served as
Chairwoman of the New York City Housing Authority from February 1992 to January
1994. In that position she had direct operational responsibility for the
nation's largest public housing program with 325 developments housing over
600,000 people, a staff of 16,000 and a budget of $1.45 billion. From January
1990 to February 1992, Ms. Hernandez-Pinero was Deputy Mayor for Finance and
Economic Development, in which position she designed and supervised the
development and implementation of business, industrial and commercial
22
<PAGE>
development policies for the City of New York. From January 1988 to January 1990
she served as Commissioner/Chairwoman of the Board of Directors of the Financial
Services Corporation of New York City where she developed and implemented the
course of action and priorities for that agency's economic development programs.
Prior to January 1988, Ms. Hernandez-Pinero served as Deputy Borough President
of Manhattan, General Counsel to the State of New York Mortgage Agency, and as
an attorney with a number of community development and legal service
organizations. Ms. Hernandez-Pinero is a director of Con Edison Corporation and
the Dime Savings Bank and National Income Realty Trust.
CORBETT A. PRICE was elected a director on September 20, 1994. Mr.
Price is a member of the Professional Conduct and Audit Committees. He is the
Chairman and Chief Executive Officer of KURRON, a New York based health care
management company which Mr. Price founded in January 1990. KURRON specializes
in the rehabilitation of distressed hospitals and health care systems. Mr. Price
began his career in health care management in 1975 at the Hospital Corporation
of America, where he served as a Vice President from 1983 to 1989. As head of
Hospital Corporation of America's Mid-Atlantic Division, he directed the
operations of approximately twenty hospitals in four states and the District of
Columbia. Mr. Price has advised the governments of Mexico, Barbados and Jamaica
on health care delivery systems and facilities.
The Company has Audit, Compensation and Nominations, Executive,
Professional Conduct and Stock Options Committees. The Compensation and
Nominations Committee administers the Company's stock option plans.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely on a review of Forms 3, 4 and 5 (and amendments thereto)
furnished to the Company, and certain written representations received by it,
the Company is not aware of any person who, during the prior fiscal year, was a
director, officer or beneficial owner of more than 10% of its outstanding Common
Stock, during (or with respect to) the prior or (except as may have been
previously reported) previous fiscal year, who failed to file with the
Securities and Exchange Commission on a timely basis reports required by Section
16 (a) of the Securities Exchange Act of 1934, except that one Form 4 for Mr.
Corbett A. Price was inadvertently filed after the due date thereof, and two
Form 5s for Donald B. Louria, M.D. were inadvertently filed after the due dates
thereof.
ITEM 11. EXECUTIVE COMPENSATION
From April 1, 1994 through May 31, 1994, the Company paid directors who
were not officers of the Company $2,000 per meeting attended. In June 1994, the
Board of Directors established a policy of paying directors who are not officers
or consultants a fee of $6,000 per annum plus $1,000 per annum ($2,000 per annum
for the Chair) for each committee on which they serve. Messrs. Conway and Price,
Dr. Louria and Ms. Hernandez-Pinero are eligible for the foregoing fees. The
Company does not intend to pay any fee to officers for serving as directors.
Effective June 28, 1994, the Company entered into a Consulting Agreement with
23
<PAGE>
Mr. Goldstein for certain services to be rendered. Such consulting agreement
calls for a monthly consulting fee and expense reimbursement of $5,000.
The following table sets forth all compensation earned, awarded or paid
by the Company to its Chief Executive Officer for the fiscal year ended March
31, 1998. No other person who was a director, executive officer or employee at
any time during the fiscal year ended March 31, 1998, received salary and bonus
in excess of $100,000 during or attributable to such fiscal year.
<TABLE>
<CAPTION>
Summary Compensation Table
--------------------------
Annual Long Term
Compensation Compensation
------------ ------------
Name and All other
Principal Position Year Salary Bonus Compensation
- ------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
Glenn C. Davis FY1998 $250,000 $ 25,000 ---
President and Chief Executive FY1997 $200,000 --- ---
Officer FY1996 $219,229 --- $1,854
</TABLE>
EMPLOYMENT AGREEMENT
The Company renewed its employment agreement with its President and
Chief Executive Officer through May 2, 1998. Under the employment agreement,
the Company's President and Chief Executive Officer is entitled to an annual
salary at a rate of $250,000 and 25,000 restricted shares of the Company's
common stock. The agreement also provides for a severance payment equal to
150% of his annual compensation, including base salary and any initial bonus
("Annual Compensation"), at the date of termination if (i) his employment is
terminated by him due to a breach of the agreement by the Company, (ii) the
Company fails to offer to extend his employment for additional terms of one
year on the same terms; or (iii) his employment terminates due to disability.
If the employment is terminated due to his death, the severance payment is
equal to 50% of his Annual Compensation at the date of death. The agreement
further provides that, in the event of a merger or sale of substantially all
of the assets of the Company, either the successor corporation or he may elect
to terminate his employment and that, if his employment is so terminated, he
will be entitled to receive a severance payment equal to 300% of his Annual
Compensation at the date of termination. In addition, the agreement provides
that he will not compete with the Company for 18 months after a termination of
his employment, except that, if such termination is by the Company for cause,
the non-competition period will be for 24 months.
At the Company's Board of Directors meeting on June 25, 1998, the
Company renewed its employment agreement with its President and Chief
Executive Officer through May 2, 2001, on substantially the same terms. The
Company's President and Chief Executive Officer is entitled to an annual
salary at a rate of $275,000 and 62,500 restricted shares of the Company's
common stock.
24
<PAGE>
STOCK OPTIONS
The following tables set forth information concerning exercisable
options during the fiscal year ended March 31, 1998, with respect to the
Common Stock. No stock options or stock appreciation rights were granted to
executive officers and no stock options or stock appreciation rights were
exercised by executive officers during such year.
Additional information required by this item is incorporated by
reference to the Company's Proxy Statement.
<TABLE>
<CAPTION>
FISCAL YEAR-END OPTION VALUES
Number of Shares Underlying Value of Unexercisable in-the-Money
Unexercised Options at fiscal Year-End Options At Fiscal Year-End
-------------------------------------- --------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Glenn C. Davis 120,000 80,000 (1) --
</TABLE>
(1) The option exercise price of such shares is $2.00 per share.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth existing stock ownership as of June 23,
1998, with respect to the beneficial ownership of shares of Common Stock by (i)
each person known by the Company to be the beneficial owner of 5% of more of the
outstanding shares of Common Stock, (ii) each nominee for director, (iii) each
director, and (iv) all officers and directors as a group, and the percentage of
the outstanding shares of Common Stock represented thereby.
25
<PAGE>
Amount of Nature
Name of of Beneficial
Beneficial Owner(1) Ownership(1) Percent of Class(2)
- ------------------- ------------ -------------------
Glenn C. Davis 336,947(3)(4)(5) 9.77
c/o Accuhealth, Inc.
1575 Bronx River Ave.
Bronx, New York, 10460
Stanley Goldstein 363,822(3)(4)(6) 10.50
c/o Accuhealth, Inc.
1575 Bronx River Ave.
Bronx, New York, 10460
E. Virgil Conway 25,885(11)(12) 1.43
Donald B. Louria, M.D. 26,500(7) *
Sally Hernandez-Pinero 9,000(12) *
Corbett A. Price 20,860(11) *
Special Situation Fund III, L.P. 628,529(8) 16.98
153 East 53 Street
New York, New York 10022
Penfield Partners, L.P. 289,439(9) 8.35
153 East 53 Street
New York, New York 10022
Special Situations Cayman Fund, L.P. 218,887(10) 6.41
CMNY Capital II, L.P. 309,251(13) 8.77
Jeffrey S. Freed, M.D. 461,883(15) 14.09
All Directors and Executive 795,514(14) 21.42
Officers as a Group (10 persons)
* Percentage of shares beneficially owned does not exceed 1% of the
class.
(1) As used herein, the term "beneficial ownership" with respect to a
security is defined by Rule 13d-3 under the Securities Exchange Act of
1934 as consisting of sole or shared voting power (including the power
to vote or direct the vote) and/or sole or shared investment power
26
<PAGE>
(including the power to dispose or direct the disposition of the
shares) with respect to the security through any contract, arrangement,
understanding, relationship or otherwise, including a right to acquire
such power(s) during the next 60 days. Unless otherwise noted,
beneficial ownership consists of sole ownership, voting and investment
rights.
(2) Percent of class assumes issuance of the shares subject to currently
exercisable options and shares issuable upon the conversion of 6%
Preferred Stock, as well as an equivalent increase in the number of
shares outstanding.
(3) Includes 120,000 and 110,000 shares issuable pursuant to currently
exercisable stock options for Davis and Goldstein, respectively.
(4) Includes shares owned of record and beneficially for the following:
Glenn C. Davis
Stanley Goldstein
(5) Includes 50,000 shares issuable upon conversion of 50,000 shares of 6%
Preferred Stock.
(6) Includes 78,000 shares issuable upon conversion of 78,000 shares of 6%
Preferred Stock.
(7) Includes 19,500 shares issuable pursuant to currently exercisable stock
options and 7,000 shares owned directly or in trust for the benefit of
members of Dr. Louria's family.
(8) Includes 203,529 shares owned of record and beneficially and 425,000
shares issuable upon conversion of 425,000 shares of 6% Preferred
Stock.
(9) Includes 101,939 shares owned of record and beneficially and 187,500
shares issuable upon conversion of 187,500 shares of 6% Preferred
Stock.
(10) Includes 81,387 shares owned of record and beneficially and 137,500
shares issuable upon conversion of 137,500 shares of 6% Preferred
Stock.
(11) Includes 16,860 shares owned of record and beneficially and 10,000
shares issuable upon conversion of 10,000 shares of 6% Preferred Stock.
(12) Includes 9,000 shares issuable pursuant to currently exercisable stock
options.
(13) Includes 59,251 shares owned of record and beneficially and 250,000
shares issuable upon conversion of 250,000 shares of 6% Preferred
Stock.
27
<PAGE>
(14) Includes 349,647 shares owned of record and beneficially, 266,334
shares issuable pursuant to currently exercisable stock options and
148,000 shares issuable upon conversion of 148,000 shares of 6%
Preferred Stock.
(15) Includes 461,883 shares issued pursuant to the Healix acquisition to
Jeffrey S. Freed, M.D..
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of June 28, 1994, the Company entered into a Consulting Agreement
with Stanley Goldstein, who is Chairman of the Board. Mr. Goldstein does not
receive compensation for services provided as a director of the Company during
the term of his consulting agreement.
Pursuant to such Consulting Agreement, Mr. Goldstein provides
consulting services to the Company in, among other areas, capital financing,
mergers and acquisitions. The Company has agreed to pay consulting fees to Mr.
Goldstein in the amount of $4,000 per month and an office expense reimbursement
of $1,000 per month for use of Mr. Goldstein's offices and support facilities in
the performance of his consulting duties. In further consideration of Mr.
Goldstein's consulting services, the Company granted to Mr. Goldstein an option
to purchase 150,000 shares of Common Stock at prices ranging from $1.625 to
$3.00 per share.
28
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1), (a)(2) See the separate section of this report following Item 14 for a
list of financial statements and schedules filed herewith.
(a)(3) Exhibits as required by Item 601 of Regulation S-K are listed in Item
14(c) below.
(b) The Company did not file any Reports on Form 8-K during the last
quarter of the fiscal year ended March 31, 1998.
(c) EXHIBITS
3.1 Registrant's Articles of Incorporation, as amended (incorporated herein
by reference to Exhibit 3 (I) to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994)
3.2 Registrant's By-laws, as amended (incorporated herein by reference to
Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994)
10.01 Loan and Security Agreement dated April 28, 1994 between Rosenthal &
Rosenthal, Inc. and the Registrant, Midview Drug, Inc., Accuhealth Home
Care, Inc. and Citiview Drug Co., Inc. (the "Loan and Security
Agreement") (incorporated herein by reference to Exhibit 10 (l) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended March
31, 1994)
10.02 Amendment No. 1 to the Loan and Security Agreement, dated as of
February 1, 1996
10.03 Amendment No. 2 to the Loan and Security Agreement, dated as of
February 1, 1997.
10.04 Amendment No. 3 to the Loan and Security Agreement dated as of July 30,
1997.
10.05 Amendment No. 4 to the Loan and Security Agreement dated as of April 9,
1998.
10.06 Warrant dated April 28, 1994 for the Registrant's Common Stock issued
by the Registrant to Rosenthal & Rosenthal, Inc. (incorporated herein
by reference to Exhibit 10(m) to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994)
29
<PAGE>
10.07 Employment Agreement dated May 2, 1994 between Glenn C. Davis and the
Registrant (incorporated herein by reference to Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
10.08 Consulting Agreement dated June 28, 1994 between Donald B. Louria, M.D.
and the Registrant (incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
10.09 Consulting Agreement dated June 28, 1994 between Stanley Goldstein and
the Registrant (incorporated herein by reference to Exhibit 10.16 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.10 Amended and Restated 1988 Stock Option Plan (incorporated herein by
reference to Exhibit B to the Registrant's 1994 Notice of Annual
Meeting and Proxy Statement)
10.11 Option Agreement dated September 20, 1994 between Corbett A. Price and
the Registrant (incorporated herein by reference to Exhibit 10.19 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.12 Option Agreement dated September 20, 1994 between E. Virgil Conway and
the Registrant (incorporated herein by reference to Exhibit 10.21 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.13 Option Agreement dated September 20, 1994 between Sally
Hernandez-Pinero and the Registrant (incorporated herein by reference
to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the
year ended March 31, 1995)
10.14 Option Agreement dated June 28, 1994 between Glenn C. Davis and the
Registrant (incorporated herein by reference to Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
10.15 Option Agreement dated June 28, 1994 between Stanley Goldstein and the
Registrant (incorporated herein by reference to Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
30
<PAGE>
10.16 Option Agreement dated June 28, 1994 between Donald B. Louria, M.D. and
the Registrant (incorporated herein by reference to Exhibit 10.27 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.17 Agreement and Plan of Merger dated as of March 14, 1997 among
Accuhealth, Inc., ACH Acquiring Corp., ProHealthCare, Inc.,
ProHealthCare Infusion Services, Inc., Thomas Laurita and David Brian
Cohen.
10.18 Agreement and Plan of Merger, dated as of April 9, 1998, among
Accuhealth, Inc., HHI Acquiring Corp., Healix HealthCare, Inc., Linda
Barkan, Chaim Charytan, Mary Comerford, Jeffrey S. Freed, Donald
Giaquinto, Robert Giaquinto, Robert Labra, Kathleen P. O'Brien McDonald
and Arthur Schwacke, Jr. (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated April 30, 1998).
10.19 Registration Rights Agreement between Accuhealth, Inc. and Robert M.
GiaQunito.
10.20 Registration Rights Agreement between Accuhealth, Inc. and Jeffrey S.
Freed, M.D.
10.21 Registration Rights Agreement between Accuhealth, Inc. and Linda
Barkan.
11 Statement re Computation of Per-Share Earnings
15.1 Letter from Ernst & Young LLP, dated April 23, 1998, regarding change
in certifying accountant (incorporated by reference to Exhibit 16 to
the Registrant's Current Report on Form 8-K/A, dated April 23, 1998).
21 Subsidiaries of the Registrant
27 Article 5 - Financial Data Schedule
31
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ACCUHEALTH, INC.
Date: June 30, 1998 By: /s/ GLENN C. DAVIS
---------------------------------------------
Glenn C. Davis
President and
Chief Executive Officer
Date: June 30, 1998 By: /s/ PRISCO J. DEMERCURIO
---------------------------------------------
Prisco J. DeMercurio
Senior Vice President - Finance
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date: June 30, 1998 By: /s/ STANLEY GOLDSTEIN
----------------------------------------
Stanley Goldstein,
Chairman of the Board of Directors
Date: June 30, 1998 By: /s/ GLENN C. DAVIS
----------------------------------------
Glenn C. Davis,
Chief Executive Officer,
President and Director
Date: June 30, 1998 By: /s/ E. VIRGIL CONWAY
----------------------------------------
E. Virgil Conway, Director
Date: June 30, 1998 By: /s/ DONALD B. LOURIA
----------------------------------------
Donald B. Louria, M.D., Director
Date: June 30, 1998 By: /s/ SALLY HERNANDEZ-PINERO
----------------------------------------
Sally Hernandez-Pinero, Director
Date: June 30, 1998 By: /s/ CORBETT A. PRICE
----------------------------------------
Corbett A. Price, Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
32
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page
----
Reports of Independent Auditors F - 2, 3
Consolidated Balance Sheets at
March 31, 1998 and March 31, 1997 F - 4
Consolidated Statements of Operations for
the Years Ended March 31, 1998, 1997 and 1996 F - 5
Consolidated Statements of Stockholders'
Equity for the Years Ended March 31, 1998, 1997
and 1996 F - 6, 7
Consolidated Statements of Cash Flows for
the Years Ended March 31, 1998, 1997 and 1996 F - 8
Notes to Consolidated Financial Statements F - 9 - 25
FINANCIAL STATEMENT SCHEDULES
II. Valuation and Qualifying Accounts F - 26
All other schedules for which provision is made in the applicable
accounting regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and,
therefore, have been omitted.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
of Accuhealth, Inc.
We have audited the accompanying consolidated balance sheet of Accuhealth, Inc.
and subsidiaries as of March 31, 1998, and the related consolidated statements
of operations, stockholders' equity, and cash flows for the year then ended. Our
audit also included the financial statement schedule listed in the index at item
14(a). These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Accuhealth, Inc. as
of March 31, 1998, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
June 25, 1998 except for note (13c)
as to which the date is July 9, 1998.
MARCUM & KLIEGMAN LLP
New York, New York
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Accuhealth, Inc.
We have audited the accompanying consolidated balance sheet of Accuhealth, Inc.
and subsidiaries as of March 31, 1997 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the two years in the
period ended March 31, 1997. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Accuhealth, Inc. and subsidiaries at March 31, 1997 and the consolidated results
of their operations and their cash flows for each of the two years in the period
ended March 31, 1997 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
ERNEST & YOUNG LLP
New York, New York
June 16, 1997
F-3
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS March 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Current Assets:
Cash $ 166,624 $ 31,548
Accounts receivable, less allowance for doubtful
accounts of $362,352 in 1998 and $317,000 in 1997 6,812,210 5,279,369
Inventories 1,196,207 665,335
Prepaid expenses and other current assets 106,682 191,323
------------ ------------
Total Current Assets 8,281,723 6,167,575
Revenue producing equipment, net 493,365 485,305
Fixed assets, net 1,788,276 1,659,056
Goodwill, net 1,152,798 --
Other 477,429 188,229
------------ ------------
Total Assets 12,193,591 8,500,165
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - revolving credit facility 4,388,977 2,782,677
Notes payable - other 470,325 224,869
Accounts payable 2,797,544 1,801,120
Accrued expenses and other current liabilities 1,660,468 1,128,828
Current portion of capital lease - Facility 71,500 53,625
Current portion of other capital lease obligations 175,891 113,124
------------ ------------
Total Current Liabilities 9,564,705 6,104,243
Notes payable - term loan 500,000 500,000
Notes payable - other 51,597 101,031
Capital lease - Facility, less current portion 232,375 303,875
Other capital lease obligations, less current portion 190,414 69,637
------------ ------------
Total Liabilities 10,539,091 7,078,786
Commitments and Contingencies (See Notes 6 and 8)
Stockholders' Equity:
Preferred stock, $.01 par value; authorized 3,650,000 shares;
no shares issued and outstanding
6% Redeemable cumulative convertible preferred stock $.01
par value; $2,754,000 liquidation preference, authorized
issued and outstanding 1,350,000 shares 13,500 13,500
Common stock $0.1 par value; authorized 15,000,000 shares;
2,109,122 (1998) and 1,787,598 (1997) shares issued and
outstanding 21,092 17,876
Additional paid-in capital 6,766,377 6,168,364
(Deficit) (4,522,149) (4,154,041)
------------ ------------
2,278,820 2,045,699
Less treasury stock (308,004 shares) at cost 624,320 624,320
------------ ------------
Total Stockholders' Equity 1,654,500 1,421,379
------------ ------------
Total Liabilities and Stockholders' Equity $ 12,193,591 $ 8,500,165
============ ============
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales $ 18,603,823 $ 16,369,376 $ 15,112,071
Cost of goods sold 10,558,531 9,599,256 8,180,422
------------ ------------ ------------
Gross profit 8,045,292 6,770,120 6,931,649
Selling, general and administrative expenses 7,359,663 6,146,783 7,104,529
Merger related costs 294,832 -- --
------------ ------------ ------------
Operating income (loss) 390,797 623,337 (172,880)
Other Expense:
Interest expense (596,905) (496,606) (605,452)
------------ ------------ ------------
Net income (loss) (206,108) 126,731 (778,332)
------------ ------------ ------------
Redeemable preferred stock dividends
and accretion (162,000) (162,000) (203,836)
------------ ------------ ------------
Net income (loss) applicable to common
stockholders $ (368,108) $ (35,269) $ (982,168)
============ ============ ============
Weighted average common stock outstanding:
Basic 1,754,342 1,400,423 1,273,274
Diluted 1,754,342 1,400,423 1,273,274
Earning (loss) per share data:
Basic $(0.21) $(0.03) $(0.77)
Diluted $(0.21) $(0.03) $(0.77)
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------- --------- --------- --------- ---------------
Number $.01 Number $.01 Additional
of Shares Par Value of Shares Par Value Paid-In Capital
--------- --------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1995 -- -- 1,550,000 $ 15,500 $ 3,053,068
Reclassification of redeemable
preferred stock 1,325,000 $ 13,250 2,739,282
Sale of preferred stock 25,000 250 62,250
Preferred stock dividends paid
with common stock - September 28, 1995 25,440 254 72,886
Preferred stock dividends paid
with common stock - May 7, 1996 54,793 548 80,452
Accretion of redeemable preferred stock
and preferred stock dividends accrued
Net loss
--------- --------- --------- -------- -----------
Balance, March 31, 1996 1,350,000 13,500 1,630,233 16,302 6,007,938
Preferred stock dividends paid 52,856 529 80,471
with common stock - July 8, 1996
Preferred stock dividends paid 104,509 1,045 79,955
with common stock- April 11, 1997
Net Income
--------- --------- --------- -------- -----------
Balance, March 31, 1997 1,350,000 13,500 1,787,598 17,876 6,168,364
Shares issued to ProHealthCare Infusion
Services, Inc., upon acquisition July 1,1997 300,000 3,000 859,500
Preferred stock dividends paid
with common stock, July 18, 1997 45,556 456 80,544
Preferred stock dividends paid
with common stock, January 15, 1998 35,354 354 80,646
Redemption of shares issued to ProHealthCare
Infusion Services, Inc. upon acquisition. (59,386) (594) (118,177)
Adjust of ProHealhCare Infusion Services, Inc.
Purchase Price (304,500)
Net Income (Loss) -- -- -- -- --
--------- --------- --------- -------- -----------
Balance, March 31, 1998 1,350,000 $ 13,500 2,109,122 $ 21,092 $ 6,766,377
========= ========= ========= ======== ===========
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
Treasury Stock
------------ --------- --------- ----------
Number
Deficit of Shares Cost Equity
<S> <C> <C> <C> <C>
Balance, March 31, 1995 $ (3,136,604)(308,004) $(624,320) $ (692,356)
Reclassification of redeemable
preferred stock 2,752,532
Sale of preferred stock 62,500
Preferred stock dividends paid
with common stock - September 28, 1995 (26,468) 46,672
Preferred stock dividends paid
with common stock - May 7, 1996 (81,000) --
Accretion of redeemable preferred stock
and preferred stock dividends accrued (96,368) (96,368)
Net loss (778,332) (778,332)
------------ ------- --------- ----------
Balance, March 31, 1996 (4,118,772)(308,004) (624,320) 1,294,648
Preferred stock dividends paid (81,000) --
with common stock - July 8, 1996
Preferred stock dividends paid (81,000) --
with common stock- April 11, 1997
Net Income 126,731 126,731
------------ ------- --------- ----------
Balance, March 31, 1997 (4,154,041)(308,004) (624,320) 1,421,379
Shares issued to ProHealthCare Infusion
Services, Inc., upon acquisition July 1,1997 862,500
Preferred stock dividends paid
with common stock, July 18, 1997 (81,000)
Preferred stock dividends paid
with common stock, January 15, 1998 (81,000)
Redemption of shares issued to ProHealthCare
Infusion Services, Inc. upon acquisition. (118,771)
Adjust of ProHealhCare Infusion Services, Inc.
Purchase Price (304,500)
Net Income (Loss) (206,108) -- -- (206,108)
------------ ------- --------- ----------
Balance, March 31, 1998 $ (4,522,149) 308,004 $(624,320) $1,654,500
============ ======= ========= ==========
</TABLE>
F-7
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (206,108) $ 126,731 $ (778,332)
Adjustments to reconcile net income (loss) to net cash used
in operating activities:
Amortization of financing costs 12,462 7,688 142,251
Depreciation and amortization 478,530 343,761 410,354
Write off of Revenue Producing Equipment -- 53,376
Changes in operating assets and liabilities:
Accounts receivable (1,293,416) (819,676) (795,446)
Inventories (24,778) (43,497) (76,279)
Prepaid expenses and other current assets 84,641 (88,209) (23,040)
Other assets (301,662) (4,297) (49,530)
Accounts payable 94,130 288,284 225,260
Notes payable, other -- -- (248,373)
Accrued expenses and other current liabilities 274,640 (249,594) 103,466
----------- ----------- -----------
Cash used in operating activities (881,561) (438,809) (1,036,293)
----------- ----------- -----------
INVESTING ACTIVITIES
Notes receivable -- 82,000
Purchase of fixed assets and revenue producing equipment (185,838) (11,295) (32,629)
Cash acquired in connection with acquisition 22,661 -- --
----------- ----------- -----------
Cash provided by (used in) investing activities (163,177) (11,295) 49,371
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from sale of redeemable convertible preferred shares -- 62,500
Proceeds from note payable - revolving credit facility, net of
payments 1,606,300 369,285 916,227
Proceed from notes payable - term loan -- 500,000 --
Notes payable - other (246,627) 31,302 395,565
Principal payments on capital lease - facility (53,625) (89,375) (71,500)
Payments on other capital lease obligations (126,234) (332,254) (271,261)
Due to prior officers -- -- (189,222)
----------- ----------- -----------
Cash provided by financing activities 1,179,814 478,958 842,309
----------- ----------- -----------
Net increase (decrease) in cash 135,076 28,854 (144,613)
Cash at beginning of period 31,548 2,694 147,307
----------- ----------- -----------
Cash at end of period $ 166,624 $ 31,548 $ 2,694
=========== =========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ 597,000 $ 500,000 $ 613,000
=========== =========== ===========
Income taxes paid -- $ -- $ -- $ --
=========== =========== ===========
Noncash investing and financing activities:
Additions to capital leases and notes payable $ 752,426 $ 48,000 $ 212,000
Goodwill recorded pursuant to acquisition $ 1,208,449
Redemption of common shares $ (118,771)
The Company acquired the following noncash assets
and liabilities in connection with its acquisition
of ProHealthCare Infusion Services Inc:
Accounts Receivable $ 658,196
Inventory 63,446
Property and Equipment 64,542
Accounts Payable (902,294)
-----------
Total $ (116,110)
===========
See notes to consolidated financial statements.
</TABLE>
F-8
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Accuhealth Inc., together with its subsidiaries (collectively, the
"Company"), provides comprehensive home health care services, including
administration of a wide array of infusion therapies, sales of oral
medications and sales and rentals of durable medical equipment and
related supplies. The Company operates throughout the New York, New
Jersey and Connecticut metropolitan area.
BASIS OF PREPARATION
The consolidated financial statements include the accounts of
Accuhealth, Inc. and its subsidiaries, all of which are wholly owned.
Significant intercompany accounts and transactions have been eliminated
in consolidation.
Management is formulating certain planned actions to strengthen the
Company's working capital position and generate sufficient cash to meet
its operating needs through March 31, 1998 and beyond. The plans
include, among other actions, increasing the Company's borrowing
capacity under its revolving credit facility (Note 4), issuing
additional equity or long term debt, obtaining better terms and
financing from vendors (Note 13) and reducing corporate expenses. No
assurances can be made that management will be successful in achieving
its plans.
INVENTORIES
Inventories consist of over-the-counter and prescription drugs,
infusion products and supplies, and home health care equipment and
supplies and are priced at the lower of cost or market using the
first-in, first-out ("FIFO") method.
CONTRACTUAL ALLOWANCES
Certain prescription pharmaceutical sales, medical equipment and supply
revenues are recorded at the Company's established rates and reduced by
estimated contractual allowances pursuant to third-party reimbursement
arrangements.
GOODWILL
Goodwill in connection with the acquisition of ProHealthCare Infusion
Services, Inc. is being amortized on a straight-line basis over a
fifteen-year period. Amortization of goodwill charged to operations for
the year ended March 31, 1998 amounted to $55,651. (Note 12)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" requires that the Company disclose
estimated fair values of financial instruments. The carrying amounts
reported in the statement of financial position for current assets and
current liabilities qualifying as financial instruments is a reasonable
estimate of fair value. The fair value of long-term debt is estimated
to approximate fair market value based on the current rates offered to
the Company for debt of the same remaining maturities.
F-9
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
MERGER RELATED COSTS
Merger transaction costs related to the Healix Healthcare, Inc. and
subsidiaries merger consists of fees for attorneys, accountants,
financial printing and other expenses directly related to the merger.
The Company recorded expenses incurred of $294,832 related to this
merger.
FIXED ASSETS AND REVENUE PRODUCING EQUIPMENT
Fixed assets and revenue producing equipment are stated at cost.
Depreciation is computed principally by the straight-line method over
the estimated useful lives of the assets and for revenue producing
equipment and leasehold improvements, over the shorter of the estimated
useful lives or the term of the related leases.
EARNINGS PER SHARE
During the year ended March 31, 1998, the Company adopted the provision
of statements of accounting standards No. 128 Earnings per Share ("SFAS
No. 128"). SFAS No. 128 eliminates the presentation of primary and
fully diluted earnings per share ("EPS") and requires presentation of
basic and diluted EPS. Basic EPS is computed by dividing income (loss)
available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS is computed by
dividing the weighted average number of common shares and common stock
equivalents outstanding at year end. Common stock equivalents have been
excluded from the weighted-average shares for 1998, 1997 and 1996, as
inclusion is anti-dilutive. Potentially diluted securities, which
consist of stock options and warrants, may be potentially diluted in
the future. All prior period EPS data has been restated to conform to
the new pronouncement.
INCOME TAXES
The Company files consolidated Federal, combined New York State and
combined New York City income tax returns. The Company's method of
accounting for income taxes is the liability method required by FASB
Statement No. 109 "Accounting for Income Taxes."
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
CASH EQUIVALENTS
The Company considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
At March 31, 1998 and 1997, the Company had no cash equivalents.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amount of revenue and
expenses during the reporting period. Actual results could differ from
those estimates.
LONG-LIVED ASSETS
In 1998, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, ACCOUNTING FOR IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. In accordance with
SFAS No. 121, the carrying values of long-lived assets are periodically
reviewed by the Company and impairments are recognized if the expected
future operating non-discounted cash flows derived from an asset are
less than its carrying value.
F-10
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONCENTRATIONS OF CREDIT RISK
Concentrations of credit risk with respect to trade accounts receivable
include amounts due from third party payers, primarily governmental
agencies (Medicare and Medicaid). At March 31, 1998 and 1997, gross
Medicare and Medicaid receivables aggregated $3,450,785 and $2,415,732,
respectively.
Laws and regulations governing the Medicare and Medicaid programs are
complex and subject to interpretation for which action for
noncompliance includes fines, penalties, and exclusion from the
Medicare and Medicaid programs. The Company believes that it is in
compliance with all applicable laws and regulations.
The Company's revenues from one customer accounted for 18%, 19% and 16%
of the Company's net sales for the years ended March 31, 1998, 1997 and
1996, respectively. At March 31, 1998, 1997 and 1996, 12%, 20% and 22%,
respectively, of net accounts receivable was due from this customer.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"). SFAS 123 is effective for
fiscal years beginning after December 31, 1995 and prescribes
accounting and reporting standards for all stock-based compensation
plans, including employee stock options, restricted stock, employee
stock purchase plans and stock appreciation rights. SFAS 123 requires
compensation expense to be recorded (i) using the new fair value method
or (ii) using existing accounting rules prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25") and related interpretations with pro forma
disclosure of what net income and earnings per share would have been
had the Company adopted the new fair value method. The Company intends
to continue to account for its stock based compensation plans in
accordance with the provisions of APB 25.
EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued two new
disclosure standards.
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"),
REPORTING COMPREHENSIVE INCOME, establishes standards for reporting and
display of comprehensive income, its components and accumulated
balances. Comprehensive income is defined to include all changes in
equity except those resulting from investments by owners and
distributions to owners. Among other disclosures, SFAS No. 130 requires
that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported
in a financial statement that is displayed with the same prominence as
other financial statements.
F-11
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION,
which supersedes SFAS No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A
BUSINESS ENTERPRISE, establishes standards for the way that public
enterprises report information about operating segments in annual
financial statements and requires reporting of selected information
about operating segments in interim financial statements regarding
products and services, geographic areas and major customers. SFAS No.
131 defines operating segments as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to
allocate resources and in assessing performance.
Both of these new standards are effective for financial statements for
periods beginning after December 15, 1997 and require comparative
information for earlier years to be restated. The Company's results of
operations and financial position will be unaffected by implementation
of these new standards.
In February 1998, the Financial Accounting Standards Board issued
statement of Financial Accounting Standards No. 132 ("SFAS No. 132"),
EMPLOYERS' DISCLOSURES ABOUT PENSIONS AND OTHER POSTRETIREMENT
BENEFITS, which standardizes the disclosure requirements for pensions
and other postretirement benefits. The adoption of SFAS No. 132 in 1998
is not expected to materially impact the Company's current disclosures.
2. REVENUE PRODUCING EQUIPMENT, NET
The following summarizes the Company's investment in revenue producing
equipment:
<TABLE>
<CAPTION>
March 31,
------------------------------- Estimated
1998 1997 Useful Lives
-----------------------------------------------
<S> <C> <C> <C>
Revenue producing
Equipment primarily under capital lease. $ 2,145,723 $1,957,661 3-5 years
Less accumulated depreciation
and amortization........................ 1,652,358 1,472,356
----------- ----------
$ 493,365 $ 485,305
=========== ==========
</TABLE>
F-12
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
3. FIXED ASSETS
<TABLE>
<CAPTION>
March 31,
------------------------------- Estimated
1998 1997 Useful Lives
-----------------------------------------------
<S> <C> <C> <C>
Land under capital lease.................. $ 136,277 $ 136,277
Building under capital lease.............. 1,226,498 1,226,498 40 years
Equipment, furniture and fixtures......... 1,008,357 816,078 5-10 years
Leasehold improvements.................... 3,838 3,838 10-15 years
Equipment, furniture and fixture
under capital leases.................... 275,127 164,953 5-10 years
Building improvements..................... 292,956 292,956 40 years
----------- ----------
2,943,053 2,640,600
Less accumulated depreciation and
amortization, including $432,731 in 1998
and $399,740 in 1997 attributable to
assets under capital leases............. 1,154,777 981,544
----------- ----------
$ 1,788,276 $1,659,056
=========== ==========
</TABLE>
4. NOTES PAYABLE AND LONG-TERM DEBT
NOTES PAYABLE - OTHER
The Company's other notes which arose in connection with the purchase of
inventories are as follows:
(A) The Company converted a portion of its accounts payable into a notes
payable to trade creditors in the principal amount aggregating
$785,094. These notes are payable in monthly installments of
approximately $1,500 to $8,000 with interest rates ranging from 8.5% to
14.5%. The outstanding principal balance at March 31, 1998 was
$465,726.
(B) In February 1997, the Company reached a settlement with the City of New
York relating to an audit of General Corporation and Commercial Rent
taxes for the years 1990 through 1992. In accordance with this
settlement agreement, the outstanding principal balance at March 31,
1998 of $56,196 is payable in monthly installments of $1,976 which
includes interest at 10% per annum. A final balloon payment of $18,146
is due on March 1, 2000.
F-13
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The weighted average interest rate for notes payable-other was 11.7%, 12.51% and
10.94% for the years ended March 31, 1998, 1997 and 1996, respectively. The
average amount of notes payable-other outstanding for the years ended March 31,
1998 and 1997 was approximately $529,833 and $210,000, respectively. Notes
payable - other are principally short-term in nature. As such, fair value
approximates the carrying value.
NOTES PAYABLE - REVOLVING CREDIT FACILITY AND TERM LOAN
In April 1994, the Company entered into a Loan and Security Agreement (the
"Agreement") with Rosenthal and Rosenthal ("Rosenthal") to borrow, under certain
conditions and terms, up to $2,500,000 at an interest rate of prime plus 4-7/8%.
Borrowings under the Agreement are collateralized by certain assets of the
Company, including accounts receivables, inventories, equipment and fixtures.
The Company's ability to use this revolving credit facility is dependent upon
the level of its eligible receivables, as defined in the Agreement. In addition,
the Company granted Rosenthal warrants to purchase 70,000 shares of the
Company's common stock (see Note 9).
Effective February 1, 1996, the Company and Rosenthal amended the Loan and
Security Agreement ("Amendment No. 1"). Amendment No. 1 extended the Agreement
through April 28, 1997 and allowed the Company to borrow, under certain
conditions and terms up to $3,500,000 (based on eligible accounts receivable, as
defined) at an interest rate of prime plus 3-7/8%. Effective February 1, 1997,
the Company and Rosenthal amended the Loan and Security Agreement ("Amendment
No. 2") to extend the Agreement through April 1, 1998 and reduce the interest
rate to prime (8 1/2% at March 31, 1998) plus 2 7/8%. In addition, the Company
granted Rosenthal warrants to purchase an additional 30,000 shares of the
Company's common stock (see Note 9). Commencing April 28, 1996, the Company was
required to pay a facility fee of $35,000 per annum, which Amendment No. 2
increased to $40,000 per annum.
Amendment No. 2 also provided a $500,000 term loan to the Company due on April
1, 1998 with interest payable monthly at a rate of prime plus 5% (Note 13).
Effective April 3, 1998, the Company agreed to an amendment of the Loan and
Security Agreement. The amendment extended the agreement through April 1, 2000
and allows the Company to borrow, under certain conditions and terms, up to $9
million under a revolving loan agreement at an interest rate of prime plus 1
1/2%, as well as an overdraft line of $1,000,000 at prime plus 3%. The amendment
also increased the term loan available to the Company to $750,000. In addition,
the Company granted Rosenthal warrants to purchase 50,000 shares of the
Company's common stock.
The revolving credit facility and the term loan bear interest at variable market
rates and as such the carrying value approximates their fair value. The weighted
average interest rate, including the facility fee, for the years ended March 31,
1998, 1997 and 1996 was 13.1%, 13.14% and 17.8%, respectively. The amount
outstanding at March 31, 1998 and 1997 was $4,888,977 and $3,287,677
respectively.
F-14
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. CAPITAL LEASE OBLIGATIONS
The Company leases its principal offices and warehouse facility and certain
equipment, furniture and fixtures, rental equipment and leasehold improvements
under capital lease agreements which extend through April 2000.
CAPITAL LEASE-FACILITY
The Company occupies a pharmacy warehouse and office facility (the "Facility")
which was obtained under a ten-year lease (the "Lease Agreement") with the New
York City Industrial Development Agency (the "Agency") as lessor. The Agency
issued to National Westminster Bank, U.S.A. (now "Fleet") $1,072,500 principal
amount of its Industrial Development bonds (the "Bonds") pursuant to an
Indenture of Mortgage and Agreement dated April 1, 1989 (the "Indenture") which
created a lien on the facility. The Company also paid $227,500 in order for the
Agency to purchase the warehouse. This amount and other acquisition costs are
capitalized as land and building under capital lease (see Note 3).
At the end of the term of the lease, the Company may purchase the Facility for
one dollar so long as all terms and conditions of the lease have been met. The
Lease Agreement and Guaranty Agreement require the Company and its subsidiaries
to comply with certain covenants, including but not limited to, maximum debt to
worth ratio, maximum allowable losses and debt service coverage ratio. The
Company's non-compliance with the debt to worth ratio covenant was waived by
Fleet through April 1, 1999.
In lieu of rent the Company pays principal on the Bonds in quarterly
installments of $17,875, plus interest at the rate of prime (8 1/2% at March 31,
1998) plus 1%. A final balloon payment of $232,375 plus interest thereon is due
on April 1, 1999. Each of the Company's wholly owned subsidiaries has guaranteed
the Company's obligations under the lease. The Lease Agreement and Guaranty
Agreement also restrict the payment of cash dividends in any one year to an
aggregate amount not to exceed 25% of the Company's net income for the
immediately preceding year.
The obligation under capital lease-facility bears interest at variable market
rates and as such the carrying value approximates its fair value.
OTHER CAPITAL LEASES
The Company leases durable medical equipment and computers under capital lease
agreements which extend through March 31, 2001 with interest rates ranging from
6.50% to 16.71%.
F-15
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Future minimum cash payments under capital leases with initial or remaining
noncancellable lease terms in excess of one year are as follows:
Other
Capital Capital
Fiscal Year Lease Facility Leases
----------- -------------- -------
1999 $ 96,689 $213,139
2000 234,215 134,479
2001 -- 79,230
-------- --------
330,904 426,848
Less interest 27,029 60,543
-------- --------
Present value of net minimum obligations 303,875 366,305
Less current portion 71,500 175,891
-------- --------
Long term obligations at March 31, 1998 $232,375 $190,414
======== ========
6. CONTINGENCIES
The Company is not aware of any existing contingencies that would have
an adverse material effect on its consolidated financial position,
results of operations or cash flows.
7. 6% CONVERTIBLE PREFERRED STOCK
On December 14, 1994 and January 30, 1995, the Company completed the
sale at $2.00 per share, of 1,325,000 shares of redeemable convertible
preferred stock (Preferred Stock) with a 6% per annum cumulative
dividend. During the quarter ended December 31, 1995, the Company sold
at $2.50 per share, 25,000 additional shares of Preferred Stock to
certain officers and directors of the Company. The Preferred Stock is
convertible at any time at the option of the holder, subject to
antidilution adjustments, into 1,350,000 shares of common stock. The
Company has reserved 1,350,000 shares of common stock for such
conversion. At any time on or after December 31, 1995, subject to
certain conditions, such as the registration of the underlying common
stock under the Securities Act of 1933, compliance with the terms of
the Preferred Stock and any other agreement with the holders of the
Preferred Stock and the payment of all dividends that are accrued and
unpaid on the Preferred Stock as of the Redemption Date, the Company
may redeem all or any portion of the Preferred Stock then outstanding.
For each share that is called for redemption, the Company shall pay
$3.00 per share from December 31, 1995 through December 31, 1997 and
$4.00 per share on or after January 1, 1998. The holders of the
Preferred Stock are entitled to voting rights equivalent to that of the
common stock. The Preferred Stock is senior to the common stock in the
event of a liquidation of the Company. The liquidation preference is
$2.00 per share plus accrued and unpaid dividends.
F-16
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Preferred Stock was subject to mandatory redemption requirements of
up to $4.00 per share plus accrued dividends. As of June 16, 1995, the
6% Convertible Preferred shareholders agreed to modify their
stockholder agreements to negate the mandatory redemption requirements.
This modification eliminates the need for recognition of accretion
effective June 16, 1995, and results in the 6% Convertible Preferred
Shares being classified as equity rather than debt.
The Company is obligated to pay annual dividends of $.12 per share on
its 1,350,000 outstanding shares of Preferred Stock. Such dividends
accrue daily, are payable each June 1 and December 1 and, at the
election of the Company, may be paid in shares of Common Stock valued
in accordance with the terms of such stock. Dividends on the Company's
Preferred Stock are payable in preference and priority to any payment
of any dividends on the common stock.
The June 1, 1997 dividend was paid out in 45,556 shares of common stock
on July 18, 1997. The December 1, 1997 dividend was paid out in 35,354
shares of common stock on January 15, 1998. At March 31, 1998 and 1997
the Company accrued 54,000 in dividends on preferred stock.
8. COMMITMENTS
OPERATING LEASES
A vendor has a security interest in certain assets of the Company,
including accounts receivable, inventories, equipment and fixtures.
This security interest is subordinate and junior in all respects to the
Loan and Security Agreement.
RELATED PARTY TRANSACTIONS
A director has a consulting arrangement with the Company whereby he
receives $4,000 and an office expense reimbursement of $1,000 per
month.
EMPLOYMENT AGREEMENT
During the year, the Company modified its employment agreement with its
President and Chief Executive Officer through May 2, 1998. Under the
employment agreement, the Company's President and Chief Executive
Officer is entitled to an annual salary at a rate of $250,000 and
25,000 shares of the Company's common stock.
At the Company's Board of Directors meeting on June 25, 1998, the
Company renewed its employment agreement with its President and Chief
Executive Officer through May 2, 2001. Under the employment agreement,
the Company's President and Chief Executive Officer is entitled to an
annual salary at a rate of $275,000 and 62,500 shares of the Company's
common stock.
F-17
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. STOCK OPTIONS AND WARRANTS
In September 1988, the Company adopted, and in September 1994 amended,
the 1988 Stock Option Plan ("Stock Option Plan"), under which options
to purchase an aggregate maximum of 300,000 shares of the Company's
common stock may be granted. The Stock Option Plan is administered by
the Board of Directors, who are responsible for determining the
individuals who will be granted options, the number of shares to be
subject to each option, the option price per share, and the exercise
period of each option. The option price may not be less than the fair
market value of the Company's common stock. The fair market value is
defined in the Stock Option Plan to be the mean between the closing bid
and the closing asked prices for the common stock of the Company on the
date of grant. No option may have a term in excess of ten years. As to
any stockholder who owns 10% or more of the Company's common stock, the
option price per share will be no less than 110% of the fair market
value of the Company's common stock on the date of grant and such
options shall not have a term in excess of five years.
Pursuant to the Stock Option Plan, in February 1992 the former Board of
Directors granted a total of 54,000 options to purchase shares of the
Company's common stock to fifteen employees with an exercise price of
$4.75 per share. During the years ended March 31, 1998 and 1997, the
Board of Directors granted a total of 130,000 and 188,500 options,
respectively, to purchase shares of the Company's common stock to
employees with exercise prices ranging from $1.625 to $2.38 per share.
These options are exercisable in four equal annual increments.
Weighted
Average
Exercise Price
Shares Per Share
------- ---------
Outstanding March 31, 1996 117,500 $ 2.77
Granted 188,500 1.63
Cancelled (36,500) (2.31)
------- ------
Outstanding at March 31, 1997 269,500 $ 2.03
Granted 130,000 2.38
Cancelled (28,250) (1.99)
------- ------
Outstanding at March 31, 1998 371,250 $ 2.22
======= ======
Exercisable at March 31, 1996 1,000 $ 4.75
======= ======
Exercisable at March 31, 1997 32,500 $ 2.81
======= ======
Exercisable at March 31, 1998 66,450 $ 2.22
======= ======
F-18
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Separate from options issued under the Stock Option Plan, in June 1990,
the Company granted options to purchase 60,500 shares of common stock
at a price of $5.00 per share ("1990 Options"). The 1990 Options vest
and become exercisable ratably after the first, second and third
anniversaries of the grant date and expire after the fifth anniversary
of the grant date. At March 31, 1998, there were no outstanding 1990
options.
Separate from options issued under the Stock Option Plan, in February
1992, the Board of Directors granted to three former directors of the
Company a total of 60,000 options to purchase shares of the Company's
common stock ("1992 Options"). The exercise price of the 1992 Options
is the mean between the closing bid and the closing asked prices for
the common stock of the Company on the date of grant, which was $4.75.
These options may be exercised in 25% increments on the first, second,
third and fourth anniversary of the date of issue, and have a term of
ten years. There were 16,000 options outstanding as of March 31, 1998.
During fiscal 1995, separate from options issued under the Stock Option
Plan, the Company granted options to purchase 352,500 of common shares
to officers and directors ("1995 Options"). The exercise prices of the
1995 Options range from $1.65 to $3.00, with options to purchase
135,000 shares vesting immediately at $2.00 and the balance vesting
over five years from the date of issuance. During the fiscal years
ended March 31, 1998 and 1997, options to purchase an additional 7,500
shares and 79,167 shares, respectively, vested at $2.00 to $3.00 per
share. During fiscal 1998, 50,000 options were cancelled at $2.00 per
share. At March 31, 1998, 302,500 of these options remain unexercised
and outstanding.
In September 1995, separate from options issued under the Stock Option
Plan, the Company granted options to purchase 37,500 of the Company's
common shares to directors ("1996 Options"). The exercise price of the
1996 Options are $1.875 with the shares vesting over five years from
the date of issuance.
In June 1996, separate from options issued under the Stock Option Plan,
the Company granted options to purchase 37,500 of the Company's common
shares to directors ("1997 Options"). The exercise price of the 1997
Options are $1.625 with the shares vesting over five years from the
date of issuance.
In June 1996, separate from options issued under the Stock Option Plan,
the Company granted options to purchase 50,000 of the Company's common
shares to a director ("June 1996 Options"). The exercise price of the
June 1996 Options are $1.625 with the shares vesting over three years
from the date of issuance.
In October 1996, separate from options issued under the Stock Option
Plan, the Company granted options to purchase 20,000 of the Company's
common shares to employees ("1997 Options"). The options carry an
exercise price of $2.125 and vest over five years from the date of
issuance.
F-19
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In October 1997, separate from options issued under the Stock Option
Plan, the Company granted options to purchase 40,000 of the Company's
common shares to directors ("1998 Options"). The exercise price of the
1998 options are $2.125, with the shares vesting over five years from
the date of issuance.
During fiscal 1998, separate from options issued under the Stock Option
Plan, the Company granted options to purchase 70,000 of the Company's
common shares to employees ("1998 Options"), with exercise prices
ranging from $2.00 to $2.50. Fifty thousand of these options vest
ratably over 24 months from the date of issuance, with the balance
vesting in four equal increments beginning one year from date of
issuance.
As of March 31, 1998, an aggregate 1,058,750 shares of the Company's
common stock are reserved for issuance under the Stock Option Plan, and
the 1990, 1992, 1995, 1996, 1997 and 1998 Options. As of March 31, 1998
options to purchase 477,450 of such shares are exercisable.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of
SFAS 123. The fair market value for these options was estimated at the
date of grant using a Black-Scholes option-pricing model with the
following weighted-average assumptions for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------------
ASSUMPTION 1998 1997 1996
------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Risk-free rate 5.47% 6.2% 6.0%
Dividend yield 0% 0% 0%
Volatility factor of the expected market price of
the Company's common stock 0.949 1.7 1.7
Average life 5 years 4.9 years 4.8 years
</TABLE>
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of
traded options, and because changes in the subjective input assumptions
can materially affect the fair value estimate, in management's opinion,
the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
F-20
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the vesting period of the
options. The Company's pro forma information follows:
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
1998 1997 1996
-----------------------------------------
<S> <C> <C> <C>
Pro forma net loss $(595,295) $ (91,725) $(900,140)
Pro forma net loss per share (.34) (0.18) (.87)
</TABLE>
The weighted average fair value of options granted during the years
ended March 31, 1998, 1997 and 1996 were $1.86, $1.53 and $2.60,
respectively, for shares granted with an exercise price equal to
the market price on the date of grant. The weighted average fair
value of options granted during the years ended March 31, 1998 and
1996 for which the exercise price was less than the market price on
the date of grant was $1.92 and $1.83, respectively. The
weighted-average remaining contractual life of options exercisable
at March 31, 1998 is 3.3 years. The exercise prices range from
$1.63 to $4.75 for options outstanding as of March 31, 1998.
In April 1994, pursuant to the terms of a Loan and Security
Agreement (see Note 4), the Company granted to a financing company
warrants to purchase 70,000 shares of common stock at a price of
$2.00 per share. On February 1, 1996, the Company granted warrants
to purchase an additional 30,000 shares of common stock at $2.50
per share expiring on April 28, 1998. On February 1, 1997, the
expiration date of the 100,000 warrants was amended to be the later
of April 1, 2001 or thirty-six months following the last day of any
term to which the Loan Commitment has been extended and the
exercise price for all warrants was restated to $2.00 per share. As
of March 31, 1998, no warrants have been exercised and an aggregate
of 100,000 of the Company's common stock are reserved for issuance
under warrants.
10. EMPLOYEE SAVINGS AND PROFIT SHARING PLAN
In December 1986, the Company established a profit sharing and
thrift plan (the "Plan") covering substantially all eligible
employees. The Plan qualifies under Section 401(k) of the Internal
Revenue Code. The Company matches contributions equal to 50% (25%
effective July 1, 1996) of an eligible employee's pre-tax 401(k)
contribution. The matching contribution is limited for any part of
an eligible employee's pre-tax 401(k) contribution which exceeds
10% of their compensation.
At the discretion of the Board of Directors, the Company may also
make additional contributions dependent on profits each year for
the benefit of eligible employees under the Plan. The Company's
contribution to the Plan was approximately $25,638, $35,000 and
$47,000 for the years ended March 31, 1998, 1997 and 1996,
respectively.
In August 1995, the Company adopted a deferred compensation plan
for the Board of Directors (the "Directors Plan"). Under the
Directors Plan, a director may elect to defer receipt of all or a
specified portion of his or her compensation. As of March 31, 1998,
no director had elected to defer any portion of his or her
compensation.
F-21
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. INCOME TAXES
The Company had net deferred assets as follows:
<TABLE>
<CAPTION>
March 31,
----------------------------
1998 1997
----------- -----------
<S> <C> <C>
Federal, State and Local Net Operating $ 1,864,000 $ 1,726,000
Loss Carry forwards
Reserve for Doubtful Accounts 163,000 143,000
Business Credit Carry-forwards 52,000 52,000
Other 208,000 (16,000)
----------- -----------
Total 2,287,000 1,905,000
Less: Valuation Allowance 2,287,000 1,905,000
----------- -----------
Net Deferred Assets $ -0- $ -0-
=========== ===========
</TABLE>
The following is a reconciliation of the amount of the income tax
expense (benefit) attributable to continuing operations to the
amount of income tax that would result from applying the federal
rate to pretax income from continuing operations:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
(Benefit) (Benefit) (Benefit)
Percent Liability Percent Liability Percent Liability
------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income tax (benefit) at
statutory rate 34% (240,000) 34% $ 43,000 (34%) (265,000)
Permanent Differences 5.1% 6,500 -- --
Other decrease in valuation
allowances related to the
Federal portion of continuing
operations (39.1%) (49,500)
Loss producing no current benefit 34% 240,000 34% 265,000
------ -------- ----- -------- --- --------
-- $ -- -- $ -- -- $ --
====== ======== ===== ======== === ========
</TABLE>
At March 31, 1998, based upon tax returns filed and to be filed, the
Company has net operating loss carryforwards for U.S. tax purposes of
approximately $3,829,000 which will begin to expire in 2009 and a
general business tax credit carryforward of approximately $52,000
available to reduce future payments of federal income taxes. The
Company also has net operating loss carryforwards for New York State
and City tax purposes of approximately $4,782,000 and $4,779,000,
respectively.
F-22
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The valuation allowances increased $382,000 in 1998, decreased $63,000
in 1997 and increased $265,000 in 1996. These amounts are equal to the
changes in deferred tax assets to reflect the uncertainty as to
realization of such assets.
The availability of net operating loss carryforwards and general
business tax carryforwards is subject to various limitations under the
Internal Revenue Code of 1986 as amended (the "Code"). Although a
formal study has not been performed, it appears that as of March 31,
1995, the Company may have undergone an ownership change as defined by
Section 382 of the Code. The effect of such an ownership change is to
limit the amount of taxable income and tax liability that can be offset
in any tax year by the net operating loss and credit carryovers.
12. ACQUISITION
On July 1, 1997, the Company consummated its acquisition of
ProHealthCare Infusion Services, Inc. ("PHCIS") pursuant to an
agreement and plan of merger, dated as of March 14, 1997, by and among
the Company, ACH Acquiring Corp., a New Jersey corporation and a
subsidiary of the Company, PHCIS, ProHealthCare, Inc., a Delaware
corporation and the parent of PHCIS, Thomas Laurita and David Brian
Cohen (the "PHCIS Merger Agreement"). The Company has determined that
the initial merger consideration of 300,000 shares of Company Common
Stock will be decreased by 59,386 shares of Company Common Stock
pursuant to certain merger consideration adjustment provisions of the
PHCIS Merger Agreement. The aggregate purchase price for the
acquisition of ProHealthCare, Inc. stock was $1,208,449 which includes
the cost of the acquisition, direct costs and assumption of certain
liabilities of PHCIS. The acquisition has been accounted for by the
purchase method of accounting. Pro forma disclosure information in
connection with this transaction is not included because it is
considered immaterial as it relates to the Company's financial
statements in accordance with the regulations of the Securities and
Exchange Commission.
F-23
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. SUBSEQUENT EVENTS
A. MERGER WITH HEALIX HEALTHCARE, INC. On April 9, 1998, the
Company consummated its merger with Healix in a tax free
exchange of common stock, whereby the stockholders of Healix
received 1,488,850 shares of Accuhealth in exchange for all of
the issued and outstanding common shares of Healix. The merger
resulted in Healix Healthcare, Inc. becoming a wholly owned
subsidiary of Accuhealth, Inc. and will be accounted for as a
pooling of interests.
B. RENEWAL OF NOTES PAYABLE - revolving credit facility and term
loan. Effective April 3, 1998, the Company agreed to an
amendment of the Loan and Security Agreement. The amendment
extended the agreement through April 1, 2000 and allows the
Company to borrow, under certain conditions and terms, up to
$9 million under a revolving loan agreement at an interest
rate of prime plus 1 1/2%, as well as an overdraft line of
$1,000,000 at prime plus 3%. The amendment also increased the
term loan available to the Company to $750,000. In addition,
the Company granted Rosenthal warrants to purchase 50,000
shares of the Company's common stock.
C. ISSUANCE OF 12% CONVERTIBLE SUBORDINATED NOTES. At its meeting
of the Board of Directors on June 25, 1998, the Company
approved the issuance of 12% Cumulative Convertible
Subordinated Notes in the face amount of $6,250,000. As a
further component of this financing, the Company's current 6%
Cumulative Convertible Preferred Stock will be converted to
common stock in Accuhealth at a 15% discount to the original
conversion price of $2.00. Accordingly, an additional 202,500
shares will be issued upon the conversion of the 1,350,000
preferred shares currently outstanding.
D. ISSUANCE OF TRADE NOTE AND PURCHASE AGREEMENT. On April 1,
1998, the Company entered into a new two-year distribution
agreement with a full-line wholesale distributor of branded
and generic pharmaceuticals and over the counter medications.
The new agreement provides the Company with pricing and
payment terms that will reduce its drug purchase costs and
improve cash flow. The reduced prices being offered are
contingent on the Company buying 80% or more of its pharmacy
purchase requirements through the wholesaler. In addition to
the reduced pricing and extended payment terms, the Company
entered into an agreement whereby the initial $300,000 of the
F-24
<PAGE>
ACCUHEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
purchases from this distributor would be in the form of a
promissory note payable on demand or if no demand is made, in
installments together with interest from the date of the note
at the rate of prime plus two. Principal and interest shall be
payable in twenty-seven consecutive monthly installments
consisting of interest for the months one through three, and
thereafter, payments of principal and interest, month four
through twenty-six with a final installment of $13,912.88 on
July 1, 2000. The note is secured by a security agreement and
financing statement which includes as collateral all the
equipment and fixtures, inventory, accounts receivable,
chattel paper and general intangibles of the Company. The lien
is subordinate only to the Company's prime lender.
On March 13, 1998, in conjunction with the merger with Healix
Healthcare, Inc., the distributor converted $300,000 in
accounts payable from Healix into a note payable, with terms
and security equivalent to the terms of the Accuhealth note
outlined above. Accuhealth has assumed full responsibility and
liability for any unpaid balance on the Healix note. The
combined outstanding indebtedness (principal only) to the
distributor as of June 23, 1998 was $600,000.
E. SETTLEMENT OF LEGAL MATTER. In June 1995, a former employee
had commenced an action in Supreme Court, New York County, New
York against the Company and certain of its former and current
officers, directors and shareholders. The action alleged that
the Company breached plaintiff's employment agreement by
withholding at least $750,000 in commissions allegedly owed to
him. As of June 1998, this matter has been settled through
court recommended mediation. The settlment did not have a
material adverse effect on the Company's consolidated
financial position, results of operations or cash flows.
F-25
<PAGE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ACCUHEALTH, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
Additions
Balance at Charged
DESCRIPTION Beginning to Cost
of and Balance at End of
Period Expenses Deductions(1) Period
<S> <C> <C> <C> <C>
Year Ended March 31, 1996
Allowance for Doubtful
Accounts $310,000 $93,000 $111,000 $292,000
Year Ended March 31, 1997
Allowance for Doubtful
Accounts $292,000 $82,000 $ 57,000 $317,000
Year Ended March 31, 1998
Allowance for Doubtful
Accounts $317,000 $106,869 $ 61,517 $362,352
</TABLE>
- -----------------------
(1) Uncollected accounts written off.
F-26
<PAGE>
EXHIBIT INDEX
3.1 Registrant's Articles of Incorporation, as amended (incorporated herein
by reference to Exhibit 3 (I) to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994)
3.2 Registrant's By-laws, as amended (incorporated herein by reference to
Exhibit 3(ii) to the Registrant's Annual Report on Form 10-K for the
fiscal year ended March 31, 1994)
10.01 Loan and Security Agreement dated April 28, 1994 between Rosenthal &
Rosenthal, Inc. and the Registrant, Midview Drug, Inc., Accuhealth Home
Care, Inc. and Citiview Drug Co., Inc. (the "Loan and Security
Agreement") (incorporated herein by reference to Exhibit 10 (l) to the
Registrant's Annual Report on Form 10-K for the fiscal year ended March
31, 1994)
10.02 Amendment No. 1 to the Loan and Security Agreement, dated as of
February 1, 1996
10.03 Amendment No. 2 to the Loan and Security Agreement, dated as of
February 1, 1997.
10.04 Amendment No. 3 to the Loan and Security Agreement dated as of July 30,
1997.
10.05 Amendment No. 4 to the Loan and Security Agreement dated as of April 9,
1998.
10.06 Warrant dated April 28, 1994 for the Registrant's Common Stock issued
by the Registrant to Rosenthal & Rosenthal, Inc. (incorporated herein
by reference to Exhibit 10(m) to the Registrant's Annual Report on Form
10-K for the fiscal year ended March 31, 1994)
<PAGE>
10.07 Employment Agreement dated May 2, 1994 between Glenn C. Davis and the
Registrant (incorporated herein by reference to Exhibit 10.14 to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
10.08 Consulting Agreement dated June 28, 1994 between Donald B. Louria, M.D.
and the Registrant (incorporated herein by reference to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
10.09 Consulting Agreement dated June 28, 1994 between Stanley Goldstein and
the Registrant (incorporated herein by reference to Exhibit 10.16 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.10 Amended and Restated 1988 Stock Option Plan (incorporated herein by
reference to Exhibit B to the Registrant's 1994 Notice of Annual
Meeting and Proxy Statement)
10.11 Option Agreement dated September 20, 1994 between Corbett A. Price and
the Registrant (incorporated herein by reference to Exhibit 10.19 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.12 Option Agreement dated September 20, 1994 between E. Virgil Conway and
the Registrant (incorporated herein by reference to Exhibit 10.21 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.13 Option Agreement dated September 20, 1994 between Sally
Hernandez-Pinero and the Registrant (incorporated herein by reference
to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the
year ended March 31, 1995)
10.14 Option Agreement dated June 28, 1994 between Glenn C. Davis and the
Registrant (incorporated herein by reference to Exhibit 10.24 to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
10.15 Option Agreement dated June 28, 1994 between Stanley Goldstein and the
Registrant (incorporated herein by reference to Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the year ended March 31,
1995)
<PAGE>
10.16 Option Agreement dated June 28, 1994 between Donald B. Louria, M.D. and
the Registrant (incorporated herein by reference to Exhibit 10.27 to
the Registrant's Annual Report on Form 10-K for the year ended March
31, 1995)
10.17 Agreement and Plan of Merger dated as of March 14, 1997 among
Accuhealth, Inc., ACH Acquiring Corp., ProHealthCare, Inc.,
ProHealthCare Infusion Services, Inc., Thomas Laurita and David Brian
Cohen.
10.18 Agreement and Plan of Merger, dated as of April 9, 1998, among
Accuhealth, Inc., HHI Acquiring Corp., Healix HealthCare, Inc., Linda
Barkan, Chaim Charytan, Mary Comerford, Jeffrey S. Freed, Donald
Giaquinto, Robert Giaquinto, Robert Labra, Kathleen P. O'Brien McDonald
and Arthur Schwacke, Jr. (incorporated by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, dated April 30, 1998).
10.19 Registration Rights Agreement between Accuhealth, Inc. and Robert M.
GiaQunito.
10.20 Registration Rights Agreement between Accuhealth, Inc. and Jeffrey S.
Freed, M.D.
10.21 Registration Rights Agreement between Accuhealth, Inc. and Linda
Barkan.
11 Statement re Computation of Per-Share Earnings
15.1 Letter from Ernst & Young LLP, dated April 23, 1998, regarding change
in certifying accountant (incorporated by reference to Exhibit 16 to
the Registrant's Current Report on Form 8-K/A, dated April 23, 1998).
21 Subsidiaries of the Registrant
27. Article 5 - Financial Data Schedule
AMENDMENT NO. 2
TO
LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 2 ("Amendment") is entered into as of February 1,
1997, by and between Accuhealth, Inc., Midview Drug, Inc., Accuhealth Home Care,
Inc. and Citiview Drug Co., Inc. (each, a "Borrower" and jointly and severally,
the "Borrowers") and Rosenthal & Rosenthal Inc. ("Lender").
BACKGROUND
Borrowers and Lender are parties to a Loan and Security Agreement dated
as of April 28, 1994, as amended by Amendment No. 1 dated as of February 1, 1996
(as further amended, supplemented or otherwise modified from time to time, the
"Loan Agreement") pursuant to which Lender provides borrowers with certain
financial accommodations.
Borrowers have requested that Lender amend certain provisions of the
Loan Agreement and Lender is willing to do so on the terms and conditions
hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrower by Lender,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction of the
conditions precedent set forth in Section 3 below, the Loan Agreement is hereby
amended as follows:
2.1. Section 1(a) is amended as follows:
(a) The defined term "Contract Rate" is amended in its entirety to read
as follows:
"CONTRACT RATE" shall mean, as applicable, the Revolving Interest
Rate and the Term Loan Rate.
(b) The defined term "LOANS" is amended by inserting the words, the
"Term Loan" immediately after the word "Advances" on the first line thereof.
(c) The defined term "TERM" is amended by deleting the date "April 1,
1996" on the first line thereof and inserting the date "April 1, 1998".
<PAGE>
(d) the following defined terms are inserted in the appropriate
alphabetical order:
"REVOLVING INTEREST RATE" means an interest rate per annum equal
to the (i) Prime Rate plus (ii) two and seven-eighths percent
(2-7/8%).
"SECOND AMENDMENT" means Amendment No. 2 to Loan and Security
Agreement dated as of February 1, 1997 among borrowers and
Lender.
"SECOND AMENDMENT EFFECTIVE DATE" shall mean February 1, 1997.
"TERM LOAN" shall have the meaning set forth in Section 2(h).
"TERM LOAN RATE" means an interest rate per annum equal to the
(i) Prime Rate plus (ii) five percent (5%).
"TERM NOTE" shall mean the promissory note described in Section
2(h) hereof.
2.2 Section 2 of the Loan Agreement is hereby amended by adding the
following new subsection (h) at the end thereof:
"(h) TERM LOAN. Subject to the terms and conditions set forth
herein and in the Ancillary Agreements, Lender will make a term loan to
Borrowers in the sum of $500,000 ("Term Loan"). The Term Loan shall be
advanced on the Second Amendment Effective Date and shall be, with
respect to principal, payable on the last day of the Term, subject to
acceleration upon the occurrence of an Event of Default hereunder or
termination of this Agreement, and shall otherwise be evidenced by and
subject to the terms and conditions set forth in a secured promissory
note in substantially the form attached to the Second Amendment as
EXHIBIT 2(h) ("Term Note")."
2.3 Section 3 of the Loan Agreement is hereby amended by (i) deleting
the term "Revolving Credit Advances" in the heading thereof and inserting
"Loans" in its place and stead, (ii) placing an "(a)" immediately before the
word "Borrowers" on the second line and (iii) adding the following at the end
thereof:
"(b) The Term Loan shall be due and payable as provided in
paragraph 2(h) hereof and in the Term Note. the Term Loan may only be
voluntarily prepaid, in whole or in part, upon payment in full of the
Revolving Credit Advances."
2.4 Section 5(a)(i) of the Loan Agreement is hereby amended by placing
the word "applicable" immediately before the term "Contract Rate" on the third
line thereof.
-2-
<PAGE>
2.5 Section 5(b)(ii) of the Loan Agreement is hereby amended in its
entirety to read as follows:
"Borrowers shall pay to Lender a facility fee in an amount equal
to $40,000 per annum payable in equal quarterly installments of $10,000
each on the 28th day of each July, October, January and April until
this Agreement is irrevocably terminated and all Obligations hereunder
shall have been paid in full, such payments to commence on April 28,
1997."
2.6. Section 17 of the Loan Agreement is hereby amended in it entirety
to read as follows:
"This Agreement shall continue in full force and effect until the
expiration of the Term; PROVIDED, HOWEVER, Lender may terminate upon
the occurrence and continuance of an Even of Default. Notwithstanding
the foregoing, Lender shall release its security interests at any time
after fifteen (15) days notice upon payment to it of all Obligations if
Borrowers shall have (i) provided Lender with an executed release of
any and all claims which Borrowers may have or thereafter shall have
under this Agreement and (ii) paid to Lender (x) the unpaid balance of
the facility fee referred to in Section 5 hereof and (y) an early
payment during the period ending with the expiration of the Term equal
to the product of (x) $150,000 multiplied by (y) the difference between
(i) fourteen (14) and (ii) the number of full months which have elapsed
from the Second Amendment Effective Date until the date of payment of
the fee hereunder, such fee being intended to compensate Lender for its
costs and expenses incurred in initially approving this Agreement or
extending same (the "Prepayment Fee").
Notwithstanding the foregoing, in the event that Borrowers shall
terminate this Agreement at a time when no Event of Default shall have
occurred and be continuing solely because the sum of Receivables
Availability plus Inventory Availability minus applicable reserves
("Availability") shall have decreased by more than 50% from
Availability as of the end of the immediately preceding month, the
early payment fee during the period ending with the expiration of the
Term, equal to the product of seventy five percent (75%) of the actual
interest charges for the three (3) months immediately preceding the
date of termination (the "Line Fee").
Notwithstanding the foregoing, in the event that Lender (x) shall
terminate this Agreement at any time following the occurrence and
during the continuance of an Event of Default or (y) shall assign all
of the Obligations to a transferee pursuant to the provisions of
Section 15 hereof and Borrower terminates this Agreement, Borrower
shall not be obligated to pay any early payment fee.
Notwithstanding the foregoing, in the event that Borrowers shall
terminate this Agreement after (a) Accuhealth shall sell substantially
all of its assets or common stock to Care Group Inc. or (b) Accuhealth
shall complete a merger with Care Group Inc., the Prepayment Fee, the
Line Fee and the facility fee due in
-3-
<PAGE>
accordance with Section 5(b)(ii) of this Agreement, in the aggregate,
shall not exceed $75,000.
3. CONDITIONS OF EFFECTIVENESS. This amendment shall become effective as of
February 1, 1997, when and only when Lender shall have received (i) four (4)
copies of this Amendment executed by Borrower and consented and agreed to by
Glenn C. Davis and Stanley Goldstein as limited guarantors subject to the same
Guaranty Agreements described in the Loan Agreement, (ii) a certified resolution
of each Borrower authorizing the acceptance of the terms and provisions of the
Term Loan and the increase of the facility, (iii) the Term Note executed by each
Borrower with respect to the Term Loan described in Section 2.2 of this
Amendment and (iv) such other certificates, instruments, documents, agreements
and opinions of counsel as may be requited by Lender or its counsel, each of
which shall be in form and substance satisfactory to Lender and its counsel.
4. REPRESENTATIONS AND WARRANTIES. Borrowers hereby represent and warrant
as follows:
(a) this Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrowers and are
enforeceable against Borrowers in accordance with their respective
terms.
(b) Upon the effectiveness of this Amendment, Borrowers hereby
reaffirm all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agree that
all such covenants, representations and warranties shall be deemed to
have been remade as of the effective date of this Amendment.
(c) No Event of Default or Default has occurred and is continuing
or would exist after giving effect to this Amendment.
(d) Borrowers have no defense, counterclaim or offset with
respect to the Loan Agreement.
5. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in
the Loan Agreement to "this Agreement," "hereunder," "herein" or words of like
import shall mean and be a reference to the Loan Agreement as amended hereby.
(b) Except as specifically amended herein, the Loan Agreement,
and all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Lender, nor
constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
-4-
<PAGE>
6. GOVERNING LAW. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
7. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
8. COUNTERPARTS. This Amendment may be executed by the parties hereto
in one or more counterparts, each of which shall be deemed an original and all
of which taken together shall be deemed to constitute one and the same
agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
ACCUHEALTH, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
MIDVIEW DRUG, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
ACCUHEALTH HOME CARE, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
CITIVIEW DRUG CO., INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
ROSENTHAL & ROSENTHAL, INC.
By:
--------------------------------
Name:
Title:
CONSENTED AND AGREED TO:
/s/ GLENN C. DAVIS
- -------------------------
Glenn C. Davis
- -------------------------
STANLEY GOLDSTEIN
-6-
<PAGE>
ACCUHEALTH, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
MIDVIEW DRUG, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
ACCUHEALTH HOME CARE, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
CITIVIEW DRUG CO., INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: President
ROSENTHAL & ROSENTHAL, INC.
By:
--------------------------------
Name:
Title:
CONSENTED AND AGREED TO:
/s/ GLENN C. DAVIS
- -------------------------
Glenn C. Davis
/s/ STANLEY GOLDSTEIN
- -------------------------
Stanley Goldstein
-6-
AMENDMENT NO.3 AND JOINDER AGREEMENT
THIS AMENDMENT NO.3 AND JOINDER AGREEMENT ("Agreement") is entered
into as of July 30, 1997, by and among ACCUHEALTH, INC., a corporation organized
under the laws of the State of New York ("Accuhealth"), MIDVIEW DRUG, INC. a
corporation organized under the laws of the State of New York ("Midview"),
ACCUHEALTH HOME CARE, INC., a corporation organized under the laws of the State
of Delaware ("AHC"), CITIVIEW DRUG CO., INC., a corporation organized under the
laws of the State of New York ("Citiview"), PROHEALTHCARE INFUSION SERVICES,
INC., a corporation organized under the laws of the State of New Jersey
("PHCIS") (Accuhealth, Midview, AJIC, Citiview and PHCIS, each a "Borrower" and,
jointly and severally, the "Borrowers"), and ROSENTHAL & ROSENTHAL, INC.
("Lender").
BACKGROUND
Borrowers (other than PHCIS) and Lender are parties to a Loan and
Security Agreement dated as of April 28, 1994, as amended by Amendment No.1
dated as of February 1.1996 and Amendment No.2 dated as of February 1, 1997 (as
further amended, supplemented or otherwise modified from time to time, the "Loan
Agreement") pursuant to which Lender provided Borrowers (other than PHCIS) with
certain financial accommodations.
Pursuant to an Agreement and Plan of Merger dated as of March 14, 1997,
by and among Accuhealth, ACH Acquiring Corp., a wholly-owned subsidiary of
Accuhealth ("Sub"), ProHealthCare, Inc. ("ProHealthCare"), PHCIS, a wholly-owned
subsidiary of ProHealthCare, Thomas Laurita and David Brian Cohen (the "Purchase
Agreement") (i) Accuhealth acquired all of the issued and outstanding shares of
capital stock PHCIS from ProHealthCare and (ii) Sub was merged with and into
PHCIS with PHCIS as the surviving corporation.
Borrowers (other than PHCIS) have requested that Lender permit PHCIS to
become a Borrower under the Loan Agreement and Lender is willing to do so on the
terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by
Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the meanings given to them in the Loan Agreement.
2. JOINDER.
(a) PHCIS is hereby added as an additional Borrower under
the Loan Agreement, and all references to "Borrower" or "Borrowers" thereunder
shall henceforth be deemed to include PHCIS;
(b) PHCIS hereby adopts the Loan Agreement and each of the
Ancillary
<PAGE>
Agreements and assumes in full, and acknowledges that it is jointly and
severally liable for, the payment, discharge, satisfaction and performance of
all Obligations under the Loan Agreement and the Ancillary Agreements. Without
limiting the generality of the foregoing, in order to secure the prompt payment
and performance to Lender of the Obligations, PHCIS hereby assigns, pledges and
grants to Lender a continuing security interest in and to all of its Collateral,
whether now owned or existing or hereafter acquired or arising and wheresoever
located.
3. Amendment to Loan Agreement. Subject to satisfaction of the
conditions precedent set forth in Section 4 below, the Loan Agreement is hereby
amended as follows:
(a) Section 1(a) of the Loan Agreement is hereby amended by adding the
following defined term in its appropriate alphabetical order:
"PHCIS" shall mean ProHealthCare Infusion Services, Inc., a New
Jersey corporation.
(b) Exhibit 12(1) to the Loan Agreement is amended by adding the
following at the end thereof:
"4. 30 Hillside Avenue
Springfield, NJ 07081"
(c) Exhibit 12(m) to the Loan Agreement is amended by adding the
following at the end thereof:
"15. Promissory Note dated July 30, 1997 by ProHealthCare Infusion
Services, Inc. ("PHCIS") in favor of Bergen Brunswig Drug
Company ("Bergen") in the principal amount of $262,035.00,
which note is subject to the Subordination and Intercreditor
Agreement dated as of July 30, 1997 among PHCIS, Bergen and
Lender."
4. CONDITIONS OF EFFECTIVENESS. This Agreement shall become effective
upon satisfaction of the following conditions precedent:
(i) Lender shall have received in form and substance
satisfactory to Lender four (4) copies of this Agreement duly executed
by each Borrower (including PHCIS) and consented to by each Guarantor;
(ii) Lender shall have received in form and substance
satisfactory to Lender an executed Purchase Agreement and all exhibits
and schedules thereto and all other documents and agreements executed
in connection therewith, including, but not limited to the Employment
Agreement, Non-competition Agreement, Tax Provisions Agreement,
Assignment and Assumption Agreement and Registration Rights Agreement;
-2-
<PAGE>
(iii) Accuhealth and/or PHCIS shall have obtained all
necessary consents with respect to each contract, lease, and agreement
being assigned to Accuhealth and/or PHCIS pursuant to the Purchase
Agreement. Accuhealth and PHCIS hereby covenant that no conditions to
effectiveness of the Purchase Agreement shall be waived by Accuhealth
or PHCIS without Lender's prior written consent, such consent not to be
unreasonably withheld;
(iv) Lender shall have received an executed Amended and
Restated Term Note in the form attached hereto as Exhibit A,
(v) Lender shall have received in form and substance
satisfactory to Lender a Collateral Assignment executed by Accuhealth
with respect to its rights under the Purchase Agreement;
(vi) Each document (including, without limitation, any Uniform
Commercial Code financing statement) required by this Agreement or
under law or reasonably requested by Lender to be filed, registered or
recorded in order to create, in favor of Lender, a perfected security
interest in or lien upon the Collateral owned by PHCIS shall have been
properly filed, registered or recorded in each jurisdiction in which
the filing, registration or recordation thereof is so required or
requested, and Lender shall have received an acknowledgment copy, or
other evidence satisfactory to it, of each such filing, registration or
recordation and satisfactory evidence of the payment of any necessary
fee, tax or expense relating thereto;
(vii) Lender shall have received a copy of the resolutions in
form and substance reasonably satisfactory to Lender, of the Board of
Directors of PHCIS authorizing (x) the execution, delivery and
performance of this Agreement, and (y) the granting by PHCIS of the
Liens upon the Collateral certified by the Secretary or an Assistant
Secretary of PHCIS as of the date of this Agreement; and, such
certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded as of the date of such
certificate;
(viii) Lender shall have received a copy of the Articles or
Certificate of Incorporation of PHCIS, and all amendments thereto,
certified by the Secretary of State or other appropriate official of
its jurisdiction of incorporation together with copies of the By-Laws
of PHCIS certified as accurate and complete by the Secretary or an
Assistant Secretary of PHCIS;
(ix) Lender shall have received good standing certificates for
PHCIS dated not more than thirty (30) days prior to the date of this
Agreement, issued by the Secretary of State or other appropriate
official of PHCIS's jurisdiction of incorporation and each jurisdiction
where the conduct of PHCIS's business activities or the ownership of
its properties necessitates qualification;
(x) Lender shall have received the executed legal opinions of
Proskauer Rose Goetz & Mendelsohn LLP and Crummy, Del Deo, Dolan,
Griffinger & Vecchione,
-3-
<PAGE>
each in form and substance satisfactory to Lender regarding the due
authorization, enforceability and validity of this Agreement by
Borrowers (other than PHCIS) and PHCIS, respectively, and the
transactions contemplated herein;
(xi) Lender shall have received in form and substance
satisfactory to Lender, certified copies of PHCIS's casualty insurance
policies, together with loss payable endorsements on Lender's standard
form of loss payee endorsement naming Lender as loss payee, and
certified copies of PHCIS's liability insurance policies, together with
endorsements naming Lender as a co-insured;
(xii) Lender shall have received a duly executed letter
agreement regarding the use of the lockbox account currently used with
respect to the Borrowers (other than PHCIS) for the collection or
servicing of the Accounts and proceeds of the Collateral of PHCIS;
(xiii) Lender shall have received in form and substance
satisfactory to Lender all landlord, mortgagee or warehousemen
agreements;
(xiv) Lender shall have reviewed all material contracts of
PHCIS including, without limitation, leases, union contracts, labor
contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Lender;
(xv) Lender shall have received (a) schedules describing all
Receivables or Medicare/Medicaid Receivables and (b) confirmatory
written assignments of such Receivables or Medicare/Medicaid
Receivables to Lender; and
(xvi) Lender shall have received such other certificates,
instruments, documents and agreements as may reasonably be required by
Lender or its counsel, each of which shall be in form and substance
satisfactory to Lender and its counsel.
5. REPRESENTATIONS AND WARRANTIES. Each Borrower hereby represents and
warrants, with respect to itself, as follows:
(a) This Agreement and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of such Borrower and
are enforceable against such Borrower in accordance with their
respective terms.
(b) Upon the effectiveness of this Agreement, such Borrower
(other than PHCIS) hereby reaffirms all covenants, representations and
warranties made in the Loan Agreement to the extent the same are not
amended hereby and agrees that all such covenants, representations and
warranties shall be deemed to have been remade as of the effective date
of this Agreement.
(c) No Event of Default or Incipient Event of Default has
occurred and is continuing or would exist after giving effect to this
Agreement.
-4-
<PAGE>
(d) Such Borrower has no defense, counterclaim or offset with
respect to the Loan Agreement.
6. REPRESENTATIONS AND WARRANTIES OF PHCIS. PHCIS hereby represents and
warrants that it is a corporation duly organized and validly existing under the
laws of the State of New Jersey, and that it is duly qualified and in good
standing in every other state or jurisdiction in which the nature of its
business presently requires such qualification.
7. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of Section 2 hereof, each reference in the
Loan Agreement to "this Agreement," "hereunder," "hereof," "herein" or words of
like import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan Agreement, and all
other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in full force and effect, and are hereby
ratified and confirmed.
(c) The execution, delivery and effectiveness of this Agreement shall
not operate as a waiver of any right, power or remedy of Lender, nor constitute
a waiver of any provision of the Loan Agreement, or any other documents,
instruments or agreements executed and/or delivered under or in connection
therewith.
8. GOVERNING LAW. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
9. HEADINGS. Section headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
10. COUNTERPARTS: TELECOPIED SIGNATURES. This Agreement may be executed
in any number of and by different parties hereto, on separate counterparts, all
of which when so executed shall be deemed an original, but all such counterparts
shall constitute one and the same agreement. Any signature delivered by a party
by facsimile transmission shall be deemed to be an original signature hereto.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day
and year first written above.
ACCUHEALTH, INC., as Borrower and
Borrowing Agent
By: /s/ GLENN C. DAVIS
----------------------------------------
Glenn C. Davis
Title: President
-5-
<PAGE>
MIDVIEW DRUG, INC., as Borrower
By: /s/ GLENN C. DAVIS
-------------------------------------
Glenn C. Davis
Title: President
ACCUHEALTH HOME CARE, INC., as Borrower
By: /s/ GLENN C. DAVIS
-------------------------------------
Glenn C. Davis
Title: President
CITIVIEW DRUG CO., INC., as Borrower
By: /s/ GLENN C. DAVIS
-------------------------------------
Glenn C. Davis
Title: President
PROHEALTHCARE INFUSION SERVICES, INC.,
as Borrower
By: /s/ GLENN C. DAVIS
-------------------------------------
Glenn C. Davis
Title: President
ROSENTHAL & ROSENTHAL, INC., as Lender
By: /s/
-------------------------------------
Title: Executive Vice President
CONSENTED TO:
/s/ GLENN C. DAVIS
- ------------------------------
Glenn C. Davis
- ------------------------------
STANLEY GOLDSTEIN
-6-
<PAGE>
MIDVIEW DRUG, INC., as Borrower
By:
-------------------------------------
Title:
----------------------------------
ACCUHEALTH HOME CARE, INC., as Borrower
By:
-------------------------------------
Title:
----------------------------------
CITIVIEW DRUG CO., INC., as Borrower
By:
-------------------------------------
Title:
----------------------------------
PROHEALTHCARE INFUSION SERVICES, INC.,
as Borrower
By:
-------------------------------------
Title:
----------------------------------
ROSENTHAL & ROSENTHAL, INC., as Lender
By:
-------------------------------------
Title:
----------------------------------
CONSENTED TO:
- ---------------------------------
GLENN C. DAVIS
/s/ STANLEY GOLDSTEIN
- ---------------------------------
STANLEY GOLDSTEIN
-6-
<PAGE>
EXHIBIT A
MENDED AND RESTATED
TERM NOTE
$500,000.00 New York, New York
July ___, 1997
This Amended and Restated Term Note is executed and delivered
under and pursuant to the terms of that certain Loan and Security Agreement
dated as of April 28, 1994, as amended by (i) Amendment No.1 dated as of
February 1, 1996, (ii) Amendment No.2 dated as of February 1,1997 and (iii)
Amendment No.3 and Joinder Agreement dated as of the date hereof (as may be
further amended, supplemented or modified from time to time the "Loan
Agreement") by and among Accuhealth, Inc. ("Accuhealth"), Midview Drug, Inc.
("Midview"), Accuhealth Home Care, Inc. ("AHC"), Citiview Drug Co., Inc.
("Citiview") and ProHealthCare Infusion Services, Inc. ("PHCIS") (each a
"Borrower" and, jointly and severally, the "Borrowers") and Rosenthal &
Rosenthal, Inc. ("Lender"). Capitalized terms not otherwise defined herein shall
have the meanings as provided in the Loan Agreement.
FOR VALUE RECEIVED, Borrowers, jointly and severally, hereby
promise to pay to the order of Lender at its offices located at 1370 Broadway,
New York, New York l00l~ or at such other place as Lender may from time to time
designate to Borrowers in writing:
(i) the principal sum of FIVE HUNDRED THOUSAND AND 00/100
DOLLARS ($500,000.00) payable in accordance with the terms of the Loan
Agreement, subject to acceleration upon the occurrence of an Event of Default
under the Loan Agreement, earlier termination of the Loan Agreement or earlier
prepayment as required pursuant to the terms thereof; and
(ii) interest on the principal amount of this Note from time
to time outstanding, payable at the Term Loan Rate in accordance with the
provisions of the Loan Agreement. In no event, however, shall interest hereunder
exceed the maximum interest rate permitted by law.
This Note is the Term Note referred to in the Loan Agreement
and is secured, inter alia, by the liens granted pursuant to the Loan Agreement
and the Ancillary Agreements, is entitled to the benefits of the Loan Agreement
and the Ancillary Agreements and is subject to all of the agreements, terms and
conditions therein contained.
This Note is subject to mandatory prepayment and may only be
voluntarily prepaid, in whole or in part, on the terms and conditions set forth
in the Loan Agreement.
If an Event of Default under Section 1 8~) of the Loan
Agreement shall occur, then this Note shall immediately become due and payable,
without notice, together with reasonable attorneys' fees if the collection
hereof is placed in the hands of an attorney to obtain or enforce payment
hereof. If any other Event of Default shall occur under the Loan Agreement or
any of the Ancillary Agreements, which is not cured within any applicable grace
period, then this Note may, as provided in the Loan Agreement, be declared to be
immediately due and
<PAGE>
payable, without notice, together with reasonable attorneys' fees, if the
collection hereof is placed in the hands of an attorney to obtain or enforce
payment hereof.
This Note is being delivered in the State of New York, and
shall be construed and enforced in accordance with the laws of such State.
This Note amends and restate in its entirety and is given in
substitution for (but not satisfaction of) that certain Term Note dated February
1, 1997 made by Accuhealth, Midview, AHC and Citiview to Lender in the original
principal amount of $500,000.
Borrowers expressly waive any presentment, demand, protest,
notice of protest, or notice of any kind except as expressly provided in the
Loan Agreement.
ACCUHEALTH, INC.
By:
---------------------------------------
Title:
---------------------------------------
MIDVIEW DRUG, INC.
By:
---------------------------------------
Title:
---------------------------------------
ACCUHEALTH HOME CARE, INC.
By:
---------------------------------------
Title:
---------------------------------------
CITIVIEW DRUG CO., INC.
By:
---------------------------------------
Title:
---------------------------------------
PROHEALTHCARE INFUSION SERVICES, INC.
By:
---------------------------------------
Title:
---------------------------------------
<PAGE>
STATE OF NEW YORK )
COUNTY OF NEW YORK : ss.:
)
On the day of July, 1997, before me personally came _________________, to me
known, who being by me duly sworn, did depose and say that he is the
_________________ of Accuhealth, Inc., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the each of the board of directors of said corporation.
-----------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF NEW YORK : ss.:
)
On the ____ day of July, 1997, before me personally came __________________, to
me known, who being by me duly sworn, did depose and say that he is the
__________________ of Midview Drug, Inc., the corporation described in and which
executed the foregoing instrument; and that he signed his name thereto by order
of the each of the board of directors of said corporation.
-----------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF NEW YORK : ss.:
)
On the day of July, 1997, before me personally came _________________, to me
known, who being by me duly sworn, did depose and say that he is the
_________________ of Accuhealth Home Care, Inc. the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the each of the board of directors of said corporation.
-----------------------------
Notary Public
STATE OF NEW YORK )
COUNTY OF NEW YORK : ss.:
)
On the ____ day of July, 1997, before me personally came ________________, to me
known, who being by me duly sworn, did depose and say that he is the
__________________ of Citiview Drug Co., Inc. the corporation described in and
which executed the foregoing instrument; and that he signed his name thereto by
order of the each of the board of directors of said corporation.
-----------------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
COUNTY OF NEW YORK : ss.:
)
On the ____ day of July, 1997, before me personally came _______________, to me
known, who being by me duly sworn, did depose and say that he is the
__________________ of ProHealthCare Infusion Services, Inc. the corporation
described in and which executed the foregoing instrument; and that he signed his
name thereto by order of the each of the board of directors of said corporation.
-----------------------------
Notary Public
AMENDMENT No.4 AND JOINDER AGREEMENT
THIS AMENDMENT No.4 AND JOINDER AGREEMENT ("Amendment") is entered into
as of April ___ 1998 by and among ACCUHEALTH, INC. a corporation organized under
the laws of the State of New York ("Accuhealth"), MIDVIEW DRUG, INC. a
corporation organized under the laws of the State of New York ("Midview"),
ACCUHEALTH HOME CARE, INC. a corporation organized under the laws of the State
of Delaware ("AFIC"), CITIVIEW DRUG CO., INC. a corporation organized under the
laws of the State of New York ("Citiview"), PROHEALTHCARE INFUSION SERVICES,
INC., a corporation organized under the laws of the State of New Jersey
("PHCIS"), HEALIX HEALTHCARE, INC. a corporation organized under the laws of the
State of Delaware ("Hill"), PRN HOMECARE AGENCY, INC. a corporation organized
under the laws of the State of New Jersey ("PRN"), AMERIX NURSING HOLDINGS, INC.
a corporation organized under the laws of the State of Delaware ("Amerix"),
HEALIX HEALTHCARE, INC. a corporation organized under the laws of the State of
New York ("Healthcare"), HEALIX HEALTHCARE OF NEW YORK, INC. a corporation
organized under the laws of the state of New York ("Healix NY"), RYE BEACH
HEALTHCARE, INC. a corporation organized under the laws of the State of New York
("Rye Beach"), HEALIX HEALTHCARE OF NEW JERSEY a corporation organized under the
laws of the State of New Jersey ("Healix NY') and AMERICARE HOME NURSING
SERVICES, INC. a corporation organized under the laws of the State of New Jersey
("Americare"), (Accuhealth, Midview, AHC, Citiview, PHCIS, Hill, PRN, Amerix,
Healthcare, Healix NY, Rye Beach, Healix NJ and Americare, each a "Borrower"
and, jointly and severally, the "Borrowers"), and ROSENTHAL & ROSENTHAL, INC.
("Lender").
BACKGROUND
Borrowers (other than HHI, PRN, Amerix, Healthcare, Healix NY, Rye
Beach, Healix NJ and Americare) and Lender are parties to a Loan and Security
Agreement dated as of April 28, 1994, as amended by Amendment No.1 dated as of
February 1, 1996, Amendment No.2 dated as of February 1, 1997 and Amendment No.3
and Joinder Agreement dated as of July 30, 1997 (as further amended,
supplemented or otherwise modified from time to time, the "Loan Agreement")
pursuant to which Lender provided Borrowers (other than Hill, PRN, Amerix,
Healthcare, Healix NY, Rye Beach, Healix NJ and Americare) with certain
financial accommodations.
Pursuant to an Agreement and Plan of Merger dated as of December 1997,
by and among Accuhealth, HHI Acquiring Corp., a wholly-owned subsidiary of
Accuhealth ("Sub"), HHI, Linda Barkan, Chaim Charytan, M.D., Mary Comerford,
Jeffrey S. Freed, M.D., Donald GiaQuinto, Robert GiaQuinto, Robert Labra,
Kathleen P. O'Brien McDonald and Arthur Schwacke, Jr. (the "Purchase Agreement")
(i) Accuhealth acquired all of the issued and outstanding shares of capital
stock of Hill and (ii) Sub was merged with and into HHI with Hill as the
surviving corporation.
Borrowers (other than HHI, PRN, Amerix, Healthcare, Healix NY, Rye
Beach, Healix NJ and Americare) have requested that Lender permit each of HHI,
PRN, Amerix, Healthcare, Healix NY, Rye Beach, Healix NJ and Americare to become
a Borrower under the Loan Agreement and
<PAGE>
amend certain provisions of the Loan Agreement and Lender is willing to do so on
the terms and conditions hereafter set forth.
NOW, THEREFORE, in consideration of any loan or advance or grant of
credit heretofore or hereafter made to or for the account of Borrowers by
Lender, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows;
1. DEFINITIONS. All capitalized terms not otherwise defined herein
shall have the meanings given to them in the Loan Agreement.
2. JOINDER.
(a) PHCIS, HILL, PRN, Amerix, Healthcare, Healix NY, Rye Beach,
Healix NJ and Americare are hereby added as additional Borrowers under the Loan
Agreement, and all references to "Borrower" or "Borrowers" thereunder shall
henceforth be deemed to include PHCIS, Hill, PRN, Amerix, Healthcare, Healix NY,
Rye Beach, Healix NJ and Americare.
(b) PHCIS, HILL, PRN, Amerix, Healthcare, Healix NY, Rye Beach,
Healix NJ and Americare hereby adopt the Loan Agreement and each of the
Ancillary Agreements and assumes in lull, and acknowledges that it is jointly
and severally liable for, the payment, discharge, satisfaction and performance
of all Obligations. Without limiting the generality of the foregoing, in order
to secure the prompt payment and performance to Lender of the Obligations, Hill,
PRN, Amerix, Healthcare, Healix NY, Rye Beach, Healix NJ and Americare each
hereby assigns, pledges and grants to Lender a continuing security interest in
and to all of its respective Collateral, whether now owned or existing or
hereafter acquired or arising and wheresoever located.
3. AMENDMENT TO LOAN AGREEMENT. Subject to satisfaction of the
conditions precedent set forth in Section 4 below, the Loan Agreement is hereby
amended as follows;
3.1 Section 1(a) of the Loan Agreement is hereby amended by adding
the following defined terms in their appropriate alphabetical order;
"AMERICARE" shall mean Americare Home Nursing Services, Inc. a
New I, Jersey corporation.
"AMERIX" shall mean AMERIX NURSING HOLDINGS, INC. a Delaware
corporation.
"FOURTH AMENDMENT" shall mean Amendment No.4 and Joinder
Agreement to Loan and Security Agreement dated as of April 28,
1994.
"FOURTH AMENDMENT EFFECTIVE DATE" shall mean ___________, 1998.
3
<PAGE>
"HEALIX NJ" shall mean Healix Healthcare of New Jersey a New
Jersey corporation.
"HEALIX NY" shall mean Healix Healthcare of New York, Inc. a
New York corporation.
"HEALTHCARE" shall mean Healix Healthcare, Inc. a New York
corporation.
"HILL" shall mean Healix Healthcare, Inc. a Delaware
corporation.
"OVERADVANCE AVAILABILITY" shall mean an amount equal to
$1,000,000 in excess of the Formula Amount.
"OVERDRAFT LOANS" shall mean the amount outstanding under the
Overadvance Availability.
"OVERADVANCE RATE" shall mean an interest rate per annum equal
to the (i) Prime Rate plus (ii) three percent (3%)."
"PHCIS" shall mean ProHealthCare Infusion Services, Inc., a New
Jersey corporation.
"PRN" shall mean PRN Homecare Agency, Inc. a New Jersey
corporation.
"RYE BEACH" shall mean Rye Beach Healthcare, Inc. a New York
corporation.
"THIRD AMENDMENT" shall mean amendment No.3 and Joinder
Agreement to Loan and Security Agreement dated as of April 28,
1994.
3.2 Section 1(a) of the Loan Agreement is further amended as
follows;
(a) The defined term "CONTRACT RATE" is amended by adding the
following at the end thereof:
"and the Overdraft Rate."
(b) The defined term "LOANS" is amended by inserting the words
"Overdraft Loans" immediately after the words "Term Loan" on the first line
thereof.
(c) The defined term "TERM" is amended by deleting the date
"April 1, 1998" on the first line thereof and inserting the date "April 1, 2000"
in its place and stead.
(d) The defined term "REVOLVING INTEREST RATE" is amended in
its
4
<PAGE>
entirety to read as follows:
"Revolving Interest Rate" means an interest rate per annum
equal to (i) the Prime Rate plus (ii) one and one half percent
(1 1/2%)."
(e) The defined term "MAXIMUM REVOLVING AMOUNT" is amended by
deleting the sum "$3,500,000" and substituting the sum "$9,000,000" in its place
and stead.
(f) The defined term "MINIMUM AVERAGE MONTHLY LOAN AMOUNT" is
amended by deleting the sum "$1,750,000" and substituting the sum "$4,500,000 in
its place and stead.
(g) The defined term "RECEIVABLES AVAILABILITY" is amended by
deleting the words "seventy percent (70%)" in the last line thereof and
substituting the words "seventy-five percent (75%)" in their place and stead.
(h) The defined term "ELIGIBLE INVENTORY" is deleted.
(i) The defined term "ELIGIBLE RECEIVABLES" is amended by:
(i) adding the following at the end of subparagraph (a)
thereof:
"provided, however, that Receivables having a face value
aggregating no more than $400,000, at any one time
outstanding, may be "bill and hold Receivables" upon the
express condition that (i) each account debtor with respect
to a bill and hold Receivable provides Lender with
documentation satisfactory to Lender regarding such bill
and hold status; and (ii) bill and hold invoicing shall be
aged based only upon the original invoice date thereof"
(ii) deleting the word "and" immediately preceding
subparagraph "(t)" in the next to last line thereof and
substituting"," in its place and stead; and
(iii) deleting the period at the end thereof and adding the
following in its place and stead:
"and (u) such Receivable is less than 150 days past invoice
date."
(i) The defined term "EVENT OF DEFAULT" is amended by
deleting the words "Section 13" and substituting the words "Section 18" in their
place and stead.
5
<PAGE>
(k) The defined term "Inventory Availability" is deleted.
(l) The defined term "Term Loan Rate" is amended in its
entirety to read as follows:
"Term Loan Rate" means an interest rate per annum equal
to (i) the Prime Rate plus (ii) four percent (4%)."
3.3 Section 2(a)(ii) of the Loan Agreement is amended in its
entirety to read as follows:
"Overadvance Availability, minus".
3.4 Section 2(c) of the Loan Agreement is amended by deleting
the word "which" in the fourth line thereof
3.5 Section 2(h) of the Loan Agreement is amended by adding
the following at the end thereof
"Notwithstanding the foregoing, subject to the terms
and conditions set forth herein and in the Ancillary
Agreements, Lender will increase the Term Loan from
$500,000 to $750,000 and upon the advance of such
additional sums ("Additional Sums") the definition of
Term Loan shall be such $750,000 Loan. The Additional
Sums shall be advanced on the Fourth Amendment
Effective Date and the resultant $750,000 Term Loan
shall be payable as set forth in the Amended and
Restated Term Note, in substantially the form attached
to the Fourth Amendment as Exhibit 2(h), which upon its
execution and delivery will be for all purposes the
"Term Note", subject to acceleration upon the
occurrence of an Event of Default or termination of
this Agreement and shall otherwise be evidenced by and
subject to the terms and conditions set forth in the
Term Note."
3.6 Section 3 of the Loan Agreement is amended by adding the
words "plus the Overadvance Line" immediately after the words "Formula Amount"
in the fourth line thereof
3.7 Section 5(b)(ii) of the Loan Agreement is amended in its
entirety to read as follows:
"Borrowers shall pay to Lender a facility fee in an
amount equal to $53,750 per contract year, earned on
the first day of each contract year, and payable in
equal quarterly installments of $13,437.50 each
commencing on April __, 1998 and on the same day on
each July, October, January and April thereafter until
this Agreement is irrevocably terminated and all
Obligations shall have been indefeasibly paid in full
to us".
6
<PAGE>
3.8 Section 5(a)(v) of the Loan Agreement is amended by
deleting the words "1-1/2\" and substituting the words "one and one half percent
(1 1/2%)" in their place and stead.
3.9 Section 12(m)(ii) of the Loan Agreement is deleted and the
following is substituted in its place and stead:
"(ii) declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of
such Borrower (other than dividends or distributions
payable in its stock or warrants or split-ups or
reclassifications of its stock) or apply any of its
funds, property or assets to the purchase, redemption
or other retirement of any common or preferred stock of
such Borrower except that so long as no Incipient Event
of Default or Event of Default shall have occurred or
would occur as a result of such payment Accuhealth may
pay cash dividends on its preferred stock,"
3.10 Section 12 of the Loan Agreement is amended by adding a
new Subsection 12(p) to read as follows:
"(p) it will not change its certified public
accountants without the prior written consent of Lender
which consent shall not be unreasonably withheld."
3.11 Section 17 of the Loan Agreement is amended by:
(i) deleting the word "second" from the
eleventh line thereof; and
(ii) deleting the last paragraph thereof and
substituting the following in its place and
stead:
"Notwithstanding the foregoing, in the
event that (x) Lender (I) shall terminate
this Agreement at any time following the
occurrence and during the continuance of an
Event of Default or (II) shall assign all
of the Obligations to a transferee pursuant
to the provisions of Section 15 hereof and
Borrower terminates this Agreement, or (y)
Borrower funds the repayment of all of the
Obligations solely from (I) the proceeds of
an equity financing of Borrower or (ii) a
refinancing of the Borrower in connection
with the acquisition by Borrower of The
Care Group (the "Care Acquisition")
provided, however, that Lender shall be
granted a right of first refusal with
respect to the financing of the Care
Acquisition".
3.12 The terms Eligible Inventory and Inventory Availability
are deleted from
7
<PAGE>
the Loan Agreement.
4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective
as of ___________________ 1998, when and only when Lender shall have received
(i) four copies of this Amendment executed by Borrower and consented and agreed
to by Glenn C. Davis, and Stanley Goldstein, as guarantors, (ii) a certified
resolution of each Borrower authorizing the acceptance of the terms and
provisions of the increased Term Loan and the increase of the facility, (iii)
the Am ended and Restated Term Note executed by each Borrower with respect to
the increase in the Term Loan described in Section 3.5 of this Amendment, (iv)
Guaranty Agreements executed by each of Glenn C. Davis, and Stanley Goldstein,
(v) a warrant, in substantially the form attached to this Amendment as Exhibit
4, issued by Accuhealth to Lender for the purchase by Lender of 50,000 shares of
common stock of Accuhealth; and (vi) such other certificates, instruments,
documents, agreements and opinions of counsel as may be required by Lender or
its counsel, each of which shall be in form and substance satisfactory to Lender
and its counsel.
5. REPRESENTATIONS AND WARRANTIES. Borrowers hereby represent and
warrant as follows:
(a) This Amendment and the Loan Agreement, as amended hereby,
constitute legal, valid and binding obligations of Borrowers and are enforceable
against Borrowers in accordance with their respective terms.
(b) Upon the effectiveness of this Amendment, Borrowers hereby
reaffirm all covenants, representations and warranties made in the Loan
Agreement to the extent the same are not amended hereby and agree that all such
covenants, representations and warranties shall be deemed to have been remade as
of the effective date of this Amendment.
(c) No Event of Default or Incipient Event of Default has occurred
and is continuing or would exist after giving effect to this Amendment.
(d) Borrowers have no defense, counterclaim or offset with respect
to the Loan Agreement.
6. EFFECT ON THE LOAN AGREEMENT.
(a) Upon the effectiveness of this Amendment, each reference in the
Loan Agreement to "this Agreement", "hereunder", "hereof', "herein" or words of
like import shall mean and be a reference to the Loan Agreement as amended
hereby.
(b) Except as specifically amended herein, the Loan Agreement, and
all other documents, instruments and agreements executed and/or delivered in
connection therewith, shall remain in lull force and effect, and are hereby
ratified and confirmed.
8
<PAGE>
(c) The execution, delivery and effectiveness of this Amendment
shall not operate as a waiver of any right, power or remedy of Lender, nor
constitute a waiver of any provision of the Loan Agreement, or any other
documents, instruments or agreements executed and/or delivered under or in
connection therewith.
7. GOVERNING LAW. This Amendment shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns and
shall be governed by and construed in accordance with the laws of the State of
New York.
8. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
9. COUNTERPARTS. This Amendment may be executed by the parties hereto
in one or more counterparts, each of which shall be deemed an original and all
of which taken together shall be deemed to constitute one and the same
agreement.
IN WITNESS WHEREOF, this Amendment has been duly executed as of the day
and year first written above.
ACCUHEALTH, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
ACCUHEALTH HOME CARE, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
PROHEALTHCARE INFUSION SERVICES
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
PRN HOMECARE AGENCY, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
MIDVIEW DRUG, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
CITIVIEW DRUG CO., INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
HEALIX HEALTHCARE, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
AMERIX NURSING HOLDINGS, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
(SIGNATURES CONTINUED ON PAGE 9)
9
<PAGE>
HEALIX HEALTHCARE, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
RYE BEACH HEALTHCARE, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
AMERICARE HOME NURSING SERVICES, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
HEALIX HEALTHCARE OF NEW YORK, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
HEALIX HEALTHCARE OF NEW JERSEY, INC.
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
Name:
Title:
CONSENTED AND AGREED TO:
By: /s/ GLENN C. DAVIS
- -----------------------------
Glenn C. Davis
- ------------------------------
Stanley Goldstein
10
<PAGE>
EXHIBIT 2(h)
TO AMENDMENT NO. 4 AND JOINDER AGREEMENT
AMENDED AND RESTATED TERM NOTE
11
<PAGE>
EXHIBIT 4
TO AMENDMENT NO. 4 AND JOINDER AGREEMENT
WARRANT
12
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (This "Agreement"), dated April 9, 1998, by
and between Accuhealth, Inc., a New York corporation, (the "Company"), and
Robert M. GiaQunito (the "Shareholder").
RECITALS:
A. The Shareholder is the owner of 444,433 shares of common stock, par
value $.O1 per share, of the Company, none of which are registered with the
Securities Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended (the "Securities Act").
B. The Company desires to grant to the Shareholder certain rights to such
shares registered under the Securities Act.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both parties, the parties agree
as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS. Unless otherwise expressly set forth herein, capitalized
terms used in this Agreement which are not otherwise defined shall have the same
meanings ascribed to them in that certain Agreement and Plan of Merger, dated
December 1, 1997 among the Company, HHI Acquiring Corp., Healix HealthCare,
Inc., Linda Barkan, Chaim Charylan, M.D., Mary Comerford, Jeffrey S. Freed,
M.D., Donald GiaQuinto, Robert GiaQuinto, Robert Labra, Kathleen P. O'Brien
McDonald, and Arthur Schwacke, Jr. (the "Merger Agreement"). In addition, the
following terms, as used herein, have the following meanings:
1.1 "Holder" means the Shareholder.
1.2 "Person" shall mean any individual, corporation, proprietorship,
firm, partnership, limited partnership, limited liability company, trust,
association or other entity.
1.3 "Registrable Securities" means the Parent Common Stock delivered to
the Shareholder pursuant to the Merger Agreement until (i) a registration
statement covering such Parent Common Stock (or any securities into which such
Parent Common Stock may be hereafter converted by operation of law or otherwise)
has been declared effective by the SEC, (ii) it is sold or may be sold pursuant
to Rule 144 under the Securities Act or (iii) it has been otherwise transferred,
and it may be resold without registration under the Securities Act.
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<PAGE>
1.4 "Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
1.5 "Underwriter" means a securities dealer who purchases any
Registrable Securities as a principal and not as part of such dealer's
market-making activities or who undertakes to sell such securities on a "best
efforts basis".
ARTICLE II
REGISTRATION RIGHTS
2.1 COMPANY REGISTRATION. On or prior to the date which is thirteen (13)
months after the Effective Time, the Company shall file a registration statement
(the "Registration Statement") with the SEC with respect to the Registrable
Securities; provided, however, that, subject to the provisions of Section 2.2,
below, the Company shall not be obligated to effect such registration within six
(6) months of the effective date of a registration of shares initiated by the
Company, other than the Company's Registration Statement on Form S-8 relating to
the Company's Amended and Restated 1988 Stock Option Plan or to another similar
plan adopted by the Company.
2.2 PIGGYBACK REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. Subject to the provisions of Section
2.2(b), below, if, and whenever prior to the filing of the Registration
Statement, the Company proposes to register any of its securities under any
applicable law for sale to the public, whether for its own account or for the
account of other security holders or both, it will, at any such time, give
written notice (the "Registration Notice") to the Holder or his permitted
transferees or assignees of its intention to do so. Subject to the limitations
contained herein, upon written request of the Holder given to the Company within
thirty (30) days of receipt by the Holder of the Registration Notice, the
Company will cause the Holder's Registrable Securities to be included in the
securities to be covered by such registration and, subject to Section 3(b), use
its best efforts to cause the Holder's Registrable Securities to be included in
any underwriting thereof; provided that, at any time prior to the effective date
of the registration statement with respect to such registration, the Company may
elect in its discretion to terminate or delay such registration, and upon giving
notice thereof to the Holders (i) in the event of any such termination, the
Company Shall have no further obligation to register the Holder's Registrable
Securities in connection with such registration, and (ii) in the event of any
such delay, the Company shall be permitted to delay the registration of the
Holder's Registrable Securities for the same period as the delay in registering
the other securities subject to such registration. The Holder shall have the
right to withdraw from participation in any public offering if either of them
disapproves of the terms of such offering.
(b) MARKETING LIMITATIONS. If the underwriter's representative
advises the Company that marketing factors require a limitation of the number of
the shares to be sold by shareholders of the Company, the underwriter's
representative may exclude some or all of the Holder's Registrable Securities
from such public offering; provided, however, that if the
2
<PAGE>
underwriter's representative limits the number of shares to be included in an
offering and a Holder and other holders of unregistered shares of Parent Common
Stock desire to participate in such offering, the number of shares belonging to
the Holder and such other holders to be included in such offering shall be
allocated between them in proportion to the respective amounts of shares of
Parent Common Stock which such parties hold.
(c) Notwithstanding anything contained herein to the contrary, the
Holder shall not directly or indirectly, sell, pledge, give, transfer, assign or
in any other way whatsoever encumber or dispose of (hereinafter collectively
called "transfer") any of the Registrable Securities, or any interest therein,
except as follows: the Holder may transfer up to 12.5% of the Registrable
Securities per quarter, on a cumulative basis, to the extent and in the manner
permitted by applicable federal and state securities laws. All certificates for
the Registrable Securities shall be endorsed with an appropriate legend
referring to this Agreement
ARTICLE III
REGISTRATION PROCEDURES
3.1 FILINGS. INFORMATION.
(a) The Company will prepare and file with the SEC the Registration
Statement covering sales of the Registrable Securities by the Holder on a form
which shall be appropriate for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution
thereof and shall use its reasonable best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as practicable after
filing. The Company shall furthermore keep such Registration Statement effective
until the shares covered thereby are no longer Registrable Securities and shall
comply in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended, including, but not limited to,
timely filing of all reports with the SEC as required thereunder.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to the
Selling Holder and each Underwriter, if any, of the Registrable Securities
covered by such registration statement, copies of such registration statement as
proposed to be filed, and thereafter the Company will furnish to such Selling
Holder and Underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such Selling Holder or Underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(c) After the filing of the Registration Statement, the Company will
promptly notify the Selling Holder of Registrable Securities covered by such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
3
<PAGE>
(d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Selling Holder reasonably (in light of
such Selling Holder's intended plan of distribution) requests and (ii) cause
such Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Selling Holder to
consummate the disposition of the Registrable Securities owned by such Selling
Holder; provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (B) subject itself to taxation in any such
jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(e) The Company will immediately notify the Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an 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 promptly make available to the Selling
Holder any such supplement or amendment.
(f) The Company and the Selling Holder will enter into customary
agreements and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities.
(g) The Company will make available for inspection by any Selling
Holder, any Underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other professional
retained by any such Selling Holder or Underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any Inspectors in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential and which it, in writing, notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction.
The Selling Holder of such Registrable Securities agrees that information
designated by the Company as confidential and obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
affiliates unless and until such is made generally available to the public. The
Selling Holder of such Registrable Securities further agrees that it will, upon
learning that the disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.
4
<PAGE>
(h) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(i) The Company will use its best efforts to cause all Registrable
Securities to be listed for trading on each securities exchange or other
securities market on which similar securities issued by the Company are then
listed.
(j) The Company may require the Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration.
(k) The Selling Holder shall, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
Selling Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.1(e) hereof, and, if so directed by the Company, such
Selling Holder will deliver to the Company all copies, other than permanent file
copies then in such Selling Holder's possession, of the most recent prospectus
covering such Registrable Securities at the time of receipt of such notice. In
the event the Company shall give such notice, the Company shall extend the
period during which such registration statement shall be maintained effective by
the number of days during the period from and including the date of the giving
of notice pursuant to Section 3.1(e) hereof to the date when the Company shall
make available to the Selling Holder of Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with the
requirements of Section 3.1(e) hereof.
3.2 REGISTRATION EXPENSES. In addition to the expenses payable under
Section 4.1, in connection with any registration statement required to be filed
hereunder, the Company shall pay all registration expenses incurred in
connection with the registration hereunder (the "Registration Expenses'9),
including the following: (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities and (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company. The Company shall not have any obligation to pay any underwriting fees,
discounts or commission attributable to the sale of Registrable Securities, or
any out-of-pocket expenses of the Holder (or the agents who manage their
accounts) or the Underwriter or any fees and expenses of Underwriter's counsel
or counsel to the Selling Holder.
5
<PAGE>
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Selling Holder from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable counsel fees) caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Securities
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities and expenses are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by such Selling
Holder or on such Selling Holder's behalf expressly for use therein; provided,
however, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the indemnity contained in this Section 4.1 shall not apply
to the extent any such loss, claim, damage, liability and expense results from
the fact that a copy of the current prospectus (as amended and supplemented, if
applicable) was not sent or given to the Person asserting any such loss, claim,
damage or liability at or prior to the written confirmation of the sale of the
Registrable Securities concerned to such Person if it is determined that the
Company has provided such current prospectus in accordance with Section 3.1(b)
and it was the responsibility of such Selling Holder to provide such Person with
a copy of such current prospectus and such copy of such current prospectus would
have cured the defect giving rise to such loss, claim, damage, liability or
expense.
4.2 INDEMNIFICATION BY HOLDER OF REGISTRATION SECURITIES. The Selling
Holder agrees to indemnify and hold harmless the Company, its officers,
directors and agents and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with reference to information relating to such
Selling Holder furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary prospectus. In case any action or proceeding shall be brought
against the Company or any of its officers, directors or agents or any such
controlling person, in respect of which indemnity may be sought against such
Selling Holder, such Selling Holder shall have the rights and duties given to
the Company, and the Company and its respective officers, directors and agents
and such controlling person shall have the rights and duties given to such
Selling Holder, by the preceding and succeeding paragraphs.
4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any proceeding (including
any governmental investigation) shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such
Person (an '9lndemnified Party") shall promptly notify the Person against whom
such indemnity may be sought (an "Indemnifying Party") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
6
<PAGE>
payment of all fees and expenses. In any such proceeding, any Indemnified Party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties, and
that all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Indemnified Parties, such firm shall be
designated in writing by the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent, or if there be a final judgment for
the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
ARTICLE V
MISCELLANEOUS
5.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.
5.2 RESTRICTIONS ON PUBLIC SALE. The Selling Holder shall not effect any
public sale or distribution of the securities being registered or a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, at any time in violation of any provisions of Federal or state
securities laws.
5.3 AMENDMENT AND MODIFICATION. This Agreement may be amended or
modified, and any provision of this Agreement may be waived, only by written
agreement of the Company and Holder.
5.4 SUCCESSORS: ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and
7
<PAGE>
permitted assigns, except that the Company may not assign its rights and
obligations hereunder. Except as otherwise provided herein, the Shareholder may
assign his rights and obligations under this Agreement upon prior written notice
to the Company, but no such assignment shall relieve the assigning party of his
obligations hereunder.
5.5 NOTICES. Any notice or other communication under this agreement
shall be in writing and shall be considered given upon receipt, if personally
delivered or telecopied, or one day after delivery to a courier for next-day
delivery, to the parties at the addresses set forth below (or at such other
address as a party may specify by notice to the others).
If to the Company, to it at: Accuhealth, Inc.
1575 Bronx River Avenue
Bronx, New York 10460
Attention: Glenn C. Davis
Facsimile number: 718-824-2432
with a copy to: Cohen & Tauber LLP
330 Madison Avenue
New York, New York 10022
Attention: Y. Jerry Cohen, Esq.
Facsimile number: 212-972-6569
and a copy to Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attention: Robert Cantone, Esq.
Facsimile number: (212) 969-2900
If to the Shareholder to: Robert M. Gia Quinto, R.Ph.
19 Redfield Street
Rye, New York 10580
with a copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, NY 10022
Leslie J. Levinson, Esq.
Facsimile number: (212)702-5957
5.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the state of New York with respect to contracts to be
wholly performed in such State.
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5.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ACCUHEALTH, INC.
By: /s/ Glenn C. Davis
----------------------------------
Name: GLENN C. DAVIS
Title:
/s/ Robert Giaqunito
----------------------------------
ROBERT GIAQUNITO
9
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (This "Agreement"), dated April 9, 1998, by
and between Accuhealth, Inc., a New York corporation, (the "Company"), and
Jeffrey S. Freed, M.D. (the "Shareholder").
RECITALS:
A. The Shareholder is the owner of 461,834 shares of common stock, par
value $.0l per share, of the Company, none of which are registered with the
Securities Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended (the "Securities Act").
B. The Company desires to grant to the Shareholder certain rights to such
shares registered under the Securities Act.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both parties, the parties agree
as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS. Unless otherwise expressly set forth herein, capitalized
terms used in this Agreement which are not otherwise defined shall have the same
meanings ascribed to them in that certain Agreement and Plan of Merger, dated
December 1, 1997 among the Company, HHI Acquiring Corp., Healix HealthCare,
Inc., Linda Barkan, Chaim Charylan, M.D., Mary Comerford, Jeffrey S. Freed,
M.D., Donald GiaQuinto, Robert GiaQuinto, Robert Labra, Kathleen P. O'Brien
McDonald, and Arthur Schwacke, Jr. (the "Merger Agreement"). In addition, the
following terms, as used herein, have the following meanings:
1.1 "Holder" means the Shareholder.
1.2 "Person" shall mean any individual, corporation, proprietorship,
firm, partnership, limited partnership, limited liability company, trust,
association or other entity.
1.3 "Registrable Securities" means the Parent Common Stock delivered to
the Shareholder pursuant to the Merger Agreement until (i) a registration
statement covering such Parent Common Stock (or any securities into which such
Parent Common Stock may be hereafter converted by operation of law or otherwise)
has been declared effective by the SEC, (ii) it is sold or may be sold pursuant
to Rule 144 under the Securities Act or (iii) it has been otherwise transferred,
and it may be resold without registration under the Securities Act.
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1.4 "Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
1.5 "Underwriter" means a securities dealer who purchases any
Registrable Securities as a principal and not as part of such dealer's
market-making activities or who undertakes to sell such securities on a "best
efforts basis".
ARTICLE II
REGISTRATION RIGHTS
2.1 COMPANY REGISTRATION. On or prior to the date which is thirteen (13)
months after the Effective Time, the Company shall file a registration statement
(the "Registration Statement") with the SEC with respect to the Registrable
Securities; provided, however, that, subject to the provisions of Section 2.2,
below, the Company shall not be obligated to effect such registration within six
(6) months of the effective date of a registration of shares initiated by the
Company, other than the Company's Registration Statement on Form S-8 relating to
the Company's Amended and Restated 1988 Stock Option Plan or to another similar
plan adopted by the Company.
2.2 PIGGYBACK REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. Subject to the provisions of Section
2.2(b), below, if, and whenever prior to the filing of the Registration
Statement, the Company proposes to register any of its securities under any
applicable law for sale to the public, whether for its own account or for the
account of other security holders or both, it will, at any such time, give
written notice (the "Registration Notice") to the Holder or his permitted
transferees or assignees of its intention to do so. Subject to the limitations
contained herein, upon written request of the Holder given to the Company within
thirty (30) days of receipt by the Holder of the Registration Notice, the
Company will cause the Holder's Registrable Securities to be included in the
securities to be covered by such registration and, subject to Section 3(b), use
its best efforts to cause the Holder's Registrable Securities to be included in
any underwriting thereof; provided that, at any time prior to the effective date
of the registration statement with respect to such registration, the Company may
elect in its discretion to terminate or delay such registration, and upon giving
notice thereof to the Holders (i) in the event of any such termination, the
Company shall have no further obligation to register the Holder's Registrable
Securities in connection with such registration, and (ii) in the event of any
such delay, the Company shall be permitted to delay the registration of the
Holder's Registrable Securities for the same period as the delay in registering
the other securities subject to such registration. The Holder shall have the
right to withdraw from participation in any public offering if either of them
disapproves of the terms of such offering.
(b) MARKETING LIMITATIONS. If the underwriter's representative
advises the Company that marketing factors require a limitation of the number of
the shares to be sold by shareholders of the Company, the underwriter's
representative may exclude some or all of the Holder's Registrable Securities
from such public offering; provided, however, that if the
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underwriter's representative limits the number of shares to be included in an
offering and a Holder and other holders of unregistered shares of Parent Common
Stock desire to participate in such offering, the number of shares belonging to
the Holder and such other holders to be included in such offering shall be
allocated between them in proportion to the respective amounts of shares of
Parent Common Stock which such parties hold.
(c) Notwithstanding anything contained herein to the contrary, the
Holder shall not directly or indirectly, sell, pledge, give, transfer, assign or
in any other way whatsoever encumber or dispose of (hereinafter collectively
called "transfer") any of the Registrable Securities, or any interest therein,
except as follows: the Holder may transfer up to 12.5% of the Registrable
Securities per quarter, on a cumulative basis, to the extent and in the manner
permitted by applicable federal and state securities laws. All certificates for
the Registrable Securities shall be endorsed with an appropriate legend
referring to this Agreement
ARTICLE III
REGISTRATION PROCEDURES
3.1 FILINGS; INFORMATION.
(a) The Company will prepare and file with the SEC the Registration
Statement covering sales of the Registrable Securities by the Holder on a form
which shall be appropriate for the sale of the Registrable Securities to be
registered thereunder in accordance with the intended method of distribution
thereof and shall use its reasonable best efforts to cause such Registration
Statement to be declared effective by the SEC as soon as practicable after
filing. The Company shall furthermore keep such Registration Statement effective
until the shares covered thereby are no longer Registrable Securities and shall
comply in all material respects with the applicable requirements of the
Securities Exchange Act of 1934, as amended, including, but not limited to,
timely filing of all reports with the SEC as required thereunder.
(b) The Company will, if requested, prior to filing a registration
statement or prospectus or any amendment or supplement thereto, furnish to the
Selling Holder and each Underwriter, if any, of the Registrable Securities
covered by such registration statement, copies of such registration statement as
proposed to be filed, and thereafter the Company will furnish to such Selling
Holder and Underwriter, if any, such number of copies of such registration
statement, each amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein), the
prospectus included in such registration statement (including each preliminary
prospectus) and such other documents as such Selling Holder or Underwriter may
reasonably request in order to facilitate the disposition of the Registrable
Securities owned by such Selling Holder.
(c) After the filing of the Registration Statement, the Company will
promptly notify the Selling Holder of Registrable Securities covered by such
registration statement of any stop order issued or threatened by the SEC and
take all reasonable actions required to prevent the entry of such stop order or
to remove it if entered.
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(d) The Company will use its best efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States as any Selling Holder reasonably (in light of
such Selling Holder's intended plan of distribution) requests and (ii) cause
such Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Selling Holder to
consummate the disposition of the Registrable Securities owned by such Selling
Holder; provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (B) subject itself to taxation in any such
jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(e) The Company will immediately notify the Selling Holder of such
Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an 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 promptly make available to the Selling
Holder any such supplement or amendment.
(f) The Company and the Selling Holder will enter into customary
agreements and take such other actions as are reasonably required in order to
expedite or facilitate the disposition of such Registrable Securities.
(g) The Company will make available for inspection by any Selling
Holder, any Underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other professional
retained by any such Selling Holder or Underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any Inspectors in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential and which it, in writing, notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction.
The Selling Holder of such Registrable Securities agrees that information
designated by the Company as confidential and obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
affiliates unless and until such is made generally available to the public. The
Selling Holder of such Registrable Securities further sees that it will, upon
learning that the disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.
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(h) The Company will otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(i) The Company will use its best efforts to cause all Registrable
Securities to be listed for trading on each securities exchange or other
securities market on which similar securities issued by the Company are then
listed.
(j) The Company may require the Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration.
(k) The Selling Holder shall, upon receipt of any notice from the
Company of the happening of any event of the kind described in Section 3.1(e)
hereof, forthwith discontinue disposition of Registrable Securities pursuant to
the registration statement covering such Registrable Securities until such
Selling Holder's receipt of the copies of the supplemented or amended prospectus
contemplated by Section 3.1(e) hereof, and, if so directed by the Company, such
Selling Holder will deliver to the Company all copies, other than permanent file
copies then in such Selling Holder's possession, of the most recent prospectus
covering such Registrable Securities at the time of receipt of such notice. In
the event the Company shall give such notice, the Company shall extend the
period during which such registration statement shall be maintained effective by
the number of days during the period from and including the date of the giving
of notice pursuant to Section 3.1(e) hereof to the date when the Company shall
make available to the Selling Holder of Registrable Securities covered by such
registration statement a prospectus supplemented or amended to conform with the
requirements of Section 3.1(e) hereof.
3.2 REGISTRATION EXPENSES. In addition to the expenses payable under
Section 4.1, in connection with any registration statement required to be filed
hereunder, the Company shall pay all registration expenses incurred in
connection with the registration hereunder (the "Registration Expenses"),
including the following: (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities and (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company. The Company shall not have any obligation to pay any underwriting fees,
discounts or commission attributable to the sale of Registrable Securities, or
any out-of-pocket expenses of the Holder (or the agents who manage their
accounts) or the Underwriter or any fees and expenses of Underwriter's counsel
or counsel to the Selling Holder.
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ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Selling Holder from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable counsel fees) caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Securities
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities and expenses are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by such Selling
Holder or on such Selling Holder's behalf expressly for use therein; provided,
however, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the indemnity contained in this Section 41 shall not apply
to the extent any such loss, claim, damage, liability and expense results from
the fact that a copy of the current prospectus (as amended and supplemented, if
applicable) was not sent or given to the Person asserting any such loss, claim,
damage or liability at or prior to the written confirmation of the sale of the
Registrable Securities concerned to such Person if it is determined that the
Company has provided such current prospectus in accordance with Section 3.1(b)
and it was the responsibility of such Selling Holder to provide such Person with
a copy of such current prospectus and such copy of such current prospectus would
have cured the defect giving rise to such loss, claim, damage, liability or
expense.
4.2 INDEMNIFICATION BY HOLDER OF REGISTRATION SECURITIES. The Selling
Holder agrees to indemnify and hold harmless the Company, its officers,
directors and agents and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with reference to information relating to such
Selling Holder furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary prospectus. In case any action or proceeding shall be brought
against the Company or any of its officers, directors or agents or any such
controlling Person, in respect of which indemnity may be sought against such
Selling Holder, such Selling Holder shall have the rights and duties given to
the Company, and the Company and its respective officers, directors and agents
and such controlling person shall have the rights and duties given to such
Selling Holder, by the preceding and succeeding paragraphs.
4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any proceeding (including
any governmental investigation) shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to Section 4.1 or 4.2, such
Person (an "Indemnified party") shall promptly notify the Person against whom
such indemnity may be sought (an "Indemnifying Party") in writing and the
Indemnifying Party shall assume the defense thereof, including the employment of
counsel reasonably satisfactory to such Indemnified Party, and shall assume the
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payment of all fees and expenses. In any such proceeding, any Indemnified Party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties, and
that all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Indemnified Parties, such firm shall be
designated in writing by the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent, or if there be a final judgment for
the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
ARTICLE V
MISCELLANEOUS
5.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.
5.2 RESTRICTIONS ON PUBLIC SALE. The Selling Holder shall not effect any
public sale or distribution of the securities being registered or a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, at any time in violation of any provisions of Federal or state
securities laws.
5.3 AMENDMENT AND MODIFICATION. This Agreement may be amended or
modified, and any provision of this Agreement may be waived, only by written
agreement of the Company and Holder.
5.4 SUCCESSORS: ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and
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permitted assigns, except that the Company may not assign its rights and
obligations hereunder. Except as otherwise provided herein, the Shareholder may
assign his rights and obligations under this Agreement upon prior written notice
to the Company, but no such assignment shall relieve the assigning party of his
obligations hereunder.
5.5 NOTICES. Any notice or other communication under this agreement
shall be in writing and shall be considered given upon receipt, if personally
delivered or telecopied, or one day after delivery to a courier for next-day
delivery, to the parties at the addresses set forth below (or at such other
address as a party may specify by notice to the others).
If to the Company, to it at: Accuhealth, Inc.
1575 Bronx River Avenue
Bronx, New York 10460
Attention: Glenn C. Davis
Facsimile number: 718-824-2432
with a copy to: Cohen & Tauber LLP
330 Madison Avenue
New York, New York 10022
Attention: Y. Jerry Cohen, Esq.
Facsimile number: 212-972-6569
and a copy to Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attention: Robert Cantone, Esq.
Facsimile number: (212) 969-2900
If to the Shareholder to: Jeffrey S. Freed, M.D.
50 East 79th Street
New York, NY 10021
with a copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, NY 10022
Leslie J. Levinson, Esq.
Facsimile number: (212)702-5957
5.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the state of New York with respect to contracts to be
wholly performed in such State.
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5.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ACCUHEALTH, INC.
By: /s/ GLENN C. DAVIS
----------------------------
Name: Glenn C. Davis
Title:
/s/ Jeffrey S. Freed, M.D.
----------------------------
JEFFREY S. FREED, M.D.
9
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement (This "Agreement"), dated April 9, 1998,
by and between Accuhealth, Inc., a New York corporation, (the "Company"), and
Linda Barkan (the "Shareholder").
RECITALS:
A. The Shareholder is the owner of 233,049 shares of common stock, par
value $.01 per share, of the Company, none of which are registered with the
Securities Exchange Commission (the "SEC") pursuant to the Securities Act of
1933, as amended (the "Securities Act").
B. The Company desires to grant to the Shareholder certain rights to
such shares registered under the Securities Act.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both parties, the parties agree
as follows:
ARTICLE I
DEFINITIONS
1. DEFINITIONS. Unless otherwise expressly set forth herein,
capitalized terms used in this Agreement which are not otherwise defined shall
have the same meanings ascribed to them in that certain Agreement and Plan of
Merger, dated December 1, 1997 among the Company, HHI Acquiring Corp., Healix
HealthCare, Inc., Linda Barkan, Chaim Charylan, M.D., Mary Comerford, Jeffrey S.
Freed, M.D., Donald GiaQuinto, Robert GiaQuinto, Robert Labra, Kathleen P.
O'Brien McDonald, and Arthur Schwacke, Jr. (the "Merger Agreement"). In
addition, the following terms, as used herein, have the following meanings:
1.1 "Holder" means the Shareholder.
1.2 "Person" Shall mean any individual, corporation,
proprietorship, firm, partnership, limited partnership, limited liability
company, trust, association or other entity.
1.3 "Registrable Securities'9 means the Parent Common Stock
delivered to the Shareholder pursuant to the Merger Agreement until (i) a
registration statement covering such Parent Common Stock (or any securities into
which such Parent Common Stock may be hereafter converted by operation of law or
otherwise) has been declared effective by the SEC, (ii) it is sold or may be
sold pursuant to Rule 144 under the Securities Act or (iii) it has been
otherwise transferred, and it may be resold without registration under the
Securities Act.
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1.4 "Selling Holder" means a Holder who is selling Registrable
Securities pursuant to a registration statement under the Securities Act.
1.5 "Underwriter" means a securities dealer who purchases any
Registrable Securities as a principal and not as part of such dealer's
market-making activities or who undertakes to sell such securities on a "best
efforts basis".
ARTICLE II
REGISTRATION RIGHTS
2.1 COMPANY REGISTRATION. On or prior to the date which is
thirteen (13) months after the Effective Time, the Company shall file a
registration statement (the "Registration Statement") with the SEC with respect
to the Registrable Securities; provided, however, that, subject to the
provisions of Section 2.2, below, the Company shall not be obligated to effect
such registration within six (6) months of the effective date of a registration
of shares initiated by the Company, other than the Company's Registration
Statement on Form 5-8 relating to the Company's Amended and Restated 1988 Stock
Option Plan or to another similar plan adopted by the Company.
2.2 PIGGYBACK REGISTRATION RIGHTS.
(a) PIGGYBACK REGISTRATION. Subject to the provisions of
Section 2.2(b), below, if, and whenever prior to the filing of the Registration
Statement, the Company proposes to register any of its securities under any
applicable law for sale to the public, whether for its own account or for the
account of other security holders or both, it will, at any such time, give
written notice (the "Registration Notice") to the Holder or his permitted
transferees or assignees of its intention to do so. Subject to the limitations
contained herein, upon written request of the Holder given to the Company within
thirty (30) days of receipt by the Holder of the Registration Notice, the
Company will cause the Holder's Registrable Securities to be included in the
securities to be covered by such registration and, subject to Section 3(b), use
its best efforts to cause the Holder's Registrable Securities to be included in
any underwriting thereof; provided that, at any time prior to the effective date
of the registration statement with respect to such registration, the Company may
elect in its discretion to terminate or delay such registration, and upon giving
notice thereof to the Holders (i) in the event of any such termination, the
Company shall have no further obligation to register the Holder's Registrable
Securities in connection with such registration, and (ii) in the event of any
such delay, the Company shall be permitted to delay the registration of the
Holder's Registrable Securities for the same period as the delay in registering
the other securities subject to such registration. The Holder shall have the
right to withdraw from participation in any public offering if either of them
disapproves of the terms of such offering.
(b) MARKETING LIMITATIONS. If the underwriter's representative
advises the Company that marketing factors require a limitation of the number of
the shares to be sold by shareholders of the Company, the underwriter's
representative may exclude some or all of the Holder's Registrable Securities
from such public offering; provided, however, that if the
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underwriter's representative limits the number of shares to be included in an
offering and a Holder and other holders of unregistered shares of Parent Common
Stock desire to participate in such offering, the number of shares belonging to
the Holder and such other holders to be included in such offering shall be
allocated between them in proportion to the respective amounts of shares of
Parent Common Stock which such parties hold.
(c) Notwithstanding anything contained herein to the contrary,
the Holder shall not directly or indirectly, sell, pledge, give, transfer,
assign or in any other way whatsoever encumber or dispose of (hereinafter
collectively called "transfer") any of the Registrable Securities, or any
interest therein, except as follows: the Holder may transfer up to 12.5% of the
Registrable Securities per quarter, on a cumulative basis, to the extent and in
the manner permitted by applicable federal and state securities laws. All
certificates for the Registrable Securities shall be endorsed with an
appropriate legend referring to this Agreement
ARTICLE III
REGISTRATION PROCEDURES
3.1 FILINGS; INFORMATION.
(a) The Company will prepare and file with the SEC the
Registration Statement covering sales of the Registrable Securities by the
Holder on a form which shall be appropriate for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended method of
distribution thereof and shall use its reasonable best efforts to cause such
Registration Statement to be declared effective by the SEC as soon as
practicable after filing. The Company shall furthermore keep such Registration
Statement effective until the shares covered thereby are no longer Registrable
Securities and shall comply in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended, including, but
not limited to, timely filing of all reports with the SEC as required
thereunder.
(b) The Company will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
furnish to the Selling Holder and each Underwriter, if any, of the Registrable
Securities covered by such registration statement, copies of such registration
statement as proposed to be filed, and thereafter the Company will furnish to
such Selling Holder and Underwriter, if any, such number of copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference therein),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Holder or
Underwriter may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such Selling Holder.
(c) After the filing of the Registration Statement, the
Company will promptly notify the Selling Holder of Registrable Securities
covered by such registration statement of any stop order issued or threatened by
the SEC and take all reasonable actions required to prevent the entry of such
stop order or to remove it if entered.
3
<PAGE>
(d) The Company will use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as any Selling Holder reasonably (in
light of such Selling Holder's intended plan of distribution) requests and (ii)
cause such Registrable Securities to be registered with or approved by such
other governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Selling Holder to
consummate the disposition of the Registrable Securities owned by such Selling
Holder; provided that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (B) subject itself to taxation in any such
jurisdiction, or (C) consent to general service of process in any such
jurisdiction.
(e) The Company will immediately notify the Selling Holder of
such Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable Securities,
such prospectus will not contain an 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 promptly make available to the Selling
Holder any such supplement or amendment.
(f) The Company and the Selling Holder will enter into
customary agreements and take such other actions as are reas6nably required in
order to expedite or facilitate the disposition of such Registrable Securities.
(g) The Company will make available for inspection by any
Selling Holder, any Underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other professional
retained by any such Selling Holder or Underwriter (collectively, the
"Inspectors"), all financial and other records, pertinent corporate documents
and properties of the Company (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the officers, directors and employees of the Company
to supply all information reasonably requested by any Inspectors in connection
with such registration statement. Records which the Company determines, in good
faith, to be confidential and which it, in writing, notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the disclosure
of such Records is necessary to avoid or correct a misstatement or omission in
such registration statement or (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent jurisdiction.
The Selling Holder of such Registrable Securities agrees that information
designated by the Company as confidential and obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company or its
affiliates unless and until such is made generally available to the public. The
Selling Holder of such Registrable Securities further agrees that it will, upon
learning that the disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at its expense,
to undertake appropriate action to prevent disclosure of the Records deemed
confidential.
4
<PAGE>
(h) The Company will otherwise use its best efforts to comply
with ail applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering a period of twelve (12) months, beginning within three (3) months after
the effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act.
(i) The Company will use its best efforts to cause all
Registrable Securities to be listed for trading on each securities exchange or
other securities market on which similar securities issued by the Company are
then listed.
(j) The Company may require the Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as the Company may from
time to time reasonably request and such other information as may be legally
required in connection with such registration.
(k) The Selling Holder shall, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
3.1(e) hereof, forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 3.1(e) hereof, and, if so directed by the
Company, such Selling Holder will deliver to the Company all copies, other than
permanent file copies then in such Selling Holder's possession, of the most
recent prospectus covering such Registrable Securities at the time of receipt of
such notice. In the event the Company shall give such notice, the Company shall
extend the period during which such registration statement shall be maintained
effective by the number of days during the period from and including the date of
the giving of notice pursuant to Section 3.1(e) hereof to the date when the
Company shall make available to the Selling Holder of Registrable Securities
covered by such registration statement a prospectus supplemented or amended to
conform with the requirements of Section 3.1(e) hereof.
3.2 REGISTRATION EXPENSES. In addition to the expenses payable under
Section 4.1, in connection with any registration statement required to be filed
hereunder, the Company shall pay all registration expenses incurred in
connection with the registration hereunder (the "Registration Expenses"),
including the following: (i) all registration and filing fees, (ii) fees and
expenses of compliance with securities or blue sky laws (including reasonable
fees and disbursements of counsel in connection with blue sky qualifications of
the Registrable Securities), (iii) printing expenses, (iv) internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), (v) the fees and expenses
incurred in connection with the listing of the Registrable Securities and (vi)
reasonable fees and disbursements of counsel for the Company and customary fees
and expenses for independent certified public accountants retained by the
Company. The Company shall not have any obligation to pay any underwriting fees,
discounts or commission attributable to the sale of Registrable Securities, or
any out-of-pocket expenses of the Holder (or the agents who manage their
accounts) or the Underwriter or any fees and expenses of Underwriter's counsel
or counsel to the Selling Holder.
5
<PAGE>
ARTICLE IV
INDEMNIFICATION
4.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Selling Holder from and against any and all losses, claims,
damages, liabilities and expenses (including reasonable counsel fees) caused by
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement or prospectus relating to the Registrable Securities
(as amended or supplemented if the Company shall have furnished any amendments
or supplements thereto) or any preliminary prospectus, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities and expenses are caused by
any such untrue statement or omission or alleged untrue statement or omission
based upon information furnished in writing to the Company by such Selling
Holder or on such Selling Holder's behalf expressly for use therein; provided,
however, that with respect to any untrue statement or omission or alleged untrue
statement or omission made in any preliminary prospectus, or in any prospectus,
as the case may be, the indemnity contained in this Section 4.1 shall not apply
to the extent any such loss, claim, damage, liability and expense results from
the fact that a copy of the current prospectus (as amended and supplemented, if
applicable) was not sent or given to the Person asserting any such loss, claim,
damage or liability at or prior to the written confirmation of the sale of the
Registrable Securities concerned to such Person if it is determined that the
Company has provided such current prospectus in accordance with Section 3.1(b)
and it was the responsibility of such Selling Holder to provide such Person with
a copy of such current prospectus and such copy of such current prospectus would
have cured the defect giving rise to such loss, claim, damage, liability or
expense.
4.2 INDEMNIFICATION BY HOLDER OF REGISTRATION SECURITIES. The Selling
Holder agrees to indemnify and hold harmless the Company, its officers,
directors and agents and each Person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Selling Holder, but only with reference to information relating to such
Selling Holder furnished in writing by such Selling Holder or on such Selling
Holder's behalf expressly for use in any registration statement or prospectus
relating to the Registrable Securities, or any amendment or supplement thereto,
or any preliminary prospectus. In case any action or proceeding shall be brought
against the Company or any of its officers, directors or agents or any such
controlling Person, in respect of which indemnity may be sought against such
Selling Holder, such Selling Holder shall have the rights and duties given to
the Company, and the Company and its respective officers, directors and agents
and such controlling person shall have the rights and duties given to such
Selling Holder, by the preceding and succeeding paragraphs.
4.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. If any proceeding
(including any governmental investigation) shall be instituted involving any
Person in respect of which indemnity may be sought pursuant to Section 4.1 or
4.2, such Person (an "Indemnified Party") shall promptly notify the Person
against whom such indemnity may be sought (an "Indemnifying Party") in writing
and the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to such Indemnified Party, and
shall assume the
6
<PAGE>
payment of all fees and expenses. In any such proceeding, any Indemnified Party
shall have the right to retain its own counsel, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the Indemnified Party and the
Indemnifying Party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them. It
is understood that the Indemnifying Party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) at any time for all such Indemnified Parties, and
that all such fees and expenses shall be reimbursed as they are incurred. In the
case of any such separate firm for the Indemnified Parties, such firm shall be
designated in writing by the Indemnified Parties. The Indemnifying Party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent, or if there be a final judgment for
the plaintiff, the Indemnifying Party shall indemnify and hold harmless such
Indemnified Parties from and against any loss or liability (to the extent stated
above) by reason of such settlement or judgment. No Indemnifying Party shall,
without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened proceeding in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability arising out
of such proceeding.
ARTICLE V
MISCELLANEOUS
5.1 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any underwritten registration hereunder unless such Person (a)
agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.
5.2 RESTRICTIONS ON PUBLIC SALE. The Selling Holder shall not effect
any public sale or distribution of the securities being registered or a similar
security of the Company, or any securities convertible into or exchangeable or
exercisable for such securities, including a sale pursuant to Rule 144 under the
Securities Act, at any time in violation of any provisions of Federal or state
securities laws.
5.3 AMENDMENT AND MODIFICATION. This Agreement may be amended or
modified, and any provision of this Agreement may be waived, only by written
agreement of the Company and Holder.
5.4 SUCCESSORS; ASSIGNMENT. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective legal
representatives, successors and
7
<PAGE>
permitted assigns, except that the Company may not assign its rights and
obligations hereunder. Except as otherwise provided herein, the Shareholder may
assign his rights and obligations under this Agreement upon prior written notice
to the Company, but no such assignment shall relieve the assigning party of his
obligations hereunder.
5.5 NOTICES. Any notice or other communication under this agreement
shall be in writing and shall be considered given upon receipt, if personally
delivered or telecopied, or one day after delivery to a courier for next-day
delivery, to the parties at the addresses set forth below (or at such other
address as a party may specify by notice to the others).
If to the Company, to it at: Accuhealth, Inc.
1575 Bronx River Avenue
Bronx, New York 10460
Attention: Glenn C. Davis
Facsimile number: 718-824-2432
with a copy to: Cohen & Tauber LLP
330 Madison Avenue
New York, New York 10022
Attention: Y. Jerry Cohen, Esq.
Facsimile number: 212-972-6569
and a copy to Proskauer Rose LLP
1585 Broadway
New York, NY 10036
Attention: Robert Cantone, Esq.
Facsimile number: (212) 969-2900
If to the Shareholder to: Linda Barkan, R.N.
15-27 212 St.
Bayside, New York 11360
with a copy to: Baer Marks & Upham LLP
805 Third Avenue
New York, NY 10022
Leslie J. Levinson, Esq.
Facsimile number: (212) 702-5957
5.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the law of the state of New York with respect to contracts to be
wholly performed in such State.
8
<PAGE>
5.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date set forth above.
ACCUHEALTH, INC.
By: /s/ GLENN C. DAVIS
--------------------------------
Name: Glenn C. Davis
Title: _________________
/s/ JEFFREY S. FREED As Atty-In-Fact
------------------------------------
Jeffrey S. Freed
LINDA BARKAN, R.N.
9
Exhibit 11
STATEMENT RE COMPUTATION OF PER-SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Basic and Diluted
Average common shares outstanding 1,754,342 1,400,423 1,273,274
Net effect of dilutive stock options - based on
the treasury method using average market price -- -- --
----------- ----------- -----------
Total 1,754,342 1,400,423 1,273,274
----------- ----------- -----------
(Loss) income from continuing operations $ (206,108) $ 126,731 $ (778,332)
Preferred stock dividends 162,000 162,000 203,836
----------- ----------- -----------
(Loss) income applicable to common stockholders (368,108) (35,269) (982,168)
=========== =========== ===========
</TABLE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
List of subsidiary corporations, each of which is wholly owned by the
Registrant:
NAME STATE OF INCORPORATION
Midview Drug, Inc. New York
*Embee Drug, Inc. New York
*Riverview Pharmacy, Inc. New York
Citiview Drug, Inc. New York
*Westview Drug Corp., Inc. New York
*Eastview 87th Street, Inc. New York
*Brittany Chemists, Inc. New York
*Villageview Pharmacy, Inc. New York
Towerview, Inc. New York
Accuhealth Home Care, Inc. Delaware
ProHealthCare Infusion Services, Inc. New Jersey
*Inactive
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information extracted
from March 31, 1998 10-K balance sheet and income statement and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000840401
<NAME> Accuhealth
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Mar-31-1998
<PERIOD-START> Apr-01-1997
<PERIOD-END> Mar-31-1998
<EXCHANGE-RATE> 1
<CASH> 166,624
<SECURITIES> 0
<RECEIVABLES> 7,174,562
<ALLOWANCES> 362,352
<INVENTORY> 1,196,207
<CURRENT-ASSETS> 8,281,723
<PP&E> 5,088,776
<DEPRECIATION> 2,807,135
<TOTAL-ASSETS> 12,193,591
<CURRENT-LIABILITIES> 9,564,705
<BONDS> 0
0
13,500
<COMMON> 21,092
<OTHER-SE> 1,619,908
<TOTAL-LIABILITY-AND-EQUITY> 12,193,591
<SALES> 18,603,823
<TOTAL-REVENUES> 18,603,823
<CGS> 10,558,531
<TOTAL-COSTS> 10,558,531
<OTHER-EXPENSES> 7,654,495
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 596,905
<INCOME-PRETAX> (206,108)
<INCOME-TAX> 0
<INCOME-CONTINUING> (206,108)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (206,108)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
