<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- -------------
Commission File Number 0-19240
U.S. HOMECARE CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-2853680
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
750 MAIN STREET, HARTFORD, CT 06103
(Address of principal executive offices) (Zip Code)
(860) 278-7242
(Registrant's telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:NONE
Securities registered pursuant to Section 12(g)of the Act:
Name of each
exchange on which
Title of Each Class registered
COMMON STOCK, $.01 PAR VALUE OTC Bulletin Board
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.
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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.
While it is difficult to determine the number of shares owned by
non-affiliates, the registrant estimates that the aggregate market value of
outstanding Common Stock on March 27, 1997, (based upon the average bid and
asked prices of such Common Stock on the "Pink Sheets" on March 27, 1997) held
by non-affiliates was approximately $10,735,000 million and the aggregate
market value of outstanding Preferred Stock on March 27, 1997 (based upon the
price at which such Preferred Stock was sold) held by non-affiliates was
approximately $10,765,000 million. For this computation, the registrant has
excluded the market value of all shares of its Common Stock and Preferred Stock
reported as beneficially owned by officers and directors and their affiliates
and certain significant shareholders of the registrant. Such exclusion shall not
be deemed to constitute an admission that any such shareholder is an affiliate
of the registrant.
Documents Incorporated by Reference
NONE.
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U.S. HOMECARE CORPORATION
ANNUAL REPORT ON FORM 10-K
DECEMBER 31, 1996
TABLE OF CONTENTS
PART I
Item 1. BUSINESS.............................................. 1
Item 2. PROPERTIES............................................ 8
Item 3. LEGAL PROCEEDINGS..................................... 9
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS............................................... 10
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS........................... 11
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA.................. 12
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS......... 13
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA........... 19
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE................ 19
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . 20
Item 11. EXECUTIVE COMPENSATION .............................. 22
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT................................ 26
Item 13. CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS ...... 28
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K. ........................................ 29
<PAGE> 4
PART I
ITEM 1. BUSINESS
GENERAL
U.S. HomeCare Corporation (collectively with its subsidiaries, "USHC"
or the "Company") is a regional provider of paraprofessional and professional
home health care services, including nursing care, personal care, and other
specialized therapies. The Company is headquartered in Hartford, Connecticut and
has operations in New York (Westchester County, metropolitan New York City, Long
Island and upstate New York) as well as Connecticut and Pennsylvania. The
Company works with physicians, social service agencies, health care
institutions, and patients to identify home care services that are appropriate
for the patient's diagnosis and required to implement the physician's plan of
treatment. The Company addresses the needs of its patients by coordinating
therapies, products, equipment and support services with the appropriate nursing
care. To further its emphasis on a diagnosis-centered approach, the Company has
designed specialized programs for patients with particular diseases such as
Cancer, AIDS and Alzheimer's disease, and for particular classes of patients
such as the developmentally disabled and hospice patients.
Following its formation in 1986, the Company expanded through a
strategy of internal growth, the opening of new branch offices, selected
acquisitions within its region and the introduction of new services and
programs, including infusion therapy which was added in 1989. In 1992, the
Company adopted an accelerated expansion strategy, opened offices in a number of
new geographic markets, developed a new and sizeable base of Medicare business
in South Florida, and, in late 1992, consummated a significant infusion therapy
acquisition in the greater New York metropolitan area. Management underestimated
the financial, managerial and system resources necessary to execute its
expansion strategy. As a result, the Company failed to successfully implement
its expansion strategy and began to incur operating losses in the second quarter
of 1993. In August 1994, the Company announced an extensive restructuring plan,
which included the closing of its development-stage offices outside of its core
markets, the consolidation of its infusion therapy pharmacy facilities from five
to two, and the sale of its South Florida operations which was completed in
December 1995. Despite these actions, the Company continued to incur operating
losses in 1994, 1995 and the first three quarters of 1996.
At the end of September 1996, the Company undertook a series of steps
to improve operating results, restore financial health and focus on building its
core home nursing services business. The Company engaged a team of experienced
turnaround consultants to improve the operating and financial performance of the
Company. During the fourth quarter of 1996 the following were accomplished:
- Corporate overhead was reduced by more than $4 million per annum and
branch level overhead and direct costs were reduced by more than $2.5
million per annum;
- The Company sold the business and operating assets of its troubled home
infusion therapy operations as of October 1, 1996; and
- The Company settled all of its material litigation and reduced the
borrowings under the Company's revolving credit facility from $8.9
million on September 30, 1996 to $5.0 million on December 31, 1996.
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In connection with these steps, the Company recognized a loss on the
sale of its home infusion therapy operations of $13.8 million (including the
write-off of $11.6 million of related goodwill and intangibles and a reserve of
$2.6 million for the collection of infusion therapy receivables) and recorded
a $3.6 million provision for restructuring and other non-recurring charges.
HOME HEALTH CARE MARKET
Home health care is a growing major segment of the health care industry
and is projected to remain so through the end of the decade. According to the
Health Care Financing Administration, U.S. home health care spending was $26
billion in 1995 with $17 billion spent in home health care nursing services. The
annual industry growth rate in home health care spending from 1986 to 1991 was
estimated to be in excess of 20%. Management believes that this growth rate has
moderated in recent periods in the markets in which it operates.
The primary factors contributing to this growth in homecare are:
- Increased acceptance of home care by physicians, patients and
third-party payors.
- Advancements in home care therapies which allow for care outside
of a traditional institutional setting.
- Changing population demographics, including an increasing number
of aged.
- Increased number of patients suffering from therapy-intensive
diseases such as AIDS and cancer.
- Cost-effectiveness of care administered in the home (home health
care is estimated to cost approximately 50% of equivalent care
delivered in the hospital).
Rapid industry growth and market forces have led to the emergence of
many independent and hospital-based home care agencies. The number of home
health care agencies in the U.S. has grown to more than 17,000 agencies.
Collectively, these agencies provide services to over 6 million people in the
U.S. who require care because of acute illness, long term chronic health
conditions, permanent disability or terminal illness. The home health care
industry, while still highly fragmented, is experiencing a period of
consolidation, with larger companies emerging through acquisitions and mergers
in order to achieve economies of scale.
The home health care industry consists of four segments: nursing
services, infusion therapy, respiratory therapy and home medical equipment. The
Company operates in the nursing services segment. The nursing services segment
includes the provision of both professional and paraprofessional nursing and
personal care in the home, and is estimated to represent two-thirds of
expenditures within the home health care market, or approximately $17 billion in
1995. Approximately 70% of nursing services are provided to people over the age
of 65 and primarily consist of nontechnical, medically related personal care
services related to assisted living. Such services are often intended to prevent
costly, premature and/or unnecessary institutionalization of the patient. The
primary diagnoses of patients receiving home nursing care are: cardiovascular
and cerebrovascular disease, respiratory disease, orthopedic conditions,
carcinomas, diabetes, and central nervous system problems.
The home health care market is highly competitive and is divided among
a large number of providers, some of which are national providers, but most of
which are either regional or local providers. Certain of the Company's
competitors and potential competitors have significantly greater financial,
technical and marketing and sales resources than the Company and may, in certain
locations,
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possess licenses or certificates (for example, certificates of need in New York
State) that permit them to provide services that the Company cannot currently
provide.
RELATIONSHIPS WITH REFERRAL SOURCES
The development and growth of the Company's business depends to a
significant extent on its ability to establish and maintain close working
relationships with home care and social service agencies, hospitals, clinics,
nursing homes, physicians and physician groups, health maintenance organizations
and other health care providers. There can be no assurance that the Company's
existing relationships with these referral sources will be successfully
maintained or that additional relationships will be successfully developed and
maintained. In March 1994, VNS HomeCare ("VNS"), a non-profit home health care
institution in New York City informed the Company that it intended to reduce the
Company's overall caseload due to substandard administrative performance
ratings. Consequently, the Company's net revenues attributable to VNS declined
from $8.8 million (16%) for the year ended December 31, 1994, to $6.2 million
(11%) for the year ended December 31, 1995, and to $5.4 million (10%) for the
year ended December 31, 1996.
DEPENDENCE ON REIMBURSEMENT BY THIRD PARTY PAYORS
A substantial portion of the Company's revenues are derived directly or
indirectly from government-sponsored health care programs, including Medicaid
and Medicare. The Company receives direct payments from both Medicare
(approximately 14% of revenue) and Medicaid (approximately 6% of revenue). The
Company also derives significant revenues indirectly from the Medicaid program
through contracts with local government agencies (approximately 17% of revenue),
such as the Department of Social Services of Westchester County. In addition, a
substantial portion of the Company's business is derived as a sub-contractor to
Medicare-Certified and Medicaid-Certified agencies. As a result, the Company
would likely be adversely affected by any rate freezes, payment delays, cutbacks
in coverage or any other adverse actions taken with respect to Medicare and
Medicaid and there can be no assurance that such actions will not be taken in
the future.
Governmental and third-party payors have taken extensive steps intended
to contain or reduce payments made to health care providers such as the Company.
These steps have included, among others, changes in reimbursement methodologies,
changes in services covered, increased utilization review of services,
negotiated prospective or discounted contract pricing and adoption of a
competitive bid approach to service contracts. Managed care and related cost
containment efforts are expected to continue in the future. Home health care,
which is generally less costly than hospital-based care, has generally benefited
from many of these cost containment efforts. As expenditures in the home health
care market continue to grow, however, initiatives aimed at reducing the cost of
health care delivery at non-hospital sites are increasing. For example, several
state Medicaid programs, in an effort to contain the cost of health care and in
light of state budgetary constraints, have reduced their payment rates and have
narrowed the scope of covered services. Such initiatives are expected to
continue in the future. A significant change in coverage or a reduction in
payment rates for the types of home health care services provided by the Company
could have a material adverse effect upon the Company's business and financial
condition.
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For each office in which the Company participates in the Medicare
program, the Company is required to file annual cost reports to establish its
reimbursement rate per Medicare visit for that office. Such reimbursement rates
are subject to audit and retroactive adjustment by the Medicare fiscal
intermediaries for the geographic areas in which the Company's
Medicare-certified offices are located.
In its core market operations the Company is required to file cost
reports for two of its upstate New York companies, for its Connecticut
operations, and for its Pennsylvania operations as well as as for home office
operations. Cost reports for all of the Company's Medicare certified operations
have been settled through June 1993 although they remain subject to reopening
through November 1998. The remaining cost reports filed for periods through
December 31, 1995 are in various stages of review, audit and or settlement with
the fiscal intermediaries. While the Company has recorded estimated settlements
for these open cost report periods there can be no assurance that final
settlements will not result in future material assessments against the Company.
Such assessments could result in reductions in revenue recorded.
For the now discontinued Florida operations the fiscal intermediary
made material adjustments to the Company's 1993 and 1994 reimbursement rate per
visit. The result of these actions had a material adverse effect on the
Company's financial condition and results of operations in 1993 and 1994.
Part of the Company's strategy is to increase its business with managed
care third party payors, such as health maintenance organizations and preferred
provider organizations. An increase in these contracts could also reduce the
profit margin for the Company's business because managed care payors typically
reimburse at lower rates and limit service coverage to a greater extent than
other non-governmental third party payors, such as indemnity insurance
providers. The Company is unable to predict how quickly, if at all, its managed
care business will increase and what effect any such increased business in this
segment would have on the Company's business or results of operations.
GOVERNMENT REGULATION
The Company and the health care industry generally are subject to
extensive and frequently changing state and federal regulation governing the
provision of home health care services and home infusion services, the licensing
of branch offices, certification of home health agencies and the licensing of
professionals. In addition, state and federal fraud and abuse laws prohibit,
among other things, the payment of remuneration for patient or business
referrals. New laws and regulations are enacted from time to time to regulate
new and existing services and products in the home health care industry, and any
changes in the laws or regulations or new interpretations of existing laws or
regulations could have an adverse effect on the Company's methods and costs of
doing business. Further, failure by the Company to comply with applicable laws
could adversely affect the Company's ability to continue to provide, or receive
reimbursement for, its services from Medicare, Medicaid and other third party
payors and also could subject the Company and its officers to civil and criminal
penalties. There can be no assurance that the Company will not encounter
regulatory impediments that could adversely affect its ability to open new
branch offices and to expand the services currently provided at its existing
branch offices.
The Company's operations are subject to the illegal remuneration
provisions of the Social Security Act (sometimes referred to as the
"anti-kickback" statute and similar state laws that impose criminal and civil
sanctions on persons who knowingly and willfully solicit, offer, receive or pay
any remuneration, whether directly or indirectly, in return for, or to induce,
the referral of a patient for
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treatment, or, among other things, the ordering, purchasing, or leasing, of
items or services that are paid for in whole or part by Medicare, Medicaid or
similar state programs. Violations of the federal anti-kickback statute are
punishable by criminal penalties, including imprisonment, fines and exclusion
from future participation in the Medicare and Medicaid programs. Federal
enforcement officials also may attempt to impose civil false claims liability
with respect to claims resulting from an anti-kickback violation. If successful,
civil penalties could be imposed, including assessments of $2,000 per improper
claim for payment plus twice the amount of such claims and suspension from
future participation in Medicare and Medicaid programs. Civil suspension for
anti-kickback violations also can be imposed through an administrative process,
without the imposition of civil monetary penalties. While the federal
anti-kickback statute expressly prohibits transactions that have traditionally
had criminal implication, such as kickbacks, rebates or bribes for patient
referrals, its language has been construed broadly and has not been limited to
such obviously wrongful transactions. Court decisions state that, under certain
circumstances, the statute is also violated when one purpose (as opposed to the
"primary" or a "material" purpose) of a payment is to induce referrals. Congress
has frequently considered federal legislation that would expand the federal
anti-kickback statute to include the same broad prohibitions regardless of payor
source.
In addition, an increasing number of states have laws, which vary from
state to state, prohibiting certain direct or indirect providers for the
referral of patients to a particular provider, including pharmacies and home
health agencies. Possible sanctions for violation of these restrictions include
loss of licensure and civil and criminal penalties. There can be no assurance
that such laws will ultimately be interpreted in a manner consistent with the
practices of the Company.
Under both the Omnibus Budget Reconciliation Act of 1933 ("Stark II")
and certain state legislation, it is unlawful for a physician to refer patients
for certain designated health services to an entity with which the physician has
a financial relationship. A "financial relationship" under Stark II is defined
as as an ownership or investment interest in, or a compensation arrangement
between, the physician and the entity. The entity is prohibited from claiming
payment under the Medicare or Medicaid programs for services rendered pursuant
to a prohibited referral and is liable for the refund of amounts received
pursuant to prohibited claims. The entity also can receive civil penalties of up
to $15,000 per improper claim and can be excluded from participation in the
Medicare and Medicaid programs.
In New York State, a certificate of need ("CON") must be obtained in
order to be certified to participate in the Medicare and Medicaid programs. The
Company does not have CONs covering its Westchester County, metropolitan New
York and Long Island branches and is therefore not certified as a Medicare
provider for such branches. A majority of the Company's business in these
branches is therefore derived as a subcontractor to Medicare-certified and
Medicaid-certified agencies or as a contractor with local government agencies.
In upstate New York (which was an acquired operation), the Company does have
CON's.
The Company is also subject to laws and regulations pertaining to the
environment, health and safety. If the Company were found to be in violation of
any such laws and regulations, it could have a material adverse effect on its
business or financial condition.
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HEALTH CARE REFORM
Political, economic and regulatory influences are likely to lead to
fundamental change in the health care industry in the United States. Numerous
proposals for comprehensive reform of the nation's health care system have been
introduced in Congress. Many approaches have been considered, including mandated
basic health care benefits, controls on health care spending through limitations
on the growth of private health insurance premiums and Medicare and Medicaid
spending, the creation of large insurance purchasing groups and fundamental
changes to health care delivery systems. In addition, some of the states in
which the Company operates are considering various health care reform proposals.
The Company anticipates that Congress and state legislatures will continue to
review and assess alternative health care delivery systems and payment
methodologies, and that public debate of these issues will continue in the
future. Due to uncertainties regarding the ultimate features of reform
initiatives and their enactment and implementation, the Company cannot predict
which, if any, reforms will be adopted, when they may be adopted, or what impact
they may have on the Company. In addition, the cost and service considerations
which have generated proposals for health care reform have also resulted in, and
are expected to continue to result in, strategic realignments and combinations
in the health care industry which may, over time, have a significant impact on
the Company's strategic direction and results of operations. The actual
announcement of reform proposals and the investment communities' reaction to
such proposals, announcements by competitors and payors of their strategies to
respond to reform initiatives and general industry conditions have produced and
may continue to produce volatility in the trading and market price of the
Company's Common Stock and for securities of health care companies generally.
ABILITY TO ATTRACT KEY MANAGEMENT AND DEPENDENCE ON HEALTH CARE
PROFESSIONALS
The Company's future success will depend in large part on its ability
to attract and retain senior management personnel and branch-level management.
In addition, the Company is highly dependent on its staff of professional nurses
and its other health care professionals and paraprofessionals. Competition for
qualified management personnel and health care professionals and
paraprofessionals is strong. The inability to attract, retain or motivate
management and sufficient numbers of qualified health care professionals and
paraprofessionals could adversely affect the Company's business and prospects.
Although the Company has been generally able to meet its staffing requirements
for professional nurses and other health care staff, the Company has experienced
occasional staffing shortages at certain of its offices, and an increase in
competition, or a decline in its ability to meet its staffing needs, in the
future could have a material adverse effect on the Company's profitability and
on the Company's ability to maintain or increase its patient base at certain or
all of its branch offices.
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LIABILITY AND INSURANCE
The Company's services subject it to liability risk. Malpractice claims
may be asserted against the Company if its services are alleged to have resulted
in patient injury or other adverse effects. The Company has from time to time
been subject to such suits in the ordinary course of its business. There can be
no assurance that future claims will not be made or that such claims, if made,
will not materially and adversely affect the Company's business or financial
condition. The Company currently maintains liability insurance in the amount of
$2.0 million per occurrence and $6.0 million in the aggregate. There can be no
assurance that the coverage limits of the Company's insurance policies will be
adequate. In addition, while the Company has been able to obtain liability
insurance in the past, such insurance varies in cost, is difficult to obtain and
may not be available in the future on acceptable terms or at all. A successful
claim against the Company in excess of the Company's insurance coverage could
have a material adverse effect upon the Company's business and financial
condition. Claims against the Company, regardless of their merits or eventual
outcome, also may have a material adverse effect upon the Company's reputation
and business.
COMPETITION
The home health care market is highly competitive and is divided among
a large number of providers, some of which are national providers, but most of
which are either regional or local providers. The Company believes that the
programs provided, the quality of care and service provided, reputation, and the
level of charges for services are significant competitive factors. Certain of
the Company's competitors and potential competitors have significantly greater
financial, technical and marketing and sales resources than the Company and may,
in certain locations, possess licenses or certificates (for example, CON's in
New York State) that permit them to provide services that the Company cannot
currently provide. There can be no assurance that the Company will not encounter
increased competition in the future that could limit the Company's ability to
maintain or increase its business and could adversely affect the Company's
operating results.
EMPLOYEES
As of December 31, 1996, the Company had more than 3,000 employees. The
Company believes that its employee relations are good. None of the Company's
employees is represented by a labor union.
PATENTS AND TRADEMARKS
The Company has no material patents or trademarks.
BACKLOG OF ORDERS AND INVENTORY
The Company has no backlog of orders.
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OTHER
The Company does not have significant research and development
expenditures. The Company's business is not significantly seasonal in nature.
RISK FACTORS
The Company's future business, financial condition and results of
operations are dependent on the Company's ability to successfully provide home
health care services to its customers and to successfully collect for such
services. Inherent in this process are a number of factors that the Company must
carefully manage in order to be successful. Some of these factors are: obtaining
sufficient cash flow from operations to meet its debt service and pay vendors on
a timely basis; complying with the financial covenants in its revolving line of
credit, subordinated credit facility and accounts receivable securitization
program so the banks would not have the right to declare the amounts outstanding
under such facilities immediately due and payable; competing effectively with
other home health care providers; establishing and maintaining close working
relationships with home care and social service agencies, hospitals, clinics,
nursing homes, physicians and physician groups, health maintenance organizations
and other health care providers; obtaining adequate reimbursement from third
party payors; complying with applicable law regarding the health care industry;
attracting and retaining senior management personnel and branch level management
as well as qualified health care professionals and paraprofessionals and
maintaining adequate liability insurance. The failure to manage such risks
successfully could have a material adverse effect on the Company's business,
financial condition and results of operations.
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ITEM 2. PROPERTIES
The following table sets forth the branch offices of the Company in
each of its markets.
<TABLE>
<CAPTION>
Date Opened Lease
or Business Square
Location Acquired Footage
- -------- -------- -------
<S> <C> <C>
HARTSDALE, NY 5/86 5,968
LONG ISLAND, NY
Brooklyn 1/88 3,215
Queens 3/89 4,860
Nassau 3/89 5,350
Suffolk 3/89 2,118
GREATER METROPOLITAN NEW YORK
Manhattan 5/86 5,305
Bronx 5/86 2,275
Scarsdale 5/86 5,854
Peekskill 5/86 1,250
2/92 13,743
CONNECTICUT
Hartford 1/88 3,476
Hartford (Corporate Headquarters) 5/86 7,425
Bridgeport 1/92 2,061
New Haven 8/92 1,224
UPSTATE NEW YORK
Kingston 4/92 2,600
Latham 4/92 4,770
PENNSYLVANIA
Philadelphia 7/90 6,000
Pittsburgh* 9/92 14,816
NEW JERSEY
Allendale * 8/92 1,224
</TABLE>
* Significant portion of facility unused as result of the sale and closure of
the IV therapy business. Future facilities cost for IV related activities have
been included in restructure reserve. The Pittsburgh lease expires in September
1997 and the Allendale lease expires January 1998.
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The Company's headquarters are located in Hartford, Connecticut. The
Company's nursing services are provided by staff located at the branch offices
in the Company's markets. All facilities are leased with various expiration
dates through the year 2000.
The Company regularly evaluates the suitability of each location and
overall adequacy of its various branch offices in regards to the impact on the
efficient operation of the business.
ITEM 3. LEGAL PROCEEDINGS
The Company was involved in the following litigation, all of which has
been settled. See also Note 8 to the Company's consolidated financial
statements.
HIPS LITIGATION. The Company reached a settlement in November 1996 in
HIPS v. USHC Infusion, et al (Supreme Court, State of New York, New York
County), a suit brought in July 1993 by Home Infusion Pharmaceutical Services,
Inc. ("HIPS") to enforce the payment of promissory notes in the face amount of
$4.5 million and approximately $880,000 in consulting fees in connection with
the acquisition (the "Acquisition") of assets from HIPS and its affiliate Abel
Health Management Services, Inc. and their principal, Edward J. Abel.
KINGSLAND LITIGATION. The Company reached a settlement in November 1996
in Kingsland Associates v. Abel Health Management Services, Inc. and U.S.
HomeCare Infusion Therapy Products Corporation (Supreme Court of the State of
New York, Nassau County), a suit which also arose from the Acquisition which
sought in excess of $375,000 in rent, damages, attorneys' fees and rent
escalation amounts.
DEBENTURE LITIGATION. The Company reached a settlement in February 1997
in Smith, Katz and Cole v. U.S. HomeCare Corporation, et al. (Supreme Court of
the State of New York, Nassau County), a suit which arose from the 1986
acquisition of Reliable Nurses Aides of Westchester, Inc. which sought $284,000
of principal payments plus interest at the rate of 9% per annum from June 1987
on a series of subordinated debentures which had been issued by the Company as
consideration in the acquisition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the OTC Bulletin Board under
the symbol "USHO." The following table presents the quarterly high and low bid
quotations, as reported by the Nasdaq National Market for 1995 and through the
second quarter of 1996; quotations for third and fourth quarter 1996 were as
reported by on-line services monitoring the OTC Bulletin Board. These quotations
reflect the inter-dealer prices, without retail mark-up, mark-down or commission
and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
1996 1995
----- ----
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $2.500 $1.625 $3.625 $1.625
Second Quarter $2.625 $1.625 2.875 1.625
Third Quarter $2.250 $1.250 2.875 1.875
Fourth Quarter $1.250 $0.500 3.000 1.750
</TABLE>
On March 27, 1997, the last reported sales price for the Company's
Common Stock on the OTC Market was $1.31 per share.
HOLDERS
At December 31, 1996, there were approximately 408 record holders of
Common Stock.
DIVIDENDS
The Company has never declared or paid any cash dividends on its
capital stock. In addition, the Company's RLOC (as defined below) prohibits the
payment of cash dividends on the Company's capital stock without prior consent.
The Company currently intends to retain all earnings for the operation of its
business and does not anticipate paying any cash dividends in the foreseeable
future. The Company pays dividends on its outstanding $35.00 6% Convertible
Preferred Stock, $1.00 par value (the "$35.00 Preferred") through the issuance
of shares of Common Stock.
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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The financial data set forth below is qualified by reference to, and
should be read in conjunction with, the consolidated financial statements,
related notes and other financial information included elsewhere herein and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The selected statement of operations and balance sheet data for the
years ended December 31, 1994, 1995 and 1996 and at December 31, 1995 and 1996
respectively, have been derived from the Company's audited consolidated
financial statements, and are included elsewhere herein.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,(1)
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues $ 58,992 $ 62,637 $ 56,351 $ 56,450 $ 56,483
Cost of revenues 34,203 42,016 38,295 37,605 39,213
-------- -------- -------- -------- --------
Gross profit 24,789 20,621 18,056 18,845 17,270
Selling, general and administrative expenses 16,099 25,436 27,382 18,607 19,016
Provision for litigation settlement 0 0 2,000(2) 0 0
Amortization and depreciation 1,688 5,166 4,875 2,208 1,943
Restructuring and other non-recurring charges 0 0 7,650 0 3,619
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations 7,002 (9,981) (23,851) (1,970) (7,308)
Interest expense 1,398 1,423 870 1,092
-------- -------- -------- -------- --------
Earnings (loss) from continuing operations before 7,002 (11,379) (25,274) (2,840) (8,400)
provisions (benefit) for
income taxes
Provision (benefit) for income taxes 3,170 (3,606) (219) 154 150
Discontinued operations:
Income (loss) from discontinued operations 268 637 (1,710) 1,196 (1,464)
Loss on sale of IV therapy business (13,779)
-------- -------- -------- -------- --------
Net earnings (loss) $ 4,100 $ (7,136) $(26,765) $ (1,798) $(23,793)
======== ======== ======== ======== ========
Earnings (loss) per share:(3)
Income (loss) from continuing operations $ .48 $ (.94) $ (3.04) $ (.37) $ (.96)
Discontinued operations:
Income (loss) from discontinued
operations .03 .07 (.21) .15 (.17)
Loss on disposal of IV therapy business 0 0 0 0 (1.55)
-------- -------- -------- -------- --------
Net income (loss) per share $ .51 $ (.87) $ (3.25) $ (.22) $ (2.68)
======== ======== ======== ======== ========
Weighted average common shares
outstanding 8,020 8,244 8,247 8,180 8,868
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Net accounts receivable $ 32,023 $ 24,024(4) $ 13,382(4) $ 15,480(4) $ 7,925(4)
Working capital (deficit) 25,145 19,338 (6,547) 8,186 (3,511)
Total assets 67,710 64,662 43,681 38,441 15,545
Short-term debt 3,429 2,747 6,729 1,119 346
Long-term debt (less current portion) 11,495 17,561 9,282 12,524 7,983
Stockholders' equity (deficit) 40,544 33,408 8,593 15,915 (7,055)
</TABLE>
- ---------------------
(1) For all periods reported, the IV therapy business has been treated as a
discontinued operation.
(2) Represents the portion of the settlement of a class action suit paid by
the Company.
(3) For all periods reported, earnings per share on both a primary and
fully diluted basis were identical.
(4) Reflects the sale of approximately $7.8 million, $9.7 million, $8.9
million and $7.5 million at December 31, 1993, 1994, 1995 and 1996,
respectively, of accounts receivable pursuant to the Company's
Securitization Program (as defined below), which resulted in a
reduction in accounts receivable carried on the Balance Sheet.
12
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Annual Report on Form 10-K contains certain statements of a
forward-looking nature relating to future events or the future financial
performance of the Company. Such statements are only predictions and the actual
events or results may differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed below and under "Risk Factors."
GENERAL
The Company was formed in April 1986 to acquire a home health care
company operating primarily through five nursing service offices in New York
City and Westchester County with net revenues of approximately $8.8 million for
the year ended May 31, 1986. Following its formation in 1986, the Company
expanded through a strategy of internal growth, the opening of new branch
offices, selected acquisitions within its region and the introduction of new
services and programs, including infusion therapy which was added in 1989.
In 1992, the Company adopted an accelerated expansion strategy, opened
offices in a number of new geographic markets, developed a new and sizeable base
of Medicare business in South Florida, and, in late 1992, consummated a
significant infusion therapy acquisition in the greater New York metropolitan
area. Management underestimated the financial, managerial and system resources
necessary to execute its expansion strategy. As a result, the Company failed to
successfully implement its expansion strategy and began to incur operating
losses in the second quarter of 1993.
In August 1994, the Company announced an extensive restructuring plan,
which included the closing of its development-stage offices outside of its core
markets, the consolidation of its infusion therapy pharmacy facilities from five
to two, and the sale of its South Florida operations which was completed in
December 1995. Despite these actions, the Company continued to incur operating
losses in 1994, 1995 and the first three quarters of 1996.
At the end of September 1996, the Company undertook a series of steps
to improve operating results, restore financial health and focus on building its
core home nursing services business. First, the Company engaged a team of
experienced turnaround specialists to improve the operating and financial
performance of the Company. During the fourth quarter of 1996, corporate
overhead was reduced by more than $4 million per annum and branch level overhead
and direct costs were reduced by more than $2.5 million per annum. Second, the
Company sold the business and operating assets of its troubled home infusion
therapy operations as of October 1, 1996. Finally, the Company settled all of
its material litigation and reduced the borrowings under the Company's revolving
credit facility from $8.9 million on September 30, 1996 to $5.0 million on
December 31, 1996.
13
<PAGE> 17
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Net revenues from continuing (nursing) operations were $56.5 million in
both 1996 and 1995.
Cost of revenues as a percentage of net revenues increased to 69.4% in
1996 as compared to 66.6% in 1995. The increase in cost of revenues reflected
increased workers compensation insurance expense, additional employee benefit
expense, and changes in the mix of direct labor.
Operating expense increased by $3.8 million or 18.3% to $24.6 million
in 1996 compared to $20.8 million for 1995. This increase primarily reflecting a
restructuring charge in the third and fourth quarters of 1996 of $3.6 million, a
decline in depreciation and amortization expense of $.3 million and an increase
in selling, general and administrative expenses of $.4 million. The increase in
SG&A costs reflected increased workers compensation insurance expense, increased
employee benefits expense, information systems expense and an increase in
personnel and related costs during the first nine months of 1996, offset by the
expense reductions achieved by the restructuring program initiated in late
September 1996.
The restructuring steps that the Company undertook at the end of
September 1996 resulted in the following. On October 31, 1996, the Company
completed the sale of certain assets (not including accounts receivable) of its
IV therapy business for approximately $2.0 million in cash. The sale had an
effective date of October 1, 1996. As a result of the sale the operations of the
IV therapy business has been treated as a discontinued operation. The Company
recorded a loss on disposal of the IV therapy business of $13.8 million. Such
loss on sale, which was net of the cash proceeds of the sale of approximately
$2,000,000, included (1) a write-off of $11.6 million of goodwill and other
intangible assets, (2) additional provisions for losses on accounts receivable
of $2.6 million, and (3) $1.6 million related to a charge for severance and
other anticipated costs during the phase out period. The Company also recorded a
provision for restructuring and other nonrecurring charges of $3.6 million which
was comprised of: severance of $.6 million, turnaround consultants' compensation
of $1.9 million, an increase in 1994 restructuring reserve of $.5 million and
other restructuring costs of $.6 million (including assets write-offs and lease
costs). The reserve established for compensation for the turnaround consultants
includes a monthly cash retainer totaling $.4 million through September 1997 and
significant performance based equity incentives valued at approximately $1.5
million. The balance of the 1996 reserve for restructuring and other
nonrecurring charges was approximately $2.7 million at December 31, 1996.
Interest expense was $1.1 million in 1996 or 25.5% higher than in 1995.
The increase reflects the result of the increased average borrowings under the
Company's bank facilities in 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net revenues from continuing operations for 1995 were $56.5 million
compared to $56.4 million for 1994.
Cost of revenues as a percentage of net revenues declined to 66.6% in
1995 as compared to 68.0% in 1994 reflecting the impact of payor mix changes.
Operating expense decreased by $21.1 million, or 50.3%, to $20.8
million in 1995. This decrease reflected cost cutting actions in 1995 as well as
bad debt, litigation and restructuring reserves taken in 1994 which did not
substantially reoccur in 1995.
Net interest expense was $0.9 million in 1995 or 38.9% lower than in
1994. The decrease was the result of decreased average borrowing under the
Company's bank facilities in 1995, as well as decreased interest charges in
connection with equipment leases.
14
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1996, the Company had cash and cash equivalents of
approximately $.6 million. Working capital (deficit) decreased by $11.7 million,
from $8.2 million at December 31, 1995 to a working capital (deficit) of ($3.5)
million at December 31, 1996. The decrease in net working capital was primarily
a result of a reduction in accounts receivable and an increase in accrued
expenses and restructuring reserves.
The reduction in net accounts receivable resulted primarily from the
reduction of receivables from the Company's discontinued infusion therapy
operations. The Company sold its infusion therapy operations on October 31,
1996. The Company retained its infusion therapy accounts receivable in
connection with the sale. Infusion therapy receivables (including off balance
sheet receivables which were sold under the securitization program) were $11.0
million on December 31, 1995 and $2.0 million on December 31, 1996.
Trade accounts payable declined from $4.2 million at December 31, 1995
to $3.2 million at December 31, 1996 reflecting the discontinuance of the
Company's infusion therapy business and the settlement and extension of certain
accounts payable.
Accrued expenses increased from $2.2 million at December 31, 1995 to
$4.5 million at December 31, 1996, resulting primarily from an increase in
accruals relating to workers compensation insurance and Medicare cost report
liabilities.
Cash flow from operating activities for the year ended December 31,
1996 improved $11.2 million to $6.0 million from ($5.2) million for the year
ended December 31, 1995. This improvement was principally due to the proceeds of
the IV therapy sale, the subsequent collection of the IV related accounts
receivable retained by the Company, improvement in collection of nursing
receivables and a reduction in cash payments on the 1994 restructuring charges.
Cash flow from financing activities was ($5.2) million for the year ended
December 31, 1996, compared to $4.9 million for the year ended December 31,
1995. Financing activities in 1995 reflect the issuance of $8.7 million of
preferred stock.
The Company has a revolving line of credit ("RLOC"), with availability
based upon a stated formula applied to "eligible" accounts receivable balances.
Borrowings bear interest at the higher of the bank's prime rate plus 2.0% or the
federal funds rate plus 1.0%. Remaining availability under the RLOC at December
31, 1996 was $1.6 million. Borrowings under the RLOC are collateralized by
substantially all of the Company's assets. The terms of the RLOC provide, among
other things, for prepayments in the event that the Company's formula based
borrowing capacity is reduced, for maintenance of certain financial ratios and
limitations on capital expenditures, acquisitions, and cash dividends. On March
25, 1997 the RLOC agreement was amended and restated to include a revised
maturity date of January 2, 1998, and an increase in the interest rate of 1% on
July 1, 1997 and an additional increase of 1% on October 1, 1997. In connection
with the revised agreement the banks were issued warrants to purchase 178,000
shares of the Company's Common Stock at $1.5969 per share.
The Company has a $3.0 million subordinated credit facility the
("Subordinated Credit Facility") with a commercial bank. The Subordinated Credit
Facility is 100% guaranteed by the Connecticut Development Authority ("CDA"). On
March 25, 1997 the maturity of the Subordinated Credit Facility was extended to
January 15, 1998 and the CDA guarantee was extended to January 30, 1998. In
connection with the October 1995 issuance of the CDA guarantee, the Company
agreed to issue additional warrants (the "Additional Warrants") to the CDA to
purchase 735,000 shares of the Company's common stock for $1.5969 per share if
the guarantee was not released by April 30, 1997. As a result of the extension
of the CDA guarantee to January 30, 1998 the Company issued the Additional
Warrants to the CDA on March 25, 1997.
15
<PAGE> 19
The Company has a Receivables Purchase and Servicing Agreement (the
"Securitization Program"), which allows the Company to sell for cash an
undivided percentage ownership interest in a designated pool of eligible
receivables, as defined. The Company relies on this accounts receivable
financing to fund working capital for current operations. The maximum amount of
cash advances (based on eligible accounts receivable) allowed under the program
is $10.0 million. The net proceeds from the sale of accounts receivable through
the Securitization Program at December 31, 1996 were $7.5 million. On March 27,
1997 the maturity date of the Securitization Program was extended to January 2,
1998.
Sales of substantial amounts of Common Stock in the public market in
the future could adversely affect the prevailing market price of the Company's
Common Stock. As outlined above, on March 25 and March 27, 1997, the Company
issued Warrants exercisable for an aggregate of 913,000 shares of Common Stock
exercisable at $1.5969 per share to its RLOC banks and the CDA. In addition,
during 1996 the Company issued or committed to issue an aggregate of 644,000
shares in exchange for the cancellation of certain of the Company's obligations
(the "Common Shares"). The foregoing securities are all restricted securities
within the definition of Rule 144 and are subject to certain resale provisions
relating to the manner and notice of sale, availability of current public
information about the Company and volume limitations. The holders of the
foregoing securities are entitled to have such shares registered by the Company
under the Securities Act of 1933, as amended. The Company intends to file a
registration statement registering approximately 11,900,000 shares of Common
Stock for resale in the second quarter of 1997 and plans to keep such
registration statement effective for a minimum of three years.
In order to fund operations during 1995 and 1996, the Company issued
securities and borrowed funds. The Company during the first three quarters of
1996 operated under severe cash flow pressure primarily because collections of
accounts receivable did not meet expectations. The Company believes that its
cash position and liquidity will continue to require careful management for the
foreseeable future. Cash availability improved during the last quarter of 1996
and the Company expects this improvement to continue during 1997.
The Company believes that its existing credit facilities, together with
cash generated from operations, will be sufficient to fund the Company's
operations and debt obligations through 1997. Beyond 1997, the Company believes
that it will need to extend or replace its existing credit facilities to ensure
sufficient funding of the Company's operations.
16
<PAGE> 20
QUARTERLY INFORMATION
The following table presents unaudited financial data for the eight
quarters beginning January 1, 1995. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) necessary have been
made to present fairly the following selected quarterly information when read in
conjunction with the consolidated financial statements included elsewhere
herein.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
1996
Net revenues ........................ $ 14,262 $ 14,481 $ 13,557 $ 14,183
Income/(loss) from
continuing operations before interest
and income taxes .................... (423) (242) (8,300) 1,657
Income/(loss) from discontinued
operations .......................... 171 (62) (14,452) (900)
Net income (loss) ................... (567) (608) (23,073) 455
Income (loss) per share(2)........... $ (.07) $ (.07) $ (2.54) $ .05
1995
Net revenues ........................ 13,581 14,296 13,937 14,636
(Loss) from continuing operations
before interest and income taxes .... (887) (342) (301) (440)
Income from discontinued operations . 135 206 336 519
Net loss ............................ (974) (337) (190) (297)
Loss per share(2).................... $ (.12) $ (.04) $ (.02) $ (.04)
</TABLE>
- -------------------
(2) The sum of the quarterly amounts does not equal the annual total due to
rounding.
During the fourth quarter of 1996, the company recorded an adjustment to reduce
its provision for restructuring and other non-recurring charges by $.9 million
based upon a reevaluation of the cost of such reorganization. Also, in the
fourth quarter of 1996 the Company increased its loss on discontinued operations
by $.9 million to adjust its estimate for uncollectable IV therapy receivables.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by the item is set forth in the Consolidated
Financial Statements on F-1 through F-18 and in the Financial Statement Schedule
in S-1 of this report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
17
<PAGE> 21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company and their ages are
as follows:
<TABLE>
<CAPTION>
Name Age Position with the Company
- ---- --- -------------------------
<S> <C> <C>
Jay C. Huffard (2) 55 Interim President, Chief Executive Officer, Chairman
of the Board and Director
Gerald J. Boisvert, Jr. 38 Vice President, Finance and Administration, and Chief
Financial Officer
Hadley C. Ford (3)(4) 61 Director
John R. Gunn (1)(3) 53 Director
W. Wallace McDowell, Jr.(2)(4) 60 Director
Shawkat Raslan (2)(3) 45 Director
Susan S. Robfogel, Esq.(1)(4) 54 Director
</TABLE>
- -----------------------
(1) Member of the Nominating Committee of which Ms. Robfogel is
Chairperson.
(2) Member of the Executive Committee of which Mr. Huffard is Chairperson.
(3) Member of the Audit Committee of which Mr. Gunn is Chairperson.
(4) Member of the Compensation Committee of which Mr. McDowell is
Chairperson.
The Company's directors hold office until the next annual meeting of
shareholders or until their successors have been duly elected and qualified. The
Company's officers are elected annually by the Board of Directors and serve at
the discretion of the Board. Each director who is not an employee of the Company
receives an annual retainer of $10,000 as compensation for services as a
director, except for Mr. Huffard who receives an additional annual fee of
$40,000 for his services as Chairman of the Board. Each director who is not an
employee of the Company also receives a fee of $1,000 for attending each regular
or special meeting of the Board or of its committees. The non-employee directors
are also reimbursed for expenses incurred in connection with performing their
respective duties as directors of the Company. Directors who are employees
receive no additional compensation for their services as directors of the
Company. During 1995, the Board did not receive its $10,000 retainer and meeting
fees. The Company satisfied the 1995 amounts as well as the 1996 amounts due
during 1996 through the issuance of shares of Common Stock equal in value to
such fees.
Jay C. Huffard has been a director of the Company since 1988, Chairman of
the Board of Directors since July 1991, and interim President and Chief
Executive Officer since October 1996. Since 1988, Mr. Huffard has been Managing
Director of Huffard & Co. L.P. From 1987 to 1988, he was Chief of Staff to the
Chairman of The Equitable. From 1980 to 1988, Mr. Huffard served in various
executive capacities at Donaldson, Lufkin & Jenrette Securities Corporation,
including Executive Vice President and Managing Director, and Chairman or Chief
Executive of certain direct or indirect subsidiaries thereof. Since 1993 Mr.
Huffard has been a Managing Director and Principal of Prima Management Corp., a
direct investment firm.
18
<PAGE> 22
Gerald J. Boisvert, Jr. served as Vice President, Finance during April
1996, Vice President, Finance & Chief Financial Officer from May 1996 to
November 1996 and Vice President, Finance and Administration & Chief Financial
Officer of the Company since December 1996. Prior to joining the Company, Mr.
Boisvert was Senior Vice President, Finance & Chief Financial Officer of Windham
Hospital from August 1992 to April 1996 and Executive Vice President, Finance
and Administration at Alden Design, Inc. from April 1988 to August 1992. Prior
to April 1988 Mr. Boisvert was a Senior Manager with Ernst & Whinney. Mr.
Boisvert is a Certified Public Accountant.
W. Wallace McDowell, Jr., has been a director of the Company since
August 1992. Since December 1994, Mr. McDowell has been a private investor. From
January 1991 to December 1994 Mr. McDowell has been a Managing Director of MLGAL
Partners, L.P., the General Partner of an investment partnership concentrating
on leveraged transactions. From 1983 to 1990, Mr. McDowell was Chairman and
Chief Executive Officer of The Prospect Group, Inc., a public diversified
holding company. He serves as a director of Children's Discovery Centers of
America, Inc., Jack Morton Productions, and Grossman's, Inc., and is Chairman of
Interactive Technologies, Inc. In addition, Mr. McDowell is a Trustee of The
Excelsior Funds, a family of mutual funds.
Hadley C. Ford has been a director of the Company since November 1994.
Mr. Ford currently is a Senior Advisor to insurance industry clients of Andersen
Consulting. From 1965 until his retirement in 1992, Mr. Ford was with Booz,
Allen & Hamilton, Inc., whose insurance industry consulting practice he founded,
in various executive capacities including Senior Vice President, director and
member of its Operating Council. Mr. Ford serves as non-executive Chairman of
the Board of Gryphon Holdings, Inc., Chairman of the Board of the American
Federation for Aging Research, and is a director and officer of the Atlantic
Salmon Federation (U.S.). In addition, Mr. Ford is a trustee of Helen Keller
International.
John R. Gunn has been a director of the Company since September 1994. Since
1987, Mr. Gunn has served as the Executive Vice President and Chief Operating
Officer of Memorial Sloan-Kettering Cancer Center, where he has served in
various executive capacities since 1982. Previously, he was the Vice President
of Finance at Michael Reese Medical Center. Mr. Gunn serves as a board member of
several companies and associations, including the Greater New York Hospital
Association, Empire Blue Cross & Blue Shield, Hospital Association of New York
and Memorial Sloan-Kettering Cancer Center.
Shawkat Raslan has been a director of the Company since December 1991.
Since 1983, Mr. Raslan has been President and Chief Executive Officer of
International Resource Holdings, Inc., an asset management and investment
advisory service for international clients. He serves as a director of several
companies, including Apogee Inc., a mental health rehabilitation company, Foster
Management, a health care investment fund, and Tiedemann Goodnow International
an equity fund. Since 1993, Mr. Raslan has been a Managing Director and
Principal of Prima Management Corp., a direct investment firm.
Susan S. Robfogel, Esq. has been a director of the Company since July
1991. Ms. Robfogel is a partner in the law firm of Nixon, Hargrave, Devans &
Doyle with which she has been associated since October 1985, and is Chair of the
Health Services Practice Group. Ms. Robfogel is a member of the visiting
committee of the University of Rochester School of Medicine and Dentistry. Ms.
Robfogel serves on the New York State Data Protection Review Board for the
Commissioner of Health.
Section 16(a) Beneficial Ownership Reporting Compliance
Mr. Boisvert, the Company's Chief Financial Officer, did not timely
report one transaction during 1996, which transaction occurred on December 30,
1996. It was subsequently reported on Mr. Boisvert's Form 5, Annual Statement
of Changes in Beneficial Ownership, filed for the year ended December 31, 1996.
19
<PAGE> 23
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual and long-term compensation
paid by the Company during the 1996 fiscal years to all individuals serving as
the Company's chief executive officer or acting in a similar capacity during
1996 and the other highest paid executive officers of the Company whose
compensation was in excess of $100,000 as of the end of the last fiscal year
(collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
-----------------------------------------------------------------------------------
Securities
Other Annual Underlying All Other
Name and Principal Year Salary Compensation Options Granted Compensation
Position ($) ($) (#) ($)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jay C. Huffard.............. 1996 108,000(1) 0 0 0
Interim President, Chief 1995 72,000(2) 0 0 0
Executive Officer, 1994 62,000(18) 0 125,000(3) 0
Chairman and Director
G. Robert O'Brien........... 1996 341,421(4) 0 0 53,125(5)
President, Chief 1995 350,000 65,864(6) 700,000(7) 86(8)
Executive Officer and 1994 125,360(9) 16,472(10) N/A N/A
Director
Gerald J. Boisvert, Jr...... 1996 86,721(11) 0 150,000(12) 0
Vice President, Finance and 1995 N/A N/A N/A N/A
Administration & Chief 1994 N/A N/A N/A N/A
Financial Officer
Stephen H. Matheson......... 1996 199,650(13) 0 0 15,625(14)
Vice President, Finance and 1995 176,603(15) 0 200,000(16) 20,000(17)
Chief Administrative Officer 1994 N/A N/A N/A N/A
</TABLE>
- ------------------
(1) Mr. Huffard was appointed Interim President and Chief Executive Officer
of the Company in October 1996. The figure of $108,000 includes Mr.
Huffard's actual earnings for the period from October 1, 1996 to
December 31, 1996 of $15,000. For the period January to December 1996,
he received $40,000 in compensation for his role as chairman of the
Company and $28,000 in compensation for his role as a director of the
Company. Mr. Huffard received an additional $25,000 for additional
services rendered to the Company. Of the $108,000 paid to Mr. Huffard
in 1996, $55,000 was paid in cash and $53,000 in Common Stock of the
Company.
(2) The figure of $72,000 includes $40,000 in cash received in compensation
for his role as chairman of the Company and $32,000 in Common Stock of
the Company received in compensation for his role as director of the
Company.
(3) Mr. Huffard's options include an option to purchase 25,000 shares of
Common Stock pursuant to the 1994 Director Stock Option Plan and an
option to purchase 100,000 shares of Common Stock pursuant to the 1990
Plan.
(4) The figure of $341,421 includes Mr. O'Brien's actual earnings as
President and Chief Executive Officer of the Company for the period
from January 1, 1996 to October 14, 1996 of $293,296 and $48,125 in
compensation as a consultant to the Company pursuant to a Settlement
Agreement and Mutual Release, dated October 14, 1996 (the "O'Brien
Agreement").
20
<PAGE> 24
(5) Represents a stock award pursuant to the O'Brien Agreement.
(6) Represents car services and certain relocation expenses.
(7) Mr. O'Brien's options consist of an incentive stock option for 114,284
shares of Common Stock and a non-statutory stock option for 585,716
shares of Common Stock, both granted pursuant to the 1990 Plan.
(8) Represents term life insurance premiums paid in 1994.
(9) Mr. O'Brien was appointed President and Chief Executive Office of the
Company in August 1994. The figure of $125,360 includes Mr. O'Brien's
actual earnings for the period from August 29, 1994 to December 31,
1994 of $107,693, based on his annual salary of $350,000. For the
period January to August 1994 which preceded his appointment as
President and Chief Executive Officer, he received $17,667 in
compensation for his role as a director of the Company.
(10) Represents car services.
(11) Mr. Boisvert, Jr. was appointed Vice President, Finance and
Administration in April 1996 and Chief Financial Officer of the Company
in May 1996. The figure of $86,721 represents Mr. Boisvert's actual
earnings for the period from April 8, 1996 to December 31, 1996, based
on his annual salary of 125,000.
(12) Granted pursuant to the 1995 Stock Option/ Stock Issuance Plan.
(13) The figure of $199,650 includes Mr. Matheson's actual earnings as Vice
President, Finance and Chief Administrative Officer of the company for
the period from January 1, 1996 to October 14, 1996 of $163,088 and
$36,562 pursuant to a Settlement Agreement and Mutual Release, dated
October 14, 1996 (the "Matheson Agreement").
(14) Represents a stock award pursuant to the Matheson Agreement.
(15) Mr. Matheson was appointed Vice President, Finance and Chief Financial
Officer of the Company in February 1995. The figure $176,603 represents
Mr. Matheson's actual earnings for the period from February 1, 1995 to
December 31, 1995, based on his annual salary of $200,000.
(16) Granted pursuant to the 1990 Plan.
(17) Represents relocation expenses.
(18) The figure of $62,000 includes $42,000 received in compensation for his
role as Chairman of the Company and $22,000 for his role as a Director
of the Company.
EMPLOYMENT ARRANGEMENTS
Jay C. Huffard's annual compensation as interim President & Chief
Executive Officer is $60,000. Mr. Huffard's annual compensation as Chairman of
the Board is $40,000.
Gerald J. Boisvert's annual salary as Vice President, Finance and
Administration & Chief Financial Officer of the Company was $125,000 with a
target bonus opportunity of $60,000. Stock options to purchase an aggregate of
90,000 shares of Common Stock were granted to Mr. Boisvert on April 8, 1996, the
commencement date of his employment with the Company. These options are
exercisable at $2.75, the fair market value of the Company's Common Stock on the
grant date. On November 13, 1996 these options were cancelled and replaced with
150,000 options exercisable at $1.00 of which 50,000 shares have vested, and the
remaining 100,000 shares will vest on November 13, 1997 and 1998 (subject to
acceleration of vesting upon an acquisition of the Company by a merger or by a
stock or asset sale).
21
<PAGE> 25
In the event that Mr. Boisvert's employment is terminated, he is entitled to his
base salary, on a monthly basis, for nine months.
In October 1996, the Company entered into a settlement agreement and mutual
release with G. Robert O'Brien (the "O'Brien Agreement") whereby Mr. O'Brien
resigned his positions as President, Chief Executive Officer and a director of
the Company and whereby the Company and Mr.O'Brien settled any outstanding
severance obligations and any and all disputes which might exist between them.
Pursuant to the O'Brien agreement, the Company shall pay Mr. O'Brien (i)
$87,500, to be paid $21,875 per month for four months and (ii) $150,000 to be
paid $6,250 per month for the next twenty-four months. The payment of $87,500 is
on consideration for, among other things, consulting services for the four month
period following Mr. O'Brien's resignation. Pursuant to the O'Brien Agreement,
the Company granted Mr. O'Brien a stock award of 85,000 shares of Common Stock
pursuant to the terms of Article III of the 1995 Stock Option/Stock Issuance
Plan.
In October 1996, the Company entered into a settlement agreement and mutual
release with Stephen H. Matheson (the "Matheson Agreement") whereby Mr. Matheson
resigned his positions as Vice President and Chief Administrative Officer of the
Company and whereby the Company and Mr. Matheson settled any outstanding
severance obligations and any and all disputes which might exist between them.
Pursuant to the Matheson agreement, the Company shall pay Mr.Matheson (i)
$58,500, to be paid $14,625 per month for four months and (ii) $150,000 to be
paid $6,250 per month for four months and (ii) $2,083.33 per month for the next
twenty-four months. Pursuant to the Matheson Agreement, the Company granted Mr.
Matheson a stock award of 25,000 shares of Common Stock pursuant to the terms of
Article III of the 1995 Stock Option/Stock Issuance Plan.
22
<PAGE> 26
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table shows, with respect to the Named Executive Officers,
certain information concerning the grant of stock options in 1996.
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term(1)
- -------------------------------------------------------------------------------------------------------------------
Name Number of Percent of Initial Expiration 5% 10%
---- Securities Total Options Exercise Date ---- -----
Underlying Granted to Price ----------
Options Employees in ($/Share)
Granted Fiscal Year(2) --------
---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Jay C. Huffard........... - -
Gerald J. Boisvert, Jr... 150,000(3) 15.87% $1.00 12/12/06 $94,334 $239,061
G. Robert O'Brien........ - -
Stephen H. Matheson...... - -
</TABLE>
- --------------
(1) This column reflects the potential realizable value of each grant
assuming that the market value of the Company's stock appreciates at
five percent and ten percent annually from the date of grant over the
term of the option. There is no assurance provided to any executive
officer or any other holder of the Company's securities that the actual
stock price appreciation over the option term will be at the assumed
five percent and ten percent levels or at any other defined level.
Unless the market price of the Common Stock does in fact appreciate
over the option term, no value will be realized from the option grants
made to the executive officers.
(2) Based on options for 945,000 shares granted to employees and directors
in 1996 under the Company's 1995 Stock Option/Stock Issuance Plan.
(3) Mr. Boisvert was initially issued an option on April 8, 1996 to
purchase 90,000 shares of the Company's Common Stock at an exercise
price of $2.75 per share (the "Initial Option"). The Initial Option
had an expiration date of April 8, 2006. The Initial Option was
cancelled on December 12, 1996 and the option, set forth
in this table, to purchase 150,000 shares of the Company's
Common Stock was granted. On December 12, 1996 the
fair market value of the Common Stock was $0.625.
23
<PAGE> 27
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information with respect to the
Named Executive Officers regarding stock options during the year ended December
31, 1996. No stock options were exercised by such persons in 1996.
<TABLE>
<CAPTION>
Number of Value of
Unexercised Options at Unexercised
Fiscal Year End In-The-Money Options at
Fiscal Year End (1)
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Jay C. Huffard...................... 45,000 80,000 0 0
Gerald J. Boisvert, Jr.............. 50,000 100,000 0 0
G. Robert O'Brien................... 500,000(2) 0 0 0
Stephen H. Matheson................. 150,000(2) 0 0 0
</TABLE>
- --------------------
(1) Based on a closing price on the OTC Market of $.6875 per share of
Common Stock on December 31, 1996, there were no unexercised
in-the-money options.
(2) Options expired during January 1997.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, Messrs. Ford and McDowell and Ms. Robfogel served as
members of the Compensation Committee. There were no Compensation Committee
interlocks between the Company and any other entity during 1996. Ms. Robfogel is
a partner in the law firm of Nixon, Hargrave, Devans & Doyle, which the Company
has retained from time to time.
24
<PAGE> 28
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 14, 1997 by (i) each
director, (ii) each of the Named Executive Officers, (iii) each person known by
the Company to be the beneficial owner of more than 5% of the Company's Common
Stock and (iv) all executive officers and directors as a group.
<TABLE>
<CAPTION>
Percent of
Shares Beneficially Shares
Name and Address of Beneficial Owner(1) Owned(2) Outstanding(2)
- ------------------------------------------------------------------- ------------------------- ---------------------
<S> <C> <C>
G. Robert O'Brien ............................................... 638,154(3) 6.4%
Stephen H. Matheson ............................................. 176,200(4) 1.8%
Gerald J. Boisvert, Jr. ......................................... 52,000(5) *
Jay C. Huffard .................................................. 1,138,554(6)(7)(8) 10.8%
W. Wallace McDowell, Jr.......................................... 110,238(7)(9) 1.2%
Shawkat Raslan .................................................. 796,548(7)(8) 7.9%
c/o International Resources Holdings, Inc.
770 Lexington Ave
New York, NY 10021
Susan S. Robfogel................................................ 39,927(7) *
John R. Gunn..................................................... 41,682(7) *
Hadley C. Ford................................................... 74,813(7)(10) *
All directors and executive officers as a group (9 persons)...... 2,358,285(11) 21.3%
W. Edward Massey ................................................ 1,082,367(12) 11.5%
173 Spring Valley Road
Ridgefield, Connecticut 06877
James Laird...................................................... 692,000(13) 6.8%
Mehdi Ali........................................................ 1,038,000(14) 9.9%
Prima Partners, L.P.............................................. 709,831(7) 7.0%
115 East 69th Street
New York, New York 10021
Don A. Sanders................................................... 572,319(15) 5.7%
c/o Sanders Morris Mundy Inc.
3100 Texas Commerce Tower
Houston, TX 77002
</TABLE>
- ----------------------
* Less than one percent.
(1) Except as where noted otherwise, the address of all persons listed is
c/o U.S. HomeCare Corporation, 750 Main Street, 12th Floor, Hartford,
Connecticut 06103.
(2) Gives effect to the shares of Common Stock issuable within 60 days
after December 31, 1996 upon the conversion of the $35.00 Preferred and
the exercise of all options, warrants and other rights beneficially
held by the indicated shareholder of that date.
25
<PAGE> 29
(3) Includes 29,280 shares of Common Stock issuable upon conversion of
1,464 shares of $35.00 Preferred. Also includes 1,250 shares of Common
Stock issuable upon exercise of warrants. Also includes 500,000 shares
of Common Stock issuable upon exercise of a stock option pursuant to
certain agreements with the Company. Such option was exercisable until
January 13, 1997.
(4) Includes 150,000 shares of Common Stock issuable upon exercise of a
stock option pursuant to certain agreements with the Company. Such
option was exercisable until January 13, 1997.
(5) Includes 50,000 shares of Common Stock of the Company granted pursuant
to the 1995 Plan. Does not include stock options for 100,000 shares of
Common Stock which will not vest within 60 days of December 31, 1996.
(6) Includes 321,223 shares of Common Stock held by Huffard & Co. L.P., of
which Jay C. Huffard, Chairman of the Board and a director of the
Company, is managing director of the general partner thereof and stock
options for 40,000 shares of Common Stock. Does not include stock
options for 60,000 shares which will not vest within 60 days of
December 31, 1996.
(7) Includes 25,000 shares of Common Stock issuable upon exercise of a
stock option granted pursuant to the 1995 Plan's Automatic Grant
Program for non-employee directors.
(8) Includes 634,029 shares of Common Stock of the Company issuable upon
conversion of 28,928 shares of $35.00 Preferred of the Company held by
Prima Partners, L.P. Also includes 37,499 shares of Common Stock
issuable upon exercise of warrants issued to Prima Management Corp.,
the general partner of Prima Partners, L.P. Messrs. Huffard and Raslan
are officers, directors and shareholders of Prima Management Corp. and
are special limited partners of Prima Partners, L.P.
(9) Includes 31,320 shares of Common Stock of the Company issuable upon
conversion of 1,429 shares of $35.00 Preferred. Also includes 2,501
shares of Common Stock issuable upon exercise of warrants.
(10) Includes 32,877 shares of Common Stock of the Company issuable upon
conversion of 1,500 shares of $35.00 Preferred.
(11) See Notes (2) through (10).
(12) Includes 355,876 shares of Common Stock held by The Lindward Group, of
which W. Edward Massey, is a general partner. Also includes 3,984
shares of Common Stock held by Mr. Massey under the Company's ESOP.
(13) Consists of 692,000 shares of Common Stock issuable upon exercise of a
stock option of which options to purchase 230,667 shares of Common
Stock were vested as of December 31, 1996 and options to purchase
461,333 shares of Common Stock vest within 60 days of December 31,
1996, upon satisfaction of certain financial performance criteria as
determined by the Company's board of directors. The board of directors
has determined that such certain financial performance criteria has
been met.
(14) Consists of 1,038,000 shares of Common stock issuable upon exercise of
a stock option of which options to purchase 346,000 shares of Common
Stock were vested as of December 31, 1996 and options to purchase
692,000 shares of Common Stock vest within 60 days of December 31,
1996, upon satisfaction of certain financial performance criteria as
determined by the Company's board of directors. The board of directors
has determined that such certain financial performance criteria has
been met.
(15) Includes 428,580 shares of Common Stock issuable upon conversion of
21,429 shares of $35.00 Preferred and 2,501 shares of Common Stock
issuable upon exercise of warrants.
26
<PAGE> 30
ITEM 13. CERTAIN RELATIONSHIPS AND CERTAIN TRANSACTIONS
For information regarding employment and severance agreement. (See
Employment Arrangements)
Ms. Robfogel is a partner in the law firm of Nixon, Hargrave, Devans &
Doyle, which the Company has retained from time to time.
27
<PAGE> 31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
- --------------------------------------------------------------------------------
Exhibit
Number
1. Financial Statement and Schedules. The Financial
Statements and Financial Statement Schedules required to
be included in this report are listed on page F-1 hereof
and attached hereto on pages F-2 through F-18 and S-1. All
other required schedules have been omitted because the
required information is shown in the consolidated
financial statements or the notes thereto.
(b) Reports on Form 8-K
None.
(c) Exhibits Required by Regulation S-K
3(i) Restated Certificate of Incorporation. (Filed as Exhibit
3(a) to the Registrant's Registration Statement on Form
S-1 (Registration No. 33-40288) and incorporated herein by
reference.)
3(i)(a) Certificate of Amendment of Certificate of Incorporation
regarding $35.00 6% Convertible Preferred Stock. (Filed as
Exhibit 3(i)(a) to the Registrant's Form 10-K for the year
ended December 31, 1994 and incorporated herein by
reference.)
3(ii) Bylaws. (Filed as Exhibit 3(b) to Registrant's
Registration Statement on Form S-1 (Registration No.
33-40288) and incorporated herein by reference.)
4.1 Shareholders and Registration Rights Agreement dated as of
March 15, 1989. (Filed as Exhibit 10(g) to the
Registrant's Registration Statement on Form S-1
(Registration No. 33- 40288) and incorporated herein by
reference.)
4.2 Form of 9% Convertible Subordinated Debenture. (Filed as
Exhibit 10(h) to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-40288) and incorporated
herein by reference.)
4.3 Standstill Agreement among Florence Katz, Judith Smith,
Steven Cole and Registrant dated February 1, 1988. (Filed
as Exhibit 10(i) to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-40288) and
incorporated herein by reference.)
4.4 Stock Purchase Warrant, dated October 6, 1995, granted to
The Chase Manhattan Bank.
4.5 Stock Purchase Warrant, dated October 6, 1995, granted to
Connecticut Development Authority.
4.6 Stock Purchase Warrant, dated October 6, 1995, granted to
28
<PAGE> 32
Creditanstalt Bankverein.
4.7 Stock Purchase Warrant, dated March 25, 1997, granted to
The Chase Manhattan Bank.
4.8 Stock Purchase Warrant, date March 25, 1997, granted to
Connecticut Development Authority.
4.9 Stock Purchase Warrant, dated March 25, 1997, granted to
Creditanstalt Bankverin.
10.1 Credit Facility with Bank of New York Commercial
Corporation, dated March 15, 1989 and related amendments
dated February 6, 1991 and April 25, 1991. (Filed as
Exhibit 10(f) to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-40288) and incorporated
herein by reference.)
10.2 1991 Employee Stock Purchase Plan. (Filed as Exhibit 10(m)
to the Registrant's Registration Statement on Form S- 1
(Registration No. 33-45748) and incorporated herein by
reference.)
10.3 Agreement of Lease dated February 28, 1991. (Filed as
Exhibit 10(k) to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-40288) and incorporated
herein by reference.)
10.4 Letter of Intent dated February 12, 1992 with the Bank of
New York to extend and amend Revolving Credit and Security
Agreement included as Exhibit 4. (Filed as Exhibit 10(o)
to the Registrant's Registration Statement on Form S-1
(Registration No. 33-45748) and incorporated herein by
reference.)
10.5 Employee Stock Ownership Plan, as amended. (Filed as
Exhibit 10(c) to the Registrant's Registration Statement
on Form S-1 (Registration No. 33-40288) and incorporated
herein by reference.)
10.6 1995 Stock Option/Stock Issuance Plan.
10.7 401(k) Plan, as amended. (Filed as Exhibit 10(d) to the
Registrant's Registration Statement on Form S-1
(Registration No. 33-40288) and incorporated herein by
reference.)
10.8 Lease Agreement dated January 31, 1992. (Filed as Exhibit
10(n) to the Registrant's Registration Statement on Form
S- 1 (Registration No. 33-45748) and incorporated herein
by reference.)
10.9 Lease Agreement dated July 28, 1988. (Filed as Exhibit
10(e) to the Registrant's Registration Statement on Form
S-1 (Registration No. 33-40288) and incorporated herein by
reference.)
10.10 Credit facility with The Chase Manhattan Bank dated March
19, 1993. (Filed as Exhibit 19 to the Registrant's Form
10- K for the year ended December 31, 1992 and
incorporated herein by reference.)
10.11 Lease Agreement dated May 18, 1992. (Filed as Exhibit 20
29
<PAGE> 33
to the Registrant's Form 10-K for the year ended December
31, 1992 and incorporated herein by reference.)
10.12 Lease Agreement dated July 1, 1992. (Filed as Exhibit 21
to the Registrant's Form 10-K for the year ended December
31, 1992 and incorporated herein by reference.)
10.13 Lease Agreement dated August 1, 1992. (Filed as Exhibit
22 to the Registrant's Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference.)
10.14 Lease Agreement dated November 18, 1992. (Filed as Exhibit
23 to the Registrant's Form 10-K for the year ended
December 31, 1992 and incorporated herein by reference.)
10.15 Amendment No. 1 to Credit facility with The Chase
Manhattan Bank dated November 8, 1993. (Filed as Exhibit
24 to the Registrant's Form 10-K for the year ended
December 31, 1993 and incorporated herein by reference.)
10.16 Letter Agreement with The Chase Manhattan Bank dated March
28, 1994. (Filed as Exhibit 25 to the Registrant's Form
10-K for the year ended December 31, 1993 and incorporated
herein by reference.)
10.17 Stock Purchase Agreement for $35 6% Convertible Preferred
Stock, dated January 31, 1995. (Filed as Exhibit 10.18 to
the Registrant's Form 10-K for the year ended December 31,
1994 and incorporated herein by reference.)
10.18 Employment Agreement of Stephen H. Matheson, dated January
27, 1995. (Filed as Exhibit 10.19 to the Registrant's Form
10-K for the year ended December 31, 1994 and incorporated
herein by reference.)
10.19 Amendment No. 4 to Credit facility with The Chase
Manhattan Bank, dated January 31, 1995. (Filed as Exhibit
10.20 to the Registrant's Form 10-K for the year ended
December 31, 1994 and incorporated herein by reference.)
10.20 Form of Stock Purchase Warrant, dated February 1, 1995.
(Filed as Exhibit 10.21 to the Registrant's Form 10-K for
the year ended December 31, 1994 and incorporated herein
by reference.)
10.21 Amended and Restated Credit Agreement dated October 6,
1995, among U.S. HomeCare Corporation and its Consolidated
Subsidiaries, signatory thereto, the Banks signatory
thereto and The Chase Manhattan Bank, N.A. as Agent.
(Filed as Exhibit 3 to the Registrant's Form 10-Q for the
quarter ended September 30, 1995 and incorporated herein
by reference.)
10.22 Credit Agreement dated October 6, 1995 among U.S. HomeCare
Corporation and its Consolidated Subsidiaries, signatory
thereto, and Fleet Bank, National Associate. (Filed as
Exhibit 4 to the Registrant's Form 10-Q for the quarter
ended September 30, 1995 and incorporated herein by
reference.)
10.23 Guarantee Agreement dated October 6, 1995 between
30
<PAGE> 34
Connecticut Development Authority and Fleet Bank, National
Association. (Filed as Exhibit 5 to the Registrant's Form
10-Q for the quarter ended September 30, 1995 and
incorporated herein by reference.)
10.24 Amendment Number 1, dated October 31, 1996, to the Amended
and Restated Credit Agreement among U.S. HomeCare
Corporation and its Consolidated Subsidiaries, signatory
thereto, the Banks signatory thereto and The Chase
Manhattan Bank, N.A., as agent.
10.25 Amendment Number 2, dated November 14, 1996 to the Amended
and Restated Credit Agreement among U.S. HomeCare
Corporation and its Consolidated Subsidiaries, signatory
thereto, the Banks signatory thereto and The Chase
Manhattan Bank, N.A., as agent.
10.26 Amendment Number 3, dated March 25, 1997, to the Amended
and Restated Credit Agreement among U.S. HomeCare
Corporation and its Consolidated Subsidiaries, signatory
thereto, the Banks signatory thereto and The Chase
Manhattan Bank, N.A., as agent.
10.27 Amendment Number 1, dated November 14, 1996, to the Credit
Agreement among U.S. HomeCare Corporation and its
Consolidated Subsidiaries, signatory thereto, and Fleet
Bank, National Associate.
10.28 Amendment Number 2, dated March 25, 1997, to the Credit
Agreement among U.S. HomeCare Corporation and its
Consolidated Subsidiaries, signatory thereto, and Fleet
Bank, National Associate.
10.29 Consulting Agreement between Mehdi Ali and U.S. HomeCare
Corporation, dated October 2, 1996. (Filed as Exhibit 10
(a) to the Registrant's Quarterly Report on Form 10-Q for
the period ended September 30, 1996 and incorporated
herein by reference).
10.30 Consulting Agreement between James Laird and U.S. HomeCare
Corporation, dated October 2, 1996. (Filed as Exhibit 10
(b) to the Registrant's Quarterly Report on Form 10-Q for
the period ended September 30, 1996 and incorporated
herein by reference).
10.31 Settlement Agreement and Mutual Release between G. Robert
O'Brien and U.S. HomeCare Corporation, dated October 14,
1996.
10.32 Settlement Agreement and Mutual Release between Stephen H.
Matheson and U.S. HomeCare Corporation, dated October 14,
1996.
10.33 Asset Purchase Agreement dated as of October 31, 1996
among Transworld Acquisition Corp., Transworld Home
HealthCare, Inc., U.S. HomeCare Infusion Therapy Services
Corporation of New Jersey, and U.S. HomeCare Corporation.
10.34 Settlement Agreement, dated as of November 25, 1996,
31
<PAGE> 35
between U.S. HomeCare Infusion Therapy Products
Corporation and U.S. HomeCare Corporation and Edward J.
Abel, Abel Health Management Services, Inc. and Home
Infusion Pharmaceutical Services, Inc.
10.35 Settlement Agreement, dated as of November 25, 1996,
between U.S. HomeCare Corporation and U.S. HomeCare
Infusion Therapy Products Corporation and Kingsland
Associates.
11. Calculation of Earnings per Share.
21. List of Subsidiaries.
27. Financial Data Schedule
32
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
U.S. HomeCare Corporation
By:/s/ Jay C. Huffard March 27, 1997
-------------------------------------
Jay C. Huffard, Interim President
and Chief Executive Officer
By:/s/ Gerald J. Boisvert, Jr. March 27, 1997
-------------------------------------
Gerald J. Boisvert, Jr., Vice
President, Finance and Administration
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
By:/s/ Jay C. Huffard March 27, 1997
-------------------------------------
Jay C. Huffard, Interim President,
Chief Executive Officer and
Director
By:/s/ W. Wallace McDowell, Jr. March 27, 1997
-------------------------------------
W. Wallace McDowell, Jr.
Director
By:/s/ Shawkat Raslan March 27, 1997
-------------------------------------
Shawkat Raslan, Director
By:/s/ Susan S. Robfogel March 27, 1997
-------------------------------------
Susan S. Robfogel, Director
By:/s/ John R. Gunn March 27, 1997
-------------------------------------
John R. Gunn, Director
By:/s/ Hadley C. Ford March 27, 1997
-------------------------------------
Hadley C. Ford, Director
33
<PAGE> 37
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of
December 31, 1996 and 1995......................................... F-3
Consolidated Statements of Operations for the
years ended December 31, 1996, 1995 and 1994....................... F-4
Consolidated Statements of Stockholders' Equity (Deficit) for
the years ended December 31, 1996, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1996, 1995 and 1994............................. F-6
Notes to Consolidated Financial Statements............................... F-7
Schedule II - Valuation and Qualifying Accounts......................... S-1
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
F-1
<PAGE> 38
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
U.S. HomeCare Corporation
Hartford, Connecticut
We have audited the accompanying consolidated balance sheets of U.S.
HomeCare Corporation and subsidiaries as of December 31, 1996 and
1995, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three
years in the period ended December 31, 1996. Our audits also included
the financial statement schedule listed in the Index on page F-1.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements and financial
statement 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, such consolidated financial statements present
fairly, in all material respects, the financial position of U.S.
HomeCare Corporation and subsidiaries as of December 31, 1996 and
1995, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in
conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
Deloitte & Touche LLP
Hartford, Connecticut
March 27, 1997
F-2
<PAGE> 39
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31,
1996 1995
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 647 $ 225
Accounts receivable, net of allowance
for doubtful accounts of $3,843 and $2,960 - Note 2 7,925 15,480
Other current assets 1,225 2,329
-------- --------
TOTAL CURRENT ASSETS 9,797 18,034
-------- --------
PROPERTY AND EQUIPMENT, net 2,578 3,875
-------- --------
OTHER ASSETS
Excess cost over net assets acquired, net
of accumulated amortization of $653 and $2,496 1,581 11,669
Intangible assets, net of accumulated
amortization of $5,165 and $6,573 822 3,735
Other 767 1,128
-------- --------
TOTAL OTHER ASSETS 3,170 16,532
-------- --------
TOTAL ASSETS $ 15,545 $ 38,441
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt $ 346 $ 1,119
Accounts payable 3,175 4,205
Accrued Expenses - Note 6 4,509 2,229
Reserve for restructuring and other non-recurring charges 3,670 1,172
Accrued payroll and related costs 1,608 1,123
-------- --------
TOTAL CURRENT LIABILITIES 13,308 9,848
-------- --------
OTHER LIABILITIES
Bank revolving lines of credit 7,980 11,766
Capital lease obligations and other long-term debt 3 758
Other 1,309 154
-------- --------
TOTAL OTHER LIABILITIES 9,292 12,678
-------- --------
TOTAL LIABILITIES 22,600 22,526
-------- --------
COMMITMENT AND CONTINGENCIES - Note 8
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, $0.01 par value, 20,000,000 shares authorized,
9,130,303 and 8,782,963 shares outstanding 94 88
Preferred stock, $1 par value, 484,000 authorized, 328,569
shares outstanding 328 328
Additional paid-in capital 44,923 45,688
Accumulated deficit (52,400) (28,607)
Treasury stock at cost, 0 and 277,936 shares 0 (1,582)
-------- --------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (7,055) 15,915
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT) $ 15,545 $ 38,441
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 40
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Net revenues $ 56,483 $ 56,450 $ 56,351
Cost of revenues, primarily payroll and related costs 39,213 37,605 38,295
-------- -------- --------
Gross profit 17,270 18,845 18,056
Operating expenses:
Selling, general & administrative expenses 19,016 18,607 27,382
Provision for litigation settlement 2,000
Amortization and depreciation 1,943 2,208 4,875
Restructuring and other non-recurring charges - Note 5 3,619 7,650
-------- -------- --------
Total operating expenses 24,578 20,815 41,907
-------- -------- --------
Loss from continuing operations before interest expense and income
taxes (7,308) (1,970) (23,851)
Interest expense 1,092 870 1,423
-------- -------- --------
Loss from continuing operations before income taxes (8,400) (2,840) (25,274)
Income taxes (benefit) 150 154 (219)
-------- -------- --------
Loss from continuing operations (8,550) (2,994) (25,055)
Discontinued Operations: (Note 1)
Income (loss) from discontinued operations (1,464) 1,196 (1,710)
Loss on sale of IV therapy business (13,779)
-------- -------- --------
Net loss $(23,793) $ (1,798) $(26,765)
======== ======== ========
Loss per share:
Loss from continuing operations $ (0.96) $ (0.37) $ (3.04)
Discontinued Operations:
Income (loss) from discontinued operation (0.17) 0.15 (0.21)
Loss on sale of IV therapy business (1.55)
-------- -------- --------
Net loss per share $ (2.68) $ (0.22) $ (3.25)
======== ======== ========
Weighted average common shares outstanding 8,868 8,180 8,247
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 41
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands)
<TABLE>
<CAPTION>
Series B
Common Stock Preferred Stock Additional Treasury Stock
------------------ ------------------- Paid-In ------------------ Accumulated
Shares Amount Shares Amount Capital Shares Amount Deficit
------ ------ ------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 8,547 $85 -- -- $ 35,924 (303) ($2,557) ($44)
Private placement -- -- 57 $ 57 1,910 -- -- --
Exercise of options 5 -- -- -- 23 -- -- --
Preferred dividends -- -- -- -- (40) -- -- --
Net loss -- -- -- -- -- -- -- (26,765)
--------------------------------------------------------------------------------------------------
Balance, December 31, 1994 8,552 85 57 57 37,817 (303) (2,557) (26,809)
Private placement -- -- 271 271 8,391 -- -- --
Purchase of treasury stock from
a related party -- -- -- -- -- (200) (329) --
Preferred dividends -- -- -- -- (1,263) 225 1,304
Stock issued in lieu of cash for
accounts payable settlement 231 3 -- -- 545 -- -- --
Stock issued under
Employee Stock Savings Plan -- -- -- -- 198 -- -- --
Net loss -- -- -- -- -- -- -- (1,798)
--------------------------------------------------------------------------------------------------
Balance, December 31, 1995 8,783 88 328 328 45,688 (278) (1,582) (28,607)
Preferred dividends 95 1 (1,583) 278 1,582
Stock issued in lieu of cash for
accounts payable settlement 534 5 807
Stock issued under
Employee Stock Savings Plan 8 11
Net loss -- -- -- -- -- -- -- (23,793)
--------------------------------------------------------------------------------------------------
Balance, December 31, 1996 9,420 $94 328 $328 $ 44,923 -- $ -- ($52,400)
==================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
F-5
<PAGE> 42
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($23,793) ($1,798) ($26,765)
Adjustments to reconcile net loss to net
cash provided by/(used in)
operating activities:
Write-off of goodwill and intangible assets 11,577
Depreciation and amortization 2,510 3,456 6,612
Provision for bad debts 3,759 1,757 8,046
Non-cash charges 1,470 59 581
Deferred income taxes (280) 202
Gain on return of leased assets (24)
Changes in operating assets and liabilities:
Decrease/(increase) in accounts receivable 3,796 (3,855) 2,596
Decrease in other current assets 1,104 2,301 3,458
Decrease/(increase) in other assets 361 (425) (425)
Increase/(decrease) in accounts payable and accrued expenses 2,062 (3,389) 2,290
Increase/(decrease) in restructuring reserve 1,494 (3,047) 5,703
Increase/(decrease) in accrued payroll and related costs 485 38 (21)
Increase in other liabilities 1,155
------- ------- -------
Net cash provided by / (used in) operating activities 5,980 (5,207) 2,277
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
(Purchases)/disposition of property and equipment, net (255) (114) 16
------- ------- -------
Net cash (used in)/provided by investing activities (255) (114) 16
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
(Payments on)/proceeds from promissory note (2,000) 2,000
Proceeds from borrowing long-term debt 3,000 378
Payments on capital leases and long-term debt (5,314) (3,201) (6,452)
Purchase of treasury stock (329)
Decrease in cash overdraft (1,247) (43)
Issuance of common stock 11
Issuance of preferred stock 8,664 1,950
------- ------- -------
Net cash (used in)/provided by financing activities (5,303) 4,887 (2,167)
------- ------- -------
Net increase/(decrease) in cash 422 (434) 126
Cash and cash equivalents, beginning of year 225 659 533
------- ------- -------
Cash and cash equivalents, end of year $ 647 $ 225 $ 659
======== ======= =======
Cash paid during the year for:
State income taxes $ 169 $ 25 $ --
======== ======= =======
Interest $ 1,043 $ 870 $ 1,380
======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 43
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995, AND 1994
1. SIGNIFICANT ACCOUNTING POLICIES
a. Basis of Presentation and Nature of Business - The consolidated
financial statements include the accounts of the Company and its subsidiaries,
all of which are wholly owned. All material intercompany accounts and
transactions have been eliminated. The Company is a provider of home health care
services, including nursing care and personal care, in Connecticut, New York,
and Pennsylvania. The infusion therapy business was discontinued September 30,
1996.
b. Management Actions and Operating Results - The accompanying
financial statements reflect operating and net losses for 1994, 1995 and 1996
and a stockholder deficit and working capital deficit at December 31, 1996. As
discussed in c. below, the Company sold its IV therapy business effective
October 1, 1996. As discussed in Note 5, the Company has restructured its
operations to reduce both corporate overhead and branch operating costs. As
discussed in Note 7, the Company's long-term debt maturities were extended to
January 1998. As a result of the above actions, the Company believes that its
existing credit facilities, together with cash generated from operations, will
be sufficient to fund the Company's operations through 1997. Beyond 1997, the
Company believes that it will need to extend or replace its existing credit
facilities.
c. Discontinued Operations - On October 31, 1996, the Company
completed the sale of certain assets (not including accounts receivable) of its
IV therapy business for approximately $2,000,000 in cash. The sale had an
effective date of October 1, 1996. The accompanying consolidated financial
statements of operations for the years ended December 31, 1996, 1995 and 1994
present the results of operations of the IV therapy business as a discontinued
operation. As a result of the sale, the Company recorded a loss on disposal of
the IV therapy business of $13,779,000. Such loss on sale included (1) a
write-off of $11,577,000 of goodwill and other intangible assets, (2) additional
provisions for losses on accounts receivable of $2,578,000, and (3) $1,624,000
related to a charge for severance and other anticipated costs during the phase
out period net of the net cash proceeds of the sale of approximately $2,000,000.
Net revenues from the discontinued IV therapy operations were approximately
$6,541,000, $14,733,000 and $22,715,000 for the years ended December 31, 1996,
1995 and 1994, respectively. The income (loss) from operations of the IV therapy
business was ($1,464,000), $1,196,000 and ($1,710,000) for the years ended
December 31, 1996, 1995 and 1994, respectively. As a result of net operating
loss tax credit carryforwards, no income tax benefits have been recognized for
the discontinued operations. The December 31, 1996 balance sheet includes
approximately $2,000,000 of accounts receivable (net of a $2.9 million allowance
for doubtful accounts) related to the assets of the IV therapy business which
was sold. The accounts receivable have been retained by the Company.
d. Accounting 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 amounts of revenues and expenses
during the reporting period. Significant estimates in the Company's financial
statements include: accounts receivable contractual allowances and bad debt
reserves, medicare reserves, reserves for self insured risks and restructuring
reserves. Actual results could differ from those estimates.
F-7
<PAGE> 44
e. Property and Equipment - Property and equipment are recorded at
cost, less accumulated depreciation computed on a straight-line basis over the
useful lives of the related assets. The useful lives vary from three to seven
years. Leasehold improvements and leased equipment are amortized over the lives
of the respective leases or the service lives of the asset, whichever is
shorter.
f. Intangible Assets - Excess cost over net assets acquired is being
amortized over a period of 25 years. The Company reviews the recoverability of
the excess cost of net assets acquired based upon anticipated future cash flows
of the acquired company. Other intangible assets consist principally of patient
and referral lists, training programs, and aides and nurses lists and are being
amortized over a period of five to ten years. The net carrying value of aides
and nurses lists was approximately $822,000 and $1,359,000 as of December 31,
1996 and 1995 respectively. The net carrying value of patient and referral lists
was approximately $0 and $2,376,000 as of December 31, 1996 and 1995,
respectively.
g. Revenue Recognition - The Company recognizes revenues as the
services are performed. The Company receives retroactive increases to certain
rates, certain of which are intended to be passed through as additional salary
and benefits to Company personnel. The Company records such additional amounts
as revenues and expenses when they are notified by the payor or the amount is
estimable. Certain of the Company's revenues and related disbursements are
subject to audit by third party payors; these revenues are accrued on an
estimated basis in the period the related services are rendered. Net revenues is
adjusted, as required in subsequent periods, based on final settlement.
h. Per Share Information - Primary earnings per share do not include
Common Stock equivalents outstanding since they are anti-dilutive.
i. Reclassification - The presentation of certain prior year
information has been reclassified to conform with the current year presentation.
j. Cash and Cash Equivalents - The Company considers all highly liquid
instruments with original maturities of three months or less to be cash
equivalents.
k. Income Taxes - The Company provides for income taxes based upon the
asset and liability method. Deferred income taxes have been provided for
temporary differences between the tax basis of assets and liabilities and their
reported amounts in the financial statements.
l. Non-cash transactions - Schedule of non-cash transactions for the
years ended:
<TABLE>
<CAPTION>
December 31, 1996
- -----------------
<S> <C>
Stock issued in lieu of cash
for accounts payable settlement $ 812,000
Preferred Stock dividends paid with common stock $1,709,000
</TABLE>
F-8
<PAGE> 45
<TABLE>
<S> <C>
December 31, 1995
Write-off of assets against restructuring
reserve $1,484,000
Disposal of assets under capital leases $ 687,000
Stock issued in lieu of cash
for accounts payable settlement $ 548,000
Preferred Stock dividends paid with common stock $1,304,000
Disposal of assets under capital leases $ 167,000
December 31, 1994
Additional property and equipment
acquired through capital lease $ 102,000
Disposal of assets under capital leases $ 325,000
</TABLE>
m. Stock Based Compensation - In October 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," which was effective for the
Company beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and non-employees and
encourages (but does not require) compensation cost to be measured based on the
fair value of the equity instrument awarded to employees. Companies are
permitted, however, to continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument awarded.
The Company will continue to apply APB Opinion No. 25 to its stock based
compensation awards to employees.
n. Fair Value of Financial Instruments - SFAS No. 107, "Disclosures
about Fair Value of Financial Instruments," requires disclosure of fair value
information for certain assets and liabilities, whether or not recognized in the
balance sheets, for which it is practicable to estimate that value. The
Company's balance sheets include the following financial instruments: cash and
cash equivalents; accounts receivable; accounts payable and accrued expenses;
bank revolving line of credit; and capital lease obligations and other long-term
debt. The Company considers the carrying amount in the financial statements to
approximate fair value of these financial instruments because of the relatively
short period of time between the origination of such instruments and their
expected realization and/or the fact that the instruments reprice frequently at
market rates.
2. ACCOUNTS RECEIVABLE
In November 1993, the Company entered into a financing agreement with a
bank whereby it can sell an undivided percentage ownership interest in a
designated pool of accounts receivable. This agreement was amended and extended
on March 27, 1997. The bank has committed up to $10.0 million based upon
securitizing the Company's eligible accounts receivable. The agreement now
expires on January 2, 1998. Accounts receivable in the consolidated balance
sheet do not include the receivables sold to the bank in the amount of
approximately $7.5 and $8.9 million at December 31, 1996 and 1995, respectively.
The Company remains liable for all sold receivables until collected.
The Company maintains a reserve for accounts receivable including
receivables sold, based upon the expected collectibility of all accounts
receivable.
F-9
<PAGE> 46
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
(In Thousands)
1996 1995
------- -------
<S> <C> <C>
Leasehold improvements and buildings $ 2,743 $ 2,663
Furniture and fixtures 1,970 2,088
Computer and other equipment 6,889 6,986
------- -------
11,602 11,737
Less accumulated depreciation and amortization 9,024 7,862
------- -------
$ 2,578 $ 3,875
======= =======
</TABLE>
At December 31, 1996 and 1995 amounts relating to assets under capital
leases (included above) had a net carrying value of approximately $116,000 and
$838,000 respectively. Depreciation expense was $1,086,000, $1,235,000, and
$2,206,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
4. INCOME TAXES
The tax benefit recognized in 1994 was limited to the amount previously
paid for federal income tax purposes, partially offset by state tax expense.
There was no federal benefit recorded in 1996 or 1995 due to the incurred net
operating losses. The 1996 and 1995 provision consisted entirely of state taxes.
The tax effect of temporary differences giving rise to the Company's
deferred tax assets and liabilities at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
1996 1995
-------- -------
(In Thousands)
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards $ 12,920 $ 7,140
Bad debt reserves 1,537 1,184
Restructuring reserves 1,468 469
Legal settlements 584 532
Accrued expenses 964 --
Other 200 208
-------- -------
Total deferred tax assets 17,673 9,533
Deferred Tax Liabilities:
Depreciation and amortization (127) (154)
-------- -------
Net Deferred Tax Asset 17,546 9,379
Valuation Allowance (17,546) (9,533)
-------- -------
Net Deferred Tax Liability $ -- $ (154)
======== =======
</TABLE>
F-10
<PAGE> 47
For financial reporting purposes, deferred tax assets are reduced by a
valuation allowance to an amount that is "more likely than not" to be realized.
Due to the Company's cumulative losses, management does not consider that enough
support to overcome the "more likely than not" criteria existed at December 31,
1996 and 1995.
The Company's income tax provision (benefit) consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994
---- ---- ----
(In Thousands)
<S> <C> <C> <C>
Current:
State and Local $ 150 $154 $ 231
Federal -- -- (329)
----- ---- -----
Total Current 150 154 (98)
Deferred (121)
----- ---- -----
Total provision/(benefit) for $ 150 $154 $(219)
income taxes ===== ==== =====
</TABLE>
At December 31, 1996 the Company has a tax net operating loss ("NOL") of
approximately $38.0 million expiring from 2009 to 2011 to offset against future
taxable income, if any. The Internal Revenue Code limits the amount of a
company's NOL carryforward that may be used in any one year to offset future
income after an "ownership change" (as defined). The Company does not believe
any such "ownership change" has occurred which would limit the available annual
amount.
5. RESTRUCTURING AND OTHER NON-RECURRING CHARGES
During the third quarter of 1996, the Company's Board of Directors made
decisions to restructure the operations of the Company and restore its focus on
core home nursing operations. The "1996 restructuring plan" included the sale of
the Company's IV therapy business discussed in Note 1. Additional actions
included the retention of two individual turnaround consultants, implementation
of plans to reorganize its home nursing operations in a more cost effective
manner, a reduction in both corporate management and non-management expenses and
the consolidation of certain offices. It is expected that the reorganization
plan will be completed by the end of the second quarter of 1997. As a result of
these decisions, the Company recorded a provision for restructuring and other
non-recurring charges of $3,619,000 during 1996 which was comprised of:
severance of $640,000, turnaround consultants $1,898,000, an increase in 1994
restructuring reserve of $535,000 and other reorganization costs of $546,000
(including asset write-offs and lease costs). The reserve established for
compensation for the turnaround consultants includes a monthly cash retainer
totaling $428,000 through September 1997 and significant performance based
equity incentives valued at approximately $1,470,000 . The balance of the "1996
plan" reserve was approximately $2,719,000 at December 31, 1996 and is related
principally to severance costs, turnaround consultant compensation, and
obligations for closed facilities.
The equity incentives granted to the turnaround consultants consist of
options to purchase 1,730,000 shares of the Company's common stock for $0.15 per
share of which 576,667 were vested immediately. The remaining 1,153,000 options
vested in January 1997 based on predefined operating results being achieved in
the fourth quarter of 1996. The option contains a put provision which would
require the Company to purchase the Options for $1,500,000 if a Realization
Event (i.e acquisition of the Company by a merger or by a stock or asset sale,
etc.) does not occur prior to December 31, 1997.
F-11
<PAGE> 48
The Company has recorded a liability at December 31, 1996 of $1,470,000 to
account for the issuance of these options to non employees. Such amount
approximates the fair value of the services provided or to be provided.
During 1996, the Company paid, on a net basis, approximately $406,000 in
restructuring and other non-recurring costs related principally to severance,
compensation to turnaround consultants, legal costs, and leasing costs. In
addition, the Company charged approximately $715,000 of non-cash items against
the reserve for restructuring and other non-recurring charges. Such non-cash
items related principally to depreciation expense and obligations settled with
common stock.
In the third quarter of 1994, the Company announced a restructuring
plan and recorded a charge of approximately $7.65 million. The plan was designed
to improve profitability by exiting the Florida market, consolidating infusion
therapy operations and closing development offices opened during 1992 and 1993.
The charge relates to: severance; disposition of property and equipment and
intangible assets related to these operations; and the estimated costs to close
or sublease facilities. The balance of the reserve at December 31, 1996 was
approximately $951,000 and is related principally to remaining obligations for
abandoned locations.
6. ACCRUED EXPENSE
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
December 31,
------------------
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Legal settlements $1,459 $ 828
Medicare 1,012 --
Workers compensation 1,398 39
Other 640 1,362
--------------------
$4,509 $2,229
====================
</TABLE>
7. LONG TERM DEBT
<TABLE>
<CAPTION>
December 31,
-----------------
1996 1995
---- ----
(In Thousands)
<S> <C> <C>
Capitalized lease obligations (a) $ 69 $ 838
Revolving credit facility (b) 4,980 8,766
Subordinated revolving credit facility (c) 3,000 3,000
Notes payable -- 743
Other 280 296
------- -------
8,329 13,643
Less current portion 346 1,119
------- -------
$ 7,983 $12,524
======= =======
</TABLE>
a. The Company leases certain equipment under non-cancelable leases
expiring at various times through 1997.
F-12
<PAGE> 49
b. The Company has a revolving line of credit ("RLOC"), with
availability based upon a stated formula applied to accounts receivable
balances. Borrowings bearing interest at the higher of the bank's prime rate
plus 2.0% or the federal funds rate plus 1.0%. The interest rate at December 31,
1996 was 10.25%. Remaining availability under the RLOC at December 31, 1996 was
$1,591,000. Borrowings under the RLOC are collateralized by substantially all of
the Company's assets. The terms of the RLOC provide, among other things, for
prepayments in the event that the Company's formula based borrowing capacity is
reduced, for maintenance of certain financial ratios, limitations on capital
expenditures, acquisitions, and cash dividends.
On March 25, 1997 the RLOC agreement was amended and restated to include a
revised maturity date of January 2, 1998, and increase in the interest rate of
1% on July 1, 1997 and an additional increase of 1% on October 1, 1997. In
connection with the revised agreement the banks were issued warrants to purchase
178,000 shares of the Company's Common Stock at $1.5969 per share.
c. In October 1995, the Company entered into a $3.0 million
subordinated credit facility with a commercial bank. The subordinated credit
facility is 100% guaranteed by the Connecticut Development Authority ("CDA").
The credit facility originally had an expiration date of April 15, 1997. On
March 25, 1997 the subordinated credit facility was extended to January 15, 1998
and the CDA guarantee was extended to January 30, 1998. The interest rate at
December 31, 1996 was 6.5%. In connection with the October 1995 issuance of the
CDA guarantee, the Company agreed to issue additional warrants (the "Additional
Warrants") to the CDA to purchase 735,000 shares of the Company's common stock
for $1.5969 per share if the guarantee was not released by April 30, 1997. As a
result of the extension of the CDA guarantee to January 30, 1998 the Company
issued the Additional Warrants to the CDA on March 25, 1997.
Aggregate maturities of long-term debt as of December 31, 1996 are as
follows:
<TABLE>
<S> <C>
(In Thousands)
1996 $ 346
1997 7,983
------
$8,329
======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
a. Operating Leases - The Company leases office space under various leases
with terms ranging from one to fifteen years. Rent expense was $1,284,000,
$1,330,000, and $2,203,000 for the years ended December 31, 1996, 1995, and 1994
respectively. Future minimum rental commitments under non-cancelable operating
leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
1997 $ 993
1998 420
1999 317
2000 250
2001 117
Thereafter 1,348
----------
$ 3,445
=========
</TABLE>
b. Medicare - Approximately 14% in 1996, 18% in 1995, and 15% in 1994 of
net revenues were derived under the Medicare program. These revenues are based,
in part, on cost reimbursement
F-13
<PAGE> 50
principles and are subject to audit and retroactive adjustment by the respective
third-party fiscal intermediaries. Included in accrued expenses at December 31,
1996 was approximately $1.0 million which is an estimate of what is to be paid
upon finalization of certain cost reports. In the opinion of management,
additional other retroactive adjustments, if any, are not expected to be
material to the consolidated financial statements of the Company.
c. Litigation -
i) HIPS/Abel. The Company reached settlement in November 1996 in HIPS v.
USHC Infusion, et al (Supreme Court, State of New York, New York County), a suit
brought in July 1993 by Home Infusion Pharmaceutical Services, Inc. ("HIPS") in
connection with the acquisition (the Acquisition") of assets from HIPS and its
affiliate Abel Health Management Services, Inc. and their principal, Edward J.
Abel.
ii) Kingsland Litigation. The Company reached settlement in November 1996
in Kingsland Associates v. Abel Health Management Services, Inc. and U.S.
HomeCare Infusion Therapy Products Corporation (Supreme Court of the State of
New York, Nassau County), a suit which also arose from the Acquisition.
iii) Debenture Litigation. The Company reached settlement in February 1997
in Smith, Katz and Cole v. U.S. HomeCare Corporation, et al. (Supreme Court of
the State of New York, Nassau County), a suit which arose from the 1986
acquisition of Reliable Nurses Aides of Westchester, Inc.
iv) Roberts v. U.S. HomeCare Corporation, et al., 93 Civ. 4060 (CLB)
(U.S. District Court for the Southern District of New York).
In October 1994, the Company reached settlement in the securities
class action suit, Roberts v. U.S. HomeCare Corporation, et al., and the
defendants (the Company and certain directors and officers of the Company)
reached a settlement agreement with the Court. On March 17, 1995, the Court
approved the settlement, certified the class for settlement purposes only, and
approved procedures for administering the settlement process. Under the
agreement the Company paid $3.0 million dollars (included in accounts payable
and accrued expenses at December 31, 1994). This amount consists of $1.0 million
to be paid by the Company's directors' and officers' liability insurance
(included in other current assets at December 31, 1994) and $2.0 million in cash
by the Company. As of March 1995 the $3.0 million dollars had been paid into a
settlement fund which was disbursed throughout the year.
v) In addition to the matters discussed above, the Company is involved
in litigation in the ordinary course of business. The Company carries general
liability insurance in the amounts of $2.0 million per occurrence and $6.0
million in the aggregate, such aggregate coverage having been increased over
time. The Company does not believe, after giving consideration to the insurance
in place and the claims outstanding, that the resolution of these matters will
have a material adverse effect on the financial position, results of operations,
or cash flows of the Company.
9. STOCKHOLDERS' EQUITY
a. Common Stock - The Company's authorized Common Stock consists of
40,000,000 shares of Common Stock, par value $0.01 per share, of which 9,419,973
shares were issued and outstanding as of December 31, 1996.
F-14
<PAGE> 51
On June 1, 1988, the Company established an Employee Stock Ownership
Plan (ESOP). The cost of the ESOP is borne by the Company through annual
contributions in amounts determined by the Board of Directors. The annual ESOP
contribution expense was $0 for the years ended December 31, 1996, 1995 and
1994. The ESOP funds are invested either by contribution of Common Stock of the
Company or open market purchases of Common Stock. On February 19, 1997 the Board
of Directors voted to terminate the plan and have the assets of the plan
distributed to the participants in accordance with the plan documents.
b. Exchange Preferred Stock - Preferred Stock Placement - On February 1
and February 8, 1995, the Company issued and sold in a private placement a total
of 271,428 shares of $35.00 6% Convertible Preferred Stock, $1.00 par value (the
"$35.00 Preferred") for $35.00 per share (the "Private Placement"). The $35.00
Preferred is convertible into approximately 7,200,000 shares of Common Stock at
a current conversion price of $1.5969 per share (as adjusted from the original
conversions price of $1.75 per share), subject to certain adjustments, and will
be automatically converted into Common Stock if the 20 day moving average of the
closing prices of the Company's Common Stock is greater than $4.375 per share.
The $35.00 Preferred pays an annual dividend of $2.10, which is payable
quarterly in cash or, at the Company's option, Common Stock. Simultaneously,
with the initial closing of the Private Placement, all of the holders of
Preferred Stock issued in September and October 1994 (the "Exchange Preferred")
exchanged their 57,141 shares of Exchange Preferred for an equal number of
shares of the $35.00 Preferred and exchanged their Exchange Warrants for
Warrants to purchase an aggregate of 99,997 shares of Common Stock at $1.5969
per share. To date, the dividends have been paid in Common Stock, with a total
of approximately 598,000 shares issued. The total liquidation preference was
$11.5 million at December 31, 1996 and 1995.
c. In connection with the restructured financing in 1995, the Company
issued warrants, which are currently exercisable to purchase an aggregate of
821,904 shares of Common Stock at $1.5969 per share to its RLOC banks. In
connection with the CDA's guarantee, the Company issued to the CDA warrants to
purchase 821,904 shares of Common Stock at $1.5969 per share and has issued, as
a result of the March 25, 1997 extension of the guarantee, to the CDA a warrant
to purchase an additional 735,000 shares of Common Stock at the same price.
These warrants are exercisable at any time through March 25, 2002.
d. Stock Options - At the Company's Annual Meeting held on May 18,
1995, the Company obtained shareholder approval of its 1995 Stock Option/Stock
Issuance Plan (the "1995 Plan"), pursuant to which 2,550,000 shares of common
Stock were reserved for issuance. The 1995 Plan is the successor to the
Company's 1990 Stock Option Plan (the "1990 Plan"). Options available for grant
at December 31, 1996 were 1,359,000.
All outstanding stock options under the 1990 Plan were incorporated
into the new 1995 Plan but continue to be governed by the terms and conditions
of the specific agreements evidencing those grants. As a result of shareholder
approval of the 1995 Plan, (i) the Company's 1993 Director Stock Option Plan
(the "1993 Plan") was terminated and all options outstanding thereunder were
cancelled on December 21, 1994 and (ii) the Company's 1991 Premium Price Stock
Option Plan (the "1991 Plan") was terminated and all options outstanding
thereunder were canceled. No further option grants or stock issuances will be
made under the 1990 Plan, the 1991 Plan or the 1993 Plan (collectively, the
"Predecessor Plans").
Prior to the inception of the Plans, options were granted to certain
key employees, officers and directors under substantially the same terms, except
that vested options automatically expired if not exercised upon the initial
public offering of the Company's stock.
F-15
<PAGE> 52
The 1995 Plan contains three separate equity incentive programs;
(i) a Discretionary Option Grant Program, (ii) an Automatic Option Grant Program
and (iii) a Stock Issuance Program.
The 1995 Plan (other than the automatic Option Grant Program) is
administered by the Compensation Committee of the Board. However, all grants
under the Automatic Option Grant Program are made in strict compliance with the
provisions of that program, and no administrative discretion is exercised by the
Compensation Committee with respect to the grants made thereunder.
Employees of the Company, non-employee members of the Board (other than
those serving as members of the Compensation Committee) and consultants and
independent advisors of the Company are eligible to participate in the
Discretionary Option Grant and Stock Issuance Program. Non-employee members of
the Board (including members of the Compensation Committee) are also eligible to
participate in the Automatic Option Grant Program.
Options may be granted under the Discretionary Option Grant Program at
an exercise price per share not less than 85% of the fair market value per share
of Common Stock on the option grant date. No granted option will have a term in
excess of ten years. The fair market value per share of Common Stock on any
relevant date under the 1995 Plan will be the last reported sales price per
share on that date.
Under the Automatic Option Grant Program, each individual who was
serving as a non-employee Board member on December 21, 1994 was automatically
granted at that time an option grant for 25,000 shares of Common Stock. Each
individual who first becomes a non-employee Board member after such date will
automatically be granted at that time an option grant for 25,000 shares of
Common Stock. Each option will have an exercise price per share equal to 100% of
the fair market value per share of Common Stock on the option grant date and a
maximum term of ten years measured from the option grant date.
Shares may be sold under the Stock Issuance Program at a price per
share not less than 85% of fair market value per share of Common Stock, payable
in cash or through a promissory note payable to the Company. Shares may also be
issued solely as a bonus for past services.
F-16
<PAGE> 53
A summary of the status of employee and directors options under
the Company's Stock Option Plan at December 31, 1996, 1995 and 1994, and changes
during the years ending on those dates, is presented below.
<TABLE>
<CAPTION>
1996 1995 1994
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
1996 EXERCISE 1995 EXERCISE 1994 EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year 1,966,500 $3.10 1,206,223 $4.25 817,325 $9.50
Granted 945,000 $1.26 1,097,232 $2.52 1,074,880 $3.32
Exercised -- -- (54,000) $3.93
Cancelled/expired (1,721,000) $2.86 (336,955) $5.97 (631,982) $9.75
---------- --------- ---------
Outstanding at end of year 1,190,500 $1.61 1,966,500 $3.10 1,206,223 $4.25
========== ========= ==========
Option exercisable at year end 767,067 $1.95 1,151,450 $3.37 739,800 $3.69
========== ========= ==========
</TABLE>
The following table summarizes information about stock options outstanding at
December 31, 1996:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICE OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$1.00-$2.00 835,000 8.8 years $ 1.12 411,667 $1.24
$2.25-$6.00 335,000 6.6 years $ 2.33 335,000 $2.33
$6.25-$10.25 20,500 8.0 years $10.04 20,400 $10.04
--------- -------
1,190,500 $ 1.61 767,067 $1.95
========= =======
</TABLE>
On December 12, 1996, the Company canceled and reissued options previously
granted to certain employees under the Discretionary Option Grant Program at a
significantly lower exercise prices but equal to or greater than the market
price on such date. A total of 409,500 shares with exercise prices ranging from
$1.22 to $25.87 were canceled and reissued with an exercise price of $1.00. The
quoted market price at the date of reissuance was $0.625
The weighted average fair values of options granted during 1996 and 1995 was
$1.19 and $1.29, respectively per share for those options granted with an
exercise price that equaled the market price of the stock on the grant date and
was $0.31 per share for options granted during 1996 whose exercise price was
greater than the market price of the stock on the grant date. The Company
applies Accounting Principles Board Opinion No. 25 and related Interpretations
in accounting for stock option plans. Accordingly, no compensation cost has been
recognized for its stock option plans. Had compensation cost for the Company's
stock option plans been determined based on the fair value at the grant dates
for awards under those plans consistent with the method of FASB Statement 123,
the
F-17
<PAGE> 54
Company's net loss and net loss per share for the years ended December 31, 1996
and 1995 would have been reduced to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net loss
As reported $ 23,793,000 $ 1,798,000
Pro forma $ 24,118,000 $ 2,498,000
Net loss per common share
As reported $ 2.67 $ 0.22
Pro forma $ 2.71 $ 0.31
</TABLE>
The fair value of options granted under the Company's stock option plans during
1996 and 1995 was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used: no
dividend yield, expected volatility of 56.3%, risk free interest rate of 6.0%,
and expected lives of 5 years. See Note 5 for discussion of non-employee
options.
10. MAJOR CUSTOMER
VNS HomeCare ("VNS"), a non-profit home health institution in New York
City, accounted for approximately $5.4 million (10%), $6.2 million (11%), and
$8.8 million (16%) respectively,of net revenue for the years ended December 31,
1996, 1995, and 1994.
11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
Unaudited quarterly results of operations are shown on page 17 of the
1996 Form 10-K.
F-18
<PAGE> 55
U.S. HOMECARE CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Description Balance at Charged to Cost Charged to Deductions Balance at End
Beginning of and Expense Other Accounts of Period
Period
- ----------------------------------------------------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Year ended
December 31, 1994:
Allowance for doubtful accounts $4,699,577 $8,045,688 $ -- $4,728,524 $8,016,741
========== ========== ============= ========== ==========
Year ended
December 31, 1995:
Allowance for doubtful accounts $8,016,741 $1,757,469 $ -- $6,814,064 $2,960,146
========== ========== ============= ========== ==========
Year ended
December 31, 1996:
Allowance for doubtful accounts $2,960,146 $3,759,455 $ -- $2,876,141 $3,843,460
========== ========== ============= ========== ==========
</TABLE>
The notes to the financial statements are an integral part of this schedule.
S-1
<PAGE> 56
Exhibit 11
U.S. HOMECARE CORPORATION
CALCULATION OF LOSS PER SHARE
<TABLE>
<CAPTION>
Primary 1996 1995 1994
- ------- -------------- -------------- --------------
<S> <C> <C> <C>
Net loss $ (23,793,000) $ (1,798,000) $ (26,765,000)
============== ============== ==============
Weighted average number of common shares 8,868,000 8,180,000 8,247,000
============== ============== ==============
Loss per share:
Loss from continuing operations $ (0.96) $ (0.37) $ (3.04)
Discontinued operations:
Income (loss) from operations (0.17) 0.15 (0.21)
Loss on sale of IV therapy business (1.55) 0.00 0.00
-------------- -------------- --------------
Net loss per share $ (2.68) $ (0.22) $ (3.25)
============== ============== ==============
</TABLE>
S-2
<PAGE> 1
EXHIBIT 4.4
Chase
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
U.S. HOMECARE CORPORATION
141 South Central Avenue
Hartsdale, New York 10530
STOCK PURCHASE WARRANT
Warrant No. WA-16
Date of Issuance: October 6, 1995 Right to Purchase 425,000
Shares of Common Stock
(subject to adjustment)
For value received, U.S. HOMECARE CORPORATION, a New York corporation
(the "Company"), hereby grants to THE CHASE MANHATTAN BANK, N.A., or its
registered assigns (the "Registered Holder"), the right to purchase from the
Company 425,000 shares of the Company's Common Stock (subject to adjustment
pursuant to Section 3 hereof) at a price of $1.75 per share. The amount and kind
of securities purchasable pursuant to the rights granted under this Warrant are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following terms have
the meanings set forth below:
"Additional Warrant Shares" has the meaning set forth
in Section 2.1.
"Affiliate" means, at any time, a Person controlling,
controlled by or under common control at such time with the Registered Holder.
<PAGE> 2
"Certificate" means the Certificate of Amendment to the
Certificate of Incorporation of the Company filed with the Secretary of the
State of New York on February 1, 1995.
"Common Stock" means the Company's Common Stock, $0.01
par value per share.
"Common Stock Deemed Outstanding" means, at any given time,
(a) the number of shares of Common Stock actually outstanding at such time; (b)
the number of shares of Common Stock issuable (i) upon the conversion of
outstanding shares of preferred stock and (ii) with respect to all other
options, warrants, rights, or other securities convertible into shares of Common
Stock (provided that such options, warrants or rights are at an exercise price
greater than the Market Price in effect on the relevant date; provided, further
that such options, warrants and rights shall only be considered "Common Stock
Deemed Outstanding" only to the extent that they have vested and are exercisable
on the relevant date), and (c) securities convertible into or exchangeable for
any of the foregoing.
"Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of the date hereof between the Company, the
Registered Holder and the other party named therein.
"Date of Issuance" shall have the meaning specified in
Section 12 of this Warrant.
"Exercise Price" shall be $1.75 per share, subject to
adjustment pursuant to Section 3 hereof.
"Market Price" means as to any security, the last reported
sales price regular way, or in case no such sales take place on such day, the
average of the closing bid and ask prices regular way, in each case on the
principal national securities exchange on which the security is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if the security is not
listed or admitted to trading on any national securities exchange and is not
quoted on the Nasdaq National Market, the average of the closing bid and ask
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors of the Company for such purpose.
"Person" means an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
- 2 -
<PAGE> 3
"Warrant Stock" means a share of the Company's authorized but
unissued Common Stock issuable upon exercise of the Warrant; provided that if
there is a change such that the securities issuable upon exercise of the Warrant
are issued by an entity other than the Company or there is a change in the class
of securities so issuable, then the term "Warrant Stock" will mean one share of
the security issuable upon exercise of the Warrant if such security is issuable
in shares, or will mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
2. Exercise of Warrant.
2.1 Exercise Period. The Registered Holder may
(i) exercise this Warrant, in whole or in
part (but not as to a fractional share of Warrant
Stock), with respect to 212,500 shares of the Warrant
Stock (subject to adjustment as herein provided) at
any time prior to 5:00 p.m. (New York time) on
October __, 2000, and
(ii) after April 1, 1996, exercise this
Warrant, in whole or in part (but not as to a
fractional share of Warrant Stock) with respect to
the remaining 212,500 shares of the Warrant Stock
(subject to adjustments as herein provided) (the
"Additional Warrant Shares"), at any time on or after
April 1, 1996 but prior to 5:00 p.m. (New York time)
on October __, 2000; provided, however, that this
Warrant shall not be exercisable for the Additional
Warrant Shares if all obligations and liabilities of
the Company and its Affiliates arising under or
related to the Credit Agreement have been repaid in
full prior to April 1, 1996; and provided, further,
that if such amounts have been repaid in full but any
or all of such amounts are required to be returned by
the Registered Holder as a preference payment or for
a similar reason, then the Additional Warrant Shares
shall again be subject to this Warrant, exercisable
pursuant to this Section 2.1(ii),
unless the right to purchase shares of Warrant Stock under this Warrant is
earlier terminated pursuant to Section 14 (the "Exercise Period").
- 3 -
<PAGE> 4
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been
exercised at such time as the Company has received all of the following items,
if applicable (the "Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising
all or part of the purchase rights represented by
this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in
the name of the Purchaser, an Assignment or
Assignments substantially in the form set forth in
Exhibit II hereto, evidencing the assignment of this
Warrant to the Purchaser; and
(iv) a check payable to the Company in an
amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock
being purchased upon such exercise.
In lieu of paying the purchase price set forth in (iv) above,
the Purchaser may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), in which event the Company shall issue to
the Purchaser the number of shares of the Company's Common Stock computed using
the following formula:
X = Y (A-B)
-------
A
Where:
X = the number of shares of Warrant Stock to be issued to the
Purchaser;
Y = the number of shares of Warrant Stock otherwise purchasable (or the
portion thereof being exercised) under this Warrant (at the date of
exercise);
A = the Market Price of one share of the Company's Common Stock (at the
date of such exercise); and
B = Exercise Price (as adjusted to the date of such exercise).
- 4 -
<PAGE> 5
(b) Certificates for shares of Warrant Stock purchased upon
exercise of this Warrant or any portion thereof will be delivered by the Company
to the Purchaser within ten days after the Exercise Date. Unless this Warrant
has expired or all of the purchase rights represented hereby have been
exercised, the Company will prepare, at its own expense, a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised. The Company will, within
such ten-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise of this
Warrant will be deemed to have been issued to the Purchaser on the Exercise
Date, and the Purchaser will be deemed for all purposes to have become the
record holder of such Warrant Stock on the Exercise Date.
(d) The issuance and delivery of certificates for shares of
Warrant Stock upon exercise of this Warrant will be made without charge to the
Registered Holder or the Purchaser for any issuance or delivery tax or
government charge in respect thereof or any other cost incurred by the Company
in connection with such exercise and the related issuance of shares of Warrant
Stock.
(e) The Company agrees to maintain books for the registration
and the registration of transfer of the warrants. The Company will not close its
books for the transfer of this Warrant or of any share of Warrant Stock issued
or issuable upon the exercise of this Warrant in any manner which interferes
with the timely exercise of this Warrant. The Company will from time to time
take all such action as may be necessary to assure that the par value per share
of the unissued Warrant Stock acquirable upon exercise of this Warrant is at all
times equal to or less than the Exercise Price.
2.3 Exercise Agreement. The Exercise Agreement will be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Registered
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable hereunder, it will also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered, and if the Purchaser wishes to
receive shares in lieu of paying the purchase price as set forth in Section 2.2,
it will also state such election.
- 5 -
<PAGE> 6
2.4 Fractional Shares. If a fractional share of Warrant Stock
would, but for the provisions of Subsection 2.1, be issuable upon exercise of
the rights represented by this Warrant, the Company will, within ten days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. Adjustment of Number of Shares Issuable upon Exercise. In case
the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or any rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock, as a dividend or other distribution upon Common
Stock, or (b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise, or (c) combine
outstanding shares of Common Stock, by reclassification or otherwise, (i) the
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase on the date purchase rights under this
Warrant are exercised, the number of shares of Warrant Stock, calculated to the
nearest full share, determined by multiplying the number of shares of Warrant
Stock purchasable hereunder immediately prior to any adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock Deemed
Outstanding immediately after such dividend, distribution, subdivision or
combination and the denominator of which shall be the number of shares of Common
Stock Deemed Outstanding immediately prior to such dividend, distribution,
subdivision or combination and (ii) the Exercise Price shall be adjusted to
equal the Exercise Price hereunder immediately prior to any such adjustment
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock Deemed Outstanding immediately before such dividend,
distribution, subdivision or combination and the denominator of which shall be
the number of shares of Common Stock Deemed Outstanding immediately after such
dividend, distribution, subdivision or combination.
4. Effect of Reorganization or Reclassification, Consolidation,
Merger or Sale. If at any time while this Warrant is outstanding there shall be
(i) any reorganization or reclassification of the capital stock of the Company
(other than a subdivision or combination of shares or dividend or distribution
provided for in Subsection 3 hereof) or (ii) any consolidation or merger of the
Company with or into another corporation, or any sale or other disposition by
the Company of all or substantially all of its assets to any other corporation,
the holder of this Warrant shall thereafter upon exercise of this Warrant be
entitled to receive the number of shares of stock or other securities or
property of the Company, or of the successor
- 6 -
<PAGE> 7
corporation resulting from such consolidation or merger, as the case may be, to
which the Warrant Stock (and any other securities and property) of the Company,
deliverable upon the exercise of this Warrant, would have been entitled upon
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition if this Warrant had been exercised immediately prior
to such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the number of shares issuable upon the exercise of this Warrant)
shall thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise hereof as if
this Warrant had been exercised immediately prior to such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition and the holder hereof had carried out the terms of the exchange as
provided for by such reorganization, reclassification of capital stock,
consolidation or merger. The Company shall not effect any such reorganization,
consolidation or merger unless, upon or prior to the consummation thereof, the
successor corporation shall assume by written instrument the obligation to
deliver to the holder hereof such shares of stock, securities, cash or property
as such holder shall be entitled to purchase in accordance with the foregoing
provisions. Notwithstanding any other provisions of this Warrant, in the event
of sale or other disposition of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise the Warrant shall terminate 60 days after the Company gives written
notice to the Registered Holder of this Warrant that such sale or other
disposition has been consummated, provided, however, that notwithstanding any
provisions of Section 2.1 (ii) to the contrary, in the event that such written
notice is given prior to April 1, 1996, and the liabilities and obligations of
the Company under the Credit Agreement have not been paid in full prior to the
giving of such notice, the right to exercise this Warrant, in whole or in part,
with respect to the Additional Warrant Shares shall vest in the Registered
Holder upon the giving of such written notice and such right shall terminate
upon the termination of such 60 day period.
5. Adjustment of Exercise Price Upon Issuance of
Additional Shares of Common Stock.
(a) In the event the Company shall, at any time after the date
hereof and prior to the first anniversary of the date hereof, issue Additional
Shares of Common Stock (as defined
- 7 -
<PAGE> 8
in Section G-4(i)(i) of the Certificate (including Additional Shares of Common
Stock deemed to be issued pursuant to Section G- 4(i)(iii) of the Certificate,
but excluding shares issued as a dividend or combination as provided in Section
3 hereof), without consideration or for a consideration per share less than the
applicable Exercise Price in effect on the date of and immediately prior to such
issue, then and in such event, such Exercise Price shall be reduced,
concurrently with such issue, to the consideration per share received by the
Company for the issue of the Additional Shares of Common Stock (determined
pursuant to Section G-4(i)(v) of the Certificate), or par value in the case of
issuance for no consideration.
(b) In the event the Company shall at any time on or after the
first anniversary of the date hereof issue Additional Shares of Common Stock
(including Additional Shares of Common Stock deemed to be issued pursuant to
Section G-4(i)(iii) of the Certificate, but excluding shares issued as a
dividend or combination as provided in Section 3 hereof), without consideration
or for a consideration per share less than the applicable Exercise Price in
effect on the date of and immediately prior to such issue, then and in such
event, such Exercise Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such Exercise
Price by a fraction, (A) the numerator of which shall be (1) the number of
shares of Common Stock outstanding immediately prior to such issue plus (2) the
number of shares of Common Stock which the aggregate consideration received or
to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the Exercise Price in effect
immediately prior to such issue; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Section 5, all shares of Common Stock issuable
upon exercise or conversion of Options (as defined in Section G-4(i)(i) of the
Certificate) or Convertible Securities (as defined in Section G-4(i)(i) of the
Certificate) outstanding immediately prior to such issue shall be deemed to be
outstanding (other than shares excluded from the definition of "Additional
Shares of Common Stock" by virtue of clause (IV) of Section G-4(i)(i)(D) of the
Certificate), and (ii) the number of shares of Common Stock deemed issuable upon
conversion of such outstanding Options and Convertible Securities shall not give
effect to any adjustments to the conversion price or conversion rate of such
Options or Convertible Securities resulting from the issuance of Additional
Shares of Common Stock that is the subject of this calculation.
Upon any adjustment of the Exercise Price as provided in this
Section, the holder hereof shall thereafter be
- 8 -
<PAGE> 9
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock purchasable hereunder immediately prior to such adjustment by a
fraction (A) the numerator of which shall be the Exercise Price in effect
immediately prior to such adjustment and (B) the denominator of which shall be
the Exercise Price resulting from such adjustment.
Notwithstanding the foregoing, the applicable
Exercise Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $.05, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $.05 or more.
6. Notice of Adjustments. Immediately upon any increase or
decrease in the number of shares of Common Stock purchasable upon exercise of
this Warrant, the Company will send written notice thereof to all Registered
Holders, stating the adjusted Exercise Price and the increased or decreased
number of shares purchasable upon exercise of this Warrant and setting forth in
reasonable detail the method of calculation for such adjustment and increase or
decrease. When appropriate, such notice may be given in advance and included as
part of any notice required to be given pursuant to Section 7 below.
7. Prior Notice as to Certain Events. In case at any time:
(a) the Company shall pay any dividend payable
in stock upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(b) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of
stock of any class or any other rights; or
(c) there shall be any reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or a sale or disposition of all or
substantially all its assets; or
(d) there shall be an amendment to the
Certificate of Incorporation of the Company; or
(e) the shareholders shall amend the By-Laws of
the Company; or
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<PAGE> 10
(f) the Company proposes to offer of its Common
Stock in a public offering; or
(g) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in each of said cases, the Company shall give prior written notice, by
registered mail, postage prepaid, return receipt requested, addressed to the
Registered Holder of this Warrant at the address of such holder as shown on the
books of the Company, of the date on which (i) the books of the Company shall
close or a record shall be taken for such stock dividend, distribution,
subscription rights or shareholder vote or (ii) such reorganization,
reclassification, consolidation, merger, sale, amendment, public offering,
dissolution, liquidation or winding up shall take place, as the case may be. A
copy of each such notice shall be sent simultaneously to each transfer agent of
the Company's Common Stock. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
8. Registration Rights. The Registered Holder of the
Warrant Stock issued upon exercise of the Warrant shall be
entitled to all rights granted pursuant to the Registration
Rights Agreement of even date herewith and agrees to be bound by
all of the obligations and limitations thereof.
9. Reservation of Common Stock. The Company will at all times
reserve and keep available, free from preemptive or other rights of third
parties, for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants, and upon such issuance such
shares of Common Stock will be validly issued, fully paid and nonassessable and
free from preemptive or other rights of third parties.
10. No Voting Rights; Limitations of Liability. This
Warrant will not entitle the holder hereof to any voting rights
or other rights as a stockholder of the Company. No provision of
this Warrant, in the absence of affirmative action by the
Registered Holder to purchase shares of Warrant Stock, and no
enumeration in this Warrant of the rights or privileges of the
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<PAGE> 11
Registered Holder, will give rise to any liability of such Holder for the
Exercise Price of Warrant Stock acquirable by exercise hereof or as a
stockholder of the Company.
11. Warrant Transferable.
(a) Subject to the transfer conditions referred
to in paragraph (b) below, this Warrant and all rights hereunder and all Warrant
Stock shall be transferable, in whole or in part, to any Person. Such Person
shall agree to be bound by the terms of that certain Registration Rights
Agreement.
(b) The Registered Holder of this Warrant
acknowledges that this Warrant has not been registered under the Securities Act
of 1933, as amended (the "Act") or under state securities or "blue sky" laws.
Except as permitted under applicable federal and state securities or "blue sky"
laws, these securities and all Warrant Stock may not be sold, offered for sale,
pledged, hypothecated, assigned or otherwise disposed of in the absence of an
effective registration under the Act, and under all applicable state securities
or "blue sky" laws or an opinion of counsel or other proof reasonably
satisfactory to the Company that such registration is not required.
12. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
will represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued. The Company
shall prepare, issue and deliver at its own expense such new Warrants.
13. No Impairment. The Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of securities or any other
voluntary action, avoid or seek in bad faith to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment.
Upon the request of the Holder, the Company will
at any time during the period this Warrant is outstanding
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<PAGE> 12
acknowledge in writing, in form satisfactory to Holder, the continuing validity
of this Warrant and the obligations of the Company hereunder.
14. Termination. Subject to Sections 4 and 7, all rights
to purchase Warrant Stock under this Warrant terminate
immediately upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company.
15. Miscellaneous.
15.1 Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing at least 50% of the shares of
Warrant Stock obtainable upon the exercise of the Warrants outstanding at the
time of such consent.
15.2 Notices. Any notices required to be sent to a Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by registered mail, postage prepaid, return receipt requested, and will
be deemed to have been given when received.
15.3 Descriptive Headings; Governing Law. The descriptive
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the State of New
York, without regard to principles of conflicts or choice of law.
15.4 Lost, Stolen, Destroyed or Mutilated Warrant. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of an indemnity satisfactory to it, and, in the case of mutilation
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date, upon reimbursement to the Company
for all reasonable expense incidental thereto. Any such new Warrant executed and
delivered pursuant to this section shall constitute a contractual obligation on
the part of the Company, whether or not this Warrant (so lost, stolen, destroyed
or mutilated) shall thereafter at any time be enforced by anyone, provided that
the indemnification provided pursuant to this section shall not be effected.
15.5 Registered Holder. (a) Notwithstanding any other
provision of this Warrant, if The Chase Manhattan Bank, N.A.
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<PAGE> 13
("Chase") or any Affiliate thereof is the Registered Holder, Chase and its
affiliates may exercise this Warrant solely to the extent such exercise would
not result in Chase and its Affiliates holding, directly or indirectly, in
excess of 4.99% of the outstanding Common Stock of the Company (such
determination to be made by Chase), except for an exercise in connection with
(i) a widely dispersed public offering of the Warrant Stock, (ii) a sale of the
Warrant Stock in to the secondary market pursuant to the transaction and volume
limitations of Rule 144 under the Act (irrespective of holding periods), or
(iii) a private placement or sale, including pursuant to Rule 144A under the
Act, so long as the transferee and its affiliates do not collectively acquire
from such Registered Holder more than 2% of the Common Stock of the Company
pursuant to such transfer.
15.6 Capitalization. As of the date hereof, there are
outstanding 8,552,963 shares of Common Stock, of which 302,777 shares are held
in treasury, and 328,569 shares of preferred stock, which are convertible into
6,571,380 shares of Common Stock.
15.7 Undertakings. Chase covenants with the Company that it
will not exercise or attempt to exercise influence over the management or
policies of the Company in connection with this Warrant or any shares of stock
for which this Warrant may be exercised.
15.8 Shareholder Communications. The Company will provide
the Registered Holder with copies of all written communications distributed to
shareholders generally.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal.
U.S. HOMECARE CORPORATION
By: _____________________________
Name: Stephen H. Matheson
Title: Chief Financial Officer
Acknowledged and agreed as
to Section 15.7 of this Warrant.
THE CHASE MANHATTAN BANK, N.A.
By: _____________________________
Name:
Title:
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<PAGE> 15
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. __), hereby irrevocably elects to purchase _____ shares of
the Common Stock covered by such Warrant and herewith makes payment of $_____,
representing the full purchase price for such shares at the price per share
provided for in such Warrant. In lieu of paying such purchase price, I will/will
not make a cashless exercise pursuant to Section 2.2 of the attached Warrant.
The Common Stock shall be issued to ____________. Unless the
attached Warrant has expired or all of the purchase rights represented thereby
have been exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not expired or been exercised shall be issued to _____________.
Signature__________________________
Address:___________________________
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<PAGE> 16
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No.______ ) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature___________________________
___________________________
Witness ___________________________
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<PAGE> 1
EXHIBIT 4.5
CDA
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
U.S. HOMECARE CORPORATION
141 South Central Avenue
Hartsdale, New York 10530
STOCK PURCHASE WARRANT
Warrant No. WA-17
Date of Issuance: October 6, 1995 Right to Purchase 750,000
Shares of Common Stock
(subject to adjustment)
For value received, U.S. HOMECARE CORPORATION, a New York corporation
(the "Company"), hereby grants to CONNECTICUT DEVELOPMENT AUTHORITY, or its
registered assigns (the "Registered Holder"), the right to purchase from the
Company 750,000 shares of the Company's Common Stock (subject to adjustment
pursuant to Section 3 hereof) at a price of $1.75 per share. The amount and kind
of securities purchasable pursuant to the rights granted under this Warrant are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following
terms have the meanings set forth below:
"Affiliate" means, at any time, a Person controlling,
controlled by or under common control at such time with the Registered Holder.
<PAGE> 2
"Certificate" means the Certificate of Amendment to the
Certificate of Incorporation of the Company filed with the Secretary of the
State of New York on February 1, 1995.
"Common Stock" means the Company's Common Stock, $0.01
par value per share.
"Common Stock Deemed Outstanding" means, at any given time,
(a) the number of shares of Common Stock actually outstanding at such time; (b)
the number of shares of Common Stock issuable (i) upon the conversion of
outstanding shares of preferred stock and (ii) with respect to all other
options, warrants, rights, or other securities convertible into shares of Common
Stock (provided that such options, warrants or rights are at an exercise price
greater than the Market Price in effect on the relevant date; provided, further
that such options, warrants and rights shall be considered "Common Stock Deemed
Outstanding" only to the extent that they have vested and are exercisable on the
relevant date), and (c) securities convertible into or exchangeable for any of
the foregoing.
"Date of Issuance" shall have the meaning specified in
Section 13 of this Warrant.
"Exercise Price" shall be $1.75 per share, subject to
adjustment pursuant to Section 3 hereof.
"Market Price" means as to any security, the last reported
sales price regular way, or in case no such sales take place on such day, the
average of the closing bid and ask prices regular way, in each case on the
principal national securities exchange on which the security is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if the security is not
listed or admitted to trading on any national securities exchange and is not
quoted on the Nasdaq National Market, the average of the closing bid and ask
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors of the Company for such purpose.
"Person" means an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
"Warrant Stock" means a share of the Company's authorized but
unissued Common Stock issuable upon exercise of the Warrant; provided that if
there is a change such that the securities issuable upon exercise of the Warrant
are issued by an entity other than the Company or there is a change in the class
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<PAGE> 3
of securities so issuable, then the term "Warrant Stock" will mean one share of
the security issuable upon exercise of the Warrant if such security is issuable
in shares, or will mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
2. Exercise of Warrant.
2.1 Exercise Period. (a) The Registered Holder may exercise
this Warrant, in whole or in part (but not as to a fractional share of Warrant
Stock), with respect to 750,000 shares of the Warrant Stock, subject to
subsection (b) below, (subject to adjustment as herein provided at any time
prior to 5:00 p.m. (New York time) on October __, 2000, unless the right to
purchase shares of Warrant Stock under this Warrant is earlier terminated
pursuant to Section 14 (the "Exercise Period").
(b) If at any time when the Junior Debt (as defined in that
certain Intercreditor Agreement dated the date hereof among Fleet Bank, National
Association ("Fleet"), the Registered Holder, the Company and its subsidiaries
listed therein, The Chase Manhattan Bank, N.A., Creditanstalt Bankverein and The
Chase Manhattan Bank, N.A., as agent (the "Intercreditor Agreement")) is not in
default the Company elects to permanently reduce the principal balance of the
Loan (as defined in the Credit Agreement dated the date hereof among Fleet, the
Company and the subsidiaries listed therein (the "Credit Agreement")) and reduce
the Commitment (as defined in the Credit Agreement), then the Warrant shall (to
the extent not previously exercised) be reduced such that the total Warrant
Stock obtainable under this Section 2.1 (including any Warrant Stock previously
issued pursuant to a partial exercise of this Warrant) is equal to the product
of 750,000 shares times a fraction, the numerator of which is the Commitment
following such reduction and the denominator of which is $3 million; provided,
however, that upon an event of default that results in total payments by the
Registered Holder to Fleet pursuant to the Guarantee Agreement dated the date
hereof among Fleet, the Registered Holder and the Company and its subsidiaries
listed therein (the "Guarantee") of an amount greater than the Commitment then
outstanding, then the Warrant shall be increased such that the total Warrant
Stock obtainable under this Section 2.1 (including any Warrant Stock previously
issued pursuant to a partial exercise of this Warrant) is equal to the product
of 750,000 shares times a fraction (not
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<PAGE> 4
to exceed 1.0), the numerator of which is the total payments made as of the date
of such calculation by the Registered Holder to Fleet pursuant to the Guarantee
and any additional amounts owed to the Registered Holder by the Company and its
subsidiaries as of the date of such calculation pursuant to the terms of the
Credit Agreement, and the denominator of which is $3 million.
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been
exercised at such time as the Company has received all of the following items,
if applicable (the "Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising
all or part of the purchase rights represented by
this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in
the name of the Purchaser, an Assignment or
Assignments substantially in the form set forth in
Exhibit II hereto, evidencing the assignment of this
Warrant to the Purchaser; and
(iv) a check payable to the Company in an
amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock
being purchased upon such exercise.
In lieu of paying the purchase price set forth in (iv) above,
the Purchaser may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), in which event the Company shall issue to
the Purchaser the number of shares of the Company's Common Stock computed using
the following formula:
X = Y (A-B)
-------
A
Where:
X = the number of shares of Warrant Stock to be issued to
the Purchaser;
Y = the number of shares of Warrant Stock otherwise purchasable
(or the portion thereof being exercised) under this Warrant
(at the date of exercise);
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<PAGE> 5
A = the Market Price of one share of the Company's Common
Stock (at the date of such exercise); and
B = Exercise Price (as adjusted to the date of such exercise).
(b) Certificates for shares of Warrant Stock
purchased upon exercise of this Warrant or any portion thereof will be delivered
by the Company to the Purchaser within ten days after the Exercise Date. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company will prepare, at its own expense, a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised. The Company will, within
such ten-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise
of this Warrant will be deemed to have been issued to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have become
the record holder of such Warrant Stock on the Exercise Date.
(d) The issuance and delivery of certificates
for shares of Warrant Stock upon exercise of this Warrant will be made without
charge to the Registered Holder or the Purchaser for any issuance or delivery
tax or government charge in respect thereof or any other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock.
(e) The Company agrees to maintain books for the
registration and the registration of transfer of the warrants. The Company will
not close its books for the transfer of this Warrant or of any share of Warrant
Stock issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company will from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued Warrant Stock acquirable upon exercise of this Warrant
is at all times equal to or less than the Exercise Price.
2.3 Exercise Agreement. The Exercise Agreement will be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Registered
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable
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<PAGE> 6
hereunder, it will also state the name of the Person to whom a new Warrant for
the unexercised portion of the rights hereunder is to be delivered, and if the
Purchaser wishes to receive shares in lieu of paying the purchase price as set
forth in Section 2.2, it will also state such election.
2.4 Fractional Shares. If a fractional share of Warrant Stock
would, but for the provisions of Subsection 2.1, be issuable upon exercise of
the rights represented by this Warrant, the Company will, within ten days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. Adjustment of Number of Shares Issuable upon Exercise. In case
the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or any rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock, as a dividend or other distribution upon Common
Stock, or (b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise, or (c) combine
outstanding shares of Common Stock, by reclassification or otherwise, (i) the
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase on the date purchase rights under this
Warrant are exercised, the number of shares of Warrant Stock, calculated to the
nearest full share, determined by multiplying the number of shares of Warrant
Stock purchasable hereunder immediately prior to any adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock Deemed
Outstanding immediately after such dividend, distribution, subdivision or
combination and the denominator of which shall be the number of shares of Common
Stock Deemed Outstanding immediately prior to such dividend, distribution,
subdivision or combination and (ii) the Exercise Price shall be adjusted to
equal the Exercise Price hereunder immediately prior to any such adjustment
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock Deemed Outstanding immediately before such dividend,
distribution, subdivision or combination and the denominator of which shall be
the number of shares of Common Stock Deemed Outstanding immediately after such
dividend, distribution, subdivision or combination.
4. Effect of Reorganization or Reclassification, Consolidation,
Merger or Sale. If at any time while this Warrant is outstanding there shall be
(i) any reorganization or reclassification of the capital stock of the Company
(other than a subdivision or combination of shares or dividend or distribution
provided for in Subsection 3 hereof) or (ii) any
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<PAGE> 7
consolidation or merger of the Company with or into another corporation, or any
sale or other disposition by the Company of all or substantially all of its
assets to any other corporation, the holder of this Warrant shall thereafter
upon exercise of this Warrant be entitled to receive the number of shares of
stock or other securities or property of the Company, or of the successor
corporation resulting from such consolidation or merger, as the case may be, to
which the Warrant Stock (and any other securities and property) of the Company,
deliverable upon the exercise of this Warrant, would have been entitled upon
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition if this Warrant had been exercised immediately prior
to such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the number of shares issuable upon the exercise of this Warrant)
shall thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise hereof as if
this Warrant had been exercised immediately prior to such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition and the holder hereof had carried out the terms of the exchange as
provided for by such reorganization, reclassification of capital stock,
consolidation or merger. The Company shall not effect any such reorganization,
consolidation or merger unless, upon or prior to the consummation thereof, the
successor corporation shall assume by written instrument the obligation to
deliver to the holder hereof such shares of stock, securities, cash or property
as such holder shall be entitled to purchase in accordance with the foregoing
provisions. Notwithstanding any other provisions of this Warrant, in the event
of sale or other disposition of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise the Warrant shall terminate 60 days after the Company gives written
notice to the Registered Holder of this Warrant that such sale or other
disposition has been consummated, provided, however, that notwithstanding any
provisions of Section 2.1 (ii) to the contrary, in the event that such written
notice is given prior to April 30, 1997, and the liabilities and obligations of
the Company under the Credit Agreement have not been paid in full prior to the
giving of such notice, the right to exercise this Warrant, in whole or in part,
with respect to the Additional Warrant Shares shall vest in the Registered
Holder upon the giving of such written notice and such right shall terminate
upon the termination of such 60 day period.
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<PAGE> 8
5. Adjustment of Exercise Price Upon Issuance of
Additional Shares of Common Stock.
(a) In the event the Company shall, at any time
after the date hereof and prior to the first anniversary of the date hereof,
issue Additional Shares of Common Stock (as defined in Section G-4(i)(i) of the
Certificate (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G- 4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to the consideration per share received by the Company for the issue of the
Additional Shares of Common Stock (determined pursuant to Section G-4(i)(v) of
the Certificate), or par value in the case of issuance for no consideration.
(b) In the event the Company shall at any time
on or after the first anniversary of the date hereof issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G-4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying such
Exercise Price by a fraction, (A) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
or to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the Exercise Price in effect
immediately prior to such issue; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Section 5, all shares of Common Stock issuable
upon exercise or conversion of Options (as defined in Section G-4(i)(i) of the
Certificate) or Convertible Securities (as defined in Section G-4(i)(i) of the
Certificate) outstanding immediately prior to such issue shall be deemed to be
outstanding (other than shares excluded from the definition of "Additional
Shares of Common Stock" by virtue of clause (IV) of Section G-4(i)(i)(D) of the
Certificate), and (ii) the number of shares of Common Stock deemed issuable upon
conversion of such outstanding Options and Convertible Securities shall not give
effect to any adjustments to the conversion price
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<PAGE> 9
or conversion rate of such Options or Convertible Securities resulting from the
issuance of Additional Shares of Common Stock that is the subject of this
calculation.
Upon any adjustment of the Exercise Price as provided in this
Section, the holder hereof shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock purchasable
hereunder immediately prior to such adjustment by a fraction (A) the numerator
of which shall be the Exercise Price in effect immediately prior to such
adjustment and (B) the denominator of which shall be the Exercise Price
resulting from such adjustment.
Notwithstanding the foregoing, the applicable Exercise Price
shall not be so reduced at such time if the amount of such reduction would be an
amount less than $.05, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $.05 or more.
6. Notice of Adjustments. Immediately upon any increase or
decrease in the number of shares of Common Stock purchasable upon exercise of
this Warrant, the Company will send written notice thereof to all Registered
Holders, stating the adjusted Exercise Price and the increased or decreased
number of shares purchasable upon exercise of this Warrant and setting forth in
reasonable detail the method of calculation for such adjustment and increase or
decrease. When appropriate, such notice may be given in advance and included as
part of any notice required to be given pursuant to Section 7 below.
7. Prior Notice as to Certain Events. In case at any
time:
(a) the Company shall pay any dividend payable
in stock upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(b) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of
stock of any class or any other rights; or
(c) there shall be any reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or a sale or disposition of all or
substantially all its assets; or
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<PAGE> 10
(d) there shall be an amendment to the
Certificate of Incorporation of the Company; or
(e) the shareholders shall amend the By-Laws of
the Company; or
(f) the Company proposes to offer of its Common
Stock in a public offering; or
(g) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in each of said cases, the Company shall give prior written notice, by
registered mail, postage prepaid, return receipt requested, addressed to the
Registered Holder of this Warrant at the address of such holder as shown on the
books of the Company, of the date on which (i) the books of the Company shall
close or a record shall be taken for such stock dividend, distribution,
subscription rights or shareholder vote or (ii) such reorganization,
reclassification, consolidation, merger, sale, amendment, public offering,
dissolution, liquidation or winding up shall take place, as the case may be. A
copy of each such notice shall be sent simultaneously to each transfer agent of
the Company's Common Stock. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
8. Registration Rights. The Registered Holder of the Warrant
Stock issued upon exercise of the Warrant shall be entitled to all rights
granted pursuant to the Registration Rights Agreement of even date herewith and
agrees to be bound by all of the obligations and limitations thereof.
9. Reservation of Common Stock. The Company will at all times
reserve and keep available, free from preemptive or other rights of third
parties, for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants, and upon such issuance such
shares of Common Stock will be validly issued, fully paid and nonassessable and
free from preemptive or other rights of third parties.
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<PAGE> 11
10. No Voting Rights; Limitations of Liability. This Warrant will
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Registered Holder to purchase shares of Warrant Stock,
and no enumeration in this Warrant of the rights or privileges of the Registered
Holder, will give rise to any liability of such Holder for the Exercise Price of
Warrant Stock acquirable by exercise hereof or as a stockholder of the Company.
11. Warrant Transferable.
(a) Subject to the transfer conditions referred
to in paragraph (b) below, this Warrant and all rights hereunder and all Warrant
Stock shall be transferable, in whole or in part, to any Person. Such Person
shall agree to be bound by the terms of that certain Registration Rights
Agreement.
(b) The Registered Holder of this Warrant
acknowledges that this Warrant has not been registered under the Securities Act
of 1933, as amended (the "Act") or under state securities or "blue sky" laws.
Except as permitted under applicable federal and state securities or "blue sky"
laws, these securities and all Warrant Stock may not be sold, offered for sale,
pledged, hypothecated, assigned or otherwise disposed of in the absence of an
effective registration under the Act, and under all applicable state securities
or "blue sky" laws or an opinion of counsel or other proof reasonably
satisfactory to the Company that such registration is not required.
12. Issuance of Additional Warrants. In the event the Guarantee
Agreement between the Registered Holder and Fleet Bank, National Association is
not released by April 30, 1997, the Company will issue the Registered Holder an
additional warrant to purchase 735,000 shares of Common Stock, which warrant
shall be substantially in the form of this Warrant with the same Exercise Price
($1.75 per share, subject to adjustment as set forth herein) and terms as this
Warrant.
13. No Impairment. The Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of securities or any other
voluntary action, avoid or seek in bad faith to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment.
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<PAGE> 12
Upon the request of the Holder, the Company will
at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
14. Termination. Subject to Sections 4 and 7, all rights to
purchase Warrant Stock under this Warrant terminate immediately upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
15. Miscellaneous.
15.1 Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing at least 50% of the shares of
Warrant Stock obtainable upon the exercise of the Warrants outstanding at the
time of such consent.
15.2 Notices. Any notices required to be sent to a Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by registered mail, postage prepaid, return receipt requested, and will
be deemed to have been given when received.
15.3 Descriptive Headings; Governing Law. The descriptive
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the State of New
York, without regard to principles of conflicts or choice of law.
15.4 Lost, Stolen, Destroyed or Mutilated Warrant. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of an indemnity satisfactory to it, and, in the case of mutilation
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date, upon reimbursement to the Company
for all reasonable expense incidental thereto. Any such new Warrant executed and
delivered pursuant to this section shall constitute a contractual obligation on
the part of the Company, whether or not this Warrant (so lost, stolen, destroyed
or mutilated) shall thereafter at any time be enforced by anyone, provided that
the indemnification provided pursuant to this section shall not be effected.
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<PAGE> 13
15.5 Capitalization. As of the date hereof, there are
outstanding 8,552,963 shares of Common Stock, of which 302,777 shares are held
in treasury, and 328,569 shares of preferred stock, which are convertible into
6,571,380 shares of Common Stock.
15.6 Shareholder Communications. The Company will provide
the Registered Holder with copies of all written communications distributed to
shareholders generally.
IN WITNESS WHEREOF, the Company has caused this
Warrant to be signed and attested by its duly authorized officers under its
corporate seal.
U.S. HOMECARE CORPORATION
By: ________________________
Name: Stephen H. Matheson
Title: Chief Financial Officer
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<PAGE> 14
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. __), hereby irrevocably elects to purchase _____ shares of
the Common Stock covered by such Warrant and herewith makes payment of $_____,
representing the full purchase price for such shares at the price per share
provided for in such Warrant. In lieu of paying such purchase price, I will/will
not make a cashless exercise pursuant to Section 2.2 of the attached Warrant.
The Common Stock shall be issued to ____________. Unless the
attached Warrant has expired or all of the purchase rights represented thereby
have been exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not expired or been exercised shall be issued to _____________.
Signature__________________________
Address:___________________________
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<PAGE> 15
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ___________________________ hereby sells, assigns
and transfers all of the rights of the undersigned under the attached Warrant
(No._____ ) with respect to the number of shares of Common Stock covered thereby
set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature___________________________
___________________________
Witness ___________________________
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<PAGE> 1
Exhibit 4.6
CA
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
U.S. HOMECARE CORPORATION
141 South Central Avenue
Hartsdale, New York 10530
STOCK PURCHASE WARRANT
Warrant No. WA-18
Date of Issuance: October 6, 1995 Right to Purchase 325,000
Shares of Common Stock
(subject to adjustment)
For value received, U.S. HOMECARE CORPORATION, a New York corporation
(the "Company"), hereby grants to CREDITANSTALT BANKVEREIN, or its registered
assigns (the "Registered Holder"), the right to purchase from the Company
325,000 shares of the Company's Common Stock (subject to adjustment pursuant to
Section 3 hereof) at a price of $1.75 per share. The amount and kind of
securities purchasable pursuant to the rights granted under this Warrant are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following
terms have the meanings set forth below:
"Additional Warrant Shares" has the meaning set forth
in Section 2.1.
"Affiliate" means, at any time, a Person controlling,
controlled by or under common control at such time with the Registered Holder.
<PAGE> 2
"Certificate" means the Certificate of Amendment to the
Certificate of Incorporation of the Company filed with the Secretary of the
State of New York on February 1, 1995.
"Common Stock" means the Company's Common Stock, $0.01
par value per share.
"Common Stock Deemed Outstanding" means, at any given time,
(a) the number of shares of Common Stock actually outstanding at such time; (b)
the number of shares of Common Stock issuable (i) upon the conversion of
outstanding shares of preferred stock and (ii) with respect to all other
options, warrants, rights, or other securities convertible into shares of Common
Stock (provided that such options, warrants or rights are at an exercise price
greater than the Market Price in effect on the relevant date; provided, further
that such options, warrants and rights shall be considered "Common Stock Deemed
Outstanding" only to the extent that they have vested and are exercisable on the
relevant date), and (c) securities convertible into or exchangeable for any of
the foregoing.
"Credit Agreement" means that certain Amended and Restated
Credit Agreement, dated as of the date hereof between the Company, the
Registered Holder and the other party named therein.
"Date of Issuance" shall have the meaning specified in
Section 12 of this Warrant.
"Exercise Price" shall be $1.75 per share, subject to
adjustment pursuant to Section 3 hereof.
"Market Price" means as to any security, the last reported
sales price regular way, or in case no such sales take place on such day, the
average of the closing bid and ask prices regular way, in each case on the
principal national securities exchange on which the security is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if the security is not
listed or admitted to trading on any national securities exchange and is not
quoted on the Nasdaq National Market, the average of the closing bid and ask
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors of the Company for such purpose.
"Person" means an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
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<PAGE> 3
"Warrant Stock" means a share of the Company's authorized but
unissued Common Stock issuable upon exercise of the Warrant; provided that if
there is a change such that the securities issuable upon exercise of the Warrant
are issued by an entity other than the Company or there is a change in the class
of securities so issuable, then the term "Warrant Stock" will mean one share of
the security issuable upon exercise of the Warrant if such security is issuable
in shares, or will mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
2. Exercise of Warrant.
2.1 Exercise Period. The Registered Holder may
(i) exercise this Warrant, in whole or in
part (but not as to a fractional share of Warrant
Stock), with respect to 162,500 shares of the Warrant
Stock (subject to adjustment as herein provided) at
any time prior to 5:00 p.m. (New York time) on
October __, 2000, and
(ii) after April 1, 1996, exercise this
Warrant, in whole or in part (but not as to a
fractional share of Warrant Stock) with respect to
the remaining 162,500 shares of the Warrant Stock
(subject to adjustments as herein provided) (the
"Additional Warrant Shares"), at any time on or after
April 1, 1996 but prior to 5:00 p.m. (New York time)
on October __, 2000; provided, however, that this
Warrant shall not be exercisable for the Additional
Warrant Shares if all obligations and liabilities of
the Company and its Affiliates arising under or
related to the Credit Agreement have been repaid in
full prior to April 1, 1996; and provided, further,
that if such amounts have been repaid in full but any
or all of such amounts are required to be returned by
the Registered Holder as a preference payment or for
a similar reason, then the Additional Warrant Shares
shall again be subject to this Warrant, exercisable
pursuant to this Section 2.1(ii),
unless the right to purchase shares of Warrant Stock under this Warrant is
earlier terminated pursuant to Section 14 (the "Exercise Period").
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<PAGE> 4
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been
exercised at such time as the Company has received all of the following items,
if applicable (the "Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising
all or part of the purchase rights represented by
this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in
the name of the Purchaser, an Assignment or
Assignments substantially in the form set forth in
Exhibit II hereto, evidencing the assignment of this
Warrant to the Purchaser; and
(iv) a check payable to the Company in an
amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock
being purchased upon such exercise.
In lieu of paying the purchase price set forth in (iv) above,
the Purchaser may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), in which event the Company shall issue to
the Purchaser the number of shares of the Company's Common Stock computed using
the following formula:
X = Y (A-B)
---------
A
Where:
X = the number of shares of Warrant Stock to be issued to
the Purchaser;
Y = the number of shares of Warrant Stock otherwise purchasable
(or the portion thereof being exercised) under this Warrant
(at the date of exercise);
A = the Market Price of one share of the Company's Common
Stock (at the date of such exercise); and
B = Exercise Price (as adjusted to the date of such exercise).
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<PAGE> 5
(b) Certificates for shares of Warrant Stock
purchased upon exercise of this Warrant or any portion thereof will be delivered
by the Company to the Purchaser within ten days after the Exercise Date. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company will prepare, at its own expense, a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised. The Company will, within
such ten-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise
of this Warrant will be deemed to have been issued to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have become
the record holder of such Warrant Stock on the Exercise Date.
(d) The issuance and delivery of certificates
for shares of Warrant Stock upon exercise of this Warrant will be made without
charge to the Registered Holder or the Purchaser for any issuance or delivery
tax or government charge in respect thereof or any other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock.
(e) The Company agrees to maintain books for the
registration and the registration of transfer of the warrants. The Company will
not close its books for the transfer of this Warrant or of any share of Warrant
Stock issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company will from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued Warrant Stock acquirable upon exercise of this Warrant
is at all times equal to or less than the Exercise Price.
2.3 Exercise Agreement. The Exercise Agreement will be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Registered
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable hereunder, it will also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered, and if the Purchaser wishes to
receive shares in lieu of paying the purchase price as set forth in Section 2.2,
it will also state such election.
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<PAGE> 6
2.4 Fractional Shares. If a fractional share of Warrant Stock
would, but for the provisions of Subsection 2.1, be issuable upon exercise of
the rights represented by this Warrant, the Company will, within ten days after
the Exercise Date, deliver to the Purchaser a check payable to the Purchaser in
lieu of such fractional share, in an amount equal to the Market Price of such
fractional share as of the close of business on the Exercise Date.
3. Adjustment of Number of Shares Issuable upon Exercise. In case
the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or any rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock, as a dividend or other distribution upon Common
Stock, or (b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise, or (c) combine
outstanding shares of Common Stock, by reclassification or otherwise, (i) the
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase on the date purchase rights under this
Warrant are exercised, the number of shares of Warrant Stock, calculated to the
nearest full share, determined by multiplying the number of shares of Warrant
Stock purchasable hereunder immediately prior to any adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock Deemed
Outstanding immediately after such dividend, distribution, subdivision or
combination and the denominator of which shall be the number of shares of Common
Stock Deemed Outstanding immediately prior to such dividend, distribution,
subdivision or combination and (ii) the Exercise Price shall be adjusted to
equal the Exercise Price hereunder immediately prior to any such adjustment
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock Deemed Outstanding immediately before such dividend,
distribution, subdivision or combination and the denominator of which shall be
the number of shares of Common Stock Deemed Outstanding immediately after such
dividend, distribution, subdivision or combination.
4. Effect of Reorganization or Reclassification, Consolidation,
Merger or Sale. If at any time while this Warrant is outstanding there shall be
(i) any reorganization or reclassification of the capital stock of the Company
(other than a subdivision or combination of shares or dividend or distribution
provided for in Subsection 3 hereof) or (ii) any consolidation or merger of the
Company with or into another corporation, or any sale or other disposition by
the Company of all or substantially all of its assets to any other corporation,
the holder of this Warrant shall thereafter upon exercise of this Warrant be
entitled to receive the number of shares of stock or other securities or
property of the Company, or of the successor
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<PAGE> 7
corporation resulting from such consolidation or merger, as the case may be, to
which the Warrant Stock (and any other securities and property) of the Company,
deliverable upon the exercise of this Warrant, would have been entitled upon
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition if this Warrant had been exercised immediately prior
to such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the number of shares issuable upon the exercise of this Warrant)
shall thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise hereof as if
this Warrant had been exercised immediately prior to such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition and the holder hereof had carried out the terms of the exchange as
provided for by such reorganization, reclassification of capital stock,
consolidation or merger. The Company shall not effect any such reorganization,
consolidation or merger unless, upon or prior to the consummation thereof, the
successor corporation shall assume by written instrument the obligation to
deliver to the holder hereof such shares of stock, securities, cash or property
as such holder shall be entitled to purchase in accordance with the foregoing
provisions. Notwithstanding any other provisions of this Warrant, in the event
of sale or other disposition of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise the Warrant shall terminate 60 days after the Company gives written
notice to the Registered Holder of this Warrant that such sale or other
disposition has been consummated, provided, however, that notwithstanding any
provisions of Section 2.1 (ii) to the contrary, in the event that such written
notice is given prior to April 1, 1996, and the liabilities and obligations of
the Company under the Credit Agreement have not been paid in full prior to the
giving of such notice, the right to exercise this Warrant, in whole or in part,
with respect to the Additional Warrant Shares shall vest in the Registered
Holder upon the giving of such written notice and such right shall terminate
upon the termination of such 60 day period.
5. Adjustment of Exercise Price Upon Issuance of
Additional Shares of Common Stock.
(a) In the event the Company shall, at any time
after the date hereof and prior to the first anniversary of the date hereof,
issue Additional Shares of Common Stock (as defined
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<PAGE> 8
in Section G-4(i)(i) of the Certificate (including Additional Shares of Common
Stock deemed to be issued pursuant to Section G- 4(i)(iii) of the Certificate,
but excluding shares issued as a dividend or combination as provided in Section
3 hereof), without consideration or for a consideration per share less than the
applicable Exercise Price in effect on the date of and immediately prior to such
issue, then and in such event, such Exercise Price shall be reduced,
concurrently with such issue, to the consideration per share received by the
Company for the issue of the Additional Shares of Common Stock (determined
pursuant to Section G-4(i)(v) of the Certificate), or par value in the case of
issuance for no consideration.
(b) In the event the Company shall at any time
on or after the first anniversary of the date hereof issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G-4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying such
Exercise Price by a fraction, (A) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
or to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the Exercise Price in effect
immediately prior to such issue; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Section 5, all shares of Common Stock issuable
upon exercise or conversion of Options (as defined in Section G-4(i)(i) of the
Certificate) or Convertible Securities (as defined in Section G-4(i)(i) of the
Certificate) outstanding immediately prior to such issue shall be deemed to be
outstanding (other than shares excluded from the definition of "Additional
Shares of Common Stock" by virtue of clause (IV) of Section G-4(i)(i)(D) of the
Certificate), and (ii) the number of shares of Common Stock deemed issuable upon
conversion of such outstanding Options and Convertible Securities shall not give
effect to any adjustments to the conversion price or conversion rate of such
Options or Convertible Securities resulting from the issuance of Additional
Shares of Common Stock that is the subject of this calculation.
Upon any adjustment of the Exercise Price as provided in this
Section, the holder hereof shall thereafter be
- 8 -
<PAGE> 9
entitled to purchase, at the Exercise Price resulting from such adjustment, the
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock purchasable hereunder immediately prior to such adjustment by a
fraction (A) the numerator of which shall be the Exercise Price in effect
immediately prior to such adjustment and (B) the denominator of which shall be
the Exercise Price resulting from such adjustment.
Notwithstanding the foregoing, the applicable
Exercise Price shall not be so reduced at such time if the amount of such
reduction would be an amount less than $.05, but any such amount shall be
carried forward and reduction with respect thereto made at the time of and
together with any subsequent reduction which, together with such amount and any
other amount or amounts so carried forward, shall aggregate $.05 or more.
6. Notice of Adjustments. Immediately upon any increase or
decrease in the number of shares of Common Stock purchasable upon exercise of
this Warrant, the Company will send written notice thereof to all Registered
Holders, stating the adjusted Exercise Price and the increased or decreased
number of shares purchasable upon exercise of this Warrant and setting forth in
reasonable detail the method of calculation for such adjustment and increase or
decrease. When appropriate, such notice may be given in advance and included as
part of any notice required to be given pursuant to Section 7 below.
7. Prior Notice as to Certain Events. In case at any
time:
(a) the Company shall pay any dividend payable
in stock upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(b) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of
stock of any class or any other rights; or
(c) there shall be any reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or a sale or disposition of all or
substantially all its assets; or
(d) there shall be an amendment to the
Certificate of Incorporation of the Company; or
(e) the shareholders shall amend the By-Laws of
the Company; or
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<PAGE> 10
(f) the Company proposes to offer of its Common
Stock in a public offering; or
(g) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in each of said cases, the Company shall give prior written notice, by
registered mail, postage prepaid, return receipt requested, addressed to the
Registered Holder of this Warrant at the address of such holder as shown on the
books of the Company, of the date on which (i) the books of the Company shall
close or a record shall be taken for such stock dividend, distribution,
subscription rights or shareholder vote or (ii) such reorganization,
reclassification, consolidation, merger, sale, amendment, public offering,
dissolution, liquidation or winding up shall take place, as the case may be. A
copy of each such notice shall be sent simultaneously to each transfer agent of
the Company's Common Stock. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
8. Registration Rights. The Registered Holder of the Warrant
Stock issued upon exercise of the Warrant shall be entitled to all rights
granted pursuant to the Registration Rights Agreement of even date herewith and
agrees to be bound by all of the obligations and limitations thereof.
9. Reservation of Common Stock. The Company will at all times
reserve and keep available, free from preemptive or other rights of third
parties, for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants, and upon such issuance such
shares of Common Stock will be validly issued, fully paid and nonassessable and
free from preemptive or other rights of third parties.
10. No Voting Rights; Limitations of Liability. This Warrant will
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the Registered Holder to purchase shares of Warrant Stock,
and no enumeration in this Warrant of the rights or privileges of the
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<PAGE> 11
Registered Holder, will give rise to any liability of such Holder for the
Exercise Price of Warrant Stock acquirable by exercise hereof or as a
stockholder of the Company.
11. Warrant Transferable.
(a) Subject to the transfer conditions referred
to in paragraph (b) below, this Warrant and all rights hereunder and all Warrant
Stock shall be transferable, in whole or in part, to any Person. Such Person
shall agree to be bound by the terms of that certain Registration Rights
Agreement.
(b) The Registered Holder of this Warrant
acknowledges that this Warrant has not been registered under the Securities Act
of 1933, as amended (the "Act") or under state securities or "blue sky" laws.
Except as permitted under applicable federal and state securities or "blue sky"
laws, these securities and all Warrant Stock may not be sold, offered for sale,
pledged, hypothecated, assigned or otherwise disposed of in the absence of an
effective registration under the Act, and under all applicable state securities
or "blue sky" laws or an opinion of counsel or other proof reasonably
satisfactory to the Company that such registration is not required.
12. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
will represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued. The Company
shall prepare, issue and deliver at its own expense such new Warrants.
13. No Impairment. The Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of securities or any other
voluntary action, avoid or seek in bad faith to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment.
Upon the request of the Holder, the Company will
at any time during the period this Warrant is outstanding
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<PAGE> 12
acknowledge in writing, in form satisfactory to Holder, the continuing validity
of this Warrant and the obligations of the Company hereunder.
14. Termination. Subject to Sections 4 and 7, all rights
to purchase Warrant Stock under this Warrant terminate
immediately upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company.
15. Miscellaneous.
15.1 Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing at least 50% of the shares of
Warrant Stock obtainable upon the exercise of the Warrants outstanding at the
time of such consent.
15.2 Notices. Any notices required to be sent to a Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by registered mail, postage prepaid, return receipt requested, and will
be deemed to have been given when received.
15.3 Descriptive Headings; Governing Law. The descriptive
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the State of New
York, without regard to principles of conflicts or choice of law.
15.4 Lost, Stolen, Destroyed or Mutilated Warrant. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of an indemnity satisfactory to it, and, in the case of mutilation
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date, upon reimbursement to the Company
for all reasonable expense incidental thereto. Any such new Warrant executed and
delivered pursuant to this section shall constitute a contractual obligation on
the part of the Company, whether or not this Warrant (so lost, stolen, destroyed
or mutilated) shall thereafter at any time be enforced by anyone, provided that
the indemnification provided pursuant to this section shall not be effected.
15.5 Registered Holder. (a) Notwithstanding any other
provision of this Warrant, if Creditanstalt Bankverein ("CB") or
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<PAGE> 13
any Affiliate thereof is the Registered Holder, the Bank and its affiliates may
exercise this Warrant solely to the extent such exercise would not result in the
Bank's and its Affiliates holding, directly or indirectly, in excess of 4.99% of
the outstanding Common Stock of the Company (such determination to be made by
Creditanstalt), except for an exercise in connection with (i) a widely dispersed
public offering of the Warrant Stock, (ii) a sale of the Warrant Stock in to the
secondary market pursuant to the transaction and volume limitations of Rule 144
under the Act (irrespective of holding periods), or (iii) a private placement or
sale, including pursuant to Rule 144A under the Act, so long as the transferee
and its affiliates do not collectively acquire from such Registered Holder more
than 2% of the Common Stock of the Company pursuant to such transfer.
15.6 Capitalization. As of the date hereof, there are
outstanding 8,552,963 shares of Common Stock, of which 302,777 shares are held
in treasury, and 328,569 shares of preferred stock, which are convertible into
6,571,380 shares of Common Stock.
15.7 Undertakings. Creditanstalt covenants with the Company
that it will not exercise or attempt to exercise influence over the management
or policies of the Company in connection with this Warrant or any shares of
stock for which this Warrant may be exercised.
15.8 Shareholder Communications. The Company will provide
the Registered Holder with copies of all written communications distributed to
shareholders generally.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal.
U.S. HOMECARE CORPORATION
By: _____________________
Name: Stephen H. Matheson
Title: Chief Financial Officer
Acknowledged and agreed as
to Section 15.7 of this Warrant.
CREDITANSTALT BANKVEREIN
By: _________________________
Name:
Title:
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<PAGE> 15
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. __), hereby irrevocably elects to purchase _____ shares of
the Common Stock covered by such Warrant and herewith makes payment of $_____,
representing the full purchase price for such shares at the price per share
provided for in such Warrant. In lieu of paying such purchase price, I will/will
not make a cashless exercise pursuant to Section 2.2 of the attached Warrant.
The Common Stock shall be issued to ____________. Unless the
attached Warrant has expired or all of the purchase rights represented thereby
have been exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not expired or been exercised shall be issued to _____________.
Signature__________________________
Address:___________________________
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<PAGE> 16
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No.____ ) with respect to the number of shares of Common Stock
covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature __________________________
__________________________
Witness __________________________
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<PAGE> 1
Exhibit 4.7
Chase
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
U.S. HOMECARE CORPORATION
750 Main Street
Hartford, Connecticut 06103
STOCK PURCHASE WARRANT
Warrant No. WA-19
Date of Issuance: March 25, 1997 Right to Purchase 100,867
Shares of Common Stock
(subject to adjustment)
For value received, U.S. HOMECARE CORPORATION, a New York corporation
(the "Company"), hereby grants to THE CHASE MANHATTAN BANK or its registered
assigns (the "Registered Holder"), the right to purchase from the Company
100,867 shares of the Company's Common Stock (subject to adjustment pursuant to
Section 3 hereof) at a price of $1.5969 per share. The amount and kind of
securities purchasable pursuant to the rights granted under this Warrant are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following
terms have the meanings set forth below:
"Affiliate" means, at any time, a Person controlling,
controlled by or under common control at such time with the Registered Holder.
"Certificate" means the Certificate of Amendment to the
Certificate of Incorporation of the Company filed with the Secretary of the
State of New York on February 1, 1995.
<PAGE> 2
"Common Stock" means the Company's Common Stock, $0.01
par value per share.
"Common Stock Deemed Outstanding" means, at any given time,
(a) the number of shares of Common Stock actually outstanding at such time; (b)
the number of shares of Common Stock issuable (i) upon the conversion of
outstanding shares of preferred stock and (ii) with respect to all other
options, warrants, rights, or other securities convertible into shares of Common
Stock (provided that such options, warrants or rights are at an exercise price
less than or equal to the Market Price in effect on the relevant date; provided,
further that such options, warrants and rights shall only be considered "Common
Stock Deemed Outstanding" only to the extent that they have vested and are
exercisable on the relevant date), and (c) securities convertible into or
exchangeable for any of the foregoing.
"Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as of October 6, 1995, as amended by Amendment No. 1
dated as of October 31, 1996, Amendment No. 2 dated as of November 14, 1996, and
Amendment No. 3 dated as of the date hereof, between the Company, the Registered
Holder and the other party named therein.
"Date of Issuance" shall have the meaning specified in
Section 12 of this Warrant.
"Exercise Price" shall be $1.5969 per share, subject to
adjustment pursuant to Sections 3 and 5 hereof.
"Market Price" means as to any security, the last reported
sales price regular way, or in case no such sales take place on such day, the
average of the closing bid and ask prices regular way, in each case on the
principal national securities exchange on which the security is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if the security is not
listed or admitted to trading on any national securities exchange and is not
quoted on the Nasdaq National Market, the average of the closing bid and ask
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors of the Company for such purpose.
"Person" means an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
"Warrant Stock" means a share of the Company's authorized but
unissued Common Stock issuable upon exercise of
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<PAGE> 3
the Warrant; provided that if there is a change such that the securities
issuable upon exercise of the Warrant are issued by an entity other than the
Company or there is a change in the class of securities so issuable, then the
term "Warrant Stock" will mean one share of the security issuable upon exercise
of the Warrant if such security is issuable in shares, or will mean the smallest
unit in which such security is issuable if such security is not issuable in
shares.
2. Exercise of Warrant.
2.1 Exercise Period. The Registered Holder may
(i) exercise this Warrant, in whole or in part (but
not as to a fractional share of Warrant Stock), with respect
to 50,433 shares of the Warrant Stock (subject to adjustment
as herein provided) at any time prior to 5:00 p.m. (New York
time) on March 25, 2002;
(ii) in the event the Company has not received
either a bona fide letter of intent for a merger or
consolidation involving the Company or the purchase of
substantially all of the stock of the Borrowers (as such term
is defined in the Credit Agreement) or the Company or
substantially all of their assets or a bona fide commitment to
refinance the Loans (as such term is defined in the Credit
Agreement) (collectively, an "Offer") by June 30, 1997,
exercise this Warrant, in whole or in part (but not as to a
fractional share of Warrant Stock) with respect to an
additional 25,217 shares of the Warrant Stock (subject to
adjustments as herein provided), at any time on or after June
30, 1997 but prior to 5:00 (New York time) on March 25, 2002;
and
(iii) in the event the Company has not received an
Offer by September 30, 1997, exercise this Warrant in whole or
in part (but not as to a fractional share of Warrant Stock)
with respect to the remaining 25,217 shares of the Warrant
Stock (subject to adjustments as herein provided), at any time
on or after September 30, 1997 but prior to 5:00 p.m. (New
York time) on March 25, 2002,
unless the right to purchase shares of Warrant Stock under this Warrant is
earlier terminated pursuant to Section 14 (the "Exercise Period").
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<PAGE> 4
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been
exercised at such time as the Company has received all of the following items,
if applicable (the "Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising
all or part of the purchase rights represented by
this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in
the name of the Purchaser, an Assignment or
Assignments substantially in the form set forth in
Exhibit II hereto, evidencing the assignment of this
Warrant to the Purchaser; and
(iv) a check payable to the Company in an
amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock
being purchased upon such exercise.
In lieu of paying the purchase price set forth in (iv) above,
the Purchaser may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), in which event the Company shall issue to
the Purchaser the number of shares of the Company's Common Stock computed using
the following formula:
X = Y (A-B)
--------
A
Where:
X = the number of shares of Warrant Stock to be issued to
the Purchaser;
Y = the number of shares of Warrant Stock otherwise purchasable
(or the portion thereof being exercised) under this Warrant
(at the date of exercise);
A = the Market Price of one share of the Company's Common
Stock (at the date of such exercise); and
B = Exercise Price (as adjusted to the date of such exercise).
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<PAGE> 5
(b) Certificates for shares of Warrant Stock
purchased upon exercise of this Warrant or any portion thereof will be delivered
by the Company to the Purchaser within ten days after the Exercise Date. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company will prepare, at its own expense, a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised. The Company will, within
such ten-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise
of this Warrant will be deemed to have been issued to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have become
the record holder of such Warrant Stock on the Exercise Date.
(d) The issuance and delivery of certificates
for shares of Warrant Stock upon exercise of this Warrant will be made without
charge to the Registered Holder or the Purchaser for any issuance or delivery
tax or government charge in respect thereof or any other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock.
(e) The Company agrees to maintain books for the
registration and the registration of transfer of the warrants. The Company will
not close its books for the transfer of this Warrant or of any share of Warrant
Stock issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company will from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued Warrant Stock acquirable upon exercise of this Warrant
is at all times equal to or less than the Exercise Price.
2.3 Exercise Agreement. The Exercise Agreement will be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Registered
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable hereunder, it will also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered, and if the Purchaser wishes to
receive shares in lieu of paying the purchase price as set forth in Section 2.2,
it will also state such election.
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<PAGE> 6
2.4 Fractional Shares. If a fractional share of Warrant
Stock would, but for the provisions of Subsection 2.1, be issuable upon exercise
of the rights represented by this Warrant, the Company will, within ten days
after the Exercise Date, deliver to the Purchaser a check payable to the
Purchaser in lieu of such fractional share, in an amount equal to the Market
Price of such fractional share as of the close of business on the Exercise Date.
3. Adjustment of Number of Shares Issuable upon Exercise. In case
the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or any rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock, as a dividend or other distribution upon Common
Stock, or (b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise, or (c) combine
outstanding shares of Common Stock, by reclassification or otherwise, (i) the
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase on the date purchase rights under this
Warrant are exercised, the number of shares of Warrant Stock, calculated to the
nearest full share, determined by multiplying the number of shares of Warrant
Stock purchasable hereunder immediately prior to any adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock Deemed
Outstanding immediately after such dividend, distribution, subdivision or
combination and the denominator of which shall be the number of shares of Common
Stock Deemed Outstanding immediately prior to such dividend, distribution,
subdivision or combination and (ii) the Exercise Price shall be adjusted to
equal the Exercise Price hereunder immediately prior to any such adjustment
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock Deemed Outstanding immediately before such dividend,
distribution, subdivision or combination and the denominator of which shall be
the number of shares of Common Stock Deemed Outstanding immediately after such
dividend, distribution, subdivision or combination.
4. Effect of Reorganization or Reclassification, Consolidation,
Merger or Sale. If at any time while this Warrant is outstanding there shall be
(i) any reorganization or reclassification of the capital stock of the Company
(other than a subdivision or combination of shares or dividend or distribution
provided for in Subsection 3 hereof) or (ii) any consolidation or merger of the
Company with or into another corporation, or any sale or other disposition by
the Company of all or substantially all of its assets to any other corporation,
the holder of this Warrant shall thereafter upon exercise of this Warrant be
entitled to receive the number of shares of stock or other securities or
property of the Company, or of the successor
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<PAGE> 7
corporation resulting from such consolidation or merger, as the case may be, to
which the Warrant Stock (and any other securities and property) of the Company,
deliverable upon the exercise of this Warrant, would have been entitled upon
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition if this Warrant had been exercised immediately prior
to such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the number of shares issuable upon the exercise of this Warrant)
shall thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise hereof as if
this Warrant had been exercised immediately prior to such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition and the holder hereof had carried out the terms of the exchange as
provided for by such reorganization, reclassification of capital stock,
consolidation or merger. The Company shall not effect any such reorganization,
consolidation or merger unless, upon or prior to the consummation thereof, the
successor corporation shall assume by written instrument the obligation to
deliver to the holder hereof such shares of stock, securities, cash or property
as such holder shall be entitled to purchase in accordance with the foregoing
provisions. Notwithstanding any other provisions of this Warrant, in the event
of sale or other disposition of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise the Warrant shall terminate 60 days after the Company gives written
notice to the Registered Holder of this Warrant that such sale or other
disposition has been consummated.
5. Adjustment of Exercise Price Upon Issuance of
Additional Shares of Common Stock.
(a) In the event the Company shall, at any time
after the date hereof and prior to the first anniversary of the date hereof,
issue Additional Shares of Common Stock (as defined in Section G-4(i)(i) of the
Certificate (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G-4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof)), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to the consideration per share received by the Company for the issue
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<PAGE> 8
of the Additional Shares of Common Stock (determined pursuant to Section
G-4(i)(v) of the Certificate), or par value in the case of issuance for no
consideration.
(b) In the event the Company shall at any time
on or after the first anniversary of the date hereof issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G-4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying such
Exercise Price by a fraction, (A) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
or to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the Exercise Price in effect
immediately prior to such issue; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Section 5, all shares of Common Stock issuable
upon exercise or conversion of Options (as defined in Section G-4(i)(i) of the
Certificate) or Convertible Securities (as defined in Section G-4(i)(i) of the
Certificate) outstanding immediately prior to such issue shall be deemed to be
outstanding (other than shares excluded from the definition of "Additional
Shares of Common Stock" by virtue of clause (IV) of Section G-4(i)(i)(D) of the
Certificate), and (ii) the number of shares of Common Stock deemed issuable upon
conversion of such outstanding Options and Convertible Securities shall not give
effect to any adjustments to the conversion price or conversion rate of such
Options or Convertible Securities resulting from the issuance of Additional
Shares of Common Stock that is the subject of this calculation.
Upon any adjustment of the Exercise Price as provided in this
Section, the holder hereof shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock purchasable
hereunder immediately prior to such adjustment by a fraction (A) the numerator
of which shall be the Exercise Price in effect immediately prior to such
adjustment and (B) the denominator of which shall be the Exercise Price
resulting from such adjustment.
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<PAGE> 9
Notwithstanding the foregoing, the applicable Exercise Price
shall not be so reduced at such time if the amount of such reduction would be an
amount less than $.05, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $.05 or more.
6. Notice of Adjustments. Immediately upon any increase or
decrease in the number of shares of Common Stock purchasable upon exercise of
this Warrant, the Company will send written notice thereof to all Registered
Holders, stating the adjusted Exercise Price and the increased or decreased
number of shares purchasable upon exercise of this Warrant and setting forth in
reasonable detail the method of calculation for such adjustment and increase or
decrease. When appropriate, such notice may be given in advance and included as
part of any notice required to be given pursuant to Section 7 below.
7. Prior Notice as to Certain Events. In case at any time:
(a) the Company shall pay any dividend payable
in stock upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(b) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of
stock of any class or any other rights; or
(c) there shall be any reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or a sale or disposition of all or
substantially all its assets; or
(d) there shall be an amendment to the
Certificate of Incorporation of the Company; or
(e) the shareholders shall amend the By-Laws of
the Company; or
(f) the Company proposes to offer of its Common
Stock in a public offering; or
(g) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in each of said cases, the Company shall give prior written notice, by
registered mail, postage prepaid, return receipt requested, addressed to the
Registered Holder of this Warrant at
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<PAGE> 10
the address of such holder as shown on the books of the Company, of the date on
which (i) the books of the Company shall close or a record shall be taken for
such stock dividend, distribution, subscription rights or shareholder vote or
(ii) such reorganization, reclassification, consolidation, merger, sale,
amendment, public offering, dissolution, liquidation or winding up shall take
place, as the case may be. A copy of each such notice shall be sent
simultaneously to each transfer agent of the Company's Common Stock. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in said dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
8. Registration Rights. The Registered Holder of the Warrant Stock
issued upon exercise of the Warrant shall be entitled to all rights granted
pursuant to the Registration Rights Agreement dated October 6, 1995, as amended
on the date hereof and agrees to be bound by all of the obligations and
limitations thereof.
9. Reservation of Common Stock. The Company will at all times reserve
and keep available, free from preemptive or other rights of third parties, for
issuance upon the exercise of Warrants such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding Warrants, and upon such issuance such shares of Common
Stock will be validly issued, fully paid and nonassessable and free from
preemptive or other rights of third parties.
10. No Voting Rights; Limitations of Liability. This Warrant will not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder to purchase shares of Warrant Stock, and no
enumeration in this Warrant of the rights or privileges of the Registered
Holder, will give rise to any liability of such Holder for the Exercise Price of
Warrant Stock acquirable by exercise hereof or as a stockholder of the Company.
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<PAGE> 11
11. Warrant Transferable.
(a) Subject to the transfer conditions referred
to in paragraph (b) below, this Warrant and all rights hereunder and all Warrant
Stock shall be transferable, in whole or in part, to any Person. Such Person
shall agree to be bound by the terms of that certain Registration Rights
Agreement.
(b) The Registered Holder of this Warrant
acknowledges that this Warrant has not been registered under the Securities Act
of 1933, as amended (the "Act") or under state securities or "blue sky" laws.
Except as permitted under applicable federal and state securities or "blue sky"
laws, these securities and all Warrant Stock may not be sold, offered for sale,
pledged, hypothecated, assigned or otherwise disposed of in the absence of an
effective registration under the Act, and under all applicable state securities
or "blue sky" laws or an opinion of counsel or other proof reasonably
satisfactory to the Company that such registration is not required.
12. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
will represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued. The Company
shall prepare, issue and deliver at its own expense such new Warrants.
13. No Impairment. The Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of securities or any other
voluntary action, avoid or seek in bad faith to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment.
Upon the request of the Holder, the Company will
at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
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<PAGE> 12
14. Termination. Subject to Sections 4 and 7, all rights to
purchase Warrant Stock under this Warrant terminate immediately upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
15. Miscellaneous.
15.1 Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing at least 50% of the shares of
Warrant Stock obtainable upon the exercise of the Warrants outstanding at the
time of such consent.
15.2 Notices. Any notices required to be sent to a Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by registered mail, postage prepaid, return receipt requested, and will
be deemed to have been given when received.
15.3 Descriptive Headings; Governing Law. The descriptive
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the State of New
York, without regard to principles of conflicts or choice of law.
15.4 Lost, Stolen, Destroyed or Mutilated Warrant. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of an indemnity satisfactory to it, and, in the case of mutilation
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date, upon reimbursement to the Company
for all reasonable expense incidental thereto. Any such new Warrant executed and
delivered pursuant to this section shall constitute a contractual obligation on
the part of the Company, whether or not this Warrant (so lost, stolen, destroyed
or mutilated) shall thereafter at any time be enforced by anyone, provided that
the indemnification provided pursuant to this section shall not be effected.
15.5 Registered Holder. Notwithstanding any other provision of
this Warrant, if The Chase Manhattan Bank ("Chase") or any Affiliate thereof is
the Registered Holder, Chase and its affiliates may exercise this Warrant, in
whole or in part, solely to the extent such exercise would not result in Chase
and its Affiliates holding, directly or indirectly, in excess of 4.99% of
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<PAGE> 13
the outstanding Common Stock of the Company at the time of such exercise (such
determination to be made by Chase).
15.6 Capitalization. As of the date hereof, there are
outstanding 9,709,490 shares of Common Stock and 328,569 shares of preferred
stock, which are convertible into 7,201,421 shares of Common Stock.
15.7 Undertakings. Chase covenants with the Company that it
will not exercise or attempt to exercise influence over the management or
policies of the Company in connection with this Warrant or any shares of stock
for which this Warrant may be exercised.
15.8 Shareholder Communications. The Company will provide
the Registered Holder with copies of all written communications distributed to
shareholders generally.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal.
U.S. HOMECARE CORPORATION
By: _________________________
Name: Gerald J. Boisvert, Jr.
Title: Chief Financial Officer
Acknowledged and agreed as
to Section 15.7 of this Warrant.
THE CHASE MANHATTAN BANK
By: _________________________
Name: John Hariaczy
Title: Vice President
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<PAGE> 15
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. __), hereby irrevocably elects to purchase _____ shares of
the Common Stock covered by such Warrant and herewith makes payment of $_____,
representing the full purchase price for such shares at the price per share
provided for in such Warrant. In lieu of paying such purchase price, I will/will
not make a cashless exercise pursuant to Section 2.2 of the attached Warrant.
The Common Stock shall be issued to ____________. Unless the
attached Warrant has expired or all of the purchase rights represented thereby
have been exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not expired or been exercised shall be issued to _____________.
Signature__________________________
Address:___________________________
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<PAGE> 16
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, _________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No.______) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature___________________________
___________________________
Witness ___________________________
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<PAGE> 1
EXHIBIT 4.8
CDA
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
U.S. HOMECARE CORPORATION
750 Main Street
Hartford, Connecticut 06103
STOCK PURCHASE WARRANT
Warrant No. WA-21
Date of Issuance: March 25, 1997 Right to Purchase 735,000
Shares of Common Stock
(subject to adjustment)
For value received, U.S. HOMECARE CORPORATION, a New York corporation
(the "Company"), hereby grants to CONNECTICUT DEVELOPMENT AUTHORITY, or its
registered assigns (the "Registered Holder"), the right to purchase from the
Company 735,000 shares of the Company's Common Stock (subject to adjustment
pursuant to Section 3 hereof) at a price of $1.5969 per share. The amount and
kind of securities purchasable pursuant to the rights granted under this Warrant
are subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is issued pursuant to Section 12 of Warrant No. WA-17 issued to
Registered Holder on October 6, 1995.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following
terms have the meanings set forth below:
"Affiliate" means, at any time, a Person controlling,
controlled by or under common control at such time with the Registered Holder.
<PAGE> 2
"Certificate" means the Certificate of Amendment to the
Certificate of Incorporation of the Company filed with the Secretary of the
State of New York on February 1, 1995.
"Common Stock" means the Company's Common Stock, $0.01
par value per share.
"Common Stock Deemed Outstanding" means, at any given time,
(a) the number of shares of Common Stock actually outstanding at such time; (b)
the number of shares of Common Stock issuable (i) upon the conversion of
outstanding shares of preferred stock and (ii) with respect to all other
options, warrants, rights, or other securities convertible into shares of Common
Stock (provided that such options, warrants or rights are at an exercise price
less than or equal to the Market Price in effect on the relevant date; provided,
further that such options, warrants and rights shall be considered "Common Stock
Deemed Outstanding" only to the extent that they have vested and are exercisable
on the relevant date), and (c) securities convertible into or exchangeable for
any of the foregoing.
"Date of Issuance" shall have the meaning specified in
Section 13 of this Warrant.
"Exercise Price" shall be $1.5969 per share, subject to
adjustment pursuant to Sections 3 and 5 hereof.
"Market Price" means as to any security, the last reported
sales price regular way, or in case no such sales take place on such day, the
average of the closing bid and ask prices regular way, in each case on the
principal national securities exchange on which the security is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if the security is not
listed or admitted to trading on any national securities exchange and is not
quoted on the Nasdaq National Market, the average of the closing bid and ask
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors of the Company for such purpose.
"Person" means an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated organization and a government or any
department or agency thereof.
"Warrant Stock" means a share of the Company's authorized but
unissued Common Stock issuable upon exercise of the Warrant; provided that if
there is a change such that the securities issuable upon exercise of the Warrant
are issued by an entity other than the Company or there is a change in the class
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<PAGE> 3
of securities so issuable, then the term "Warrant Stock" will mean one share of
the security issuable upon exercise of the Warrant if such security is issuable
in shares, or will mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
2. Exercise of Warrant.
2.1 Exercise Period. (a) The Registered Holder may exercise
this Warrant, in whole or in part (but not as to a fractional share of Warrant
Stock), with respect to 735,000 shares of the Warrant Stock, subject to
subsection (b) below, (subject to adjustment as herein provided at any time
prior to 5:00 p.m. (New York time) on March 25, 2002, unless the right to
purchase shares of Warrant Stock under this Warrant is earlier terminated
pursuant to Section 13 (the "Exercise Period").
(b) If at any time when the Junior Debt (as defined in that
certain Intercreditor Agreement dated October 6, 1995 among Fleet Bank, National
Association ("Fleet"), the Registered Holder, the Company and its subsidiaries
listed therein, The Chase Manhattan Bank, N.A., Creditanstalt Bankverein and The
Chase Manhattan Bank, N.A., as agent (the "Intercreditor Agreement")) is not in
default the Company elects to permanently reduce the principal balance of the
Loan (as defined in the Credit Agreement dated the date hereof among Fleet, the
Company and the subsidiaries listed therein (the "Credit Agreement")) and reduce
the Commitment (as defined in the Credit Agreement), then the Warrant shall (to
the extent not previously exercised) be reduced such that the total Warrant
Stock obtainable under this Section 2.1 (including any Warrant Stock previously
issued pursuant to a partial exercise of this Warrant) is equal to the product
of 735,000 shares times a fraction, the numerator of which is the Commitment
following such reduction and the denominator of which is $3 million; provided,
however, that upon an event of default that results in total payments by the
Registered Holder to Fleet pursuant to the Guarantee Agreement dated October 6,
1995, as amended the date hereof among Fleet, the Registered Holder and the
Company and its subsidiaries listed therein (the "Guarantee") of an amount
greater than the Commitment then outstanding, then the Warrant shall be
increased such that the total Warrant Stock obtainable under this Section 2.1
(including any Warrant Stock previously issued pursuant to a partial exercise of
this Warrant) is equal to the product of 735,000 shares times a fraction (not to
exceed 1.0), the numerator of which is the total payments made as of the date of
such calculation by the Registered Holder to Fleet pursuant to the Guarantee and
any additional amounts owed to the Registered Holder by the Company and its
subsidiaries as of the date of such calculation pursuant to the terms of the
Credit Agreement, and the denominator of which is $3 million.
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<PAGE> 4
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been
exercised at such time as the Company has received all of the following items,
if applicable (the "Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising
all or part of the purchase rights represented by
this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in
the name of the Purchaser, an Assignment or
Assignments substantially in the form set forth in
Exhibit II hereto, evidencing the assignment of this
Warrant to the Purchaser; and
(iv) a check payable to the Company in an
amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock
being purchased upon such exercise.
In lieu of paying the purchase price set forth in (iv) above,
the Purchaser may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), in which event the Company shall issue to
the Purchaser the number of shares of the Company's Common Stock computed using
the following formula:
X = Y (A-B)
-------
A
Where:
X = the number of shares of Warrant Stock to be issued to
the Purchaser;
Y = the number of shares of Warrant Stock otherwise purchasable
(or the portion thereof being exercised) under this Warrant
(at the date of exercise);
A = the Market Price of one share of the Company's Common
Stock (at the date of such exercise); and
B = Exercise Price (as adjusted to the date of such exercise).
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<PAGE> 5
(b) Certificates for shares of Warrant Stock
purchased upon exercise of this Warrant or any portion thereof will be delivered
by the Company to the Purchaser within ten days after the Exercise Date. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company will prepare, at its own expense, a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised. The Company will, within
such ten-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise
of this Warrant will be deemed to have been issued to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have become
the record holder of such Warrant Stock on the Exercise Date.
(d) The issuance and delivery of certificates
for shares of Warrant Stock upon exercise of this Warrant will be made without
charge to the Registered Holder or the Purchaser for any issuance or delivery
tax or government charge in respect thereof or any other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock.
(e) The Company agrees to maintain books for the
registration and the registration of transfer of the warrants. The Company will
not close its books for the transfer of this Warrant or of any share of Warrant
Stock issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company will from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued Warrant Stock acquirable upon exercise of this Warrant
is at all times equal to or less than the Exercise Price.
2.3 Exercise Agreement. The Exercise Agreement will be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Registered
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable hereunder, it will also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered, and if the Purchaser wishes to
receive shares in lieu of paying the purchase price as set forth in Section 2.2,
it will also state such election.
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<PAGE> 6
2.4 Fractional Shares. If a fractional share of Warrant
Stock would, but for the provisions of Subsection 2.1, be issuable upon exercise
of the rights represented by this Warrant, the Company will, within ten days
after the Exercise Date, deliver to the Purchaser a check payable to the
Purchaser in lieu of such fractional share, in an amount equal to the Market
Price of such fractional share as of the close of business on the Exercise Date.
3. Adjustment of Number of Shares Issuable upon Exercise. In case
the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or any rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock, as a dividend or other distribution upon Common
Stock, or (b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise, or (c) combine
outstanding shares of Common Stock, by reclassification or otherwise, (i) the
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase on the date purchase rights under this
Warrant are exercised, the number of shares of Warrant Stock, calculated to the
nearest full share, determined by multiplying the number of shares of Warrant
Stock purchasable hereunder immediately prior to any adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock Deemed
Outstanding immediately after such dividend, distribution, subdivision or
combination and the denominator of which shall be the number of shares of Common
Stock Deemed Outstanding immediately prior to such dividend, distribution,
subdivision or combination and (ii) the Exercise Price shall be adjusted to
equal the Exercise Price hereunder immediately prior to any such adjustment
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock Deemed Outstanding immediately before such dividend,
distribution, subdivision or combination and the denominator of which shall be
the number of shares of Common Stock Deemed Outstanding immediately after such
dividend, distribution, subdivision or combination.
4. Effect of Reorganization or Reclassification, Consolidation,
Merger or Sale. If at any time while this Warrant is outstanding there shall be
(i) any reorganization or reclassification of the capital stock of the Company
(other than a subdivision or combination of shares or dividend or distribution
provided for in Subsection 3 hereof) or (ii) any consolidation or merger of the
Company with or into another corporation, or any sale or other disposition by
the Company of all or substantially all of its assets to any other corporation,
the holder of this Warrant shall thereafter upon exercise of this Warrant be
entitled to receive the number of shares of stock or other securities or
property of the Company, or of the successor
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<PAGE> 7
corporation resulting from such consolidation or merger, as the case may be, to
which the Warrant Stock (and any other securities and property) of the Company,
deliverable upon the exercise of this Warrant, would have been entitled upon
such reorganization, reclassification of capital stock, consolidation, merger,
sale or other disposition if this Warrant had been exercised immediately prior
to such reorganization, reclassification of capital stock, consolidation,
merger, sale or other disposition. In any such case, appropriate adjustment (as
determined by the Board of Directors of the Company) shall be made in the
application of the provisions set forth in this Warrant with respect to the
rights and interests thereafter of the holder of this Warrant to the end that
the provisions set forth in this Warrant (including those relating to
adjustments of the number of shares issuable upon the exercise of this Warrant)
shall thereafter be applicable, as near as reasonably may be, in relation to any
shares or other property thereafter deliverable upon the exercise hereof as if
this Warrant had been exercised immediately prior to such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition and the holder hereof had carried out the terms of the exchange as
provided for by such reorganization, reclassification of capital stock,
consolidation or merger. The Company shall not effect any such reorganization,
consolidation or merger unless, upon or prior to the consummation thereof, the
successor corporation shall assume by written instrument the obligation to
deliver to the holder hereof such shares of stock, securities, cash or property
as such holder shall be entitled to purchase in accordance with the foregoing
provisions. Notwithstanding any other provisions of this Warrant, in the event
of sale or other disposition of all or substantially all of the assets of the
Company as a part of a plan for liquidation of the Company, all rights to
exercise the Warrant shall terminate 60 days after the Company gives written
notice to the Registered Holder of this Warrant that such sale or other
disposition has been consummated.
5. Adjustment of Exercise Price Upon Issuance of Additional
Shares of Common Stock.
(a) In the event the Company shall, at any time
after the date hereof and prior to the first anniversary of the date hereof,
issue Additional Shares of Common Stock (as defined in Section G-4(i)(i) of the
Certificate (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G- 4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof)), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to the consideration per share received by the Company for the issue
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<PAGE> 8
of the Additional Shares of Common Stock (determined pursuant to Section
G-4(i)(v) of the Certificate), or par value in the case of issuance for no
consideration.
(b) In the event the Company shall at any time
on or after the first anniversary of the date hereof issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G-4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying such
Exercise Price by a fraction, (A) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
or to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the Exercise Price in effect
immediately prior to such issue; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Section 5, all shares of Common Stock issuable
upon exercise or conversion of Options (as defined in Section G-4(i)(i) of the
Certificate) or Convertible Securities (as defined in Section G-4(i)(i) of the
Certificate) outstanding immediately prior to such issue shall be deemed to be
outstanding (other than shares excluded from the definition of "Additional
Shares of Common Stock" by virtue of clause (IV) of Section G-4(i)(i)(D) of the
Certificate), and (ii) the number of shares of Common Stock deemed issuable upon
conversion of such outstanding Options and Convertible Securities shall not give
effect to any adjustments to the conversion price or conversion rate of such
Options or Convertible Securities resulting from the issuance of Additional
Shares of Common Stock that is the subject of this calculation.
Upon any adjustment of the Exercise Price as provided in this
Section, the holder hereof shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock purchasable
hereunder immediately prior to such adjustment by a fraction (A) the numerator
of which shall be the Exercise Price in effect immediately prior to such
adjustment and (B) the denominator of which shall be the Exercise Price
resulting from such adjustment.
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<PAGE> 9
Notwithstanding the foregoing, the applicable Exercise Price
shall not be so reduced at such time if the amount of such reduction would be an
amount less than $.05, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $.05 or more.
6. Notice of Adjustments. Immediately upon any increase or
decrease in the number of shares of Common Stock purchasable upon exercise of
this Warrant, the Company will send written notice thereof to all Registered
Holders, stating the adjusted Exercise Price and the increased or decreased
number of shares purchasable upon exercise of this Warrant and setting forth in
reasonable detail the method of calculation for such adjustment and increase or
decrease. When appropriate, such notice may be given in advance and included as
part of any notice required to be given pursuant to Section 7 below.
7. Prior Notice as to Certain Events. In case at any time:
(a) the Company shall pay any dividend payable
in stock upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(b) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of stock of any
class or any other rights; or
(c) there shall be any reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or a sale or disposition of all or
substantially all its assets; or
(d) there shall be an amendment to the
Certificate of Incorporation of the Company; or
(e) the shareholders shall amend the By-Laws of
the Company; or
(f) the Company proposes to offer of its Common
Stock in a public offering; or
(g) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in each of said cases, the Company shall give prior written notice, by
registered mail, postage prepaid, return receipt requested, addressed to the
Registered Holder of this Warrant at
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<PAGE> 10
the address of such holder as shown on the books of the Company, of the date on
which (i) the books of the Company shall close or a record shall be taken for
such stock dividend, distribution, subscription rights or shareholder vote or
(ii) such reorganization, reclassification, consolidation, merger, sale,
amendment, public offering, dissolution, liquidation or winding up shall take
place, as the case may be. A copy of each such notice shall be sent
simultaneously to each transfer agent of the Company's Common Stock. Such notice
shall also specify the date as of which the holders of the Common Stock of
record shall participate in said dividend, distribution or subscription rights
or shall be entitled to exchange their Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Company's transfer books are closed in respect thereto.
8. Registration Rights. The Registered Holder of the Warrant Stock
issued upon exercise of the Warrant shall be entitled to all rights granted
pursuant to the Registration Rights Agreement dated October 6, 1995, as amended
on the date hereof and agrees to be bound by all of the obligations and
limitations thereof.
9. Reservation of Common Stock. The Company will at all times reserve
and keep available, free from preemptive or other rights of third parties, for
issuance upon the exercise of Warrants such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding Warrants, and upon such issuance such shares of Common
Stock will be validly issued, fully paid and nonassessable and free from
preemptive or other rights of third parties.
10. No Voting Rights; Limitations of Liability. This Warrant will not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder to purchase shares of Warrant Stock, and no
enumeration in this Warrant of the rights or privileges of the Registered
Holder, will give rise to any liability of such Holder for the Exercise Price of
Warrant Stock acquirable by exercise hereof or as a stockholder of the Company.
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<PAGE> 11
11. Warrant Transferable.
(a) Subject to the transfer conditions referred
to in paragraph (b) below, this Warrant and all rights hereunder and all Warrant
Stock shall be transferable, in whole or in part, to any Person. Such Person
shall agree to be bound by the terms of that certain Registration Rights
Agreement.
(b) The Registered Holder of this Warrant
acknowledges that this Warrant has not been registered under the Securities Act
of 1933, as amended (the "Act") or under state securities or "blue sky" laws.
Except as permitted under applicable federal and state securities or "blue sky"
laws, these securities and all Warrant Stock may not be sold, offered for sale,
pledged, hypothecated, assigned or otherwise disposed of in the absence of an
effective registration under the Act, and under all applicable state securities
or "blue sky" laws or an opinion of counsel or other proof reasonably
satisfactory to the Company that such registration is not required.
12. No Impairment. The Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of securities or any other
voluntary action, avoid or seek in bad faith to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment.
Upon the request of the Holder, the Company will
at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
13. Termination. Subject to Sections 4 and 7, all rights to
purchase Warrant Stock under this Warrant terminate immediately upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
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<PAGE> 12
14. Miscellaneous.
14.1 Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing at least 50% of the shares of
Warrant Stock obtainable upon the exercise of the Warrants outstanding at the
time of such consent.
14.2 Notices. Any notices required to be sent to a Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by registered mail, postage prepaid, return receipt requested, and will
be deemed to have been given when received.
14.3 Descriptive Headings; Governing Law. The descriptive
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the State of New
York, without regard to principles of conflicts or choice of law.
14.4 Lost, Stolen, Destroyed or Mutilated Warrant. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of an indemnity satisfactory to it, and, in the case of mutilation
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date, upon reimbursement to the Company
for all reasonable expense incidental thereto. Any such new Warrant executed and
delivered pursuant to this section shall constitute a contractual obligation on
the part of the Company, whether or not this Warrant (so lost, stolen, destroyed
or mutilated) shall thereafter at any time be enforced by anyone, provided that
the indemnification provided pursuant to this section shall not be effected.
14.5 Capitalization. As of the date hereof, there are
outstanding 9,709,490 shares of Common Stock and 328,569 shares of preferred
stock, which are convertible into 7,201,421 shares of Common Stock.
14.6 Shareholder Communications. The Company will provide
the Registered Holder with copies of all written communications distributed to
shareholders generally.
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<PAGE> 13
IN WITNESS WHEREOF, the Company has caused this
Warrant to be signed and attested by its duly authorized officers under its
corporate seal.
U.S. HOMECARE CORPORATION
By: __________________________
Name: Gerald J. Boisvert, Jr.
Title: Chief Financial Officer
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<PAGE> 14
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. __), hereby irrevocably elects to purchase _____ shares of
the Common Stock covered by such Warrant and herewith makes payment of $_____,
representing the full purchase price for such shares at the price per share
provided for in such Warrant. In lieu of paying such purchase price, I will/will
not make a cashless exercise pursuant to Section 2.2 of the attached Warrant.
The Common Stock shall be issued to ____________. Unless the
attached Warrant has expired or all of the purchase rights represented thereby
have been exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not expired or been exercised shall be issued to _____________.
Signature__________________________
Address:___________________________
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<PAGE> 15
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. ______) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature___________________________
___________________________
Witness ___________________________
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<PAGE> 1
EXHIBIT 4.9
CA
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
U.S. HOMECARE CORPORATION
750 Main Street
Hartford, Connecticut 06103
STOCK PURCHASE WARRANT
Warrant No. WA-20
Date of Issuance: March 25, 1997 Right to Purchase 77,133
Shares of Common Stock
(subject to adjustment)
For value received, U.S. HOMECARE CORPORATION, a New York corporation
(the "Company"), hereby grants to CREDITANSTALT BANKVEREIN or its registered
assigns (the "Registered Holder"), the right to purchase from the Company 77,133
shares of the Company's Common Stock (subject to adjustment pursuant to Section
3 hereof) at a price of $1.5969 per share. The amount and kind of securities
purchasable pursuant to the rights granted under this Warrant are subject to
adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
1. Definitions. As used in this Warrant, the following terms
have the meanings set forth below:
"Affiliate" means, at any time, a Person controlling,
controlled by or under common control at such time with the Registered Holder.
<PAGE> 2
"Certificate" means the Certificate of Amendment to the
Certificate of Incorporation of the Company filed with the Secretary of the
State of New York on February 1, 1995.
"Common Stock" means the Company's Common Stock, $0.01
par value per share.
"Common Stock Deemed Outstanding" means, at any given time,
(a) the number of shares of Common Stock actually outstanding at such time; (b)
the number of shares of Common Stock issuable (i) upon the conversion of
outstanding shares of preferred stock and (ii) with respect to all other
options, warrants, rights, or other securities convertible into shares of Common
Stock (provided that such options, warrants or rights are at an exercise price
less than or equal to the Market Price in effect on the relevant date; provided,
further that such options, warrants and rights shall only be considered "Common
Stock Deemed Outstanding" only to the extent that they have vested and are
exercisable on the relevant date), and (c) securities convertible into or
exchangeable for any of the foregoing.
"Credit Agreement" means that certain Amended and Restated
Credit Agreement dated as of October 6, 1995, as amended by Amendment No. 1
dated as of October 31, 1996, Amendment No. 2 dated as of November 14, 1996, and
Amendment No. 3 dated as of the date hereof, between the Company, the Registered
Holder and the other party named therein.
"Date of Issuance" shall have the meaning specified in
Section 12 of this Warrant.
"Exercise Price" shall be $1.5969 per share, subject to
adjustment pursuant to Sections 3 and 5 hereof.
"Market Price" means as to any security, the last reported
sales price regular way, or in case no such sales take place on such day, the
average of the closing bid and ask prices regular way, in each case on the
principal national securities exchange on which the security is listed or
admitted to trading, or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq National Market or, if the security is not
listed or admitted to trading on any national securities exchange and is not
quoted on the Nasdaq National Market, the average of the closing bid and ask
prices as furnished by any New York Stock Exchange member firm selected from
time to time by the Board of Directors of the Company for such purpose.
"Person" means an individual, a partnership, a corporation, a
trust, a joint venture, an unincorporated
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<PAGE> 3
organization and a government or any department or agency thereof.
"Warrant Stock" means a share of the Company's authorized but
unissued Common Stock issuable upon exercise of the Warrant; provided that if
there is a change such that the securities issuable upon exercise of the Warrant
are issued by an entity other than the Company or there is a change in the class
of securities so issuable, then the term "Warrant Stock" will mean one share of
the security issuable upon exercise of the Warrant if such security is issuable
in shares, or will mean the smallest unit in which such security is issuable if
such security is not issuable in shares.
2. Exercise of Warrant.
2.1 Exercise Period. The Registered Holder may
(i) exercise this Warrant, in whole or in part (but
not as to a fractional share of Warrant Stock), with respect
to 38,567 shares of the Warrant Stock (subject to adjustment
as herein provided) at any time prior to 5:00 p.m. (New York
time) on March 25, 2002;
(ii) in the event the Company has not received
either a bona fide letter of intent for a merger or
consolidation involving the Company or the purchase of
substantially all of the stock of the Borrowers (as such term
is defined in the Credit Agreement) or the Company or
substantially all of their assets or a bona fide commitment to
refinance the Loans (as such term is defined in the Credit
Agreement) (collectively, an "Offer") by June 30, 1997,
exercise this Warrant, in whole or in part (but not as to a
fractional share of Warrant Stock) with respect to an
additional 19,283 shares of the Warrant Stock (subject to
adjustments as herein provided), at any time on or after June
30, 1997 but prior to 5:00 (New York time) on March 25, 2002;
and
(iii) in the event the Company has not received an
Offer by September 30, 1997, exercise this Warrant in whole or
in part (but not as to a fractional share of Warrant Stock)
with respect to the remaining 19,283 shares of the Warrant
Stock (subject to adjustments as herein provided), at any time
on or after September 30, 1997 but prior to 5:00 p.m. (New
York time) on March 25, 2002,
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<PAGE> 4
unless the right to purchase shares of Warrant Stock under this Warrant is
earlier terminated pursuant to Section 14 (the "Exercise Period").
2.2 Exercise Procedure.
(a) This Warrant will be deemed to have been
exercised at such time as the Company has received all of the following items,
if applicable (the "Exercise Date"):
(i) a completed Exercise Agreement, as
described below, executed by the Person exercising
all or part of the purchase rights represented by
this Warrant (the "Purchaser");
(ii) this Warrant;
(iii) if this Warrant is not registered in
the name of the Purchaser, an Assignment or
Assignments substantially in the form set forth in
Exhibit II hereto, evidencing the assignment of this
Warrant to the Purchaser; and
(iv) a check payable to the Company in an
amount equal to the product of the Exercise Price
multiplied by the number of shares of Warrant Stock
being purchased upon such exercise.
In lieu of paying the purchase price set forth in (iv) above,
the Purchaser may elect to receive shares equal to the value of this Warrant (or
the portion thereof being exercised), in which event the Company shall issue to
the Purchaser the number of shares of the Company's Common Stock computed using
the following formula:
X = Y (A-B)
-------
A
Where:
X = the number of shares of Warrant Stock to be issued to
the Purchaser;
Y = the number of shares of Warrant Stock otherwise purchasable
(or the portion thereof being exercised) under this Warrant
(at the date of exercise);
A = the Market Price of one share of the Company's Common
Stock (at the date of such exercise); and
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<PAGE> 5
B = Exercise Price (as adjusted to the date of such exercise).
(b) Certificates for shares of Warrant Stock
purchased upon exercise of this Warrant or any portion thereof will be delivered
by the Company to the Purchaser within ten days after the Exercise Date. Unless
this Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company will prepare, at its own expense, a new Warrant,
substantially identical hereto, representing the rights formerly represented by
this Warrant which have not expired or been exercised. The Company will, within
such ten-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(c) The Warrant Stock issuable upon the exercise
of this Warrant will be deemed to have been issued to the Purchaser on the
Exercise Date, and the Purchaser will be deemed for all purposes to have become
the record holder of such Warrant Stock on the Exercise Date.
(d) The issuance and delivery of certificates
for shares of Warrant Stock upon exercise of this Warrant will be made without
charge to the Registered Holder or the Purchaser for any issuance or delivery
tax or government charge in respect thereof or any other cost incurred by the
Company in connection with such exercise and the related issuance of shares of
Warrant Stock.
(e) The Company agrees to maintain books for the
registration and the registration of transfer of the warrants. The Company will
not close its books for the transfer of this Warrant or of any share of Warrant
Stock issued or issuable upon the exercise of this Warrant in any manner which
interferes with the timely exercise of this Warrant. The Company will from time
to time take all such action as may be necessary to assure that the par value
per share of the unissued Warrant Stock acquirable upon exercise of this Warrant
is at all times equal to or less than the Exercise Price.
2.3 Exercise Agreement. The Exercise Agreement will be
substantially in the form set forth in Exhibit I hereto, except that if the
shares of Warrant Stock are not to be issued in the name of the Registered
Holder of this Warrant, the Exercise Agreement will also state the name of the
Person to whom the certificates for the shares of Warrant Stock are to be
issued, and if the number of shares of Warrant Stock to be issued does not
include all the shares of Warrant Stock purchasable hereunder, it will also
state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be delivered, and if the Purchaser wishes to
receive shares
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<PAGE> 6
in lieu of paying the purchase price as set forth in Section 2.2, it will also
state such election.
2.4 Fractional Shares. If a fractional share of Warrant
Stock would, but for the provisions of Subsection 2.1, be issuable upon exercise
of the rights represented by this Warrant, the Company will, within ten days
after the Exercise Date, deliver to the Purchaser a check payable to the
Purchaser in lieu of such fractional share, in an amount equal to the Market
Price of such fractional share as of the close of business on the Exercise Date.
3. Adjustment of Number of Shares Issuable upon Exercise. In case
the Company shall at any time after the date hereof (a) issue any shares of
Common Stock or any securities convertible into or exchangeable for Common
Stock, or any rights to purchase Common Stock or securities convertible into or
exchangeable for Common Stock, as a dividend or other distribution upon Common
Stock, or (b) issue any shares of Common Stock in subdivision of outstanding
shares of Common Stock by reclassification or otherwise, or (c) combine
outstanding shares of Common Stock, by reclassification or otherwise, (i) the
Registered Holder of this Warrant shall thereafter (until another such
adjustment) be entitled to purchase on the date purchase rights under this
Warrant are exercised, the number of shares of Warrant Stock, calculated to the
nearest full share, determined by multiplying the number of shares of Warrant
Stock purchasable hereunder immediately prior to any adjustment by a fraction,
the numerator of which shall be the number of shares of Common Stock Deemed
Outstanding immediately after such dividend, distribution, subdivision or
combination and the denominator of which shall be the number of shares of Common
Stock Deemed Outstanding immediately prior to such dividend, distribution,
subdivision or combination and (ii) the Exercise Price shall be adjusted to
equal the Exercise Price hereunder immediately prior to any such adjustment
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock Deemed Outstanding immediately before such dividend,
distribution, subdivision or combination and the denominator of which shall be
the number of shares of Common Stock Deemed Outstanding immediately after such
dividend, distribution, subdivision or combination.
4. Effect of Reorganization or Reclassification, Consolidation,
Merger or Sale. If at any time while this Warrant is outstanding there shall be
(i) any reorganization or reclassification of the capital stock of the Company
(other than a subdivision or combination of shares or dividend or distribution
provided for in Subsection 3 hereof) or (ii) any consolidation or merger of the
Company with or into another corporation, or any sale or other disposition by
the Company of all or substantially all of its assets to any other corporation,
the
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<PAGE> 7
holder of this Warrant shall thereafter upon exercise of this Warrant be
entitled to receive the number of shares of stock or other securities or
property of the Company, or of the successor corporation resulting from such
consolidation or merger, as the case may be, to which the Warrant Stock (and any
other securities and property) of the Company, deliverable upon the exercise of
this Warrant, would have been entitled upon such reorganization,
reclassification of capital stock, consolidation, merger, sale or other
disposition if this Warrant had been exercised immediately prior to such
reorganization, reclassification of capital stock, consolidation, merger, sale
or other disposition. In any such case, appropriate adjustment (as determined by
the Board of Directors of the Company) shall be made in the application of the
provisions set forth in this Warrant with respect to the rights and interests
thereafter of the holder of this Warrant to the end that the provisions set
forth in this Warrant (including those relating to adjustments of the number of
shares issuable upon the exercise of this Warrant) shall thereafter be
applicable, as near as reasonably may be, in relation to any shares or other
property thereafter deliverable upon the exercise hereof as if this Warrant had
been exercised immediately prior to such reorganization, reclassification of
capital stock, consolidation, merger, sale or other disposition and the holder
hereof had carried out the terms of the exchange as provided for by such
reorganization, reclassification of capital stock, consolidation or merger. The
Company shall not effect any such reorganization, consolidation or merger
unless, upon or prior to the consummation thereof, the successor corporation
shall assume by written instrument the obligation to deliver to the holder
hereof such shares of stock, securities, cash or property as such holder shall
be entitled to purchase in accordance with the foregoing provisions.
Notwithstanding any other provisions of this Warrant, in the event of sale or
other disposition of all or substantially all of the assets of the Company as a
part of a plan for liquidation of the Company, all rights to exercise the
Warrant shall terminate 60 days after the Company gives written notice to the
Registered Holder of this Warrant that such sale or other disposition has been
consummated.
5. Adjustment of Exercise Price Upon Issuance of
Additional Shares of Common Stock.
(a) In the event the Company shall, at any time
after the date hereof and prior to the first anniversary of the date hereof,
issue Additional Shares of Common Stock (as defined in Section G-4(i)(i) of the
Certificate (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G- 4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof)), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and
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<PAGE> 8
immediately prior to such issue, then and in such event, such Exercise Price
shall be reduced, concurrently with such issue, to the consideration per share
received by the Company for the issue of the Additional Shares of Common Stock
(determined pursuant to Section G-4(i)(v) of the Certificate), or par value in
the case of issuance for no consideration.
(b) In the event the Company shall at any time
on or after the first anniversary of the date hereof issue Additional Shares of
Common Stock (including Additional Shares of Common Stock deemed to be issued
pursuant to Section G-4(i)(iii) of the Certificate, but excluding shares issued
as a dividend or combination as provided in Section 3 hereof), without
consideration or for a consideration per share less than the applicable Exercise
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Exercise Price shall be reduced, concurrently with such issue,
to a price (calculated to the nearest cent) determined by multiplying such
Exercise Price by a fraction, (A) the numerator of which shall be (1) the number
of shares of Common Stock outstanding immediately prior to such issue plus (2)
the number of shares of Common Stock which the aggregate consideration received
or to be received by the Company for the total number of Additional Shares of
Common Stock so issued would purchase at the Exercise Price in effect
immediately prior to such issue; and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; provided
that, (i) for the purpose of this Section 5, all shares of Common Stock issuable
upon exercise or conversion of Options (as defined in Section G-4(i)(i) of the
Certificate) or Convertible Securities (as defined in Section G-4(i)(i) of the
Certificate) outstanding immediately prior to such issue shall be deemed to be
outstanding (other than shares excluded from the definition of "Additional
Shares of Common Stock" by virtue of clause (IV) of Section G-4(i)(i)(D) of the
Certificate), and (ii) the number of shares of Common Stock deemed issuable upon
conversion of such outstanding Options and Convertible Securities shall not give
effect to any adjustments to the conversion price or conversion rate of such
Options or Convertible Securities resulting from the issuance of Additional
Shares of Common Stock that is the subject of this calculation.
Upon any adjustment of the Exercise Price as provided in this
Section, the holder hereof shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock purchasable
hereunder immediately prior to such adjustment by a fraction (A) the numerator
of which shall be the Exercise Price in effect
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<PAGE> 9
immediately prior to such adjustment and (B) the denominator of which shall be
the Exercise Price resulting from such adjustment.
Notwithstanding the foregoing, the applicable Exercise Price
shall not be so reduced at such time if the amount of such reduction would be an
amount less than $.05, but any such amount shall be carried forward and
reduction with respect thereto made at the time of and together with any
subsequent reduction which, together with such amount and any other amount or
amounts so carried forward, shall aggregate $.05 or more.
6. Notice of Adjustments. Immediately upon any increase or
decrease in the number of shares of Common Stock purchasable upon exercise of
this Warrant, the Company will send written notice thereof to all Registered
Holders, stating the adjusted Exercise Price and the increased or decreased
number of shares purchasable upon exercise of this Warrant and setting forth in
reasonable detail the method of calculation for such adjustment and increase or
decrease. When appropriate, such notice may be given in advance and included as
part of any notice required to be given pursuant to Section 7 below.
7. Prior Notice as to Certain Events. In case at any
time:
(a) the Company shall pay any dividend payable
in stock upon its Common Stock or make any distribution (other than cash
dividends) to the holders of its Common Stock; or
(b) the Company shall offer for subscription pro
rata to the holders of its Common Stock any additional shares of
stock of any class or any other rights; or
(c) there shall be any reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation or a sale or disposition of all or
substantially all its assets; or
(d) there shall be an amendment to the
Certificate of Incorporation of the Company; or
(e) the shareholders shall amend the By-Laws of
the Company; or
(f) the Company proposes to offer of its Common
Stock in a public offering; or
(g) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
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<PAGE> 10
then, in each of said cases, the Company shall give prior written notice, by
registered mail, postage prepaid, return receipt requested, addressed to the
Registered Holder of this Warrant at the address of such holder as shown on the
books of the Company, of the date on which (i) the books of the Company shall
close or a record shall be taken for such stock dividend, distribution,
subscription rights or shareholder vote or (ii) such reorganization,
reclassification, consolidation, merger, sale, amendment, public offering,
dissolution, liquidation or winding up shall take place, as the case may be. A
copy of each such notice shall be sent simultaneously to each transfer agent of
the Company's Common Stock. Such notice shall also specify the date as of which
the holders of the Common Stock of record shall participate in said dividend,
distribution or subscription rights or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, as the case may be. Such written notice shall be
given at least 20 days prior to the action in question and not less than 20 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto.
8. Registration Rights. The Registered Holder of the Warrant Stock
issued upon exercise of the Warrant shall be entitled to all rights granted
pursuant to the Registration Rights Agreement dated October 6, 1995, as amended
on the date hereof and agrees to be bound by all of the obligations and
limitations thereof.
9. Reservation of Common Stock. The Company will at all times reserve
and keep available, free from preemptive or other rights of third parties, for
issuance upon the exercise of Warrants such number of its authorized but
unissued shares of Common Stock as will be sufficient to permit the exercise in
full of all outstanding Warrants, and upon such issuance such shares of Common
Stock will be validly issued, fully paid and nonassessable and free from
preemptive or other rights of third parties.
10. No Voting Rights; Limitations of Liability. This Warrant will not
entitle the holder hereof to any voting rights or other rights as a stockholder
of the Company. No provision of this Warrant, in the absence of affirmative
action by the Registered Holder to purchase shares of Warrant Stock, and no
enumeration in this Warrant of the rights or privileges of the Registered
Holder, will give rise to any liability of such Holder for the Exercise Price of
Warrant Stock acquirable by exercise hereof or as a stockholder of the Company.
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<PAGE> 11
11. Warrant Transferable.
(a) Subject to the transfer conditions referred
to in paragraph (b) below, this Warrant and all rights hereunder and all Warrant
Stock shall be transferable, in whole or in part, to any Person. Such Person
shall agree to be bound by the terms of that certain Registration Rights
Agreement.
(b) The Registered Holder of this Warrant
acknowledges that this Warrant has not been registered under the Securities Act
of 1933, as amended (the "Act") or under state securities or "blue sky" laws.
Except as permitted under applicable federal and state securities or "blue sky"
laws, these securities and all Warrant Stock may not be sold, offered for sale,
pledged, hypothecated, assigned or otherwise disposed of in the absence of an
effective registration under the Act, and under all applicable state securities
or "blue sky" laws or an opinion of counsel or other proof reasonably
satisfactory to the Company that such registration is not required.
12. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
will represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. The date the Company initially issues this
Warrant will be deemed to be the "Date of Issuance" of this Warrant regardless
of the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant are issued. The Company
shall prepare, issue and deliver at its own expense such new Warrants.
13. No Impairment. The Company shall not by any action, including,
without limitation, amending its certificate of incorporation or through any
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, winding up, issue or sale of securities or any other
voluntary action, avoid or seek in bad faith to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate to protect the rights of Holder
against impairment.
Upon the request of the Holder, the Company will
at any time during the period this Warrant is outstanding acknowledge in
writing, in form satisfactory to Holder, the continuing validity of this Warrant
and the obligations of the Company hereunder.
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<PAGE> 12
14. Termination. Subject to Sections 4 and 7, all rights to
purchase Warrant Stock under this Warrant terminate immediately upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company.
15. Miscellaneous.
15.1 Amendment and Waiver. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may take
any action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
Registered Holders of Warrants representing at least 50% of the shares of
Warrant Stock obtainable upon the exercise of the Warrants outstanding at the
time of such consent.
15.2 Notices. Any notices required to be sent to a Registered
Holder will be delivered to the address of such Registered Holder shown on the
books of the Company. All notices referred to herein will be delivered in person
or sent by registered mail, postage prepaid, return receipt requested, and will
be deemed to have been given when received.
15.3 Descriptive Headings; Governing Law. The descriptive
headings of the paragraphs of this Warrant are inserted for convenience only and
do not constitute a part of this Warrant. The construction, validity and
interpretation of this Warrant will be governed by the laws of the State of New
York, without regard to principles of conflicts or choice of law.
15.4 Lost, Stolen, Destroyed or Mutilated Warrant. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft or
destruction, of an indemnity satisfactory to it, and, in the case of mutilation
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant of like tenor and date, upon reimbursement to the Company
for all reasonable expense incidental thereto. Any such new Warrant executed and
delivered pursuant to this section shall constitute a contractual obligation on
the part of the Company, whether or not this Warrant (so lost, stolen, destroyed
or mutilated) shall thereafter at any time be enforced by anyone, provided that
the indemnification provided pursuant to this section shall not be effected.
15.5 Registered Holder. (a) Notwithstanding any other
provision of this Warrant, if Creditanstalt Bankverein ("CB") or any Affiliate
thereof is the Registered Holder, CB and its affiliates may exercise this
Warrant solely to the extent such exercise would not result in the Bank's and
its Affiliates holding, directly or indirectly, in excess of 4.99% of the
- 12 -
<PAGE> 13
outstanding Common Stock of the Company (such determination to be made by CB),
except for an exercise in connection with (i) a widely dispersed public offering
of the Warrant Stock, (ii) a sale of the Warrant Stock in to the secondary
market pursuant to the transaction and volume limitations of Rule 144 under the
Act (irrespective of holding periods), or (iii) a private placement or sale,
including pursuant to Rule 144A under the Act, so long as the transferee and its
affiliates do not collectively acquire from such Registered Holder more than 2%
of the Common Stock of the Company pursuant to such transfer.
15.6 Capitalization. As of the date hereof, there are
outstanding 9,709,409 shares of Common Stock and 328,569 shares of preferred
stock, which are convertible into 7,201,421 shares of Common Stock.
15.7 Undertakings. CB covenants with the Company that it will
not exercise or attempt to exercise influence over the management or policies of
the Company in connection with this Warrant or any shares of stock for which
this Warrant may be exercised.
15.8 Shareholder Communications. The Company will provide
the Registered Holder with copies of all written communications distributed to
shareholders generally.
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<PAGE> 14
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
and attested by its duly authorized officers under its corporate seal.
U.S. HOMECARE CORPORATION
By: _____________________________
Name: Gerald J. Boisvert, Jr.
Title: Chief Financial Officer
Acknowledged and agreed as
to Section 15.7 of this Warrant.
CREDITANSTALT BANKVEREIN
By: _________________________
Name: A.W. Seidel
Title: Vice President
By: _________________________
Name: Peter Halter
Title: Vice President
- 14 -
<PAGE> 15
EXHIBIT I
EXERCISE AGREEMENT
To:
Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (No. __), hereby irrevocably elects to purchase _____ shares of
the Common Stock covered by such Warrant and herewith makes payment of $_____,
representing the full purchase price for such shares at the price per share
provided for in such Warrant. In lieu of paying such purchase price, I will/will
not make a cashless exercise pursuant to Section 2.2 of the attached Warrant.
The Common Stock shall be issued to ____________. Unless the
attached Warrant has expired or all of the purchase rights represented thereby
have been exercised, a new Warrant, substantially identical to the attached
Warrant, representing the rights formerly represented by the attached Warrant
which have not expired or been exercised shall be issued to _____________.
Signature__________________________
Address:___________________________
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<PAGE> 16
EXHIBIT II
ASSIGNMENT FORM
FOR VALUE RECEIVED, ______________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (No. _______) with respect to the number of shares of Common
Stock covered thereby set forth below, unto:
Name of Assignee Address No. of Shares
Dated: Signature __________________________
__________________________
Witness __________________________
- 16 -
<PAGE> 1
Exhibit 10.24
AMENDMENT NO. 1
Dated as of October 31, 1996
This AMENDMENT among U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED IN ANNEX 1 HERETO (collectively, the "Borrowers" and each,
individually, a "Borrower"), the banks parties to the Credit Agreement referred
to below (the "Banks"), and THE CHASE MANHATTAN BANK (successor by merger to The
Chase Manhattan Bank, N.A.), as agent (the "Agent") for the Banks thereunder.
PRELIMINARY STATEMENT.
A. The Borrowers, the Banks and the Agent have entered
into an Amended and Restated Credit Agreement dated as of October 6, 1995 (said
Credit Agreement being hereinafter referred to as the "Credit Agreement"; the
terms defined therein being used herein as therein defined unless otherwise
defined herein).
B. Pursuant to the Credit Agreement, the Borrowers are
indebted to the Banks under the Notes in the aggregate principal amount of
$7,173,596.27, as of the date hereof (the "Indebtedness"), which Indebtedness is
owed by the Borrowers to the Banks without offset, defense or counterclaim of
any kind, nature or description. As security for such Indebtedness, the
Borrowers have heretofore granted to the Banks a first priority security
interest in all the Borrowers' assets (such security interest having been
partially released by the Banks pursuant to the Partial Release Letter), whether
now owed or hereafter acquired, wherever located of any kind, nature or
description, tangible or intangible, including without limitation, the
Borrowers' accounts receivable, inventory, equipment, and general intangibles,
and such security interests and liens granted by the Borrowers to the Banks are,
subject to the terms of the Partial Release Letter, hereby reacknowledged and
confirmed by the Borrowers.
C. The Borrowers, the Banks and the Agent have agreed to
amend the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 3 hereof, hereby amended as follows:
(a) The following new definitions are added in
proper alphabetical order to Section 1.1 of the Credit Agreement:
"February 15 Reduction" means: (a) if the
First Period Amount is greater than or equal to $350,000, zero dollars
($0) or (b) if the First Period Amount is less than $350,000, an amount
equal to (i) $350,000 minus (ii) the First Period Amount.
"First Period" means the period of time
between the date hereof and February 15, 1997, inclusive.
<PAGE> 2
2
"First Period Amount" means an amount equal
to (a) the first $350,000 of First Period Receivables, plus (b) fifty
percent (50%) of the First Period Receivables exceeding $350,000.
"First Period Receivables" means the
Reducing Receivables collected during the First Period.
"March 28 Reduction" means (a) if the Second
Period Amount is greater than or equal to the Threshold Amount, zero
dollars ($0) or (b) if the Second Period Amount is less than the
Threshold Amount, an amount equal to (i) Threshold Amount minus (ii)
the Second Period Amount.
"October 31 Reduction" means $500,000.
"Reducing Receivables" means the collections
of USHNJ Receivables other than USHNJ Eligible Receivables and USHNJ
Receivables subject to the Purchase Agreement.
"Second Period" means the period between
February 16, 1997 and March 28, 1997, inclusive.
"Second Period Amount" means an amount equal
to (i) the Second Period Receivables collected during the Second Period
up to and including the Threshold Amount and (ii) fifty percent (50%)
of the Second Period Receivables which exceed the Threshold Amount.
"Second Period Receivables" means the
Reducing Receivables collected during the Second Period.
"Threshold Amount" means (a) if the First
Period Amount is less than or equal to $350,000, the Threshold Amount
shall be $350,000, or (b) if the First Period Amount exceeds $350,000,
the Threshold Amount shall be equal to (i) $350,000 minus (ii) the
amount by which the First Period Amount exceeds $350,000.
"USHNJ" means U.S. HomeCare Infusion Therapy
Services Corporation of New Jersey.
(b) The aggregate Commitments of the Banks shall
permanently reduce pro rata by an amount equal to (i) the October 31 Reduction
on October 31, 1996, (ii) on each Banking Day during the First Period, the First
Period Amount, upon receipt of the First Period Receivables from time to time,
(iii) the February 15 Reduction, on February 15, 1997, (iv) on each Banking Day
during the Second Period, the Second Period Amount, upon receipt of the Second
Period Receivables from time to time, and (v) the March 28 Reduction on March
28, 1997. In accordance with the terms of the Credit Agreement, such reductions
in the Commitments shall automatically reduce the amount of the Borrowing Base
available under
<PAGE> 3
3
paragraph (b) of the definition of Borrowing Base contained in Section 1.1
(e.g., the $2,500,000 figure set forth in said paragraph (b) shall reduce to
$2,000,000 on October 31, 1996).
(c) In addition to the reductions set forth in
Section 1(b) hereof, availability under the Borrowing Base shall be reduced by
reducing the $6,500,000 figure in paragraph (a) of the definition of Borrowing
Base contained in Section 1.1 to $6,000,000 on March 28, 1997.
(d) Notwithstanding anything to the contrary
contained herein. the October 31 Reduction, the February 15 Reduction and the
March 28 Reduction to the Borrowers' availability under the Borrowing Base shall
take effect whether or not the funds contemplated to be received on or before
such reduction dates have been received, in whole or in part, by the Agent.
(e) The following sentence is added at the end
of Section 6.7: "Without in any way limiting any of the foregoing rights of the
Agent and the Banks, the Borrowers agree to meet monthly with the Agent and/or
the Banks, whether in person or by telephone, to review the financial
performance of the Borrowers for the prior calendar month."
(f) The word "or" is deleted at the end of
subsection (l) of Section 9.12, the period (".") at the end of subsection (m) of
Section 9.1 is replaced with a semicolon (";") and the following new Events of
Default are added at the end of Section 9.1:
(n) at any time prior to the
Termination Date, Mehdi R. Ali shall fail to be contractually obligated
to provide consulting services to the Borrowers; or
(o) the Borrowers shall pay more than
$100,000 in the aggregate with respect to the services provided by
Sanders Morris Mundy Inc. in connection with the USHNJ Sale Agreement
(as defined below).
(g) A new Section 6.12 is added as follows:
Section 6.12. Warrants. File a registration
statement with the Securities and Exchange Commission covering the
Warrants within 30 days following completion of the Parent's audited
financial statements for the year ending December 31, 1996 (but in no
event later than April 30, 1997) and to diligently pursue obtaining the
effectiveness thereof; provided that the Borrower hereby acknowledges
that the foregoing covenant shall not be construed to mean that any one
or more of the Banks intend to extend the Termination Date beyond March
31, 1997, or that any one or more of the Banks have any obligation to
consider such an extension.
(h) Section 11.4 is amended and restated in full
to read as follows:
Section 11.4. Survival. The obligations of
the Borrowers under Sections 6.12 and 11.3 shall survive the repayment
of the Loans and the termination of the Commitments.
<PAGE> 4
4
SECTION 2. Consent. Effective as of the date hereof
and subject to the satisfaction of the conditions precedent set forth in Section
3 hereof, the Agent and the Banks hereby consent, pursuant to subsection (d) of
Section 7.7 of the Credit Agreement, to the proposed sale (the "USHNJ Sale") by
U.S. HomeCare Infusion Therapy Services Corporation of New Jersey of
substantially all of its assets other than its accounts receivable to Transworld
Acquisition Corp. ("TAC") in connection with the entering into by USHNJ and the
Parent of that certain Asset Purchase Agreement with TAC dated as of October 31,
1996 (the "USHNJ Sale Agreement"). The foregoing consent (the "Consent"),
however, shall not be construed as a consent to any sale of USHNJ Receivables or
any other assets of the Borrowers, which consent is expressly denied. The
Consent is subject to the following limitations, terms and conditions:
(a) Cash proceeds for the Sale in the amount of
$2,000,000, as adjusted pursuant to Sections 2.7 and 2.11 of the USHNJ Sale
Agreement, shall be utilized to repay amounts outstanding under the Loans, with
$500,000 of such repayments resulting in the permanent reduction of the
Commitments as set forth in subsection (a) of Section 1 of this Amendment.
(b) The USHNJ Receivables shall continue to be
serviced and collected by the Parent and USHNJ following the closing of the
USHNJ Sale, and such cash collections shall continue to be utilized to repay
amounts outstanding from time to time under the Loans.
(c) The Consent is granted based upon the
Borrowers' assurance that they will enter into a mutually agreeable step-down of
the securitization line of credit commitment and the funded debt under said
securitization line of credit with the Purchaser (as defined in the Purchase
Agreement) no later than November 30, 1996, which step-down shall be
satisfactory to the Agent and the Required Banks.
(d) The Consent is granted without prejudice to
any right the Agent or any Bank may have, on any future date, to declare the
Parent or any of the other Borrowers to be out of compliance with any term or
provision of the Credit Agreement, for a reason other than the USHNJ Sale
pursuant to the Asset Purchase Agreement referenced above.
(e) The Consent shall have no effect on any
other portions of the Credit Agreement, all of which shall remain in full force
and effect, including all of the Agent's and the Banks' rights and remedies
thereunder, all of which are expressly reserved.
(f) The Agent and the Banks are under no
obligation to grant the Consent. The Agent's and the Banks' granting of the
Consent shall not be deemed to limit or hinder any rights of the Agent or any
Bank under the Credit Agreement, nor shall it be deemed to create or infer a
course of dealing between the Agent or any Bank and the Parent or any of the
other Borrowers with regard to any provision of the Credit Agreement.
SECTION 3. Conditions of Effectiveness. This
Amendment shall become effective when, and only when, the Agent shall have
received counterparts of this Amendment
<PAGE> 5
5
executed by the Borrowers and all of the Banks , except that Sections 1 and 2
hereof shall become effective when, and only when, the Agent shall have
additionally received all of the following documents, each document (unless
otherwise indicated) being dated the date of receipt thereof by the Agent (which
date shall be the same for all such documents), in form and substance
satisfactory to the Banks:
(a) Certified copies of (i) the resolutions of
the Board of Directors of each Borrower approving this Amendment and the matters
contemplated hereby, (ii) all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this Amendment and
the matters contemplated hereby; and (iii) the USHNJ Sale Agreement.
(b) A certificate of the Secretary or an
Assistant Secretary of each Borrower certifying the names and true signatures of
the officers of such Borrower authorized to sign this Amendment and the other
documents to be delivered hereunder.
(c) An accounts receivable analysis for USHNJ
showing aging by account debtor and allocation of the reliance on such accounts
receivable for the Borrowing Base and for the Purchase Agreement.
(d) A business plan consisting of the following
on a consolidated basis: (i) a pro forma balance sheet reflecting the USHNJ
Sale, (ii) monthly pro forma balance sheets and cash flow projections for
October 1996 through December 31, 1997, and (iii) quarterly pro forma balance
sheets and cash flow projections for the 1998 fiscal year.
SECTION 4. Representations and Warranties of the
Borrowers. Each Borrower represents and warrants as follows:
(a) Such Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) The execution, delivery and performance by
such Borrower of this Amendment and the Facility Documents, as amended hereby,
to which it is or is to be a party are within such Borrower's corporate powers,
have been duly authorized by all necessary corporate action and do not
contravene (i) such Borrower's charter or by-laws, (ii) any contractual
restriction binding on or affecting such Borrower, or result in, or require, the
creation or imposition of any mortgage, deed of trust, pledge, lien, security
interest or other charge, encumbrance or preferential arrangement of any nature
upon or with respect to any of the properties now owned or hereafter acquired by
such Borrower, or (iii) to the best of such Borrower's knowledge, any law.
(c) No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for the due execution, delivery and performance by such
Borrower of this Amendment or any of the Facility Documents, as amended hereby,
to which it is or is to be a party.
<PAGE> 6
6
(d) This Amendment and each of the other
Facility Documents as amended hereby, to which such Borrower is a party
constitute legal, valid and binding obligations of such Borrower enforceable
against such Borrower in accordance with their respective terms.
(e) To the best of such Borrower's knowledge,
the Security Agreement constitutes valid and perfected first priority security
interests and liens in and to the Collateral covered thereby enforceable against
all third parties in all jurisdictions and secure the payment of all obligations
of such Borrower under the Facility Documents, as amended hereby, and the
execution, delivery and performance of this Amendment do not adversely affect
the aforesaid security interests and liens of such Security Agreement.
(f) There is no pending or threatened action or
proceeding affecting such Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of such Borrower or any Subsidiary or which
purport to affect the legality, validity or enforceability of this Amendment or
any of the other Facility Documents, as amended hereby, except as set forth in
Schedule 4(f) hereto.
(g) After giving effect to the terms of the
Amendment, no event has occurred and is continuing which constitutes a Default
or an Event of Default, except that the Borrowers have informed the Banks that
due to interim financial performance and/or the consummation of the USHNJ Sale
may cause the Borrowers to violate the provisions of Section 8.1 of the Credit
Agreement.
SECTION 5. Reference to and Effect on the Facility
Documents. (a) Upon the effectiveness of Sections 1 and 2 hereof, on and after
the date hereof each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference in
any Facility Documents to the Credit Agreement or any other Facility Document,
shall mean and be a reference to the Credit Agreement or such other Facility
Document as amended hereby.
(b) Except as specifically amended above, the
Credit Agreement and the other Facility Documents shall remain in full force and
effect and are hereby ratified and confirmed. Without limiting the generality of
the foregoing, the Pledge Agreements and all of the Pledged Collateral described
therein, and the Security Agreement and all of the Collateral described therein,
do and shall continue to secure the payment of all Obligations, in each case as
amended hereby.
(c) The execution, delivery and effectiveness of
this Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Agent or any Bank under any of the
Facility Documents, nor constitute a waiver of any provision of any of the
Facility Documents, including, without limitation, Section 8.1 of the Credit
Agreement.
SECTION 6. Costs, Expenses and Taxes. The Borrowers
jointly and severally agree to pay on demand all costs and expenses of the Agent
and the Banks in connection
<PAGE> 7
7
with the preparation, execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for the
Agent and the Banks with respect thereto and with respect to advising the Agent
and the Banks as to their rights and responsibilities hereunder and thereunder.
The Borrowers further jointly and severally agree to pay on demand all costs and
expenses, if any (including, without limitation, reasonable counsel fees and
expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of rights under
this Section 6. In addition, the Borrowers shall pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution and
delivery of this Amendment and the other instruments and documents to be
delivered hereunder, and agrees to save the Agent and the Banks harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes.
SECTION 7. Execution in Counterparts. This Amendment
may be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 8. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State of New
York.
<PAGE> 8
8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written..
Borrowers:
U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED ON NNEX 1 HERETO
By: _________________________________
Name:
Vice President of each of the above
corporations
Banks:
THE CHASE MANHATTAN BANK (successor
by merger to The Chase Manhattan Bank, N.A.)
By: _________________________________
John Hariaczyi
Vice President
CREDITANSTALT BANKVEREIN
By: _________________________________
A. W. Seidel
Vice President
By: _________________________________
Name:
Title:
<PAGE> 9
Agent:
THE CHASE MANHATTAN BANK (successor by
merger to The Chase Manhattan Bank, N.A.)
By: _________________________________
John Hariaczyi
Vice President
<PAGE> 10
ANNEX 1
U.S. HOMECARE CORPORATION, AFFILIATED HOME CARE OF WESTCHESTER, INC., U.S.
HOMECARE CORPORATION OF NORTHERN WESTCHESTER, U.S. HOMECARE CORPORATION OF
MANHATTAN, U.S. HOMECARE CORPORATION OF THE BRONX, U.S. HOMECARE CERTIFIED
CORPORATION OF NEW YORK, U.S. HOMECARE CORPORATION OF ALBANY, U.S. HOMECARE
INFUSION THERAPY SERVICES CORPORATION OF NEW JERSEY, U.S. HOMECARE CORPORATION
OF CONNECTICUT, U.S. HOMECARE CERTIFIED CORPORATION OF CONNECTICUT, U.S.
HOMECARE CORPORATION OF PENNSYLVANIA, U.S. HOMECARE CERTIFIED CORPORATION OF
PENNSYLVANIA, U.S. HOMECARE MEDICAL EQUIPMENT CORP., U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION, U.S. HOMECARE INFUSION THERAPY SERVICES
CORPORATION OF CONNECTICUT, U.S. HOMECARE CORP. OF SOUTH FLORIDA, U.S. HOMECARE
CERTIFIED CORP. OF FLORIDA, U.S. HOMECARE INFUSION THERAPY CORP. OF FLORIDA,
U.S. HOMECARE CORPORATION OF THE MIDATLANTIC REGION, U.S. HOMECARE CORPORATION
OF MICHIGAN, U.S. HOMECARE CORPORATION OF CALIFORNIA
<PAGE> 1
EXHIBIT 10.25
AMENDMENT NO. 2
Dated as of November 14, 1996
This AMENDMENT among U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED IN ANNEX 1 HERETO (collectively, the "Borrowers" and each,
individually, a "Borrower"), the banks parties to the Credit Agreement referred
to below (the "Banks"), and THE CHASE MANHATTAN BANK (successor by merger to The
Chase Manhattan Bank, N.A.), as agent (the "Agent") for the Banks thereunder.
PRELIMINARY STATEMENT.
A. The Borrowers, the Banks and the Agent have entered into an
Amended and Restated Credit Agreement dated as of October 6, 1995, as amended by
Amendment No. 1 dated as of October 31, 1996 (said Credit Agreement, as so
amended, being hereinafter referred to as the "Credit Agreement"; the terms
defined therein being used herein as therein defined unless otherwise defined
herein).
B. Pursuant to the Credit Agreement, the Borrowers are indebted
to the Banks under the Notes in the aggregate principal amount of $4,128,919.73,
as of the date hereof (the "Indebtedness"), which Indebtedness is owed by the
Borrowers to the Banks without offset, defense or counterclaim of any kind,
nature or description. As security for such Indebtedness, the Borrowers have
heretofore granted to the Banks a first priority security interest in all the
Borrowers' assets (such security interest having been partially released by the
Banks pursuant to the Partial Release Letter), whether now owed or hereafter
acquired, wherever located of any kind, nature or description, tangible or
intangible, including without limitation, the Borrowers' accounts receivable,
inventory, equipment, and general intangibles, and such security interests and
liens granted by the Borrowers to the Banks are, subject to the terms of the
Partial Release Letter, hereby reacknowledged and confirmed by the Borrowers.
C. The Borrowers, the Banks and the Agent have agreed to amend
the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments. The Credit Agreement is, effective as
of the date hereof and subject to the satisfaction of the conditions precedent
set forth in Section 3 hereof, hereby amended as follows:
(a) The following new definition is added in proper
alphabetical order to Section 1.1 of the Credit Agreement:
"EBITDA" shall mean, for any Person, for any period,
earnings before Interest Expense, taxes, depreciation, amortization and
extraordinary items for such period of such Person determined in
accordance with GAAP.
<PAGE> 2
2
(b) Section 8.1 is amended and restated in its entirety to
read as follows:
Section 8.1 Minimum Earnings. The Borrowers shall
maintain on a consolidated basis at all times as of the end of each
calendar month EBITDA of not less than 90% of the projected EBITDA for
such month as set forth in the Borrowers' business plan dated October
23, 1996.
(c) Subsection (l) of Section 6.8 is amended and restated in
its entirety to read as follows:
(l) as soon as available, and in any event within 25
days of the end of each calendar month, (i) a Borrowing Base
Certificate, and (ii) computations demonstrating compliance with the
covenant contained in Section 8.1, each certified by the Borrowers'
chief financial officer as of the close of business as of the end of
such month and after giving effect to all transactions occurring on
such day under the Sale Agreement;
(d) Subsection (n) of Section 6.8 is amended and restated in
its entirety to read as follows:
(n) immediately upon the request of the Agent or any
Bank from time to time (but not more often than once per calendar month
for the month just ended), and in no event later than 2 Banking Days
following any such request, a list setting forth the names and
addresses of all account debtors, an aging schedule with respect to
Receivables, classified according to the names of all account debtors,
an aging schedule with respect to accounts payable, a reconciliation of
Receivables and loan reconciliations, each certified by the Borrowers'
chief financial officer and in form and substance satisfactory to the
Agent;
(e) Subsection (n) of Section 9.1 is amended and restated in
its entirety to read as follows:
(n) at any time prior to the Termination Date, any of
the turnaround consultants providing consulting services to the
Borrowers as of October 31, 1996 shall no longer be providing such
consulting services;
SECTION 2. Waivers. Effective as of September 30, 1996 and
subject to the satisfaction of the conditions precedent set forth in Section 3
hereof, the Agent and the Banks hereby waive any Default or Event of Default due
to the Borrowers' failure to comply with (i) the covenant contained in Section
8.1 of the Credit Agreement for the fiscal quarter ending September 30, 1996,
and (ii) the covenant contained in Section 8.4 of the Credit Agreement for the
fiscal quarters ending September 30, 1996 and December 31, 1996.
SECTION 3. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Agent shall have received counterparts
of this Amendment executed by the Borrowers and all of the Banks , except that
Sections 1 and 2 hereof shall become
<PAGE> 3
3
effective when, and only when, the Agent shall have additionally received all of
the following documents, each document (unless otherwise indicated) being dated
the date of receipt thereof by the Agent (which date shall be the same for all
such documents), in form and substance satisfactory to the Banks:
(a) Certified copies of (i) the resolutions of the Board of
Directors of each Borrower approving this Amendment and the matters contemplated
hereby, (ii) all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to this Amendment and the matters
contemplated hereby, and (iii) all waivers and amendments with respect to the
Junior Debt concerning the matters covered by this Amendment.
(b) A certificate of the Secretary or an Assistant Secretary
of each Borrower certifying the names and true signatures of the officers of
such Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder.
(c) Payment of a $25,000 fee to the Agent for the ratable
benefit of the Banks.
SECTION 4. Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as follows:
(a) Such Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.
(b) The execution, delivery and performance by such Borrower
of this Amendment and the Facility Documents, as amended hereby, to which it is
or is to be a party are within such Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not contravene (i) such
Borrower's charter or by-laws, (ii) any contractual restriction binding on or
affecting such Borrower, or result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge,
encumbrance or preferential arrangement of any nature upon or with respect to
any of the properties now owned or hereafter acquired by such Borrower, or (iii)
to the best of such Borrower's knowledge, any law.
(c) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by such Borrower of
this Amendment or any of the Facility Documents, as amended hereby, to which it
is or is to be a party.
(d) This Amendment and each of the other Facility Documents
as amended hereby, to which such Borrower is a party constitute legal, valid and
binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms.
(e) To the best of such Borrower's knowledge, the Security
Agreement constitutes valid and perfected first priority security interests and
liens in and to the Collateral covered thereby enforceable against all third
parties in all jurisdictions and secure the payment of
<PAGE> 4
4
all obligations of such Borrower under the Facility Documents, as amended
hereby, and the execution, delivery and performance of this Amendment do not
adversely affect the aforesaid security interests and liens of such Security
Agreement.
(f) There is no pending or threatened action or proceeding
affecting such Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of such Borrower or any Subsidiary or which
purport to affect the legality, validity or enforceability of this Amendment or
any of the other Facility Documents, as amended hereby, except as set forth in
Schedule 4(f) hereto.
(g) After giving effect to the terms of the Amendment, no
event has occurred and is continuing which constitutes a Default or an Event of
Default.
SECTION 5. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Sections 1 and 2 hereof, on and after the date
hereof each reference in the Credit Agreement to "this Agreement," "hereunder,"
"hereof," "herein" or words of like import, and each reference in any Facility
Documents to the Credit Agreement or any other Facility Document, shall mean and
be a reference to the Credit Agreement or such other Facility Document as
amended hereby.
(b) Except as specifically amended above, the Credit
Agreement and the other Facility Documents shall remain in full force and effect
and are hereby ratified and confirmed. Without limiting the generality of the
foregoing, the Pledge Agreements and all of the Pledged Collateral described
therein, and the Security Agreement and all of the Collateral described therein,
do and shall continue to secure the payment of all Obligations, in each case as
amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Agent or any Bank under any of the Facility
Documents, nor constitute a waiver of any provision of any of the Facility
Documents.
(d) The Agent and the Banks are under no obligation to grant
the waivers contained in this Amendment. The Agent's and the Banks' granting of
such waivers shall not be deemed to limit or hinder any rights of the Agent or
any Bank under the Credit Agreement, nor shall it be deemed to create or infer a
course of dealing between the Agent or any Bank and the Parent or any of the
other Borrowers with regard to any provision of the Credit Agreement.
SECTION 6. Costs, Expenses and Taxes. The Borrowers jointly
and severally agree to pay on demand all costs and expenses of the Agent and the
Banks in connection with the preparation, execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent and the Banks with respect thereto and with respect to
advising the Agent and the Banks as to their rights and responsibilities
hereunder and thereunder. The Borrowers further jointly and severally agree to
pay on demand all costs and
<PAGE> 5
5
expenses, if any (including, without limitation, reasonable counsel fees and
expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Amendment and the other instruments and
documents to be delivered hereunder, including, without limitation, reasonable
counsel fees and expenses in connection with the enforcement of rights under
this Section 6. In addition, the Borrowers shall pay any and all stamp and other
taxes payable or determined to be payable in connection with the execution and
delivery of this Amendment and the other instruments and documents to be
delivered hereunder, and agrees to save the Agent and the Banks harmless from
and against any and all liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes.
SECTION 7. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 8. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed by their respective officers thereunto duly authorized, as of the
date first above written..
Borrowers:
U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED ON ANNEX 1 HERETO
By: ____________________________________
Name:
Vice President of each of the above
corporations
Banks:
THE CHASE MANHATTAN BANK (successor by
merger to The Chase Manhattan Bank, N.A.)
By: ____________________________________
John Hariaczyi
Vice President
<PAGE> 6
6
CREDITANSTALT BANKVEREIN
By: ____________________________________
A. W. Seidel
Vice President
By: ____________________________________
Peter Halter
Vice President
Agent:
THE CHASE MANHATTAN BANK (successor by
merger to The Chase Manhattan Bank, N.A.)
By: ____________________________________
John Hariaczyi
Vice President
<PAGE> 7
ANNEX 1
U.S. HOMECARE CORPORATION, AFFILIATED HOME CARE OF WESTCHESTER, INC., U.S.
HOMECARE CORPORATION OF NORTHERN WESTCHESTER, U.S. HOMECARE CORPORATION OF
MANHATTAN, U.S. HOMECARE CORPORATION OF THE BRONX, U.S. HOMECARE CERTIFIED
CORPORATION OF NEW YORK, U.S. HOMECARE CORPORATION OF ALBANY, U.S. HOMECARE
INFUSION THERAPY SERVICES CORPORATION OF NEW JERSEY, U.S. HOMECARE CORPORATION
OF CONNECTICUT, U.S. HOMECARE CERTIFIED CORPORATION OF CONNECTICUT, U.S.
HOMECARE CORPORATION OF PENNSYLVANIA, U.S. HOMECARE CERTIFIED CORPORATION OF
PENNSYLVANIA, U.S. HOMECARE MEDICAL EQUIPMENT CORP., U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION, U.S. HOMECARE INFUSION THERAPY SERVICES
CORPORATION OF CONNECTICUT, U.S. HOMECARE CORP. OF SOUTH FLORIDA, U.S. HOMECARE
CERTIFIED CORP. OF FLORIDA, U.S. HOMECARE INFUSION THERAPY CORP. OF FLORIDA,
U.S. HOMECARE CORPORATION OF THE MIDATLANTIC REGION, U.S. HOMECARE CORPORATION
OF MICHIGAN, U.S. HOMECARE CORPORATION OF CALIFORNIA
<PAGE> 1
EXHIBIT 10.26
AMENDMENT NO. 3
Dated as of March 25, 1997
This AMENDMENT among U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED IN ANNEX 1 HERETO (collectively, the "Borrowers" and each,
individually, a "Borrower"), the banks parties to the Credit Agreement referred
to below (the "Banks"), and THE CHASE MANHATTAN BANK (successor by merger to The
Chase Manhattan Bank, N.A.), as agent (the "Agent") for the Banks thereunder.
PRELIMINARY STATEMENT.
A. The Borrowers, the Banks and the Agent have entered into an
Amended and Restated Credit Agreement dated as of October 6, 1995, as amended by
Amendment No. 1 dated as of October 31, 1996, and Amendment No. 2 dated as of
November 14, 1996 (said Credit Agreement, as so amended, being hereinafter
referred to as the "Credit Agreement"; the terms defined therein being used
herein as therein defined unless otherwise defined herein).
B. Pursuant to the Credit Agreement, the Borrowers are indebted
to the Banks under the Notes in the aggregate principal amount of $5,065,802.29,
as of the date hereof (the "Indebtedness"), which Indebtedness is owed by the
Borrowers to the Banks without offset, defense or counterclaim of any kind,
nature or description. As security for such Indebtedness, the Borrowers have
heretofore granted to the Banks a first priority security interest in all the
Borrowers' assets (such security interest having been partially released by the
Banks pursuant to the Partial Release Letter), whether now owed or hereafter
acquired, wherever located of any kind, nature or description, tangible or
intangible, including without limitation, the Borrowers' accounts receivable,
inventory, equipment, and general intangibles, and such security interests and
liens granted by the Borrowers to the Banks are, subject to the terms of the
Partial Release Letter, hereby reacknowledged and confirmed by the Borrowers.
C. The Borrowers, the Banks and the Agent have agreed to amend
the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments. The Credit Agreement is,
effective as of the date hereof and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The following definitions contained in Section 1.1 of the
Credit Agreement are amended and restated in full to read as follows:
"Current Liabilities" means all liabilities of the
Borrowers treated as current liabilities in accordance with GAAP,
including without limitation (a) all obligations payable on demand or
within one year after the date in which the determination is made and
(b) installment and sinking fund payments required to be made within
one year after the date on which determination is made, but excluding
(i) the Restructuring Reserve, (ii) current maturities of long term
debt (including the
<PAGE> 2
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Junior Debt and debt under this Agreement), and (iii) all such
liabilities or obligations which are renewable or extendable at the
option of any Borrower to a date more than one year from the date of
determination.
"Interest Coverage Ratio" shall mean, for any Person, as at
the end of any fiscal quarter, the ratio of (a) to (b) where (a) is
equal to (i) EBITDA (but not including in such calculation any
adjustments included in EBITDA during the relevant period, with respect
to any prior periods, relating to Medicare/Medicaid, discontinued
operations or other matters of such Person) of such Person for such
fiscal quarter, less (ii) Capital Expenditures of such Person for such
fiscal quarter, and (b) is equal to the Interest Expense of such Person
for such fiscal quarter.
"Margin" means (a) for the period up to and including June
30, 1997, two percent (2%), (b) for the period from and including July
1, 1997 to and including September 30, 1997, three percent (3%), and
(c) thereafter, four percent (4%); provided, however, that so long as
no Default or Event of Default then exists, when the aggregate
Commitments of the Banks are equal to $5,000,000 or less, the Margin
shall be one-half percent (1/2%) less than the Margin that would
otherwise be in effect.
"Termination Date" means (i) January 2, 1998; provided that
if such date is not a Banking Day, the Termination Date shall be the
next succeeding Banking Day, or (ii) the earlier date of termination in
whole of the Commitments pursuant to Section 2.7 or Section 9.2, or
otherwise.
"Warrants" means those certain warrants in the form of
Exhibit L to be delivered by the Parent to the Banks under the terms of
this Agreement and any additional warrants from time to time delivered
by the Parent to the Banks in connection with this Agreement.
(b) Article 8 is amended and restated in its entirety to
read as follows:
ARTICLE 8. FINANCIAL COVENANTS.
So long as any of the Notes shall remain unpaid or any Bank
shall have any Commitment under this Agreement:
Section 8.1 Minimum Earnings. The Borrowers shall maintain
on a consolidated basis at all times as of the end of each calendar
month EBITDA of not less than 90% of the projected EBITDA for such
month as set forth in the Borrowers' business plan dated October 23,
1996.
Section 8.2 Capital Expenditures. The Borrowers shall not
make or permit to be made Consolidated Capital Expenditures during any
fiscal year of the Borrowers to exceed in the aggregate $500,000.
<PAGE> 3
-3-
Section 8.3 Current Ratio. The Borrowers shall maintain at
all times as of the end of each fiscal quarter a ratio of Consolidated
Current Assets to Consolidated Current Liabilities of not less than
1.25 to 1.0.
Section 8.4 Interest Coverage Ratio. The Borrowers shall
maintain at all times as of the end of each fiscal quarter on a
consolidated basis an Interest Coverage Ratio of not less than 2.5 to
1.0.
(a) The following new Subsection (d) is added at the end of
Section 2.11:
(d) Extension Fee. The Borrowers shall pay to the Agent for
the ratable benefit of the Banks an extension fee in the amount of
$35,000, which shall be fully earned by the Banks on March 31, 1997,
and which shall be payable on the Termination Date.
(d) A new Section 6.13 is added as follows:
Section 6.13. Amendment to Purchase Agreement. By March 31,
1997, enter into an amendment to the Purchase Agreement extending the
maturity date thereof to January 2, 1998, which amendment shall modify
the Purchase Agreement consistent with the terms of that certain
memorandum Re: Terms and Conditions Addendum for Contract Extension to
U.S. HomeCare Receivables Purchasing Program, dated March 12, 1997, by
and between The Chase Manhattan Bank and the Parent and which amendment
shall be satisfactory to the Banks.
(e) A new Section 6.14 is added as follows:
Section 6.14. Corporate Status. By April 30, 1997, with
respect to each of U.S. Homecare Medical Equipment Corp., U.S. Homecare
Infusion Therapy Products Corporation, U.S. HomeCare Infusion Therapy
Services Corporation of Connecticut, U.S. Homecare Corporation of the
MidAtlantic Region and U.S. Homecare Corporation of Michigan (the
"Inactive Borrowers"), either (i) take affirmative steps to cause such
Inactive Borrower's dissolution or (ii) cause such Inactive Borrower to
be in good standing under the laws of its jurisdiction of incorporation
and each other state in which it is required to qualify to do business
as a foreign corporation, and provide copies of good standing
certificates from the relevant states to the Banks. As soon as
available, the Borrowers will provide the Banks with copies of
certificates of dissolution for each of the Inactive Borrowers
dissolved in accordance with clause (i) of this Section 6.14.
(f) Subsection 6.8(m) is deleted in its entirety, and the
following subsections relettered accordingly.
(g) The corporations listed on Schedule 1(g) to this
Amendment (the "Dissolved Borrowers") shall cease to be "Borrowers" under the
Credit Agreement and the other Facility Documents in all respects.
Notwithstanding the foregoing, the
<PAGE> 4
-4-
Agent and the Banks shall have no obligation to release their security interests
in and security interest filings against the assets of the Dissolved Borrowers,
and nothing contained herein shall be construed to constitute such a release.
(h) A new Section 7.15 is added as follows:
Section 7.15. Inactive Borrowers. Unless the Borrowers have
elected pursuant to Section 6.14 to return such Inactive Borrower to
good standing, transfer assets or liabilities to any Inactive Borrower
or cause any such Inactive Borrower to generate accounts receivable.
SECTION 2. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Agent shall have received counterparts
of this Amendment executed by the Borrowers and all of the Banks , except that
Sections 1 and 2 hereof shall become effective when, and only when, the Agent
shall have additionally received all of the following documents, each document
(unless otherwise indicated) being dated the date of receipt thereof by the
Agent (which date shall be the same for all such documents), in form and
substance satisfactory to the Banks:
(a) Certified copies of (i) the resolutions of the Board of
Directors or Executive Committee of each Borrower approving this Amendment and
the matters contemplated hereby, and (ii) all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Amendment and the matters contemplated hereby, (iii) all waivers and
amendments with respect to the Junior Debt concerning the matters covered by
this Amendment, which shall include an amendment to the Junior Debt documents
extending the maturity date thereof to January 15, 1998, (iv) an executed copy
of that certain memorandum Re: Terms and Conditions Addendum for Contract
Extension to U.S. HomeCare Receivables Purchasing Program, dated March 12, 1997,
by and between The Chase Manhattan Bank and the Parent, and (v)
management-prepared financial statements as of December 31, 1996.
(b) A certificate of the Secretary or an Assistant Secretary of
each Borrower certifying the names and true signatures of the officers of such
Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder.
(c) A favorable opinion of Brobeck, Phleger & Harrison LLP,
counsel for the Borrowers, to the effect that this Amendment and each and every
other document delivered by any of the Borrowers have been duly authorized,
executed and delivered by such Borrowers, and constitute the legal, valid and
binding obligations of such Borrowers, enforceable against such Borrowers in
accordance with their respective terms, and as to such other matters as the
Agent may reasonably require.
(d) A certificate signed by a duly authorized officer of each
Borrower stating that:
<PAGE> 5
-5-
(i) The representations and warranties contained in Section
3 hereof are correct on and as of the date of such certificate as
though made on and as of such date, and
(ii) After giving effect to the terms of the Amendment, no
event has occurred and is continuing which constitutes a Default or an
Event of Default.
(e) Results of a recent field examination by the Banks of the
Borrowers' assets, liabilities, books and records.
(f) Additional warrants, in the same form and containing the same
strike price as the Warrants dated as of October 6, 1995 (the "Existing
Warrants"), granting the Banks the ratable rights to purchase 89,000 shares of
the Parent (the "Additional Warrants"). The Additional Warrants will contain a
provision granting the Banks the rights to purchase the following additional
shares of the Parent on the following dates if the Parent has not received by
such dates either a bona fide letter of intent for a merger or consolidation
involving the Parent or the purchase of substantially all of the stock of the
Borrowers or the Parent or substantially all of their assets or a bona fide
commitment to refinance the Loans: (i) on June 30, 1997, the rights to purchase
44,500 shares of the Parent, and (ii) on September 30, 1997, the rights to
purchase 44,500 shares of the Parent. The registration statement covering the
shares issuable upon exercise of the Existing Warrants that is to be filed
within 30 days following completion of the Parent's audited financial statements
for the year ended December 31, 1996 (but in no event later than April 30, 1997)
shall also cover all shares issuable upon exercise of the Additional Warrants.
(g) Amendment No. 1 to the Registration Rights Agreement, dated
October 6, 1995, among the Parent and the Banks.
(h) Notice Letter from the Parent, notifying the holders of the
Existing Warrants of the current strike price and number of shares issuable upon
exercise thereof and reaffirming the continuing validity of the Existing
Warrants and the obligations of the Parent thereunder.
(i) Amendment No. 1 to the Existing Warrants.
(j) Payment of a $40,000 extension fee to the Agent for the
ratable benefit of the Banks, which shall be fully earned by the Banks on the
date so paid.
SECTION 3. Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as follows:
(a) Such Borrower is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation.
(b) The Dissolved Borrowers, on their respective dates of
dissolution, possessed no material assets and no material liabilities. The
Inactive Borrowers possess no
<PAGE> 6
-6-
material assets and no material liabilities. None of the Dissolved Borrowers or
the Inactive Borrowers generate accounts receivable.
(c) The execution, delivery and performance by such Borrower of
this Amendment and the Facility Documents, as amended hereby, to which it is or
is to be a party are within such Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not contravene (i) such
Borrower's charter or by-laws, (ii) any contractual restriction binding on or
affecting such Borrower, or result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge,
encumbrance or preferential arrangement of any nature upon or with respect to
any of the properties now owned or hereafter acquired by such Borrower, or (iii)
to the best of such Borrower's knowledge, any law.
(d) No authorization, approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by such Borrower of this Amendment
or any of the Facility Documents, as amended hereby, to which it is or is to be
a party.
(e) This Amendment and each of the other Facility Documents as
amended hereby, to which such Borrower is a party constitute legal, valid and
binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms.
(f) To the best of such Borrower's knowledge, the Security
Agreement constitutes valid and perfected first priority security interests and
liens in and to the Collateral covered thereby enforceable against all third
parties in all jurisdictions and secure the payment of all obligations of such
Borrower under the Facility Documents, as amended hereby, and the execution,
delivery and performance of this Amendment do not adversely affect the aforesaid
security interests and liens of such Security Agreement.
(g) There is no pending or threatened action or proceeding
affecting such Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of such Borrower or any Subsidiary or which
purport to affect the legality, validity or enforceability of this Amendment or
any of the other Facility Documents, as amended hereby.
(h) After giving effect to the terms of the Amendment, no event
has occurred and is continuing which constitutes a Default or an Event of
Default.
SECTION 4. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Sections 1 and 2 hereof, on and
after the date hereof each reference in the Credit Agreement to "this
Agreement," "hereunder," "hereof," "herein" or words of like import, and each
reference in any Facility Documents to the Credit Agreement or any other
Facility Document, shall mean and be a reference to the Credit Agreement or such
other Facility Document as amended hereby.
<PAGE> 7
-7-
(b) Except as specifically amended above, the Credit Agreement
and the other Facility Documents shall remain in full force and effect and are
hereby ratified and confirmed. Without limitation to the foregoing, each of the
Borrowers hereby confirms that the removal of the Dissolved Borrowers from the
Borrowers hereunder shall not affect its obligations under the Credit Agreement
and the other Facility Documents, which are continuing obligations of such
Borrower. Without limiting the generality of the foregoing, the Pledge
Agreements and all of the Pledged Collateral described therein, and the Security
Agreement and all of the Collateral described therein, do and shall continue to
secure the payment of all Obligations, in each case as amended hereby.
(c) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver of any
right, power or remedy of the Agent or any Bank under any of the Facility
Documents, nor constitute a waiver of any provision of any of the Facility
Documents.
(d) The Agent and the Banks are under no obligation to enter into
this Amendment. The Agent's and the Banks' entering into this Amendment shall
not be deemed to limit or hinder any rights of the Agent or any Bank under the
Credit Agreement, nor shall it be deemed to create or infer a course of dealing
between the Agent or any Bank and the Parent or any of the other Borrowers with
regard to any provision of the Credit Agreement.
SECTION 5. Costs, Expenses and Taxes. The Borrowers jointly
and severally agree to pay on demand all costs and expenses of the Agent and the
Banks in connection with the preparation, execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Agent and the Banks with respect thereto and with respect to
advising the Agent and the Banks as to their rights and responsibilities
hereunder and thereunder. The Borrowers further jointly and severally agree to
pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 5. In addition, the Borrowers shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the
Agent and the Banks harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes.
SECTION 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
<PAGE> 8
-8-
SECTION 7. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written..
Borrowers:
U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED ON ANNEX 1 HERETO
By: _____________________________________
Name:
Vice President of each of the above
corporations
Banks:
THE CHASE MANHATTAN BANK (successor by
merger to The Chase Manhattan Bank, N.A.)
By: _____________________________________
John Hariaczyi
Vice President
CREDITANSTALT BANKVEREIN
By: _____________________________________
A. W. Seidel
Vice President
By: _____________________________________
Peter Halter
Vice President
<PAGE> 9
-9-
Agent:
THE CHASE MANHATTAN BANK (successor by
merger to The Chase Manhattan Bank, N.A.)
By: _____________________________________
John Hariaczyi
Vice President
<PAGE> 10
ANNEX 1
U.S. HOMECARE CORPORATION, AFFILIATED HOME CARE OF WESTCHESTER, INC., U.S.
HOMECARE CORPORATION OF NORTHERN WESTCHESTER, U.S. HOMECARE CORPORATION OF
MANHATTAN, U.S. HOMECARE CORPORATION OF THE BRONX, U.S. HOMECARE CERTIFIED
CORPORATION OF NEW YORK, U.S. HOMECARE CORPORATION OF ALBANY, U.S. HOMECARE
INFUSION THERAPY SERVICES CORPORATION OF NEW JERSEY, U.S. HOMECARE CORPORATION
OF CONNECTICUT, U.S. HOMECARE CERTIFIED CORPORATION OF CONNECTICUT, U.S.
HOMECARE CORPORATION OF PENNSYLVANIA, U.S. HOMECARE CERTIFIED CORPORATION OF
PENNSYLVANIA, U.S. HOMECARE MEDICAL EQUIPMENT CORP., U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION, U.S. HOMECARE INFUSION THERAPY SERVICES
CORPORATION OF CONNECTICUT, U.S. HOMECARE CORPORATION OF THE MIDATLANTIC REGION,
U.S. HOMECARE CORPORATION OF MICHIGAN
<PAGE> 11
SCHEDULE 1(G)
DISSOLVED BORROWERS
Florida Corporations:
U.S. Homecare Corp. of South Florida
U.S. Homecare Certified Corp. of Florida
U.S. Homecare Infusion Therapy Corp. of Florida
California Corporation:
U.S. Homecare Corporation of California
<PAGE> 1
AMENDMENT NO. 1
Dated as of November 14, 1996
This AMENDMENT among U.S. HOMECARE CORPORATION AND ITS SUBSIDIARIES
LISTED IN ANNEX 1 HERETO (collectively, the "Borrowers" and each, individually,
a "Borrower") and FLEET NATIONAL BANK (successor by merger to Fleet Bank,
National Association) (the "Bank").
PRELIMINARY STATEMENT.
A. The Borrowers and the Bank have entered into a Credit Agreement
dated as of October 6, 1995 (the "Credit Agreement"; the terms defined therein
being used herein as therein defined unless otherwise defined herein).
B. Pursuant to the Credit Agreement, the Borrowers are indebted to the
Bank under the Note in the principal amount of $3,000,000.00, as of the date
hereof (the "Indebtedness"), which indebtedness is owed by the Borrowers to the
Bank without offset, defense or counterclaim of any kind, nature or description.
As security for such Indebtedness, the Borrowers have heretofore granted to the
Bank a second priority security interest in all the Borrowers' assets (excluding
certain health care receivables as more fully set forth in the Security
Agreement), whether nor owed or hereafter acquired, wherever located of any
kind, nature or description, tangible or intangible, including without
limitation, the Borrowers' accounts receivable, inventory, equipment, and
general intangibles, and such security interests and liens granted by the
Borrowers to the Bank are hereby reacknowledged and confirmed by the Borrowers.
C. The Borrowers and the Bank have agreed to amend the Credit
Agreement as hereinafter set forth.
SECTION 1. Amendments. The Credit Agreement is, effective as of
the date hereof and subject to the satisfaction of the conditions precedent set
forth in Section 3 hereof, hereby amended as follows:
(a) The following new definition is added in proper alphabetical
order to Section 1.1 of the Credit Agreement:
"EBITDA" shall mean, for any Person, for any period, earnings
before Interest Expense, taxes, depreciation, amortization and extraordinary
items for such period of such Person determined in accordance with GAAP.
(b) Section 7.1 is amended and restated in its entirety to read
as follows:
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Section 7.1 Minimum Earnings. The Borrowers shall maintain
on a consolidated basis at all times as of the end of each calendar month EBITDA
of not less than 90% of the projected EBITDA for such month as set forth in the
Borrowers' business plan dated October 23, 1996.
(c) Subsection (l) of Section 5.8 is amended and restated in its
entirety to read as follows:
(l) as soon as available, and in any event within 25 days of
the end of each calendar month, (i) a certificate, and (ii) computations
demonstrating compliance with the covenant contained in Section 7.1 each
certified by the Borrowers' chief financial officer as of the close of business
as of the end of such month and after giving effect to all transactions
occurring on such day under the Sale Agreement;
(d) Subsection (n) of Section 5.8 is amended and restated in its
entirety to read as follows:
(n) immediately upon the request of the Bank or the
Guarantor from time to time (but not more often than once per calendar month for
the month just ended) and in no event later than 2 Banking Days following any
such request, a list setting forth the names and addresses of all account
debtors, an aging schedule with respect to Receivables classified according to
the names of all account debtors, an aging schedule with respect to accounts
payable, a reconciliation of Receivables and loan reconciliations, each
certified by the Borrowers' chief financial officer and in form and substance
satisfactory to the Bank and Guarantor.
(e) Section 5.8 is amended by deleting the word "and" at the end
of subsection (t), replacing the period (".") at the end of subsection (u) with
a semicolon (";") and the word "and" and adding the following new subsection (v)
at the end of Section 5.8:
(v) as soon as available and in any event within 45 days
after the end of each month of each fiscal year of the Borrowers, consolidated
balance sheets of the Borrowers and their Consolidated Subsidiaries as of the
end of such month and consolidated income statements of the Borrowers and their
Consolidated Subsidiaries for the period commencing at the end of the previous
fiscal year and ending with the end of such month, all in reasonable detail and
stating in comparative form the respective consolidated figures for the
corresponding date and period in the previous fiscal year and all prepared in
accordance with GAAP and certified by the chief financial officer of each
Borrower (subject to year-end adjustments).
(f) Section 8.1 is amended by deleting the word "or" at the end
of subsection (n), replacing the period (".") at the end of subsection (o) with
a semicolon (";") and adding the following new Events of Default at the end of
Section 8.1:
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(p) at any time prior to the Termination Date, any of the
turnaround consultants providing consulting services to the Borrowers as of
October 31, 1996 shall no longer be providing such consulting services; or
(q) the Borrowers shall pay more than $100,000 in the aggregate
with respect to the services provided by Sanders Morris Mundy Inc. in connection
with the Asset Purchase Agreement dated as of October 31, 1996 among U.S.
HomeCare Infusion Therapy Services Corporation of New Jersey, the Parent and
Transworld Acquisition Corp.
SECTION 2. Waivers. Effective as of September 30, 1996, and subject to
the satisfaction of the conditions precedent set forth in Section 3 hereof, the
Bank hereby waives any Default or Event of Default due to the Borrowers' failure
to comply with (i) the covenant contained in Section 7.1 of the Credit Agreement
for the fiscal quarter ending September 30, 1996, and (ii) the covenant
contained in Section 7.4 of the Credit Agreement for the fiscal quarters ending
September 30, 1996 and December 31, 1996.
SECTION 3. Conditions of Effectiveness. This Amendment shall become
effective when, and only when, the Bank shall have received counterparts of this
Amendment executed by the Borrowers and the consent hereto executed by the
Guarantor, except that Sections 1 and 2 hereof shall become effective when and
only when, the Bank shall have additionally received all of the following
documents, each document (unless otherwise indicated) being dated the date of
receipt thereof by the Bank (which date shall be the same for all such
documents), in form and substance satisfactory to the Bank and the Guarantor:
(a) Certified copies of (i) the resolutions of the Board of Directors
of each Borrower approving this Amendment and the matters contemplated hereby,
(ii) all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to this Amendment and the matters contemplated
hereby, and (iii) all waivers and amendments with respect to the Senior Debt (as
defined in the Intercreditor Agreement) concerning the matters covered by this
Amendment.
(b) A certificate of the Secretary or an Assistant Secretary of each
Borrower certifying the names and true signatures of the officers of such
Borrower authorized to sign this Amendment and the other documents to be
delivered hereunder.
(c) Payment of a $10,000 fee to the Bank.
SECTION 4. Representations and Warranties of the Borrowers. Each
Borrower represents and warrants as follows:
(a) Such Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation.
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<PAGE> 4
(b) The execution, delivery and performance by such Borrower of this
Amendment and the Facility Documents, as amended hereby, to which it is or is to
be a party are within such Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not contravene (i) such
Borrower's charter or by-laws, (ii) any contractual restriction binding on or
affecting such Borrower, or result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge,
encumbrance or preferential arrangement of any nature upon or with respect to
any of the properties now owned or hereafter acquired by such Borrower, or (iii)
to the best of such Borrower's knowledge, any law.
(c) No authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is required for the
due execution, delivery and performance by such Borrower of this Amendment or
any of the Facility Documents, as amended hereby, to which it is or is to be a
party.
(d) This Amendment and each of the other Facility Documents as amended
hereby, to which such Borrower is a party constitute legal, valid and binding
obligations of such Borrower enforceable against such Borrower in accordance
with their respective terms.
(e) To the best of such Borrower's knowledge, the Security Agreement
constitutes valid and perfected second priority security interests and liens in
and to the Collateral covered thereby enforceable against all third parties in
all jurisdictions and secure the payment of all obligations of such Borrower
under the Facility Documents, as amended hereby, and the execution, delivery and
performance of this Amendment do not adversely affect the aforesaid security
interests and liens of such Security Agreement.
(f) There is no pending or threatened action or proceeding affecting
such Borrower or any of its Subsidiaries before any court, governmental agency
or arbitrator, which may materially adversely affect the financial condition or
operations of such Borrower or any Subsidiary or which purport to affect the
legality, validity or enforceability of this Amendment or any of the other
Facility Documents, as amended hereby, except as set forth in Schedule 4(f)
hereto.
(g) After giving effect to the terms of the Amendment, no event has
occurred and is continuing which constitutes a Default or an Event of Default.
SECTION 5. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Sections 1 and 2 hereof, on and after
the date hereof each reference in the Credit Agreement to "this Agreement",
"hereunder," "hereof", "herein" or words of like import, and each reference in
any Facility Documents to the Credit Agreement or any other Facility Document,
shall mean and be a reference to the Credit Agreement or such other Facility
Document as amended hereby.
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<PAGE> 5
(b) Except as specifically amended above, the Credit Agreement and the
other Facility Documents shall remain in full force and effect and are hereby
ratified and confirmed. Without limiting the generality of the foregoing, the
Pledge Agreement and all of the Pledged Collateral described therein, and the
Security Agreement and all of the Collateral described therein, do and shall
continue to secure the payment of all Obligations, in each case as amended
hereby.
(c) The execution, delivery and effectiveness of this Amendment shall
not, except as expressly provided herein, operate as a waiver of any right,
power or remedy of the Bank or the Guarantor under any of the Facility
Documents, nor constitute a waiver of any provision of any of the Facility
Documents.
(d) The Bank is under no obligation to grant the waivers contained in
this Amendment. The Bank's granting of such waivers shall not be deemed to limit
or hinder any rights of the Bank or the Guarantor under the Credit Agreement,
nor shall it be deemed to create or infer a course of dealing between the Bank
and the Parent or any of the other Borrowers with regard to any provision of the
Credit Agreement.
SECTION 6. Costs, Expenses and Taxes. The Borrowers jointly and
severally agree to pay on demand all costs and expenses of the Bank and the
Guarantor in connection with the preparation, execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank and the Guarantor with respect thereto and with respect to
advising the Bank and the Guarantor as to their rights and responsibilities
hereunder and thereunder. The Borrowers further jointly and severally agree to
pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 6. In addition, the Borrowers shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the Bank
and the Guarantor harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes.
SECTION 7. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which when taken together shall constitute but one and
the same instrument.
SECTION 8. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of Connecticut.
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<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWERS:
U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED ON ANNEX 1 HERETO
By:______________________________________
Name:
Vice President of each of the above
corporations
BANK:
FLEET NATIONAL BANK, Successor by merger
to Fleet Bank, National Association
By:______________________________________
Christopher R. Zell
Vice President
CONSENT OF GUARANTOR
The Guarantor hereby consents to the execution of the foregoing Amendment by the
Bank and to the terms and conditions contained therein.
CONNECTICUT DEVELOPMENT AUTHORITY
By:______________________________________
Frank T. Gagliardo
Vice President and Senior Loan Officer
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<PAGE> 7
ANNEX 1
U.S. HOMECARE CORPORATION, AFFILIATED HOME CARE OF WESTCHESTER, INC., U.S.
HOMECARE CORPORATION OF NORTHERN WESTCHESTER, U.S. HOMECARE CORPORATION OF
MANHATTAN, U.S. HOMECARE CORPORATION OF THE BRONX, U.S. HOMECARE CERTIFIED
CORPORATION OF NEW YORK, U.S. HOMECARE CORPORATION OF ALBANY, U.S. HOMECARE
INFUSION THERAPY SERVICES CORPORATION OF NEW JERSEY, U.S. HOMECARE CORPORATION
OF CONNECTICUT, U.S. HOMECARE CERTIFIED CORPORATION OF CONNECTICUT, U.S.
HOMECARE CORPORATION OF PENNSYLVANIA, U.S. HOMECARE CERTIFIED CORPORATION OF
PENNSYLVANIA, U.S. HOMECARE MEDICAL EQUIPMENT CORP., U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION, U.S. HOMECARE INFUSION THERAPY SERVICES
CORPORATION OF CONNECTICUT, U.S. HOMECARE CORP. OF SOUTH FLORIDA, U.S. HOMECARE
CERTIFIED CORP. OF FLORIDA, U.S. HOMECARE INFUSION THERAPY CORP OF FLORIDA, U.S.
HOMECARE CORPORATION OF THE MIDATLANTIC REGION, U.S. HOMECARE CORPORATION OF
MICHIGAN, U.S. HOMECARE CORPORATION OF CALIFORNIA
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<PAGE> 1
AMENDMENT NO. 2
Dated as of March ____, 1997
This AMENDMENT among U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED IN ANNEX 1 HERETO (collectively, the "Borrowers" and each,
individually, a "Borrower") and FLEET NATIONAL BANK (successor by merger to
Fleet Bank, National Association)(the "Bank").
PRELIMINARY STATEMENT.
A. The Borrowers and the Bank have entered into a Credit
Agreement dated as of October 6, 1995, as amended by Amendment No. 1 dated as of
November 14, 1996 (said Credit Agreement, as so amended, being hereinafter
referred to as the "Credit Agreement"; the terms defined therein being used
herein as therein defined unless otherwise defined herein).
B. Pursuant to the Credit Agreement, the Borrowers are
indebted to the Bank under the Note in the principal amount of $3,000,000, as of
the date hereof (the "Indebtedness"), which Indebtedness is owed by the
Borrowers to the Bank without offset, defense or counterclaim of any kind,
nature or description. As security for such Indebtedness, the Borrowers have
heretofore granted to the Bank a second priority security interest in all the
Borrowers' assets (excluding certain health care receivables as more fully set
forth in the Security Agreement), whether now owed or hereafter acquired,
wherever located of any kind, nature or description, tangible or intangible,
including without limitation, the Borrowers' accounts receivable, inventory,
equipment, and general intangibles, and such security interests and liens
granted by the Borrowers to the Bank are hereby reacknowledged and confirmed by
the Borrowers.
C. The Borrowers and the Bank have agreed to amend the
Credit Agreement as hereinafter set forth.
SECTION 1. Amendments.
(a) The Credit Agreement is, effective as of the date
hereof and subject to the satisfaction of the conditions precedent set forth in
Section 2 hereof, hereby amended as follows:
(i) The following definitions contained in
Section 1.1 of the Credit Agreement are
amended and restated in full to read as
follows:
"Current Liabilities" means all liabilities
of the Borrowers treated as current liabilities in
accordance with GAAP, including without limitation
(a) all obligations payable on demand or within one
year after the date in which the determination is
made and (b) installment and sinking fund payments
required to be made within one year after the date on
which determination is made, but excluding (i) the
Restructuring Reserve, (ii) current maturities of
long term debt (including the Senior Debt (as defined
in the Intercreditor Agreement) and debt under this
Agreement), and (iii) all such liabilities or
obligations which are renewable or extendable at the
option of any Borrower to a date more than one year
from the date of determination.
"Interest Coverage Ratio" shall mean, for
any Person, as at the end of any fiscal quarter, the
ratio of (a) to (b) where (a) is equal to (i) EBITDA
(but not including in such calculation any
adjustments included in EBITDA during the relevant
period, with respect to any prior periods, relating
to Medicare/Medicaid, discontinued operations or
other matters of such Person) of such Person for such
fiscal quarter, less (ii) Capital Expenditures of
such Person for such fiscal quarter, and (b) is equal
to the Interest Expense of such Person for such
fiscal quarter.
"Termination Date" means (i) January 15,
1998; provided that if such date is not a Banking
Day, the Termination Date shall be the next
succeeding Banking Day, or (ii) the earlier date of
termination in whole of the Commitments pursuant to
Section 2.6 or Section 8.2, or otherwise.
<PAGE> 2
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(ii) Article 7 is amended and restated in its
entirety to read as follows:
ARTICLE 7. FINANCIAL COVENANTS.
So long as the Note shall remain unpaid or the Bank
shall have any Commitment under this Agreement:
Section 7.1 Minimum Earnings. The Borrowers shall
maintain on a consolidated basis at all times as of the end of
each calendar month EBITDA of not less than 90% of the
projected EBITDA for such month as set forth in the Borrowers'
business plan dated October 23, 1996.
Section 7.2 Capital Expenditures. The Borrowers shall
not make or permit to be made Consolidated Capital
Expenditures during any fiscal year of the Borrowers to exceed
in the aggregate $500,000.
Section 7.3 Current Ratio. The Borrowers shall
maintain at all times as of the end of each fiscal quarter a
ratio of Consolidated Current Assets to Consolidated Current
Liabilities of not less than 1.25 to 1.0.
Section 7.4 Interest Coverage Ratio. The Borrowers
shall maintain at all times as of the end of each fiscal
quarter on a consolidated basis an Interest Coverage Ratio of
not less than 2.5 to 1.0.
(iii) A new Section 5.12 is added as follows:
Section 5.12 Amendment to Purchase Agreement. By
March 31, 1997, enter into an amendment to the Purchase
Agreement extending the maturity date thereof to January 2,
1998, which amendment shall modify the Purchase Agreement
consistent with the terms of that certain memorandum Re: Terms
and Conditions Addendum for Contract Extension to U.S.
HomeCare Receivables Purchasing Program, dated March 12, 1997,
by and between The Chase Manhattan Bank and the Parent and
which amendment shall be satisfactory to the Bank and the
Guarantor.
(iv) A new Section 5.13 is added as follows:
Section 5.13. Corporate Status. By April 30, 1997,
with respect to each of U.S. Homecare Medical Equipment Corp.,
U.S. Homecare Infusion Therapy Products Corporation, U.S.
HomeCare Infusion Therapy Services Corporation of Connecticut,
U.S. Homecare Corporation of the MidAtlantic Region and U.S.
Homecare Corporation of Michigan (the "Inactive Borrowers"),
either (i) take affirmative steps to cause such Inactive
Borrower's dissolution or (ii) cause such Inactive Borrower to
be in good standing under the laws of its jurisdiction of
incorporation and each other state in which it is required to
qualify to do business as a foreign corporation, and provide
copies of good standing certificates from the relevant states
to the Bank. As soon as available, the Borrowers will provide
the Bank with copies of certificates of dissolution for each
of the Inactive Borrowers dissolved in accordance with clause
(i) of this Section 5.13.
(v) Subsection 5.8 (m) is deleted in its
entirety, and the following subsections
relettered accordingly.
(vi) The corporations listed on Schedule 1(a)(vi)
to this Amendment (the "Dissolved
Borrowers") shall cease to be "Borrowers"
under the Credit Agreement and the other
Facility Documents in all respects.
Notwithstanding the foregoing, the Bank
shall have no obligation to release its
security interests in and security interest
filings against the assets of the Dissolved
Borrowers, and nothing contained herein
shall be construed to constitute such a
release.
<PAGE> 3
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(vii) A new Section 6.14 is added as follows:
Section 6.14. Inactive Borrowers. Unless the
Borrowers have elected pursuant to Section 5.13 to return such
Inactive Borrowers to good standing, transfer assets or
liabilities to the Inactive Borrowers or cause any such
Inactive Borrowers to generate accounts receivable.
(b) The Note is, effective as of the date hereof and
subject to the satisfaction of the conditions precedent set forth in Section 2
hereof, hereby amended as follows:
The following definition contained in Section 1(ix) of the
Note is amended and restated in full to read as follows:
(ix) "Termination Date" means January 15, 1998.
SECTION 2. Conditions of Effectiveness. This Amendment shall
become effective when, and only when, the Bank shall have received counterparts
of this Amendment executed by the Borrowers and the Bank and the consent hereto
executed by the Guarantor, except that Section 1 hereof shall become effective
when, and only when, the Bank shall have additionally received all of the
following documents, each document (unless otherwise indicated) being dated the
date of receipt thereof by the Bank (which date shall be the same for all such
documents), in form and substance satisfactory to the Bank and the Guarantor:
(a) Certified copies of (i) the resolutions of the Board
of Directors or Executive Committee of each Borrower approving this Amendment
and the matters contemplated hereby, (ii) all documents evidencing other
necessary corporate action and governmental approvals, if any, with respect to
this Amendment and the matters contemplated hereby, (iii) all waivers and
amendments with respect to the Senior Debt (as defined in the Intercreditor
Agreement) concerning the matters covered by this Amendment, which shall include
an amendment to the Senior Debt (as defined in the Intercreditor Agreement)
documents extending the maturity date thereof to January 2, 1998, (iv) an
executed copy of that certain memorandum Re: Terms and Conditions Addendum for
Contract Extension to U.S. HomeCare Receivables Purchasing Program, dated March
12, 1997, by and between The Chase Manhattan Bank and the Parent, and (v)
management-prepared financial statements as of December 31, 1996.
(b) A certificate of the Secretary or an Assistant
Secretary of each Borrower certifying the names and true signatures of the
officers of such Borrower authorized to sign this Amendment and the other
documents to be delivered hereunder.
(c) A favorable opinion of Brobeck, Phleger & Harrison
LLP, counsel for the Borrowers, to the effect that this Amendment and each and
every other document delivered by any of the Borrowers have been duly
authorized, executed and delivered by such Borrowers, and constitute the legal,
valid and binding obligations of such Borrowers, enforceable against such
Borrowers in accordance with their respective terms, and as to such other
matters as the Bank or the Guarantor may reasonably require.
(d) A certificate signed by a duly authorized officer of
each Borrower stating that:
(i) The representations and warranties contained in
Section 3 hereof are correct on and as of the date of such
certificate as though made on and as of such date, and
(ii) After giving effect to the terms of the
Amendment, no event has occurred and is continuing which
constitutes a Default or an Event of Default.
(iii) All conditions to the effectiveness of Section
1 of Amendment No. 3 to the Restated First Credit Agreement
with the Senior Lenders, a certified copy of which shall have
been provided to the Bank as provided above, have been
satisfied and that Section 1 is effective.
(e) A fully executed amendment to the Guarantee extending
the termination date thereof to a date no
<PAGE> 4
earlier than January 31, 1998. -4-
(f) Payment of a $15,000 extension fee to the Bank, which
shall be fully earned by the Bank on the date so paid.
SECTION 3. Representations and Warranties of the Borrowers.
Each Borrower represents and warrants as follows:
(a) Such Borrower is a corporation duly organized and validly
existing under the laws of the jurisdiction of its incorporation.
(b) The Dissolved Borrowers, on their respective dates of
dissolution, possessed no material assets and no material liabilities. The
Inactive Borrowers possess no material assets and no material liabilities. None
of the Dissolved Borrowers or the Inactive Borrowers generate accounts
receivable.
(c) The execution, delivery and performance by such Borrower
of this Amendment and the Facility Documents, as amended hereby, to which it is
or is to be a party are within such Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not contravene (i) such
Borrower's charter or by-laws, (ii) any contractual restriction binding on or
affecting such Borrower, or result in, or require, the creation or imposition of
any mortgage, deed of trust, pledge, lien, security interest or other charge,
encumbrance or preferential arrangement of any nature upon or with respect to
any of the properties now owned or hereafter acquired by such Borrower, or (iii)
to the best of such Borrower's knowledge, any law.
(d) No authorization, approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by such Borrower of
this Amendment or any of the Facility Documents, as amended hereby, to which it
is or is to be a party.
(e) This Amendment and each of the other Facility Documents as
amended hereby, to which such Borrower is a party constitute legal, valid and
binding obligations of such Borrower enforceable against such Borrower in
accordance with their respective terms.
(f) To the best of such Borrower's knowledge, the Security
Agreement constitutes valid and perfected second priority security interests and
liens in and to the Collateral covered thereby enforceable against all third
parties in all jurisdictions and secure the payment of all obligations of such
Borrower under the Facility Documents, as amended hereby, and the execution,
delivery and performance of this Amendment do not adversely affect the aforesaid
security interests and liens of such Security Agreement.
(g) There is no pending or threatened action or proceeding
affecting such Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may materially adversely affect the
financial condition or operations of such Borrower or any Subsidiary or which
purport to affect the legality, validity or enforceability of this Amendment or
any of the other Facility Documents, as amended hereby.
(h) After giving effect to the terms of the Amendment, no
event has occurred and is continuing which constitutes a Default or an Event of
Default.
SECTION 4. Reference to and Effect on the Facility Documents.
(a) Upon the effectiveness of Section 1 hereof, on and after
the date hereof each reference in the Credit Agreement to "this Agreement,"
"hereunder," "hereof," "herein" or words of like import, and each reference in
any Facility Documents to the Credit Agreement or any other Facility Document,
shall mean and be a reference to the Credit Agreement or such other Facility
Document as amended hereby.
(b) Except as specifically amended above, the Credit Agreement
and the other Facility Documents
<PAGE> 5
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shall remain in full force and effect and are hereby ratified and confirmed.
Without limitation to the foregoing, each of the Borrowers hereby confirms that
the removal of the Dissolved Borrowers from the Borrowers hereunder shall not
affect its obligations under the Credit Agreement and the other Facility
Documents, which are continuing obligations of such Borrower. Without limiting
the generality of the foregoing, the Pledge Agreement and all of the Pledged
Collateral described therein, and the Security Agreement and all of the
Collateral described therein, do and shall continue to secure the payment of all
Obligations (as defined in the Pledge Agreement and the Security Agreement
respectively), in each case as amended hereby.
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver of
any right, power or remedy of the Bank or the Guarantor under any of the
Facility Documents, nor constitute a waiver of any provision of any of the
Facility Documents.
(d) The Bank is under no obligation to enter into this
Amendment. The Bank's entering into this Amendment shall not be deemed to limit
or hinder any rights of the Bank or the Guarantor under the Credit Agreement,
nor shall it be deemed to create or infer a course of dealing between the Bank
and the Parent or any of the other Borrowers with regard to any provision of the
Credit Agreement.
SECTION 5. Costs, Expenses and Taxes. The Borrowers jointly
and severally agree to pay on demand all costs and expenses of the Bank and the
Guarantor in connection with the preparation, execution and delivery of this
Amendment and the other instruments and documents to be delivered hereunder,
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank and the Guarantor with respect thereto and with respect to
advising the Bank and the Guarantor as to their rights and responsibilities
hereunder and thereunder. The Borrowers further jointly and severally agree to
pay on demand all costs and expenses, if any (including, without limitation,
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this Amendment
and the other instruments and documents to be delivered hereunder, including,
without limitation, reasonable counsel fees and expenses in connection with the
enforcement of rights under this Section 5. In addition, the Borrowers shall pay
any and all stamp and other taxes payable or determined to be payable in
connection with the execution and delivery of this Amendment and the other
instruments and documents to be delivered hereunder, and agrees to save the Bank
and the Guarantor harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes.
SECTION 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same instrument.
SECTION 7. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of Connecticut.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly authorized,
as of the date first above written..
Borrowers:
U.S. HOMECARE CORPORATION AND ITS
SUBSIDIARIES LISTED ON ANNEX 1 HERETO
By:________________________________________________
Name:
Vice President of each of the above corporations
<PAGE> 6
-6-
Bank:
FLEET NATIONAL BANK (successor by merger to
Fleet Bank, National Association)
By:_________________________________
Christopher R. Zell
Vice President
CONSENT OF GUARANTOR
The Guarantor hereby consents to the execution of the foregoing Amendment by the
Bank and to the terms and conditions contained therein.
CONNECTICUT DEVELOPMENT AUTHORITY
By_______________________________________
Francis T. Gagliardo
Vice President and Senior Loan Officer
<PAGE> 7
ANNEX 1
U.S. HOMECARE CORPORATION, AFFILIATED HOME CARE OF WESTCHESTER, INC., U.S.
HOMECARE CORPORATION OF NORTHERN WESTCHESTER, U.S. HOMECARE CORPORATION OF
MANHATTAN, U.S. HOMECARE CORPORATION OF THE BRONX, U.S. HOMECARE CERTIFIED
CORPORATION OF NEW YORK, U.S. HOMECARE CORPORATION OF ALBANY, U.S. HOMECARE
INFUSION THERAPY SERVICES CORPORATION OF NEW JERSEY, U.S. HOMECARE CORPORATION
OF CONNECTICUT, U.S. HOMECARE CERTIFIED CORPORATION OF CONNECTICUT, U.S.
HOMECARE CORPORATION OF PENNSYLVANIA, U.S. HOMECARE CERTIFIED CORPORATION OF
PENNSYLVANIA, U.S. HOMECARE MEDICAL EQUIPMENT CORP., U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION, U.S. HOMECARE INFUSION THERAPY SERVICES
CORPORATION OF CONNECTICUT, U.S. HOMECARE CORPORATION OF THE MIDATLANTIC REGION,
U.S. HOMECARE CORPORATION OF MICHIGAN
<PAGE> 8
SCHEDULE 1(a)(vi)
DISSOLVED BORROWERS
Florida Corporations:
U.S. Homecare Corp. of South Florida
U.S. Homecare Certified Corp. of Florida
U.S. Homecare Infusion Therapy Corp. of Florida
California Corporation:
U.S. Homecare Corporation of California
<PAGE> 1
EXHIBIT 10.31
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This SETTLEMENT AGREEMENT AND MUTUAL RELEASE of claims is made by
U.S. HomeCare Corporation, its past, present and future partners, parents,
subsidiaries, related entities, predecessors, successors, directors, officers,
agents, employer sponsored employee benefit and welfare benefit plans, trustees
and administrators of such plans, employees, contractors and assigns
(hereinafter "USHO") and G. Robert O'Brien and his predecessors, successors,
agents, heirs and assigns (hereinafter "Employee"). USHO and Employee shall
hereafter collectively be referred to as the "Parties."
WITNESSETH:
WHEREAS, G. Robert O'Brien has been an employee of USHO pursuant
to an employment agreement, dated August 10, 1994 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement the Employee is
entitled to a severance package consisting of cash and other benefits; and
WHEREAS, the Parties wish to sever their relationship and settle
any outstanding severance obligations and any and all disputes which may exist
between them;
NOW, THEREFORE, for and in consideration of the representations
made, actions and agreements to be undertaken, and payments to be made as set
forth herein, the Parties agree to fully and forever release and discharge each
other, and covenant not to sue or otherwise institute or cause to be instituted,
or maintain any legal or administrative proceedings against each other with
respect to any matter, including but not limited to claims and causes of action
relating to Employee's employment with USHO and/or the termination of his
employment, including, without limitation, any rights set forth in Section 4 of
the Employment Agreement, provided, however, that nothing in this Agreement
shall be deemed to release USHO from any preexisting obligation to indemnify
Employee in connection with his services as an officer and director of USHO.
This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is made in
consideration of the following:
A. Employee agrees that his employment with USHO will terminate
effective as of the date hereof (the "Termination Date"). Employee will have no
right to employment with USHO after the date hereof.
<PAGE> 2
B. Pursuant to Employee's existing stock option agreements with
USHO, an aggregate of 500,000 shares of USHO's Common Stock are vested and
exercisable by Employee. Pursuant to Section 3.03 of such option agreements, no
additional portion of any such option shall vest, but the vested portion may be
exercised in whole or in part within three (3) months of the date hereof.
C. Employee hereby resigns as Chief Executive Officer and
director of USHO effective November 4, 1996. Employee hereby resigns as member
of the Executive Committee of USHO effective immediately.
D. USHO shall pay Employee (i) $87,5000, to be paid $21,875 per
month for four months and (ii) $150,000, to be paid $6,250 per month for the
twenty-four months following the time period of section (i) of this Paragraph.
Payments shall be made in arrears every two weeks in accordance with USHO's
standard payroll practices. The payments made pursuant to this Paragraph D (the
"Payments") are in addition to Employee's salary through the date hereof. The
Payments are made in consideration of the representations made and actions and
agreements to be undertaken as set forth herein, are not made in compensation
for services as an employee of USHO, and are not intended to be subject to FICA,
Medicare, or other taxes or withholdings.
E. In consideration of the payments made by USHO pursuant to
Section C(i) hereof, USHO agrees to engage Employee, and Employee accepts such
engagement, as a consultant to USHO for a four-month period commencing on the
date hereof, pursuant to a consulting agreement in the form attached hereto as
Exhibit A (the "Consulting Agreement").
F. USHO shall grant to Employee on November 15, 1996 a stock
award of 85,000 shares of USHO Common Stock pursuant to the terms of Article III
of the 1995 Stock Option/Stock Issuance Plan.
G. Employee shall retain possession of the automobile provided to
him by USHO until December 13, 1996, on which date Employee shall relinquish all
rights to said automobile and shall make it available to USHO at its office in
Hartford, Connecticut.
H. Employee will remain eligible to participate in USHO's health
insurance, life insurance and disability insurance programs for three months
from the date hereof (the "Benefit Period") unless and until Employee commences
full-time employment with another employer. Employee understands that his
entitlement to any benefit continuation following the end of the Benefit Period
will be governed by COBRA and will be at Employee's expense. Employee
understands that his vacation accrual will cease effective on the date hereof
and agrees that accrued vacation pay, if any, is satisfied by the payments made
to Employee pursuant to Paragraph D above.
<PAGE> 3
I. Employee acknowledges that the payments made hereunder are not
part of an exit incentive or other employment termination program offered to a
group or class of employees.
J. Employee and USHO represent that they are not currently
involved, directly or indirectly, in any legal or administrative proceedings
against one another, and have not engaged in any efforts, plans or preparation
to become so involved in the future.
K. The Parties understand and agree that they are waiving any
rights that they may have or now have, known or unknown, to pursue any and all
claims, charges, complaints, demands, actions, causes of action, suits, rights,
debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including attorneys' fees and costs), of every kind
and nature which he ever had or now has, known or unknown, against USHO, its
officers, directors, stockholders, corporate affiliates, agents and employees,
including, but not limited to, all claims arising out of his employment
relationship with USHO, all employment discrimination claims under Title VII of
the Civil Rights Act of 1964, 42 U.S.C. Section 2000e et seq., the Age
Discrimination in Employment Act, 29 U.S.C. Section 621 et seq., and the
Connecticut General Statutes, damages arising out of all employment
discrimination claims, wrongful discharge claims or other common law claims and
damages. Nothing in this SETTLEMENT AGREEMENT AND MUTUAL RELEASE, however, shall
be construed as releasing USHO from its obligations under this SETTLEMENT
AGREEMENT AND MUTUAL RELEASE and the exhibits hereto nor shall anything in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE be deemed to release USHO from any
preexisting obligation to indemnify Employee in connection with his services as
an officer and director of USHO.
L. In addition, and in further consideration of the foregoing,
the Parties agree that nothing contained in this SETTLEMENT AGREEMENT AND MUTUAL
RELEASE shall constitute or be treated as an admission of liability or
wrongdoing by USHO or Employee.
M. This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is deemed to have
been entered into in the State of Connecticut and shall be construed and
interpreted in accordance with the laws of that state.
N. In addition, and in further consideration of the foregoing,
this release extends to claims which the Parties do not know or suspect to exist
in their favor at the time of executing the mutual release, which if known by
them must have materially affected this settlement.
3.
<PAGE> 4
O. The Parties agree that they will not, without compulsion of
legal process, disclose to others the terms or amounts referred to in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE or the fact of the payment of said
amounts, except that they may disclose them to their attorneys, accountants or
other professional advisors to whom the disclosure is necessary to effect the
purposes for which they have consulted such professional advisors. The Parties
further agree that they will not defame or disparage each other.
P. The Parties understand that the covenants contained in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE, including the covenants of
nondisclosure, non-defamation and non-disparagement, are material inducements
for the making of this agreement and that, in the event of a material breach
hereof, including, without limitation, the nonpayment of any amounts payable
hereunder, the other party will be entitled to pursue its legal and equitable
remedies, including without limitation, the right to recover damages and seek
injunctive relief. The prevailing party in any such action shall be entitled to
recover its costs and reasonable attorneys' fees. Furthermore, in the event that
Employee files or commences any legal action or administrative proceeding
against USHO for any matter other than enforcement of Employee's rights under
this SETTLEMENT AGREEMENT AND MUTUAL RELEASE, the Consulting Agreement, or any
indemnification obligation not released hereby, USHO shall, in addition to any
available legal and equitable remedies, not be obligated to make any future
payments of any amounts which would otherwise be due under Paragraph D.
Q. The Parties acknowledge and agree that no promises or
representations were made which do not appear written in this Agreement and the
Consulting Agreement and that this SETTLEMENT AGREEMENT AND MUTUAL RELEASE,
including the Consulting Agreement, contains the entire agreement of the Parties
as to the subject matter hereof. This SETTLEMENT AGREEMENT AND MUTUAL RELEASE
shall be construed to be fully enforceable. If for any reason any part of this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE is determined to be void or
unenforceable, the agreement and/or any remaining part hereof shall be construed
without reference to such void or inapplicable provisions to be an enforceable
SETTLEMENT AGREEMENT AND MUTUAL RELEASE between the Parties.
R. The Parties acknowledge that they have read and understand the
foregoing SETTLEMENT AGREEMENT AND MUTUAL RELEASE and that they sign it
voluntarily and without coercion. They further acknowledge that they have been
advised by and been given the opportunity to consult with an attorney of their
own choosing concerning the waivers contained in this SETTLEMENT AGREEMENT AND
MUTUAL RELEASE and that the waivers made herein are knowing, conscious and with
full appreciation that such party is forever foreclosed from pursuing any of the
rights so waived. Employee further acknowledges that he has twenty-one (21) days
after receipt of this SETTLEMENT AGREEMENT AND
4.
<PAGE> 5
MUTUAL RELEASE to consider this SETTLEMENT AGREEMENT AND MUTUAL RELEASE and he
understands that it will not become effective and may be revoked until seven (7)
days after it is executed. In order to revoke this SEPARATION AGREEMENT AND
MUTUAL RELEASE, Employee must deliver to USHO's Chairman, Jay C. Huffard, on or
before seven (7) days after the execution of this SEPARATION AGREEMENT AND
MUTUAL RELEASE, a letter stating that he is revoking this SEPARATION AGREEMENT
AND MUTUAL RELEASE.
Dated: October 14, 1996 /s/ G. Robert O'Brien
------------------------------------
G. Robert O'Brien
Dated: October 14, 1996 U.S. HomeCare Corporation
By: Jay Huffard
---------------------------------
5.
<PAGE> 6
EXHIBIT 10.32
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This SETTLEMENT AGREEMENT AND MUTUAL RELEASE of claims is made by
U.S. HomeCare Corporation, its past, present and future partners, parents,
subsidiaries, related entities, predecessors, successors, directors, officers,
agents, employer sponsored employee benefit and welfare benefit plans, trustees
and administrators of such plans, employees, contractors and assigns
(hereinafter "USHO") and Stephen H. Matheson and his predecessors, successors,
agents, heirs and assigns (hereinafter "Employee"). USHO and Employee shall
hereafter collectively be referred to as the "Parties."
WITNESSETH:
WHEREAS, Stephen H. Matheson has been an employee of USHO pursuant
to an employment agreement, dated January 27, 1995 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement the Employee is
entitled to a severance package consisting of cash and other benefits; and
WHEREAS, the Parties wish to sever their relationship and settle
any outstanding severance obligations and any and all disputes which may exist
between them;
NOW, THEREFORE, for and in consideration of the representations
made, actions and agreements to be undertaken, and payments to be made as set
forth herein, the Parties agree to fully and forever release and discharge each
other, and covenant not to sue or otherwise institute or cause to be instituted,
or maintain any legal or administrative proceedings against each other with
respect to any matter, including but not limited to claims and causes of action
relating to Employee's employment with USHO and/or the termination of his
employment, including, without limitation, any rights set forth in the
Employment Agreement.
This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is made in
consideration of the following:
A. Employee agrees that his employment with USHO will terminate
effective the date hereof (the "Termination Date"). Employee will have no right
to employment with USHO after the date hereof.
B. Pursuant to Employee's existing stock option agreements with
USHO, an aggregate of 150,000 shares of USHO's Common Stock are vested and
exercisable by Employee. Pursuant to Section 3.03 of such option agreements, no
<PAGE> 7
additional portion of any such option shall vest, but the vested portion may be
exercised in whole or in part within three (3) months of the date hereof.
C. Employee hereby resigns as Chief Administrative Officer of
USHO.
D. USHO shall pay Employee (i) $58,500, to be paid $14,625 per
month for four months and (ii) $50,000, to be paid $2,083.33 per month for the
twenty-four months following the time period of section (i) of this Paragraph.
Payments shall be made in arrears every two weeks in accordance with USHO's
standard payroll practices.
E. USHO shall grant to Employee on November 15, 1996 a stock
award of 25,000 shares of USHO Common Stock pursuant to the terms of Article III
of the 1995 Stock Option/Stock Issuance Plan.
F. Employee will remain eligible to participate in USHO's health
insurance, life insurance and disability insurance programs for three months
from the date hereof (the "Benefit Period") unless and until Employee commences
full-time employment with another employer. Employee understands that his
entitlement to any benefit continuation following the end of the Benefit Period
will be governed by COBRA and will be at Employee's expense. Employee
understands that his vacation accrual will cease effective on the date hereof
and agrees that accrued vacation pay, if any, is satisfied by the payments made
to Employee pursuant to Paragraph D above.
G. Employee acknowledges that the payments made hereunder are not
part of an exit incentive or other employment termination program offered to a
group or class of employees.
H. Employee and USHO represent that they are not currently
involved, directly or indirectly, in any legal or administrative proceedings
against one another, and have not engaged in any efforts, plans or preparation
to become so involved in the future.
I. The Parties understand and agree that they are waiving any
rights that they may have or now have, known or unknown, to pursue any and all
claims, charges, complaints, demands, actions, causes of action, suits, rights,
debts, sums of money, costs, accounts, reckonings, covenants, contracts,
agreements, promises, doings, omissions, damages, executions, obligations,
liabilities, and expenses (including attorneys' fees and costs), of every kind
and nature which he ever had or now has, known or unknown, against USHO, its
officers, directors, stockholders, corporate affiliates, agents and employees,
including, but not limited to, all claims arising out of his employment
relationship with USHO, all employment discrimination claims under Title VII of
the Civil Rights Act of 1964, 42 U.S.C.
2.
<PAGE> 8
Section 2000e et seq., the Age Discrimination in Employment Act, 29 U.S.C.
Section 621 et seq., and the Connecticut General Statutes, damages arising out
of all employment discrimination claims, wrongful discharge claims or other
common law claims and damages. Nothing in this SETTLEMENT AGREEMENT AND MUTUAL
RELEASE, however, shall be construed as releasing USHO from its obligations
under this SETTLEMENT AGREEMENT AND MUTUAL RELEASE and the exhibits hereto.
J. In addition, and in further consideration of the foregoing,
the Parties agree that nothing contained in this SETTLEMENT AGREEMENT AND MUTUAL
RELEASE shall constitute or be treated as an admission of liability or
wrongdoing by USHO or Employee.
K. This SETTLEMENT AGREEMENT AND MUTUAL RELEASE is deemed to have
been entered into in the State of Connecticut and shall be construed and
interpreted in accordance with the laws of that state.
L. In addition, and in further consideration of the foregoing,
this release extends to claims which the Parties do not know or suspect to exist
in their favor at the time of executing the mutual release, which if known by
them must have materially affected this settlement.
M. The Parties agree that they will not, without compulsion of
legal process, disclose to others the terms or amounts referred to in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE or the fact of the payment of said
amounts, except that they may disclose them to their attorneys, accountants or
other professional advisors to whom the disclosure is necessary to effect the
purposes for which they have consulted such professional advisors. The Parties
further agree that they will not defame or disparage each other.
N. The Parties understand that the covenants contained in this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE, including the covenants of
nondisclosure, non-defamation and non-disparagement, are material inducements
for the making of this agreement and that, in the event of a material breach
hereof, the other party will be entitled to pursue its legal and equitable
remedies, including without limitation, the right to recover damages and seek
injunctive relief. The prevailing party in any such action shall be entitled to
recover its costs and reasonable attorneys' fees. Furthermore, in the event that
Employee files or commences any legal action or administrative proceeding
against USHO, USHO shall, in addition to any available legal and equitable
remedies, not be obligated to make any future payments of any amounts which
would otherwise be due under Paragraph D.
O. The Parties acknowledge and agree that no promises or repre-
sentations were made which do not appear written in this Agreement and that this
3.
<PAGE> 9
SETTLEMENT AGREEMENT AND MUTUAL RELEASE, contains the entire agreement of the
Parties as to the subject matter hereof. This SETTLEMENT AGREEMENT AND MUTUAL
RELEASE shall be construed to be fully enforceable. If for any reason any part
of this SETTLEMENT AGREEMENT AND MUTUAL RELEASE is determined to be void or
unenforceable, the agreement and/or any remaining part hereof shall be construed
without reference to such void or inapplicable provisions to be an enforceable
SETTLEMENT AGREEMENT AND MUTUAL RELEASE between the Parties.
P. The Parties acknowledge that they have read and understand the
foregoing SETTLEMENT AGREEMENT AND MUTUAL RELEASE and that they sign it
voluntarily and without coercion. They further acknowledge that they have been
advised by and been given the opportunity to consult with an attorney of their
own choosing concerning the waivers contained in this SETTLEMENT AGREEMENT AND
MUTUAL RELEASE and that the waivers made herein are knowing, conscious and with
full appreciation that such party is forever foreclosed from pursuing any of the
rights so waived. Employee further acknowledges that he has twenty-one (21) days
after receipt of this SETTLEMENT AGREEMENT AND MUTUAL RELEASE to consider this
SETTLEMENT AGREEMENT AND MUTUAL RELEASE and he understands that it will not
become effective and may be revoked until seven (7) days after it is executed.
In order to revoke this SEPARATION AGREEMENT AND MUTUAL RELEASE, Employee must
deliver to USHO's Chairman, Jay C. Huffard, on or before seven (7) days after
the execution of this SEPARATION AGREEMENT AND MUTUAL RELEASE, a letter stating
that he is revoking this SEPARATION AGREEMENT AND MUTUAL RELEASE.
Dated: October 14, 1996 /s/ Stephen Matheson
------------------------------------
Stephen H. Matheson
Dated: October 14, 1996 U.S. HomeCare Corporation
By: /s/ Jay Huffard
--------------------------------
4.
<PAGE> 1
EXHIBIT 10.33
ASSET PURCHASE AGREEMENT
AMONG
TRANSWORLD ACQUISITION CORP.,
AS BUYER,
TRANSWORLD HOME HEALTHCARE, INC.,
THE SOLE STOCKHOLDER OF BUYER,
U.S. HOMECARE INFUSION THERAPY SERVICES
CORPORATION OF NEW JERSEY,
AS SELLER,
AND
U.S. HOMECARE CORPORATION
THE SOLE STOCKHOLDER OF SELLER
-----------------------------------------------------------------------
DATED AS OF OCTOBER 31, 1996
-----------------------------------------------------------------------
<PAGE> 2
ASSET PURCHASE AGREEMENT
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS................................................................................ 1
SECTION 1.1 Definitions................................................................................. 1
SECTION 1.2 Interpretation.............................................................................. 6
ARTICLE II PURCHASE AND SALE; CLOSING................................................................. 6
SECTION 2.1 Purchase and Sale of Purchased Assets....................................................... 6
SECTION 2.2 Transfer, Assignment and Conveyance of Purchased Assets..................................... 8
SECTION 2.3 Excluded Assets............................................................................. 9
SECTION 2.4 Purchase Price.............................................................................. 9
SECTION 2.5 Assumption of Liabilities................................................................... 9
SECTION 2.6 Closing..................................................................................... 10
SECTION 2.7 Purchase of Additional Assets............................................................... 10
SECTION 2.8 Collection of Existing A/R.................................................................. 10
SECTION 2.9 Certain Employees; Use of Facilities........................................................ 11
SECTION 2.10 Certain Nursing Services................................................................... 12
SECTION 2.11 Effective Date............................................................................. 13
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDER............................................................ 14
SECTION 3.1 Authority Relative to this Agreement........................................................ 14
SECTION 3.2 No Conflicts; Consents...................................................................... 15
SECTION 3.3 Corporate Existence and Power............................................................... 15
SECTION 3.4 Subsidiaries................................................................................ 15
SECTION 3.5 Charter Documents and Corporate Records..................................................... 16
SECTION 3.6 Financial Statements........................................................................ 16
SECTION 3.7 Absence of Certain Changes.................................................................. 17
SECTION 3.8 Properties.................................................................................. 19
SECTION 3.9 Contracts................................................................................... 19
SECTION 3.10 Intangible Property........................................................................ 22
SECTION 3.11 Claims and Proceedings..................................................................... 23
SECTION 3.12 Restrictions on Business Activities........................................................ 23
SECTION 3.13 Taxes...................................................................................... 23
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SECTION 3.14 Employee Benefits Plans.................................................................... 24
SECTION 3.15 Officers, Directors and Key Employees...................................................... 26
SECTION 3.16 Employment Related Matters................................................................. 26
SECTION 3.17 Potential Conflicts of Interest............................................................ 27
SECTION 3.18 Insurance.................................................................................. 27
SECTION 3.19 Suppliers, Customers and Contractors....................................................... 28
SECTION 3.20 Compliance with Laws....................................................................... 28
SECTION 3.21 Permits.................................................................................... 29
SECTION 3.22 Finders; Fees.............................................................................. 29
SECTION 3.23 Depositaries............................................................................... 29
SECTION 3.24 Disclosure................................................................................. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER.................................................... 30
SECTION 4.1 Corporate Existence and Power............................................................... 30
SECTION 4.2 Authority Relative to This Agreement........................................................ 30
SECTION 4.3 No Conflicts; Consents...................................................................... 30
SECTION 4.4 Litigation.................................................................................. 31
SECTION 4.5 Finders; Fees............................................................................... 31
SECTION 4.6 Disclosure.................................................................................. 31
ARTICLE V COVENANTS AND AGREEMENTS................................................................... 31
SECTION 5.1 Conduct of Business......................................................................... 31
SECTION 5.2 Corporate Examinations and Investigations................................................... 33
SECTION 5.3 Additional Financial Statements............................................................. 33
SECTION 5.4 Filings and Authorizations.................................................................. 34
SECTION 5.5 Efforts to Consummate....................................................................... 34
SECTION 5.6 Negotiations With Others.................................................................... 35
SECTION 5.7 Notices of Certain Events................................................................... 35
SECTION 5.8 Public Announcements........................................................................ 36
SECTION 5.9 Confidentiality............................................................................. 36
SECTION 5.10 Bulk Sales................................................................................. 37
SECTION 5.11 Use of Name................................................................................ 37
SECTION 5.12 Certain Expenses........................................................................... 37
SECTION 5.13 Tax Matters................................................................................ 37
ARTICLE VI CONDITIONS TO CLOSING...................................................................... 38
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SECTION 6.1 Conditions to the Obligations of Seller and Buyer........................................... 38
SECTION 6.2 Conditions to the Obligations of Seller..................................................... 39
SECTION 6.3 Conditions to the Obligations of Buyer...................................................... 40
ARTICLE VII INDEMNIFICATION............................................................................ 41
SECTION 7.1 Survival of Representations and Warranties.................................................. 41
SECTION 7.2 Obligation of Seller to Indemnify........................................................... 42
SECTION 7.3 Obligation of Buyer to Indemnify............................................................ 42
SECTION 7.4 Notice and Opportunity to Defend Third Party Claims......................................... 43
SECTION 7.5 Limits on Indemnification................................................................... 43
ARTICLE VIII TERMINATION................................................................................ 44
SECTION 8.1 Termination................................................................................. 44
SECTION 8.2 Effect of Termination; Right to Proceed..................................................... 44
ARTICLE IX LIQUIDATED DAMAGES......................................................................... 45
ARTICLE X MISCELLANEOUS.............................................................................. 45
SECTION 10.1 Notices.................................................................................... 45
SECTION 10.2 Entire Agreement........................................................................... 46
SECTION 10.3 Waivers and Amendments; NonContractual Remedies; Preservation
of Remedies................................................................................ 46
SECTION 10.4 Governing Law.............................................................................. 47
SECTION 10.5 Consent to Jurisdiction and Service of Process............................................. 47
SECTION 10.6 Designated Buyer........................................................................... 47
SECTION 10.7 Binding Effect; No Assignment.............................................................. 47
SECTION 10.8 Severability............................................................................... 48
SECTION 10.9 Counterparts .............................................................................. 48
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<PAGE> 5
SCHEDULES
Schedule 2 Bill of Sale
Schedule 2.3 Excluded Assets
Schedule 2.4(b) Allocation of Purchase Price
Schedule 2.5 Assumption Agreement
Schedule 2.5(a) Assumed Liabilities
Schedule 2.9(a) Retained Employees
Schedule 2.9(d) Exceptions to Transition Costs
Schedule 2.11 October Expenses
Schedule 3.2 Required Consents
Schedule 3.5 Exception to Records
Schedule 3.6(b) Other Liabilities
Schedule 3.6(d) Debt
Schedule 3.7 Recent Developments
Schedule 3.8(a) Real Property
Schedule 3.8(b) Tangible Property
Schedule 3.8(c) Other Personal Property
Schedule 3.9 Contracts
Schedule 3.10 Intangible Property
Schedule 3.11 Claims and Proceedings
Schedule 3.13 Tax Matters
Schedule 3.14(a) Employee Benefit Plans
Schedule 3.14(e) Multiemployer Plans
Schedule 3.15 Officers, Directors and Key Employees
Schedule 3.16 Employment-Related Matters
Schedule 3.17 Potential Conflicts of Interest
Schedule 3.18 Insurance Policies, Fidelity, and Surety Bonds
Schedule 3.19 Suppliers and Customers
Schedule 3.20 Cost Reports
Schedule 3.21 Permits
Schedule 3.22 Finders Fees
Schedule 3.23 Depositories
Schedule 4.3 Buyer's Consents
Schedule 6.2(d)(iv) Form of Buyer's Opinion
Schedule 6.3(e)(iv) Form of Sellers' Opinion
Schedule 6.3(f) Form of Covenant Not to Compete
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<PAGE> 6
ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT dated as of October 31, 1996 among Transworld
Acquisition Corp., a Delaware corporation ("Buyer"), Transworld Home HealthCare,
Inc., a New York corporation ("Transworld"), U.S. HomeCare Infusion Therapy
Services Corporation of New Jersey, a New Jersey corporation ("Seller,") and
U.S. HomeCare Corporation, a New York corporation, the sole security holder of
Seller (the "Stockholder").
W I T N E S S E T H:
WHEREAS, Seller is engaged in the business of providing infusion
therapy products and related skilled nursing and other related services to
patients in the home (the "Business"); and
WHEREAS, Buyer wishes to purchase from Seller and Seller wishes to sell
to Buyer, in accordance with the terms and subject to the conditions of this
Agreement, certain of the assets, properties and rights belonging to Seller that
are used in or pertain to the Business.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
other agreements contained herein, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION I. 1 Definitions. (a) The following terms, as used herein, have
the following meanings:
"Acquisition Proposal" shall mean any proposal for the acquisition of,
or merger or other business combination involving, Seller or the sale of any
equity interest in, or a substantial portion of the assets of, Seller other than
the transactions by Buyer as contemplated by this Agreement.
"Affiliate" of any person means any other person directly or indirectly
through one or more intermediary persons, controlling, controlled by or under
common control with such person.
"Agreement" or "this Agreement" shall mean, and the words "herein",
"hereof" and "hereunder" and words of similar import shall refer to, this
agreement, and the Schedules
<PAGE> 7
and Exhibits hereto, as the same from time to time may be amended.
"Assumption Agreement" shall mean the Assumption Agreement in the form
of Schedule 2.5 between Seller and Buyer.
"Audit" or "audited" when used in regard to financial statements shall
mean an examination of the financial statements by a firm of independent public
accountants in accordance with GAAP consistently applied for the purpose of
expressing an opinion thereon.
"Balance Sheet" shall mean the balance sheet of Seller included in
their unaudited financial statements as at and for the year ended December 31,
1995.
"Balance Sheet Date" shall mean December 31, 1995.
"Bill of Sale" shall mean the Bill of Sale in the form of Schedule 2
hereto.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the Borough of
Manhattan, the City of New York, are authorized or obligated by law or executive
order to close.
"Business Employees" shall mean the employees of Seller.
"Buyer's Accountants" shall mean Coopers & Lybrand LLP or such other
firm of independent auditors selected by Buyer.
"Certificate of Incorporation" shall mean the certificate of
incorporation, articles of incorporation or charter of a corporation howsoever
denominated under the laws of the jurisdiction of its organization.
"Close of Business" on any given date shall mean 5:00 p.m., New York
time, on such date; provided, however, that if such date is not a Business Day,
"Close of Business" shall mean 5:00 p.m., New York time, on the next succeeding
Business Day.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
The term "control", with respect to any person, shall mean the power to
direct the management and policies of such person, directly or indirectly, by or
through stock ownership, agency or otherwise, or pursuant to or in connection
with an agreement, arrangement or understanding (written or oral) with one or
more other persons by or through stock ownership, agency or otherwise; and the
terms "controlling" and "controlled" shall have meanings correlative to the
foregoing.
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<PAGE> 8
"Escrow Agent" shall mean Brobeck, Phleger & Harrison LLP and each
successor Escrow Agent appointed in accordance with the provisions of the Escrow
Agreement.
"Escrow Agreement" shall mean the Escrow Agreement dated October 9,
1996 hereto among Transworld, Seller, Stockholder, Escrow Agent and Sanders
Morris Mundy Inc.
"Existing A/R" shall mean the accounts receivable of Seller pertaining
to goods sold and services performed on or prior to the Closing Date, whether or
not an invoice has been submitted for such goods and services as of the Closing
Date.
"GAAP" shall mean generally accepted accounting principles in effect on
the date hereof as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or as may be generally accepted by the accounting profession of
the United States.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"IRS" shall mean the Internal Revenue Service.
"Liability" shall mean any direct or indirect indebtedness, liability,
claim, loss, damage, deficiency, obligation or responsibility, fixed or unfixed,
choate or inchoate, liquidated or unliquidated, secured or unsecured, accrued,
absolute, contingent or otherwise.
"Lien" shall mean any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.
"1933 Act" shall mean the Securities Act of 1933, as amended, and all
rules and regulations promulgated thereunder.
"Net Book Value" shall mean with respect to any asset, the depreciated
book value of such asset as of the Effective Date, determined in accordance with
GAAP.
"October Net Revenues" shall mean the gross revenues generated by the
Business (net of normal and other contractual allowances determined on a basis
consistent with prior periods) and exclusive of extraordinary items and charges
or credits relating to other periods during the period from October 1, 1996
through Closing.
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<PAGE> 9
"October Expenses" shall mean the sum of (i) the direct cost of goods
sold and related direct packaging costs incurred in generating the October Net
Revenue on a basis consistent with prior periods exclusive of extraordinary
items and charges or credits relating to other periods, net of the applicable
portion of the product discount related to Humatrope (which discount is equal to
4% of the cost of Humatrope and any other applicable discounts or credits, and
(ii) those specific identifiable costs which would have been incurred by Buyer
had it operated the Business during such period on a fully integrated basis, all
as more fully described on Schedule 2.11 hereto.
The term "person" shall mean an individual, corporation, partnership,
joint venture, association, trust, unincorporated organization or other entity.
"Seller's Accountants" shall mean Deloitte & Touche, independent
certified public accountants, or such other accounting firm selected by Seller
that is acceptable to Buyer.
"Subsidiary" as to any person shall mean any entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are owned
directly or indirectly through one or more intermediaries, or both, by such
person.
"Tax" (including, with correlative meaning, the terms "Taxes" and
"Taxable") shall mean: (i) any net income, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property or windfall
profits tax, alternative or add-on minimum tax, customs duty or other tax, fee,
assessment or charge of any kind whatsoever, together with any interest and any
penalty, addition to tax or additional amount imposed by any governmental
authority (domestic or foreign) responsible for the imposition of any such tax
(a "Taxing Authority"), with respect to Seller; (ii) any liability for the
payment of any amount of the type described in the immediately preceding clause
(i) as a result of Seller being a member of an affiliated or combined group with
any other corporation at any time on or prior to the Closing Date; and (iii) any
liability of Sellers for the payment of any amounts of the type described in the
immediately preceding clause (i) as a result of a contractual obligation to
indemnify any other person (other than Buyer).
"Taxable Year" shall mean, with respect to any Tax of Seller, the
calendar or fiscal year, or shorter period, for which the Tax is computed and
the Return for such Tax is made.
"Transaction Documents" shall mean, collectively, this Agreement, the
Escrow Agreement, the Non-Compete Agreements, the Assumption Agreement, the Bill
of Sale and each of the other agreements and instruments to be executed and
delivered by all or some of the parties hereto in connection with the
consummation of the transactions contemplated hereby.
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<PAGE> 10
The term "voting power" when used with reference to the capital stock
of, or units of equity interests in, any person shall mean the power under
ordinary circumstances (and not merely upon the happening of a contingency) to
vote in the election of directors of such person (if such person is a
corporation) or to participate in the management and control of such person (if
such person is not a corporation).
(b) The following terms are defined in the following sections of this
Agreement:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Asserted Liability 7.4(a)
Assumed Liabilities 2.5(a)
Business
Recital
Claims 3.11
Claims Notice 7.4(a)
Closing 2.6
Closing Date 2.6
Condition of the Business 3.3
Contemplated Transactions 3.1
Contracts 3.2
Debt 3.6(d)
Deposit 2.4
Effective Date 2.11
Environmental Laws 3.21(a)
Environmental Matters 3.21(a)
Environmental Permits 3.21(e)
ERISA 3.14(a)
Excluded Assets 2.3
Excluded Obligations 2.5(b)
Existing Accounts 2.1(f)
Financial Statements 3.6(a)
Governmental Bodies 3.20
Group 3.14(a)
Group Plans 3.14(a)
Hazardous Materials 3.21(a)
Indemnifying Party 7.4(a)
Indemnitee 7.4(a)
Intellectual Property Rights 3.10
Laws 3.20
Liabilities
Definitions
</TABLE>
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<PAGE> 11
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Losses 7.2
Marketed Accounts 2.10
Orders 3.20
Permits 3.22
Plan 3.14(b)
Products 3.11
Proposed Contracts 3.9(a)(xxi)
Purchased Assets 2.1
Real Property Leases 3.8
Receivables 3.6(c)
Representatives 5.2
Required Consents 3.2
Retained Employees 2.9
Returns 3.13(a)
Selected Employees 2.9
Settlement Account 2.11(b)
Tangible Property 3.8(b)
Transition Expenses 2.9
Transition Period 2.9
</TABLE>
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<PAGE> 12
SECTION I.2 Interpretation. Unless the context otherwise requires, the
terms defined in Section 1.1 shall have the meanings herein specified for all
purposes of this Agreement, applicable to both the singular and plural forms of
any of the terms defined herein. All accounting terms defined in this Article I,
and those accounting terms used in this Agreement not defined in Section 1.1,
except as otherwise expressly provided herein, shall have the meanings
customarily given thereto in accordance with GAAP. Except as otherwise expressly
provided herein, all terms used in conjunction with a description of securities
shall have the meanings given to those terms under the 1934 Act. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The use of the neuter gender herein
shall be deemed to include the masculine and feminine genders wherever necessary
or appropriate, the use of the masculine gender shall be deemed to include the
neuter and feminine genders and the use of the feminine gender shall be deemed
to include the neuter and masculine genders wherever necessary or appropriate.
ARTICLE II
PURCHASE AND SALE; CLOSING; OTHER MATTERS
SECTION II.1 Purchase and Sale of Purchased Assets. Except as otherwise
provided in Section 2.3, at the Closing, Seller shall sell, assign, transfer,
convey and deliver to Buyer, and Buyer shall acquire and purchase from Seller,
all the Purchased Assets, free and clear of all Liens. As used in this
Agreement, the term "Purchased Assets" shall mean all of the properties, rights,
goodwill, franchises, interests and assets of every kind, real, personal or
mixed, tangible or intangible, and wheresoever situated, belonging to Seller
whether or not reflected on the books and records of Seller, other than the
Excluded Assets, including, but not limited to:
(a) Those fixed assets, and certain inventory which are
purchased pursuant to Section 2.7 hereof which if, and only if, so purchased
shall be deemed to be a Purchased Asset;
(b) All claims, rights and choses in action of Seller against
third parties, including but not limited to those in respect of unliquidated
rights, under manufacturers' and vendors' warranties, guarantees or similar
obligations, other than Existing A/R and product credits and product
replacements from any supplier earned through the Effective Date;
(c) All trademarks, trade names, service marks, logos
(excluding the
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<PAGE> 13
U.S. HomeCare Corporation logo), designs and other intangible property
(including all Federal, state and foreign registrations and applications for
registration of such trademarks, trade names, service marks, logos or designs)
owned by Seller or used in the Business;
(d) All rights, titles and interests of Seller in, to and
under all Contracts (other than Real Property Leases and any contract included
within the Excluded Assets);
(e) All prepaid expenses, claims and other prepayments,
including prepaid supplies, and deferred charges attributable to the Contracts
of Seller that are to be assigned to Buyer under this Agreement;
(f) All patient and customer lists, copies of files and
computer system files and data files relating to existing patients and any
inactive patient, (i.e. a patient not currently on service, but who is expected
to or could resume service in the future) (collectively, the "Existing
Accounts"), credit policies and credit information with respect to all patients
and customers of, and all cost and pricing data for, the Business;
(g) All supplier lists, product specifications, bills of
materials and all other production information;
(h) All employee records of the Business with respect to
Selected Employees;
(i) All existing business plans, advertising and promotional
plans, product development plans, forecasts, market research reports and
competitor information;
(j) All existing formulae, technology, trade secrets, and
know-how used by Seller in connection with the Business, and other similar data;
(k) All rights under permits, licenses, franchises and similar
authorizations of Seller (including all rights of Sellers to obtain renewals and
extensions thereof), to the extent transferable;
(l) All patents, patent applications, copyrights and copyright
applications of Seller (including all rights of Seller to obtain renewals and
extensions thereof); and
(m) All existing referral sources to and of the Business.
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<PAGE> 14
SECTION II.2 Transfer, Assignment and Conveyance of Purchased Assets.
(a) Instruments of Transfer, Assignment, Conveyance and
Assumption, Etc. At the Closing, Seller will deliver to Buyer the Bill of Sale,
Assumption Agreement, instruments of transfer of Intellectual Property Rights,
and any other instruments of transfer, conveyance and assignment deemed
necessary or desirable by Buyer to transfer all the Purchased Assets, all as
provided in Section 2.1. Simultaneously therewith, Seller shall take all steps
as may be reasonably necessary or desirable to put Buyer in possession or
control of all the Purchased Assets. At the Closing, Buyer will deliver to
Seller the Assumption Agreement and any other instruments of assumption
necessary to evidence the assumption by Buyer of the Assumed Liabilities, all as
provided in Section 2.5.
(b) Power of Attorney; Right of Endorsement. Effective upon
the Closing Date, Seller hereby constitutes and appoints Buyer, and any
successors and assigns, as the true and lawful attorney of Seller with full
power of substitution, in the name of Buyer, or the name of Seller, on behalf of
and for the benefit of Buyer, to (i) institute and prosecute, in the name of
Seller or otherwise, all proceedings which Buyer may deem proper in order to
assert or enforce any right or title of any kind in or to the Purchased Assets
to be transferred, conveyed and assigned as provided herein, (ii) with notice to
Seller as provided herein, defend and compromise any and all actions, suits or
proceedings in respect of any of the Purchased Assets, and (iii) do all such
acts and things in relation thereto as Buyer may deem advisable. Seller agrees
that the foregoing powers are coupled with an interest and shall not be
revocable by the dissolution of Seller or in any other manner or for any reason.
(c) Further Assurances. At any time and from time to time
after the Closing Date, upon the request of Buyer, Seller and the Stockholder,
without further consideration, will do, execute, acknowledge and deliver, or
cause to be done, executed, acknowledged or delivered, all such further acts,
deeds, assignments, transfers, conveyances, powers of attorney or assurances
(including obtaining any Required Consent not delivered at Closing with the
approval of Buyer) as may be reasonably required for the better transferring,
assigning, conveying, granting, assuring and confirming to Buyer, or for aiding
and assisting in the collection of or reducing to possession by Buyer, any of
the Purchased Assets to be transferred, conveyed and assigned hereunder or to
vest in Buyer all of Seller's right, title and interest in and to the Purchased
Assets being conveyed hereunder.
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<PAGE> 15
(d) Access by Buyer and Seller. Those books and records the
possession of which is not being transferred to Buyer pursuant to this Agreement
which relate to the Purchased Assets shall be preserved and maintained by Seller
for seven years from the Closing Date. Seller and Stockholder shall give to
Buyer and its authorized Representatives, during normal business hours, such
access to such books and records retained by Seller and Stockholder as may be
reasonably required by Buyer. Buyer shall be entitled, at its own expense, to
make extracts and copies thereof and Seller and Stockholder shall cooperate with
Buyer in connection with accomplishing the same. Seller and Stockholder shall
deliver to Buyer at Closing (and thereafter as the case may be) the originals of
all documents, records, instruments and files as Buyer shall require or request
to operate the Business as of and after the Closing or to satisfy any obligation
to Seller hereunder. Those books and records relating to the Purchased Assets
being transferred to Buyer shall be preserved and maintained by Buyer for seven
years from the Closing Date and shall be made available to Seller at its expense
for copying at reasonable times, upon reasonable notice.
SECTION II.3 Excluded Assets. Anything in Section 2.1 to the contrary
notwithstanding, there shall be excluded from the assets, properties, rights and
businesses to be transferred to Buyer hereunder those items listed on Schedule
2.3 attached hereto. Such assets, properties and rights not being purchased by
Buyer as aforesaid are hereinafter collectively called the "Excluded Assets".
SECTION II.4 Purchase Price. Subject to the terms and conditions of
this Agreement:
(a) The purchase price (the "Purchase Price") payable by Buyer
for the Purchased Assets shall, subject to adjustment as provided in Sections
2.7 and 2.11 hereof, equal the sum of $2,000,000 plus interest from October 1,
1996 to the Closing Date at the per annum rate equal to Transworld's effective
borrowing rate as of the Closing Date, which Purchase Price includes the sum of
$350,000 (the "Deposit"), which sum has been placed in escrow with the Escrow
Agent and which shall be released as provided in the Escrow Agreement. The
balance of the Purchase Price, as adjusted, shall be payable by wire transfer to
Seller at Closing.
(b) The Purchase Price shall be allocated among the Purchased
Assets in the manner set forth on Schedule 2.4(b). Seller and Buyer agree that
such allocations shall be utilized by the parties for all purposes.
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<PAGE> 16
SECTION II.5 Assumption of Liabilities.
(a) Liabilities Assumed by Buyer. In addition to payment of
the Purchase Price, except for the Excluded Obligations (as defined below),
Buyer shall assume, as of the Closing Date, the Liabilities of Seller relating
to the Business listed on Schedule 2.5(a) attached hereto. Such obligations and
liabilities to be assumed by Buyer pursuant to this Agreement are sometimes
collectively referred to herein as the "Assumed Liabilities."
(b) Liabilities Not Assumed by Buyer. Anything in this
Agreement to the contrary notwithstanding, Buyer shall not assume, or in any way
be liable or responsible for any liability or obligation of Seller or any other
person relating to the Business which, is not listed on Schedule 2.5(a),
including but not limited to all accounts and trade payables incurred prior to
Closing and all amounts owed to Seller's Humatrope supplier. Such obligations
and liabilities of Seller not being assumed by Buyer are referred to herein
collectively, as "Excluded Obligations". Seller and the Stockholder shall take
any and all action which may be necessary to prevent any person from having
recourse against any of the Purchased Assets or against Buyer as transferee
thereof with respect to any Excluded Obligations and shall indemnify Buyer and
hold it harmless therefrom.
SECTION II.6 Closing. The closing (the "Closing") of the purchase and
sale of the Purchased Assets hereunder shall take place at the offices of Baer
Marks & Upham LLP, 805 Third Avenue, New York, New York at 10:00 a.m., local
time, on October 31, 1996, provided that all applicable conditions to Closing
specified in Article VI have been satisfied, or at such other time and place
upon which Seller and Buyer may agree (the time and date of the Closing being
hereinafter called the "Closing Date"). All transactions consummated at the
Closing shall be deemed to have taken place simultaneously and shall be deemed
to be effective as of the Close of Business of Seller on the Closing Date.
SECTION II.7 Purchase of Additional Assets. (a) At Closing, Buyer shall
have the right to purchase those fixed assets of Seller (other than Excluded
Assets) as it shall have notified Seller of at or prior to Closing, at a
purchase price equal to 40% of the Net Book Value of such assets.
(b) At Closing, Buyer shall purchase Seller's usable inventory
(as reasonably determined by Buyer) on hand as of the Closing Date at the lesser
of Seller's acquisition cost or, if a material difference exists, the cost that
such inventory is customarily acquired at by Transworld and Seller's inventory
of usable pumps (as reasonably determined by Buyer) on hand as of the Closing
Date at the fair market value thereof as determined by one or more third party
vendors mutually acceptable to Buyer and Seller. The Buyer and
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<PAGE> 17
Seller shall make a mutual good faith estimate of the purchase price of the
inventory and pumps so purchased which amount shall also be paid at Closing. The
calculation of the final purchase price for the inventory and pumps shall be
made by Buyer and Seller or the third party vendors, respectively, within the
ninety (90) day period following Closing and any adjustment shall, subject to
Section 2.11, be paid to Seller or Buyer, as the case may be, by certified check
or wire transfer within five (5) Business Days thereafter.
SECTION II.8 Collection of Existing A/R. (a) Following the Closing,
Seller will continue to collect the Existing A/R. Commencing on the ninety-first
day following the Closing Date and for a period of 180 days thereafter, to the
extent requested by Seller, Buyer will use commercially reasonable efforts
(which, it being specifically understood and agreed, shall not include the
institution of litigation or other extraordinary actions) to assist Seller in
the collection of the Existing A/R. In consideration thereof, Seller shall
reimburse Buyer for all of its actual costs of personnel who are involved in the
collection of such Existing A/R and all other costs directly related to the
collection by Buyer of the Existing A/R (such as telephone and postage) but not
including overhead costs, which reimbursable costs and time records Buyer will
document for Seller in reasonable detail. Such reimbursement shall be made
within five (5) Business Days following receipt of Buyer's records. Proceeds of
collection of the Existing A/R shall continue to be deposited into Seller's
lender lockbox without any right of offset by Buyer. Seller and Stockholder
jointly and severally agree to remit to Buyer weekly, any funds that have been
received in the lockbox which pertain to goods sold or services performed after
the Closing Date. Following the expiration of the 180 day period, the parties
will re-evaluate any further collection arrangements with respect to collection
of Existing A/R. The parties acknowledge and agree that Buyer does not guarantee
the collection or collectibility of any Existing A/R either during or after the
expiration of any collection period.
(b) The parties shall each have the right to review the
collection status of all accounts monthly and Seller shall have the right to
continue to actively seek collection of the Existing A/R. Clinical and
reimbursement documentation with respect to Existing A/R will remain the
property of Seller; provided however, that if Seller elects to have Buyer assist
in its collection efforts, it shall deliver to Buyer, at the time of such
request, copies of all records necessary to enable Buyer to provide such
assistance; and provided further, that Buyer will retain such documentation with
respect to the Existing A/R as shall be necessary to manage its ongoing
operations, and will give Seller reasonable access to such documentation during
any collection period.
SECTION II.9 Certain Employees; Use of Facilities. (a) Buyer shall have
the right to designate at Closing and through the period ending December 1, 1996
(or such later date, which shall not be more than 60 days following Closing, as
Buyer shall advise Seller of by
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<PAGE> 18
November 25, 1996, such period being referred to as the "Transition Period") by
notice to Seller, those employees of Seller (other than the employees listed on
Schedule 2.9, who shall remain employees of Seller (the "Retained Employees"))
it desires to employ and Seller and Stockholder shall use their respective best
efforts to assist Buyer in the hiring of and retention of such employees
(herein, the "Selected Employees"), and Buyer shall be responsible for all costs
after Closing associated with such Selected Employees. Buyer shall have no
obligation, however, to offer employment to any of Seller's or Stockholder's
employees and shall have no obligation or liability with respect to any
employees, except as expressly provided in this Agreement. Buyer and Transworld
agree not to solicit the Retained Employees for employment by either of them or
any of their Affiliates for a period of one (1) year from the Closing Date to
the extent that they remain employees of Seller or Stockholder during such
period.
(b) Seller and Stockholder shall pay all accrued salary,
taxes, benefits and other costs for its existing employees including the
Selected Employees through the end of the Transition Period. Commencing on the
date immediately following the end of the Transition Period, Buyer shall be
responsible for all salary, taxes, benefits and other costs of the Selected
Employees.
(c) Consistent with pharmacy and homecare licensing and
regulatory requirements, Seller and Stockholder agree that Buyer and Transworld
shall have the right to use, without cost to Buyer or Transworld, Seller's
existing facilities during the Transition Period, in order to ensure an orderly
transition of the Purchased Assets to Buyer. Buyer acknowledges that Seller will
also be using such facilities for its ongoing operations and shall cooperate
with Seller in seeking to minimize any interference with such operations. In
order to ensure an orderly transition of care for those patients for whom Seller
has provided home infusion therapy products or services prior to the Closing,
Seller and Stockholder agree that during the Transition Period, Seller shall
dispense on behalf of Buyer and Transworld such pharmaceutical products for such
patients as Buyer or Transworld requests. Seller shall deliver such
pharmaceutical products in the manner and to the locations as Buyer or
Transworld shall from time to time direct. For any such pharmaceutical products
sold by Seller, Buyer shall pay Seller or Stockholder an amount equal to
Seller's or Stockholder's direct costs (which shall mean the cost of drugs,
direct labor costs, packaging and delivery) for such pharmaceutical products.
Seller and Stockholder agree that Seller shall maintain all necessary licenses
and permits to permit them to perform their obligations hereunder. Seller,
Stockholder, Buyer and Transworld shall cooperate with each other as necessary
to facilitate the proper billing by Buyer and reimbursement from third party
payors for such pharmaceutical products.
(d) During the Transition Period, in order to assist in the
transition of the Business to Buyer, Buyer shall have the right to request that
Seller use its reasonable best efforts to retain its existing employees and
existing business functions of the Business, and
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<PAGE> 19
Buyer shall be responsible for paying all costs incurred by Seller directly
related to such employees and business functions, other than as set forth on
Schedule 2.9(d), (the "Transition Costs"). All Transition Costs shall be settled
from the Settlement Account pursuant to Section 2.11 hereof.
SECTION II.10 Certain Nursing Services. (a) In order to assist in
providing continuity of care to patients who are included within the Existing
Accounts and any accounts which are referred to Transworld or an Affiliate by
Seller or Stockholder (the "Marketed Accounts") during the ninety (90) day
period after the Closing, Buyer will utilize Stockholder's skilled nurses at a
rate of $90 per visit in cases where skilled nursing services are required in
connection with infusion therapy services or products. With respect to visits
which are longer than two (2) hours, Seller and Stockholder will bill Buyer at
the rate of $45 per hour for each additional hour, in addition to the base rate
of $90 per visit; provided however, that where a CHHA will reimburse Buyer in
connection with nursing services related to the provision of gamma globulin,
Seller and Stockholder will bill Buyer the same amount as Buyer will be
reimbursed by the CHHA. Buyer and Transworld agree that, during such 90-day
period, neither they nor their Affiliates will solicit such nurses for
employment, except to the extent that such nurses are included within the
Selected Employees. Seller, Stockholder and Transworld's Steri-Pharm, Inc.
subsidiary will enter into such nursing services agreements as Buyer, Transworld
and Seller may request, which agreements shall contain terms consistent with the
foregoing and such other terms as are normal, customary and appropriate for
nursing services agreements. If after such 90 day period, Buyer requests Seller
or Stockholder to continue to provide such skilled nursing services, Seller and
Stockholder shall continue to provide such skilled nursing services and Buyer or
Transworld shall reimburse Seller or Stockholder at the greater of (i) the rates
set forth above or (ii) Seller's or Stockholder's direct costs incurred in
providing such skilled nursing services.
(b) Transworld agrees that after the Closing, and until the
second anniversary thereof, Stockholder shall be given a preferential
opportunity to provide skilled nursing services to Transworld at service rates
no higher than can be obtained by Transworld from other sources, in those
markets where Stockholder now or hereafter provides such skilled nursing
services, except that Stockholder shall not be entitled to any such preference
in any markets where (i) Transworld or any Affiliate thereof now or hereafter
provides such skilled nursing services, (ii) Transworld or any Affiliate thereof
is committed to utilize nursing services from another provider, or (iii)
Transworld or any Affiliate thereof has been directed by a referral source to
use a particular provider (which may include Transworld or its Affiliates).
(c) The parties acknowledge and agree that in furtherance of
the provisions of Section 2.9 hereof, and in order to provide continuity of
care, the parties contemplate that
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(and Seller and Stockholder shall use their reasonable best efforts to cause) as
of and after Closing (i) the two (2) CHHA nurses of Seller based in Queens, New
York will remain employees of Stockholder or its subsidiaries and will be
cross-charged to Buyer under a nursing services agreement which will provide for
their full salary, benefits and on-call expenses and (ii) the two (2) CHHA
nurses of Stockholder or its subsidiaries based in Scarsdale, New York will
become employees of Transworld's Steri-Pharm, Inc. subsidiary.
SECTION II.11 Effective Date. (a) To the extent permitted by applicable
law and, in the manner provided in this Section 2.11, and provided that the
Closing has occurred, the parties intend that all of the Purchased Assets shall
be deemed vested in and with the Buyer, effective as of the commencement of
business on October 1, 1996 (the "Effective Date").
(b) The parties acknowledge and agree that the October Net
Revenues, subject to the October Expenses, shall be for the benefit of the
Buyer. As of the Closing Date the parties shall jointly prepare a good faith
estimate of the October Net Revenues and the October Expenses. At Closing, an
amount equal to 20% of the October Net Revenues (as so estimated) shall be paid
to Buyer in cash, and an amount equal to the October Net Revenues less the
October Expenses less such 20% payment shall be recorded on the books and
records of the Seller as an account payable to Buyer (the "Settlement Account").
Within the sixty (60) day period following Closing, Buyer and Seller shall
endeavor to finalize the October Net Revenues and Expenses, and on the ninetieth
day following Closing, Seller shall pay to Buyer the Settlement Account as
adjusted for any post-Closing adjustments to be made pursuant to Section 2.7
hereof and any amounts due to Seller pursuant to Section 2.9(d); provided,
however that Seller may retain an amount equal to 3% of October Net Revenues
from the payment of the Settlement Account as an offset against actual bad debt
in excess of 7% of October Net Revenues, with any unused portion of said 3% to
be paid to Buyer on the 180th day following Closing. In the event that the
parties are unable to agree as to such amounts, they shall, within fifteen (15)
days following the expiration of the sixty (60) day period jointly appoint an
independent public accounting firm who shall, within fifteen (15) days after
such appointment, issue its calculation of the amount of the final Settlement
Account amounts, which calculation, absent manifest error, shall be binding upon
the parties. The cost of any independent accounting firm so appointed shall be
shared equally between Buyer and Seller. In furtherance of Section 3.7 and 5.1,
Seller represents and warrants to Buyer that it has and will operate the
Business only in the ordinary course between October 1, 1996 and Closing.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLER AND THE STOCKHOLDER
Seller and the Stockholder hereby jointly and severally represent and
warrant to Buyer that:
SECTION III.1 Authority Relative to this Agreement. Seller and the
Stockholder have full power, capacity and authority to execute and deliver this
Agreement and each other Transaction Document to which it is a party and to
consummate the transactions contemplated hereby (the "Contemplated
Transactions"). The execution and delivery of this Agreement and the
consummation of the Contemplated Transactions have been duly and validly
authorized by Seller and the Stockholder and no other proceedings on the part of
Seller or the Stockholder (or any other person) is necessary to authorize the
execution and delivery by Seller and the Stockholder of this Agreement or the
consummation of the Contemplated Transactions. The consideration to be received
by Seller represents the fair value of the Purchased Assets to be transferred to
Buyer. This Agreement has been duly and validly executed and delivered by Seller
and the Stockholder, and (assuming the valid execution and delivery of this
Agreement by the other parties hereto) constitutes the legal, valid and binding
agreement of such party enforceable against such party in accordance with its
terms except as such obligations and their enforceability may be limited by
bankruptcy, insolvency reorganization, moratorium and other similar laws
affecting the enforcement of creditors' rights generally and except that the
availability of equitable remedies, including specific performance, is subject
to the discretion of the court before which any proceeding therefor may be
brought (whether at law or in equity).
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SECTION III.2 No Conflicts; Consents. The execution, delivery and
performance by Seller and the Stockholder of this Agreement and each other
Transaction Document to which it is a party and the consummation of the
Contemplated Transactions will not (i) violate any provision of the Certificate
of Incorporation or By-laws (or comparable instruments) of Seller; (ii) require
Seller or the Stockholder to obtain any consent, approval or action of, or make
any filing with or give any notice to, any Governmental Body or any other
person, except as set forth on Schedule 3.2 (the "Required Consents"); (iii) if
the Required Consents are obtained, violate, conflict with or result in the
breach of any of the terms of, result in a modification of the effect of, or
otherwise cause the termination of or give any other contracting party to a
contract the right to terminate, or constitute (or with notice or lapse of time
or both constitute) a default (by way of substitution, novation or otherwise)
under any contract, agreement, indenture, note, bond, loan, instrument, lease,
conditional sale contract, purchase order, sales order, agreement with customer,
agreement with supplier, union contract, collective bargaining agreement,
mortgage, license, permit, franchise, commitment or other binding arrangement,
whether written, oral, express or implied, (the "Contracts") to which Seller is
a party or by or to which Seller or any of its properties may be bound or
subject, or result in the creation of any Lien upon the Purchased Assets or upon
the properties of Seller pursuant to the terms of any such Contract; (iv) if the
Required Consents are obtained, violate any Order of any Governmental Body
against, or binding upon, Seller or upon its respective securities, properties
or business; (v) if the Required Consents are obtained, violate any Law of any
Governmental Body, or (vi) if the Required Consents are obtained, violate or
result in the revocation or suspension of any Permit.
SECTION III.3 Corporate Existence and Power. Seller is a corporation
duly organized, validly existing and in good standing under the laws of its
state of incorporation, and has all requisite powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted. Seller is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a material
adverse effect on the business, properties, financial condition or the results
of operations of Seller and its Affiliates, individually or taken as a whole
(the "Condition of the Business"). Seller is not qualified to do business as a
foreign corporation in any other jurisdiction.
SECTION III.4 Subsidiaries. Seller does not own, directly or
indirectly, any equity or other interest in any other person and has no
Subsidiaries.
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SECTION III.5 Charter Documents and Corporate Records. (a) Seller has
heretofore delivered to Buyer true and complete copies of the Certificate of
Incorporation (certified by the Secretaries of State or other appropriate
official of its jurisdictions of incorporation) and By-laws (certified by
Seller's secretary or an assistant secretary), or comparable instruments, of
Seller as in effect on the date hereof. The stock books of Seller which have
been made available to Buyer for its inspection are true and complete. The
Stockholder is the sole record and beneficial owner of all of the outstanding
capital stock of Seller and there are no options, warrants or other agreements
of any kind outstanding or proposed to be issued with respect to the capital
stock of Seller.
(b) All financial, business and accounting books, ledgers,
accounts and other records relating to Seller have been properly and accurately
kept and completed in all material respects except as set forth on Schedule
3.5(b) hereto.
SECTION III.6 Financial Statements. (a) Seller has delivered to Buyer
unaudited financial statements of Seller consisting of a statement of net assets
being sold and statement of income as at and for the six-month period ended June
30, 1996, and unaudited financial statements of Seller consisting of statement
of net assets being sold and statement of income as at and for Seller's fiscal
year ended December 31, 1995. Such financial statements (collectively, the
"Financial Statements") present fairly the financial position of Seller and the
results of its operations and changes in financial position as of the dates and
for the periods indicated, in conformity with GAAP consistently applied during
each of such periods.
(b) Except as set forth on Schedule 3.6(b): (i) As at the
Balance Sheet Date, Seller did not have any Liabilities that were not fully and
adequately reflected or reserved against on the balance sheet contained in, or
in the notes to, the December 31, 1995 Financial Statements; (ii) Seller has
not, except in the ordinary course of business consistent with past practice and
except for customary expenses incurred in connection with the Contemplated
Transactions, incurred any Liabilities since the Balance Sheet Date; and (iii)
neither Seller nor the Stockholder has any knowledge of any circumstance,
condition, event or arrangement that they reasonably anticipate would hereafter
give rise to any Liabilities of Seller or any successor to its businesses except
Liabilities arising in the ordinary course of business consistent with past
practice and customary expenses incurred in connection with the Contemplated
Transactions. Seller and Stockholder represent and warrant that they know of no
reason why the Financial Statements cannot be audited in accordance with the
requirements of Section 5.3 hereof.
(c) The accounts receivable of Seller with respect to patients
who have been on service since June 1, 1996 (the "Receivables") (except such
Receivables as have been collected since such date) constitute bona fide
Receivables resulting from the sale of goods and services in the ordinary course
of business in conformity with applicable purchase
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orders and agreements. Except as otherwise disclosed by Seller to Buyer, such
Receivables are subject to no valid defense, offsets, returns, allowances or
credits of any kind other than defenses, offsets, returns, allowances and
credits arising in the ordinary course of business, it being understood that
nothing herein shall be interpreted as a guarantee of the collectibility of such
Receivables.
(d) Insofar as it relates to or affects the Purchased Assets,
Schedule 3.6(d) sets forth a brief description of all Liabilities of Seller in
respect of (i) money borrowed from and owed to any bank, financial institution
or other person and (ii) any indebtedness or potential indebtedness under any
guaranty, letter of credit or performance credit (collectively, "Debt"). Except
as set forth on Schedule 3.6(d), all Debt may be repaid or prepaid upon no more
than 30 days' notice without premium or penalty.
SECTION III.7 Absence of Certain Changes. Since the Balance Sheet Date,
except as contemplated by this Agreement or disclosed in Schedule 3.7, Seller
has conducted its business in the ordinary course consistent with past practices
and there has not been:
(a) Any event (other than those events affecting the infusion
therapy industry generally) that has had or would reasonably be expected to have
a material adverse effect on the operations of Seller, individually or in the
aggregate;
(b) Any amendment to the Certificate of Incorporation or
By-laws of Seller or any amendment to any term of any outstanding security of
Seller;
(c) Insofar as it relates to or affects the Purchased Assets,
any (i) incurrence, assumption or guarantee by Seller of any debt other than in
the ordinary course of business in amounts and on terms consistent with past
practices, (ii) issuance or sale of any securities convertible into or
exchangeable for debt securities of Seller, or (iii) issuance or sale of options
or other rights to acquire from Seller, directly or indirectly, debt securities
of Seller or any securities convertible into or exchangeable for any such debt
securities;
(d) Insofar as it relates to or affects the Purchased Assets,
any creation, incurrence or assumption by Seller of any lien on any asset other
than (i) liens for Taxes not yet due or being contested in good faith (and for
which adequate reserves have been established); (ii) liens which do not
materially detract from the value of such asset as now used, or materially
interfere with any present or intended use of such asset; or (iii)
warehousemen's, mechanics', carriers', landlords', repairmen's or other similar
liens arising in the ordinary course of business;
(e) Insofar as it relates to or affects the Purchased Assets,
any making or
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forgiving of any loan, advance or capital contribution to or investment in any
person other than loans, advances or capital contributions to or investments in
wholly-owned subsidiaries made in the ordinary course of business consistent
with past practices;
(f) Any damage, destruction or other casualty loss (whether or
not covered by insurance) affecting the business or assets of Seller which,
individually or in the aggregate, has had or will reasonably be expected to have
a material adverse effect on its operations;
(g) Except in the ordinary course of business, any transaction
or commitment made, or any Contract entered into, by Seller relating to its
assets or business (including the acquisition or disposition of any substantial
assets) or any relinquishment by Seller or other party of any Contract or other
right;
(h) Any change in any method of accounting or accounting
practice by Seller or its marketing practices;
(i) Any assumption or guarantee of the obligations of any
person;
(j) Insofar as it may affect or relate to any Selected
Employee, any grant of any severance or termination pay to any employee of
Seller, any entering into of any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
employee of Seller or any increase in benefits payable under any existing
severance or termination pay policies or employment agreements, or any increase
in compensation, bonus or other benefits payable to any employee of Seller,
other than routine increases for employees in the ordinary course of business or
disclosed to Buyer in writing prior to the date hereof or on any Schedule;
(k) Any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of Seller, which employees were not subject to
a collective bargaining agreement at the Balance Sheet Date, or any lockouts,
strikes, slowdowns, work stoppages or, to the knowledge of Seller, threats
thereof by or with respect to such employees;
(l) Any intentional waiver of any material right under any
Contract of the type required to be set forth on any Schedule;
(m) Except for any changes made in the ordinary course of
business, any material change in any business policies of Seller, including
pricing, purchasing, production, personnel, sales or product acquisition/return
policies;
(n) Except in the ordinary course of business, any payment,
directly or
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indirectly, of any Liability before the same became due in accordance with its
terms;
(o) Any termination or failure to renew, or the receipt of any
written threat (that was not subsequently withdrawn) to terminate or fail to
renew, any Contract that is or was material to the operation; or
(p) Any agreement or arrangement made by Seller to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty in this Section untrue or incorrect in any material
respect.
SECTION III.8 Properties. (a) Schedule 3.8(a) sets forth a brief
description (including the address) of all real property leased by Seller ("Real
Property Leases"); the date of the lease and any amendments thereto, the term
thereof, the term of any renewal options and the aggregate monthly rental
payable thereunder. Seller owns no real property.
(b) Schedule 3.8(b) sets forth a complete and correct list and
description of all tangible property (the "Tangible Property"), owned or used by
Seller or which Seller holds an option to acquire having a book value
individually of $5,000 or more or $10,000 or more in the aggregate in case of
any group of similar items of Tangible Property, including, without limitation,
all machinery, equipment, furniture, furnishings, leasehold improvements,
fixtures, vehicles and structures. All Tangible Property selected by Buyer
pursuant to Section 2.7 shall be in a state of working order except for a
nonmaterial portion of such Tangible Property that may be undergoing repairs or
maintenance in the ordinary course.
(c) Except as set out in Schedule 3.8(c) and insofar as it may
affect or relate to the Purchased Assets, Seller has good title to, or in the
case of leased property have valid leasehold interests in, all properties and
assets (whether real, personal, tangible or intangible) reflected on the Balance
Sheet or acquired after the Balance Sheet Date except for properties and assets
sold or disposed of since the Balance Sheet Date in the ordinary course of
business consistent with past practice. Except as set forth on Schedule 3.8(c),
none of such properties or assets is subject to any Liens, except:
(i) Liens disclosed on the Balance Sheet or the notes
thereto;
(ii) Liens for taxes not yet due or being contested in
good faith (and for which adequate reserves have been established on the Balance
Sheet);
(iii) Liens which do not materially detract from the value
of such property or assets as now used, or materially interfere with any present
or intended use of such property or assets; or
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(iv) Warehousemen's, mechanics', carriers', landlords',
repairmen's or other similar Liens arising in the ordinary course of business.
SECTION III.9 Contracts. (a) Except for (i) purchase orders with
suppliers or sales orders from patients or customers arising in the ordinary
course of business and (ii) Contracts pursuant to the terms of which Seller is
to make or receive payments not in excess of $10,000, in the aggregate,
throughout the term thereof, Schedule 3.9 sets forth as of the date hereof a
complete and accurate list and description of all Contracts to which Seller is a
party or by or to which it or its assets or properties are bound or subject,
including, without limitation:
(i) Contracts with any current or former shareholder,
officer, director, employee, independent contractor, consultant, agent or other
representative or with any Affiliate of any of the foregoing;
(ii) Contracts with any labor union or association
representing any employee;
(iii) Contracts for the purchase of materials, supplies,
equipment, merchandise or services in excess of $10,000 for any one individual
item;
(iv) Other than in the ordinary course of business: (A)
Contracts for the sale of any of its assets or properties or business or (B)
Contracts for the grant to any person of any preferential rights to purchase any
of its assets or properties;
(v) Partnership or joint venture Contracts;
(vi) Contracts under which Seller agrees to indemnify
any party;
(vii) Contracts under which Seller agrees to share Tax
liability of or with any party;
(viii) Contracts that cannot be cancelled without
liability, premium or penalty;
(ix) Contracts that can be cancelled only on 60 days' or
more notice;
(x) Any special financial arrangements with the largest
(in terms of sales volume) 25 customers, referral sources or third party payors
of Seller that is outside of Seller's published policies including, but not
limited to, any arrangements relating to chargebacks, allowances and payment
terms;
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(xi) Contracts with any person to advertise or market
Seller's products or services other than in the ordinary course of business;
(xii) Contracts containing covenants not to compete in any
line of business or with any person in any geographical area (or not to solicit
or accept any business) or covenants of any other person not to compete in any
line of business or in any geographical area (or not to solicit or accept any
business);
(xiii) Contracts relating to the acquisition of any operating
business or the capital shares of any other person;
(xiv) Options for the purchase or sale of any asset,
tangible or intangible;
(xv) Contracts requiring the payment to any person of an
override or similar commission or fee;
(xvi) Contracts relating to all Debt, insofar as it affects
or relates to the Purchased Assets;
(xvii) Contracts with customers, referral sources, third
party payors, independent suppliers, contractors and manufacturers other than in
the ordinary course of business;
(xviii) Sales agency, licensing, representative, provider,
managed care or distributorship Contracts;
(xix) Contracts for the payment of fees or other
consideration to any officer or director of Seller or to any other entity in
which any of the foregoing has an interest;
(xx) management Contracts and other similar agreements with
any person;
(xxi) Any other Contracts not made in the ordinary course of
business or pursuant to the terms of which there is either a current or future
obligation or right of Seller to make payments or receive payments in excess
(individually or, in the case of any group of similar items, in the aggregate)
of $10,000 throughout the term thereof. Schedule 3.9 also lists and describes
the status of all Contracts currently in negotiation or proposed by Seller as to
which there exists a draft agreement, letter of intent or similar instrument and
which is of a type which if entered into by Seller would be required to be
listed on Schedule 3.9 or on any other Schedule (the "Proposed Contracts").
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(b) There are no Contracts, other than those set forth on
Schedule 3.9, and on any other Schedule hereto, that are required to be
disclosed hereunder. Except as set forth on Schedule 3.9, all such Contracts and
all Contracts reflected on any other Schedule hereto are valid, subsisting, in
full force and effect and binding upon Seller, and, to the best knowledge of
Seller, on the other parties thereto in accordance with their terms, and the
Seller has paid in all respects or accrued all amounts due thereunder and has
satisfied in all respects or provided for all of its liabilities and obligations
thereunder to be satisfied or provided for through the date hereof, and is not
in default under any of them in any material respect, nor, to the best knowledge
of Seller, is any other party to any such Contract in default thereunder in any
respect, nor, to the best knowledge of Seller, does any condition exist that
with notice or lapse of time or both would constitute a default thereunder.
Seller and Stockholder further represent and warrant that notwithstanding that
any Contract may be in the name of another U.S. HomeCare Corporation entity, no
such entity other than Seller has an interest in any such Contracts, and at
Closing and thereafter as provided herein, Seller and Stockholder shall take any
further corrective action to ensure the transfer of such Contract to Buyer
(subject to any Required Consents) as is reasonably requested by Buyer. Except
as separately identified on Schedule 3.9 hereto or on any other Schedule, no
approval or consent of any person is needed in order that the Contracts set
forth on Schedule 3.9 or on any other Schedule continue in full force and effect
following the consummation of the Contemplated Transactions.
(c) There have been delivered to Buyer, true and complete
copies of (i) all of the Contracts required to be set forth on Schedule 3.9 or
on any other Schedule and (ii) the most recent draft, letter of intent or term
sheet of all of the Proposed Contracts required by the provisions of Section
3.9(a)(xxi) to be set forth on Schedule 3.9.
SECTION III.10 Intangible Property. (a) Schedule 3.10 sets forth all
patents, trademarks, copyrights, service marks and trade names owned or used by
Seller relating to the Business, all applications for any of the foregoing, and
all permits, grants and licenses or other rights running to or from Seller
relating to any of the foregoing (the "Intellectual Property Rights"), and there
are no other patents, trademarks, copyrights, service marks and trade names that
are material to the Business. To the best of Seller's knowledge: (i) with
respect to trademarks material to the Business as presently conducted (and only
in such jurisdictions where such trademarks are material to the Business as
presently conducted), all renewals of the registrations set forth in Schedule
3.10 for such trademarks have been appropriately filed; (ii) Seller has
exercised its best efforts to ensure compliance with all registration
requirements, and have paid all necessary government fees; and (iii) the
trademark registrations material to the Business as presently conducted are
valid with respect to Products that are covered by the registrations. The
trademarks of Seller that are material to the Business are identified on
Schedule 3.10 by means of an asterisk.
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(b) Except as set forth on Schedule 3.10, no Intellectual
Property Rights or any other such right is subject to any security interest or
outstanding order, judgment, decree, stipulation or agreement restricting the
use or licensing thereof. Except as set forth on Schedule 3.10, (i) Seller,
during the three years preceding the date hereof, has not been sued or charged
in writing with or been a defendant in any claim, suit, action or proceeding
relating to the Business which has not been terminated prior to the date hereof
and which involves a claim of infringement of any Intellectual Property Rights;
and (ii) the Stockholder and Seller have no knowledge of any such charge or
claim of any infringement during the three years preceding the date hereof by
any other person of any Intellectual Property Rights.
SECTION III.11 Claims and Proceedings. Except as set forth on Schedule
3.11, there are no outstanding Orders of any Governmental Body against or
involving Seller other than Orders affecting the home health care industry
generally. Except as set forth on Schedule 3.11, there are no actions, suits,
claims or counterclaims or legal, administrative or arbitral proceedings or
investigations (collectively, "Claims") (whether or not the defense thereof or
liabilities in respect thereof are covered by insurance), pending or threatened
in writing, against or involving Seller, the Business, the Purchased Assets or
Seller's properties which (i) involve a claim for the payment of money damages
of $25,000 or more; (ii) relate to employment, regardless of amount; (iii)
involve a claim from any prior or present patient, payor or referral source or
involve any alleged violation of laws relating to health regulation (including
state certificate of need and licensure laws and federal and state controlled
substances laws) or the Medicare or Medicaid programs; or (iv) individually or
in the aggregate, would have a material adverse effect upon the Contemplated
Transactions or upon the Condition of the Business other than Claims affecting
the home health care industry generally. Except as set forth on Schedule 3.11,
to the best knowledge of Seller, there is no fact, event or circumstances that
would give rise to any Claim that would be required to be set forth on Schedule
3.11 if currently pending or threatened. All notices required to have been given
to any insurance company listed as insuring against any Claim set forth on
Schedule 3.11 have been timely and duly given and, except as set forth on
Schedule 3.11, no insurance company has asserted in writing that such Claim is
not covered by the applicable policy relating to such Claim. Except as set forth
on Schedule 3.11 there are no product liability Claims against or involving
Seller or, to the best knowledge of Seller, any product marketed or distributed
by Seller ("Products").
SECTION III.12 Restrictions on Business Activities. There is no
agreement, judgment, injunction, order, decree or other instrument binding upon
Seller which has or would reasonably be expected to have the effect of
prohibiting (i) competition by Seller, (ii) any business practice of Seller,
(iii) any acquisition of property by Seller, or (iv) to the knowledge of Seller
or the Stockholder, the conduct of the Business.
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SECTION III.13 Taxes. (a) Except as set forth on Schedule 3.13, (i) all
Tax returns, statements, reports and forms required to be filed with any Taxing
Authority by or on behalf of Seller (collectively, the "Returns") have been
timely filed through the date hereof or will be filed when due (taking into
account any extension granted by the appropriate Taxing Authority), in
accordance with all applicable Laws; (ii) as of the time of filing, the Returns
correctly reflected (and, as to any Returns not filed as of the date hereof,
will correctly reflect) the income and expenses of Seller and any other
information required to be shown therein; (iii) Seller has timely paid (or is
contesting in good faith and has reserved adequate amounts therefor) all Taxes
that have been shown as due and payable on the Returns that have been filed;
(iv) Seller is not delinquent in the payment of any Tax and has not requested
any extension of time within which to file or send any Return, which Return has
not since been filed or sent; (v) no deficiency for any Tax or claim for
additional Taxes by any Taxing Authority has been proposed, asserted or assessed
in writing against Seller (or any member of any affiliated or combined group of
which Seller is or have been a member); (vi) Seller (or any member of any
affiliated or combined group of which Seller is or has been a member) have not
granted any extension or waiver of the limitation period applicable to any
Returns; (vii) Seller has not filed any consent or election under the Code,
other than such consents and elections, if any, reflected in the Returns; (viii)
there is no claim, audit, action, suit, proceeding or investigation now pending
against or with respect to Seller in respect of any Tax or assessment; (ix)
there are no Liens for Taxes upon the assets of Seller; (x) Seller has not been
a member of an affiliated group other than one of which Stockholder was the
common parent, or filed or been included in a combined, consolidated or unitary
Return together other than one filed by Stockholder; (xi) Seller has complied
with all Laws relating to Tax withholding; and (xii) Seller is not currently
under any contractual obligation to indemnify any other person with respect to
Taxes.
(b) True and correct copies of the Returns for the years 1995,
1994 and 1993 have been delivered to Buyer.
(c) Neither Buyer nor Seller shall be required to pay any
amount to anyone else pursuant to any tax-sharing or tax allocation agreement to
which Seller is a party.
(d) Seller does not hold and has not held a permit,
registration, certificate or like instrument as a "dealer" or other collecting
agent from a state Taxing Authority under which it collects sales tax from their
business operations and remits such tax to such Taxing Authority.
SECTION III.14 Employee Benefits Plans. (a) Schedule 3.14(a) contains a
true and complete list of (i) all employee benefit plans described in Section
3(3) of ERISA of Seller, and of any other companies or entities which constitute
a "controlled group" with Seller (within the meaning of Sections 4001(a)(14) and
(b) of the Employee Retirement Income
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Security Act of 1974, as amended ("ERISA") and/or Sections 414(b)-(o) of the
Code (hereinafter referred to collectively as the "Group"), which are presently
in effect or which may give rise to liability, and are for the benefit of the
Business Employees, and (ii) any other pension, profit sharing, retirement,
deferred compensation, stock purchase, stock option, incentive, bonus,
sabbatical leave, vacation, severance (including, without limitation,
arrangements providing for benefits in the event of a change of ownership in
whole or in part of Seller), disability, hospitalization, medical insurance,
relocation, child care, educational assistance or other employee benefit plan or
program which any member of the Group maintains or to which any member of the
Group has any present or future obligation to contribute for the benefit of the
Business Employees. (The plans or programs described in clauses (i) and (ii) are
herein collectively referred to as the "Group Plans".) Seller has delivered or
made available to Buyer true and complete copies of all documents (including
plan documents and related trust agreements), as they may have been amended to
the date of delivery or availability, embodying the Group Plans. Since such date
of delivery or availability, the Group Plans have not been amended to materially
change the terms thereof. Seller has also delivered to Buyer true and complete
copies of all annual reports, summary annual reports, summary plan descriptions
and a summary of material modifications with respect to each Group Plan for the
preceding three years.
(b) Except for Seller's 401(k) Plan (the "Plan") and the U.S.
HomeCare Corporation Employee Stock Ownership Plan (the "ESOP"), the Group
maintains no tax qualified "employee pension benefit plan" as defined in Section
401 of the Code or Section 3(2) of ERISA for the benefit of employees of the
Seller, nor has the Group ever maintained any other employee pension benefit
plan for the benefit of employees of the Seller, except for multiemployer plans
as defined in Section 3(37) of ERISA.
(c) The IRS has issued a favorable determination letter to the
effect that the Plan qualifies under Section 401(a) of the Code and that the
related trust is exempt from taxation under Section 501(a) of the Code and such
determination letter remains in effect and has not been revoked. To Seller's
best knowledge, nothing has occurred (or, if occurred, has not been corrected in
a manner acceptable to the IRS as expressly applied to the Plan) or is expected
to occur that would adversely affect the qualified status of the Plan or any
related trust subsequent to the issuance of such determination letter.
(d) Except for the ESOP each member of the Group is in
material compliance with the requirements prescribed by any and all statutes,
orders, governmental rules or regulations applicable to the Group Plans and all
reports and disclosures relating to the Group Plans required to be filed with or
furnished to governmental agencies, participants or beneficiaries prior to the
Closing Date have been or will be filed or furnished in a timely manner and in
accordance with applicable law.
(e) Except as provided in Schedule 3.14(e), no member of the
Group
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currently has any obligation to contribute to any multiemployer plan as defined
in Section 3(37) of ERISA. With respect to each such multiemployer plan listed
on Scheduled 3.14(e), the Group has not incurred withdrawal liability within the
meaning of the Multiemployer Pension Plan Amendments Act of 1980.
(f) To Seller's best knowledge, no member of the Group nor any
other "disqualified person" or "party in interest" (as defined in Section 4975
of the Code and Section 3 of ERISA, respectively) has engaged in any "prohibited
transaction," as such term is defined in Section 4975 of the Code or Section 406
of ERISA with respect to a Group Plan, which could subject any of the Group
Plans (or their related trusts), any officer, director or employee of any entity
within the Group or any trustee, administrator or any other fiduciary of any of
the Group Plans to a material tax or penalty imposed under Section 4975 of the
Code or Section 502(i) of ERISA.
(g) There are no actions, audits, suits or claims pending
(other than routine claims for benefits) or, to the knowledge of Seller,
threatened against any of the Group Plans or any fiduciary of any of the Group
Plans or against the assets of any of the Group Plans.
(h) The consummation of the Contemplated Transactions will not
accelerate any liability under any of the Group Plans because of an acceleration
of any rights or benefits to which employees may be entitled thereunder.
(i) The consummation of the Contemplated Transactions will not
provide a basis for a participant in any Group Plan to claim an involuntary
termination of his employment with any member of the Group and become entitled
thereby to payments under such Group Plan.
(j) With respect to any Group Plan that is an employee welfare
benefit plan within the meaning of Section 3(1) of ERISA (a "Welfare Plan"), (i)
each such Welfare Plan, the contributions to which are claimed as a deduction
under any provision of the Code, is in substantial compliance with all
applicable requirements pertaining to such deduction, (ii) to Sellers' best
knowledge, any Welfare Plan which is a group health plan within the meaning of
Section 5000(b) of the Code satisfies in all material respects all of the
requirements of Section 4980B of the Code, and (iii) all employer contributions
due have been fully and timely paid or accrued on the books of Seller.
(k) Other than as required by law, Seller has no obligation to
or on behalf of any retired or former employee with regard to any disability
(long or short term), hospitalization, medical, dental or life insurance plans
(whether insured or self-insured) or other Welfare Plan as defined in Section
3(1) of ERISA maintained by Sellers.
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SECTION III.15 Officers, Directors and Key Employees. Schedule 3.15
sets forth (a) the name and total direct compensation of each employee,
consultant, agent or other representative of Seller whose current or committed
annual rate of compensation (including bonuses and commissions) exceeds $25,000,
(b) all wage and salary increases, bonuses and increases in any other direct
compensation received by or accrued to such persons since December 31, 1995, (c)
any payments or commitments to pay any severance or termination pay to any such
persons or to any other person, and (d) any accrual for, or any commitment or
agreement by Seller to pay, such increases, bonuses or pay. Except as set forth
on Schedule 3.15, the employment of all persons presently employed by Seller are
terminable at will.
SECTION III.16 Employment-Related Matters. Except as set forth in
Schedule 3.16, (a) Seller is not a party to any contract or agreement with any
labor organization or other representative of its employees; (b) there is no
unfair labor practice charge or complaint pending or, to Seller's best
knowledge, threatened against Seller; (c) there is no labor strike, slowdown,
work stoppage or other labor controversy in effect or, to Seller's best
knowledge, threatened against or otherwise affecting Seller; (d) Seller has not
experienced any labor strike, slowdown, work stoppage or similar labor
controversy within the past three years; (e) no representation question has been
raised respecting any employees of Seller working within the past three years,
nor, to the best knowledge of Seller, are there any campaigns being conducted to
solicit authorization from any employees of Seller to be represented by any
labor organization; (f) no collective bargaining agreement relating to any
employees of Seller is being negotiated other than extensions or renewals of
existing agreements set forth in Schedule 3.16; (g) no action, suit, complaint,
charge, arbitration, inquiry, proceeding or investigation by or before any
court, governmental agency, administrative agency or commission brought by or on
behalf of any employee, prospective employee, former employee, retiree, labor
organization or other representative of Seller's employees, is pending or, to
Seller's best knowledge, threatened against Seller; (h) Seller is not a party
to, or otherwise bound by, any consent decree with, citation or order by, any
Governmental Body relating to their employees or employment practices relating
to the employees; (i) Seller is in compliance in all material respects with all
applicable laws, policies, procedures, agreements and contracts, relating to
employment, employment practices, wages, hours, and terms and conditions of
employment; (j) Seller has paid in full to all of its employees all wages,
salaries, commissions, bonuses, benefits and other compensation due and payable
to such employees on or prior to the date hereof.
SECTION III.17 Potential Conflicts of Interest. Except for the Excluded
Assets, neither the Stockholder nor any officer, director or Affiliate of
Seller, or any spouse of any such officer, director or Affiliate, and no entity
controlled by one or more of the foregoing:
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(a) owns, directly or indirectly, any interest in (excepting
less than 1% stock holdings for investment purposes in securities of publicly
held and traded companies), or is an officer, director, employee or consultant
of, any person which is, or is engaged in business as, a competitor, lessor,
lessee, supplier, distributor, sales agent or customer of Seller;
(b) owns, directly or indirectly, in whole or in part, any
material property that Seller uses in the conduct of their business; or
(c) has any material cause of action or other claim whatsoever
against, or owes any amount to, Seller, except for claims in the ordinary course
of business such as for accrued vacation pay and accrued benefits under employee
benefit plans.
SECTION III.18 Insurance. Seller has provided to Buyer a list of all
insurance policies and fidelity and surety bonds covering the assets, business,
equipment, properties, operations, employees, officers and directors of Seller
and true and complete copies of all such policies and bonds have been made
available to Buyer and such policies and bonds are in full force and effect.
SECTION III.19 Suppliers, Customers and Contractors. Schedule 3.19
lists, by dollar volume paid or revenues generated, as the case may be, for the
month ended September 30, 1996, the 15 largest suppliers and the 25 largest
customers, referral sources and third party payors of Seller. Except as
otherwise disclosed to Buyer in Schedule 3.7 hereof with respect to the gamma
globulin and growth hormone components of the Business, during the last six
months (i) no supplier to the Business has refused to ship products or supplies
to the Seller; and (ii) the Seller has not suffered the loss of any significant
referral source or patient group.
SECTION III.20 Compliance with Laws. (a) Seller is not in violation of
any applicable order, judgment, injunction, award, decree or writ (collectively,
"Orders"), or any applicable law, statute, code, ordinance, rule, regulation or
other requirement (collectively, "Laws"), of any government or political
subdivision thereof, whether federal, state, local or foreign, or any agency or
instrumentality of any such government or political subdivision, or any court or
arbitrator (collectively, "Governmental Bodies") affecting its property, affairs
or business, where the effect of any such violation, individually or in the
aggregate, would have a material adverse effect on the Condition of the
Business, including any environmental law, rule or regulation. Seller has not
made any illegal payment to officers or employees of any Governmental Body, or
made any illegal payment to customers for the sharing of fees or to customers or
suppliers for rebating of charges, or engaged in any other illegal reciprocal
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practice, or made any illegal payment or given any other illegal consideration
to purchasing agents or other representatives of customers in respect of sales
made or to be made by Seller.
(b) Without limiting the generality of the foregoing, Seller
has been and is in compliance in all material respects with The False Statement
Statute (18 U.S.C. ' 1001), The Criminal False Claims Statute (18 U.S.C. ' 287),
The Civil False Claims Act (31 U.S.C. " 3729), The Medicare and Medicaid Civil
Monetary Penalties Act (42 U.S.C. " 1320a-7a), The Medicare and Medicaid
Criminal Penalties Act (42 U.S.C. ' 1320a-7b), The Stark Law (42 U.S.C. '
1395nn), The Medicare and Medicaid Anti-Kickback law (42 U.S.C. ' 1320a-7b(b))
and all similar state statutes in all of the states in which Seller operates or
provides services.
(c) Schedule 3.20 hereto lists the required cost reports and
other submissions and filings (other than claims for payments) with respect to
Medicaid and Medicare or other third party payments to Seller, and the last year
for which such cost report or other submissions or filings or payments to Seller
have been audited by any Governmental Body or other third party payor (and all
disallowances and retroactive rate adjustments thereon settled, paid or
otherwise recouped). All such cost reports and other submissions and filings
were complete and accurate in all material respects, and were prepared in
accordance with the requirements of the Medicaid program, the Medicare program
or the other third party payors, as applicable.
(d) No third-party payor (including, without limitation,
Medicare or Medicaid) has asserted any liability against Seller in respect of
any period through the date hereof which has not been settled or paid; to the
best knowledge of the Seller and Stockholder, there is no pending audit or any
pending or threatened audit assessment or retroactive rate adjustment against
Seller, for any period through the date hereof; and, if any such audit
assessment or retroactive rate adjustment is so asserted, it will be promptly
paid or otherwise satisfied by Seller and will have no material effect upon any
of its rates, operations or financial performance.
(e) Schedule 3.20 hereto also contains a complete and correct
list of all agreements, arrangements and other relationships of Seller currently
in effect, or in effect at any time since January 1, 1995, with individuals and
entities who refer or have referred to or otherwise generate or have generated
business for Seller (including, without limitation, sales representatives and
referring health care providers).
(f) Neither Seller nor Stockholder has any actual knowledge
that any referring physician, chiropractor, podiatrist, dentist, nurse or other
licensed health professional currently has, or has had at any time after January
1, 1995, an ownership interest in or otherwise have or had a financial
relationship with Seller.
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SECTION III.21 Permits. Seller has all licenses, permits, orders or
approvals of, and has made all required registrations with, any Governmental
Body that are necessary to the conduct of the Business and participation in the
Medicare or Medicaid programs (collectively, "Permits"), except for such Permits
which, if not in the possession of Seller, would not have a materially adverse
effect on the Condition of the Business. All Permits are listed on Schedule 3.21
and are in full force and effect; no material violations are or have been
recorded in respect of any Permit; and no proceeding is pending or threatened to
revoke or limit any Permit.
SECTION III.22 Finders; Fees. Except for Sanders Morris Mundy Inc.,
there is no investment banker, broker, finder or other intermediary which has
been retained by or is authorized to act on behalf of Seller or the Stockholder
who might be entitled to any fee or commission upon consummation of the
Contemplated Transactions, and Seller and Stockholder agree to satisfy any
obligations to them at Closing.
SECTION III.23 Depositaries. Schedule 3.23 sets forth the name of each
bank or similar entity in which Seller has an account, lock box or safe deposit
box and the names of all persons authorized to draw thereon or to have access
thereto.
SECTION III.24 Disclosure. Neither this Agreement, the Schedules
hereto, the Financial Statements nor any other audited or unaudited financial
statements, documents or certificates furnished or to be furnished to Buyer by
or on behalf of Seller or the Stockholder pursuant to this Agreement contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. There are no facts which would materially adversely affect the
Condition of the Business which have not been set forth herein, or in any
Schedule hereto, or in any certificate or statement furnished or to be furnished
to Buyer by Seller or the Stockholder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND TRANSWORLD
Buyer and Transworld represent and warrant to Seller that:
SECTION IV.1 Corporate Existence and Power Buyer is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and has all requisite corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
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SECTION IV.2 Authority Relative to This Agreement. Buyer has full
corporate power and authority to execute and deliver this Agreement and each
other Transaction Document to which it is a party and to consummate the
Contemplated Transactions. The execution and delivery of this Agreement and the
consummation of the Contemplated Transactions have been duly and validly
authorized and approved by the Board of Directors of Buyer and no other
corporate proceedings on the part of Buyer (or any other person) are necessary
to authorize the execution and delivery by Buyer of this Agreement or the
Contemplated Transactions. This Agreement has been duly and validly executed and
delivered by Buyer and (assuming the valid execution and delivery of this
Agreement by the other parties hereto) constitutes the legal, valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except as such obligations and their enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting creditors' rights generally and except that the availability of
equitable remedies, including specific performance, is subject to the discretion
of the court before which any proceeding therefor may be brought (whether in law
or at equity).
SECTION IV.3 No Conflicts; Consents. The execution, delivery and
performance by Buyer of this Agreement and each other Transaction Document to
which it is a party and the consummation by Buyer of the Contemplated
Transactions will not (i) violate any provision of the Certificate of
Incorporation or By-laws of Buyer; (ii) require Buyer to obtain any consent,
approval or action of, or make any filing with or give any notice to, any
Governmental Body or any other person, except for obtaining the consents listed
on Schedule 3.9 and Schedule 4.3; (iii) violate, conflict with or result in the
breach of any of the terms of, result in a material modification of the effect
of, or otherwise cause the termination of or give any other contracting party to
a contract the right to terminate, or constitute (or with notice or lapse of
time or both constitute) a default (by way of substitution, novation or
otherwise) under any Contract to which Buyer is a party or by or to which it or
any of its properties may be bound or subject, or result in the creation of any
Lien upon the properties of Buyer; (iv) subject to obtaining the consents listed
on Schedule 3.9 and 4.3, violate any Order of any Governmental Body against, or
binding upon, Buyer or upon Buyer's securities, properties or business; (v)
subject to obtaining the consents listed on Schedule 3.9 and 4.3, violate any
Law of any Governmental Body; or (vi) violate or result in the revocation or
suspension of any Permit.
SECTION IV.4 Litigation. There are no Claims (whether or not the
defense thereof or liability in respect thereof are covered by insurance)
pending or threatened in writing against or involving Buyer which individually
or in the aggregate would have a material adverse effect upon the business,
properties, financial condition or results of operations of Buyer taken as a
whole. No suit, action or proceeding before any court or any
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Governmental Body has been commenced or is pending or, to the knowledge of
Buyer, threatened against Buyer, which suit, action or proceeding seeks to
restrain, prevent, change or delay in any material respect the Contemplated
Transactions.
SECTION IV.5 Finders; Fees. There is no investment banker, broker,
finder or other intermediary retained by or authorized to act on behalf of Buyer
who might be entitled to any fee or commission from Buyer upon consummation of
the Contemplated Transactions.
SECTION IV.6 Disclosure. Neither this Agreement, the Schedules hereto,
nor any other audited or unaudited financial statements, documents or
certificates furnished or to be furnished to Seller by or on behalf of Buyer
pursuant to this Agreement contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading.
ARTICLE V
COVENANTS AND AGREEMENTS
SECTION V.1 Conduct of Business. (a) From the date hereof through the
Closing Date, Seller agrees (and the Stockholder will cause Seller):
(i) To conduct its operations according to its ordinary
and usual course of business consistent with past practice, to use reasonable
efforts to preserve intact its present business operations and organization, to
use reasonable efforts to keep available the services of its present officers
and employees, and to use reasonable efforts to preserve its relationships with
customers, suppliers, contractors and others having business dealings with it.
(ii) To maintain in the ordinary course of business
consistent with past practice all their material structures, equipment and other
Tangible Property in its present repair, order and condition, except for
depletion, depreciation and ordinary wear and tear.
(iii) To keep in full force and effect insurance
comparable in amount and scope of coverage to insurance now carried by it.
(iv) To perform all of its obligations under the
Contracts.
(v) To maintain its books of account and records in the
usual,
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regular and ordinary manner.
(vi) To comply in all material respects with all
Laws applicable to it.
(vii) To use its best good faith efforts, upon the
request of Buyer, to assist Buyer in obtaining the continued services of the
Selected Employees.
(viii) To take all reasonable steps to keep all
material Contracts in full force and effect.
(ix) To conduct its marketing, promotional,
billing and collection practices consistent with past practices.
(x) To not cause any increase or decrease in
rates charged for services or products, or in its purchasing practices, unless
previously agreed to by Buyer in writing, and Seller shall give Buyer prompt
written notice of any changes in any Medicare or Medicaid reimbursement rates.
(b) From the date hereof through the Closing Date, except
with the prior written consent of Buyer, Seller agrees (and the Stockholder will
cause Seller to):
(i) Except with respect to transactions with
customers and suppliers in the ordinary course of business, not to incur any
material Liability nor to enter into any Contract with a value in excess of
$5,000.
(ii) Not to undertake (nor permit to be
undertaken) any of the actions specified in Section 3.7 which are within the
control of Seller.
(iii) With respect to all employees, except as
provided or disclosed in Schedule 3.14 or 3.15, not to: (A) make, institute,
agree to or change any bonus, profit sharing, pension, retirement, severance,
termination, "parachute" or other similar arrangement or plan for employees; and
(B) otherwise than in accordance with past practices: (1) increase the
compensation payable or to become payable to any employee, and (2) accrue any
bonus, percentage of compensation or other like benefit to or for the credit of
any employee.
(iv) Not to authorize or make any capital
expenditures involving the payment or liability of $25,000 or more in the
aggregate.
(c) From the date hereof through the Closing Date, the
Stockholder agrees to use reasonable best efforts to cause the affairs of Seller
to be conducted in such a manner so that the representations and warranties of
the Stockholder and Seller contained herein shall
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continue to be true and correct on and as of the Closing Date as if made on and
as of the Closing Date.
SECTION V.2 Corporate Examinations and Investigations. Prior to the
Closing Date, Seller and Stockholder agree that Buyer shall be entitled, through
its directors, officers, employees, attorneys, accountants, representatives,
consultants and other agents (collectively, "Representatives"), to make such
investigation of the properties, businesses and operations of Seller and
Stockholder, and such examination of the books, records and financial condition
of Seller and Stockholder, as Buyer reasonably deems necessary. Any such
investigation and examination shall be conducted at reasonable times, under
reasonable circumstances and upon reasonable notice, and the Stockholder shall,
and shall cause Seller to, cooperate fully therein. No investigation by Buyer
shall diminish or obviate any of the representations, warranties, covenants or
agreements of Seller or the Stockholder contained in this Agreement. In order
that Buyer may have full opportunity to make such physical, business, accounting
and legal review, examination or investigation as it may reasonably deem
necessary of the affairs of Seller, Seller shall make available and the
Stockholder shall cause Seller to make available to the Representatives of Buyer
during such period, without however causing any unreasonable interruption in the
operations of Seller, all such information and copies of such documents and
records concerning the affairs of Seller as such Representatives may reasonably
request, shall permit the Representatives of Buyer access to the properties of
Seller and all parts thereof and to their respective customers, suppliers,
contractors and others, and shall cause Seller and the Seller's Representatives
to cooperate fully in connection with such review and examination.
SECTION V.3 Additional Financial Statements. (a) Prior to Closing, if
requested by Buyer, Seller shall provide Buyer with daily summaries of net
revenues and cost of goods sold, in such form as Buyer may reasonably request.
Within ten (10) Business Days after Closing, Seller shall furnish Buyer with a
statement of net assets being sold and statement of income for the nine (9)
month period ended September 30, 1996 on a basis consistent with those financial
statements delivered pursuant to Section 3.6(a). If requested by Buyer, as soon
as available and in any event within twenty (20) Business Days after the end of
each monthly accounting period of Seller after September 30, 1996, Seller shall
furnish Buyer unaudited financial statements for such period in such detail as
such financial statements have been prepared consistent with past practice.
(b) If requested by Buyer in order to comply with its
reporting requirements under the 1934 Act, as promptly as practicable (and in
any event by no later than twenty (20) days after such request (or such later
date as the Buyer and Seller shall agree upon) in the case of calendar years
1995, 1994 and 1993, Seller and the Stockholder shall cause the Seller's
Accountants to conduct and complete an audit of the financial
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statements of the Seller and to issue certified financial statements with
respect thereto for the year ended December 31, 1995, 1994 and 1993 (the
"Subsequent Audited Financial Statements"). An accounting firm selected by Buyer
shall have the right to review the work of the Seller's Accountants and to
comment thereon. The Subsequent Audited Financial Statements shall be prepared
in accordance with (i) GAAP and present fairly the financial position and
results of operations of Seller as at and for the periods then ended; and (ii)
Regulation S-X under the 1933 Act. The Subsequent Audited Financial Statements
shall not vary in any material respect from the applicable unaudited Financial
Statements delivered to Buyer pursuant to Section 3.6(a) hereof.
SECTION V.4 Filings and Authorizations. (a) Concurrent with the
execution of this Agreement, Seller shall file all required applications with
all relevant Governmental Bodies and other parties in connection with the
Required Consents and Seller shall thereafter prosecute such applications with
all reasonable diligence in order to obtain the approval of such applications as
expeditiously as practicable.
(b) The consummation of the Contemplated Transactions is
expressly conditioned upon (i) the grant of Governmental Bodies' and other
parties' consent in connection with the Required Consents, and (ii) the
Governmental Bodies' and other parties' consents having become final orders or
approvals, as the case may be, without any condition which would have a material
adverse effect upon Buyer's ability to continue to operate the Business in the
normal course, which grants and consents are no longer subject to
administrative, judicial or other review.
(c) With respect to each Permit which may expire prior to the
Closing Date and during the Transition Period, Seller shall (i) timely file with
the appropriate Governmental Bodies applications for renewal of each such Permit
(the "Applications"), (ii) deliver to Buyer true and complete copies of such
Applications, (iii) diligently prosecute such Applications to conclusion, and
(iv) cooperate fully with all Governmental Bodies in the processing of such
Applications.
SECTION V.5 Efforts to Consummate. (a) Subject to the terms and
conditions herein provided, each party hereto without payment or further
consideration shall use its reasonable, good faith efforts to take or cause to
be taken all action and to do or cause to be done all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective, as soon as reasonably practicable, the Contemplated Transactions,
including, but not limited to, obtaining all consents, authorizations, orders
and approvals of any third party, whether private or governmental, required in
connection with such party's performance of such transactions and each party
hereto shall cooperate with the other in all of the foregoing. Notwithstanding
anything to the contrary contained in this
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Agreement, Buyer shall not be required to undertake any measures which in the
reasonable opinion of Buyer are extraordinary to obtain any such approvals or
consents, including, without limitation, under no circumstances shall Buyer be
required to (a) make any payments to any person or party from whom such consents
or approvals are sought, as consideration therefor; or (b) except as Buyer may
otherwise agree in writing (and Buyer shall have no obligation to so agree),
accept any changes in the terms of the document or instrument for which a
consent, approval or waiver is sought or (c) alter or modify its capital or debt
structure or any term or provision contained in any agreement relating thereto.
(b) Whenever this Agreement requires Seller to take any action
(or to use any effort to take such action) or refrain from taking any action,
such requirement shall be deemed to include an undertaking on the part of the
Stockholder to cause Seller to take or refrain from taking such action.
SECTION V.6 Negotiations With Others. From and after the date hereof
unless and until this Agreement shall have terminated in accordance with its
terms, the Stockholder will not, and will not permit Seller or any officer,
director, employee or other Representative of Seller to, directly or indirectly
(a) solicit, engage in discussions or engage in negotiations with any person
(other than Buyer or any of its Affiliates) with respect to an Acquisition
Proposal; (b) provide information to any person (other than Buyer or any of its
Affiliates) in connection with an Acquisition Proposal; or (c) enter into any
transaction with any person (other than Buyer or any of its Affiliates) with
respect to an Acquisition Proposal. If the Stockholder, Seller or Representative
receives any offer or proposal to enter into discussions or negotiations
relating to any of the above, Seller or the Stockholder will immediately notify
Buyer in writing as to the identity of the offeror or the party making any such
proposal and the specific terms of such offer or proposal.
SECTION V.7 Notices of Certain Events. Seller shall advise Buyer within
three (3) Business Days (or one (1) Business Day in the case of any Selected
Employee) of learning, after the date hereof, of any employee of Seller who
intends to cancel or otherwise terminate his or her relationship with Seller. In
addition, Seller and Buyer shall promptly notify the other of:
(a) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection with the
Contemplated Transactions;
(b) any notice or other communication from any Governmental
Body in connection with the Contemplated Transactions; and
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(c) any event, condition or circumstance occurring from the
date hereof through the Closing Date that would constitute a violation or breach
of any representation or warranty, whether made as of the date hereof or as of
the Closing Date, or that would constitute a violation or breach of any covenant
of any party contained in this Agreement.
SECTION V.8 Public Announcements. Neither Seller, Stockholder nor Buyer
shall make or issue, or cause to be made or issued, any announcement or
statement (whether written or oral) concerning this Agreement or the
transactions contemplated hereby for dissemination to the general public without
the prior written consent of the other party. This provision shall not apply,
however, to any announcement or statement required in the reasonable opinion of
Buyer, Stockholder or Seller, to be made by law or the regulations of any
federal or state governmental agency or any stock exchange.
SECTION V.9 Confidentiality. (a) Buyer, on the one hand, and the
Stockholder and Seller, on the other hand, each shall hold in strict confidence,
and shall use its best efforts to cause all its Representatives to hold in
strict confidence, unless compelled to disclose by judicial or administrative
process, or by other requirements of law, all information concerning the
Stockholder and Seller (in the case of Buyer) and Buyer (in the case of the
Stockholder and Seller) which is created or obtained prior to, on or after the
dates hereof in connection with the Contemplated Transactions, and Buyer and the
Stockholder and Seller shall not use or disclose to others, or permit the use of
or disclosure of, any such information created or obtained except to the extent
that such information can be shown to have been (i) previously known by Buyer or
the Stockholder or Seller as the case may be (ii) in the public domain through
no fault of Buyer or the Stockholder or Seller, as the case may be, or any of
their respective Representatives, and will not release or disclose such
information to any other person, except its officers, directors, employees,
Representatives, investors and lending institutions who need to know such
information in connection with this Agreement.
(b) If the Contemplated Transactions are not consummated, such
confidence shall be maintained for five (5) years except (i) as required by law
or (b) to the extent such information comes into the public domain through no
fault of Buyer or Seller or the Stockholder, as the case may be, or any of their
respective Representatives. If the Contemplated Transactions are not consummated
and if requested by Seller or Buyer, as the case may be, Buyer shall return to
Seller all tangible evidence of such information regarding Seller and Seller
shall return to Buyer all tangible evidence of such information regarding Buyer.
SECTION V.10 Bulk Sales. Seller and Buyer each waives any requirement
for
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compliance with the procedures of any applicable "bulk sales law", including,
without limitation, the bulk transfer provisions of any applicable Uniform
Commercial Code; provided, however, that Seller and the Stockholder shall
jointly and severally indemnify Buyer from any liability arising therefrom.
SECTION V.11 Use of Name. From and after the Closing, Seller shall, and
the Stockholder shall cause Seller to, cease any use of the tradename "U.S.
HomeCare Infusion Therapy Services," other than in connection with Seller's
billing and collection activities with respect to the Existing A/R. From and
after the Closing Date, Seller shall discontinue using and dispose of any assets
in its possession including, without limitation, stationery, business cards and
literature, bearing the tradename "U.S. HomeCare Infusion Therapy Services" or
any derivation thereof. During the six (6) month period following the Closing
Date, Buyer shall have the right to use, for transition purposes, the name U.S.
HomeCare Infusion Therapy Services. Thereafter, Buyer shall have the right to
use such name to the extent necessary to conduct joint marketing activities with
Seller or Stockholder or in connection with any referrals made to Buyer by
Seller or Stockholder. As of and after the Closing Date, the Seller and
Stockholder shall promptly forward any inquiry or referral for infusion therapy
services to Buyer indicating to such referrer or inquiring party that Buyer has
purchased the Business and is providing service with respect thereto.
SECTION V.12 Certain Expenses.
(a) Any and all sales, use, transfer and documentary taxes and
recording and filing fees applicable to the transfer of the Purchased Assets to
Buyer shall be borne equally by Buyer and Seller.
(b) Except as otherwise specifically provided herein, Buyer
and Seller shall bear their respective expenses incurred in connection with the
preparation, execution and performance of this Agreement and the Contemplated
Transactions, including, without limitation, all fees and expenses of agents,
representatives, counsel and accountants.
(c) Whether or not the Contemplated Transaction is
consummated, Buyer shall reimburse Seller, upon presentation of appropriate
invoices therefor, for its reasonable auditing expenses incurred with respect to
each year for which audited financial statements are required under Section 5.3
of this Agreement to be delivered by Seller to Buyer in connection with the
Contemplated Transactions.
SECTION V.13 Tax Matters. (a) After the Closing, Buyer and Seller will
provide each other such assistance as may be reasonably requested by either of
them in connection
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with the preparation of any Return, any audit or other examination by any Taxing
Authority, or any judicial or administrative proceedings relating to liability
for Taxes, and each will retain and provide the other with, at all reasonable
times, any work papers, records or other information which may be relevant to
such return, audit or tax examination proceedings or determinations.
(b) Seller shall provide Buyer with a clearance certificate or
similar document(s) that may be required by the taxing authority of any
jurisdiction in order to relieve Buyer of any obligation to withhold or escrow
any portion of the Purchase Price.
(c) Prior to Seller's filing of any Return for its Taxable
Year ended December 31, 1996, Seller shall provide Buyer with a copy of such
Return at least ten business days prior to the date on which Seller gives notice
to Buyer that Seller will file such Return. Seller will prepare such Returns and
compute the amount of their income and the Tax liability owed, if any, in
accordance and consistent with the past custom and practice of Seller in filing
its Returns.
(d) Seller shall timely pay all Taxes (including payments of
estimated Taxes) that are shown as due and payable on Returns that are due
(taking into account any valid extensions of time to file or any amounts
contested in good faith for which adequate amounts have been reserved) in
connection with the period ended December 31, 1996.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION VI.1 Conditions to the Obligations of Seller and Buyer. The
obligations of Buyer and Seller to consummate the Contemplated Transactions by
this Agreement are subject to the satisfaction of the following conditions:
(a) No Injunction. No provision of any applicable Law and no
judgment, injunction, order or decree of any Governmental Body shall prohibit
the consummation of the Contemplated Transactions including any provisions of
the HSR Act.
(b) No Proceeding or Litigation. No suit, action or proceeding
before any Governmental Body instituted by any person shall have been commenced
or be pending or threatened against Seller, Buyer or the Stockholder or any of
their respective Affiliates, associates, officers or directors, which suit,
action or proceeding shall have a reasonable likelihood of success and which
suit, action or proceeding seeks to restrain, prevent, change or delay in any
material respect the Contemplated Transactions or seeks to challenge any of the
terms or provisions of this Agreement or seeks material damages in connection
with any
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of such transactions or seeks to restrain or prevent the ownership and
operations by Buyer after the Closing Date of the assets and business of Seller.
(c) Consents. All Required Consents shall have been obtained
in form and substance consistent with the provisions of this Agreement or as
otherwise agreed to in writing by Buyer and shall have become effective, no
longer subject to any statutory, administrative or judicial waiting, appeal,
reconsideration or appeal periods, without any condition which is adverse to
Buyer.
SECTION VI.2 Conditions to the Obligations of Seller. All obligations
of Seller hereunder are subject, at the option of Seller, to the fulfillment
prior to or at the Closing of each of the following further conditions:
(a) Performance. Buyer shall have performed in all material
respects with all of its agreements, obligations and covenants hereunder
required to be performed by it at or prior to the Closing Date.
(b) Representations and Warranties. The representations and
warranties of Buyer contained in this Agreement and in any certificate or other
writing delivered by Buyer pursuant hereto shall be true in all material
respects at and as of the Closing Date as if made at and as of such time.
(c) Purchase Price. Buyer shall have paid to Seller the
Purchase Price (less the Deposit) by wire transfer of immediately available
funds.
(d) Documentation. There shall have been delivered to Seller
the following:
(i) One or more duly executed originals of the
Assumption Agreement signed by Buyer, and such other instruments of assumption
as are reasonably necessary or desirable to effect the assumption by Buyer of
the Assumed Liabilities.
(ii) A certificate, dated the Closing Date, of the
President or a Vice-President of Buyer and Transworld confirming the matters set
forth in Section 6.2(a) and (b) hereof.
(iii) A certificate, dated the Closing Date, of the
Secretary or Assistant Secretary of Buyer and Transworld certifying, among other
things, that attached or appended to such certificate (A) is a true and correct
copy of its Certificate of Incorporation and all amendments if any thereto as of
the date thereof; (B) is a true and correct copy of its By-laws; (C) is a true
copy of all corporate resolutions of its board of directors authorizing
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the execution, delivery and performance of this Agreement, and each other
document to be delivered by Buyer pursuant hereto; and (D) are the names and
signatures of its duly elected or appointed officers who are authorized to
execute and deliver this Agreement and any certificate, document or other
instrument in connection herewith.
(iv) A signed opinion of Buyer's counsel, dated
the Closing Date and addressed to Seller, substantially in the form of opinion
annexed as Schedule 6.2(d)(iv) hereto.
(e) Lender's Consent. The Seller's senior secured lenders
shall have consented to the execution, delivery and performance of this
Agreement and the Contemplated Transactions.
SECTION VI.3 Conditions to the Obligations of Buyer. All obligations of
Buyer hereunder are subject, at its option, to the fulfillment prior to or at
the Closing of each of the following further conditions:
(a) Performance. Seller and the Stockholder shall have
performed and complied in all material respects with all agreements, obligations
and covenants required by this Agreement to be performed or complied with by
them at or prior to the Closing Date.
(b) Representations and Warranties. The representations
and warranties of Seller and the Stockholder contained in this Agreement and in
any certificate or other writing delivered by the Stockholder or Seller pursuant
hereto shall be true in all material respects at and as of the Closing Date as
if made at and as of such time.
(c) No Adverse Change. During the period from the date
hereof to the Closing Date, there shall not have been (i) any material adverse
change in the Condition of the Business; (ii) any damage to the Purchased Assets
by fire, flood, casualty, act of God or other cause, which has a material
adverse effect on the Purchased Assets or the Business; or (iii) any lawsuits,
claims or proceedings filed, or to the knowledge of Seller or the Stockholder
threatened, against or affecting Seller which, if adversely determined, is
reasonably likely to have a material adverse effect on the Condition of the
Business.
(d) Documentation. There shall have been delivered to
Buyer the following:
(i) one or more duly executed originals of the
Bill of Sale and such other instruments as are necessary or desirable to effect
the transfers, conveyances and assignments to Buyer of the Purchased Assets, and
to perform Seller's and Stockholder's obligations hereunder.
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(ii) A certificate dated the Closing Date, of the
President of Seller and Stockholder, confirming the matters set forth in Section
6.3(a) and (b) hereof.
(iii) A certificate, dated the Closing Date, of
the Secretary or Assistant Secretary of Seller and Stockholder certifying, among
other things, that attached or appended to such certificate (A) is a true and
correct copy of the Certificate of Incorporation and By-laws (or comparable
instruments) of Seller and Stockholder, and all amendments if any thereto as of
the date thereof; (B) is a true copy of all corporate actions taken by it,
including resolutions of its board of directors, authorizing the execution,
delivery and performance of this Agreement, and each other document to be
delivered by Seller and Stockholder pursuant hereto; and (C) are the names and
signatures of its duly elected or appointed officers who are authorized to
execute and deliver this Agreement and any certificate, document or other
instrument in connection herewith.
(iv) A signed opinion(s) of Seller's counsel,
dated the Closing Date, addressed to Buyer, substantially in the form of opinion
annexed as Schedule 6.3(e)(iv) hereto.
(v) Releases of all Liens on the Purchased
Assets, together with copies of UCC, tax and judgment searches with respect to
Seller and the appropriate tax certificates evidencing the payment of all taxes
owed by Seller, each dated as of a date within five (5) Business Days of the
Closing Date.
(e) Lender's Consent. The Buyer's lenders shall have
consented to the execution, delivery and performance of this Agreement and the
Contemplated Transactions.
(f) Covenants Not to Compete. The Seller and the
Stockholder shall have executed and delivered a Covenant Not to Compete in the
form of Schedule 6.3(f) annexed hereto.
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ARTICLE VII
INDEMNIFICATION
SECTION VII.1 Survival of Representations and Warranties.
Notwithstanding any right of Buyer or Seller fully to investigate the affairs of
Buyer or Seller, and notwithstanding any knowledge of facts determined or
determinable by Buyer or Seller pursuant to such investigation or right of
investigation, Buyer and Seller have the right to rely fully upon the
representations, warranties, covenants and agreements of Seller, the Stockholder
and Buyer contained in this Agreement, or listed or disclosed on any Schedule
hereto or in any instrument or document delivered in connection with or pursuant
to any of the foregoing. All such representations, warranties, covenants and
agreements shall survive the execution and delivery of this Agreement and the
Closing hereunder for a period of two (2) years after the Closing Date, except
that (a) any representation, warranty, covenant or agreement contained in
Sections 3.1 and 4.2 hereof shall survive the execution and delivery of this
Agreement and the Closing hereunder without limitation, (b) any representation,
warranty, covenant or agreement related to Taxes shall survive the execution and
delivery of this Agreement and the Closing hereunder until the expiration of the
applicable statute of limitations, (c) any non-compete agreement delivered
pursuant hereto shall survive the Closing until the expiration of the duration
of such covenant not to compete, and (d) any representation, warranty, covenant
or agreement contained herein and any Liabilities of Seller with respect thereto
relating to Medicare, Medicaid or third party payors shall survive until the
later of the third anniversary of the Closing Date or the conclusion of any
audit or review commenced within such three-year period.
SECTION VII.2 Obligation of Seller to Indemnify. The Stockholder and
Seller, jointly and severally, agree to indemnify, defend and hold harmless
Buyer (and its directors, officers, employees, Affiliates, successors and
assigns and Representatives) from and against all claims, losses, liabilities,
damages, deficiencies, judgments, settlements, costs of investigation or other
expenses (including interest, penalties and reasonable attorneys' fees and
disbursements (collectively, the "Losses")) based upon, arising out of or
otherwise in respect of:
(a) any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of Seller or the Stockholder
contained in this Agreement or in any Schedules, instrument or documents
delivered pursuant to this Agreement;
(b) any obligation or liability arising in connection
with the Business from or in respect of any event or circumstance occurring
prior to the Closing Date;
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(c) any and all Losses resulting from any adjustment to
any accounts receivable or prior billings of Seller for the period from October
1, 1996 through Closing, other than those contained in allowances for doubtful
accounts as set forth in the books and records of Seller as of the date hereof;
and
(d) any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
SECTION VII.3 Obligation of Buyer to Indemnify. Buyer agrees to perform
and discharge all of the Assumed Liabilities and agrees to indemnify, defend and
hold harmless Sellers and the Stockholder from and against any Losses based upon
Buyer's failure to do so or arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
of Buyer contained in this Agreement or in any instrument or document delivered
pursuant to this Agreement and any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
SECTION VII.4 Notice and Opportunity to Defend Third Party Claims. (a)
Promptly after receipt by any party hereto (the "Indemnitee") of notice of any
demand, claim or circumstance which would or might give rise to a claim or the
commencement (or threatened commencement) of any action, proceeding or
investigation (an "Asserted Liability") that may result in a Loss, the
Indemnitee shall give written notice thereof (the "Claims Notice") to the party
obligated to provide indemnification pursuant to Section 7.2 or 7.3 hereof (the
"Indemnifying Party"). The Claims Notice shall describe the Asserted Liability
in reasonable detail and shall indicate the amount (estimated, if necessary, and
to the extent feasible) of the Loss that has been or may be suffered by the
Indemnitee.
(b) The Indemnifying Party may elect to compromise or
defend, at its own expense and by its own counsel, any Asserted Liability. If
the Indemnifying Party elects to compromise or defend such Asserted Liability,
it shall within thirty days (or sooner, if the nature of the Asserted Liability
so requires) notify the Indemnitee in writing of its intent to do so, and the
Indemnitee shall cooperate, at the expense of the Indemnifying Party, in the
compromise of, or defense against, such Asserted Liability. If the Indemnifying
Party elects not to compromise or defend the Asserted Liability, fails to notify
the Indemnitee of its election as herein provided or contests its obligation to
indemnify under this Agreement, the Indemnitee may pay, compromise or defend
such Asserted Liability. Notwithstanding the
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foregoing, neither the Indemnifying Party nor the Indemnitee may settle or
compromise any claim over the objection of the other; provided, however, that
consent to settlement or compromise shall not be unreasonably withheld or
delayed. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in the defense or compromise of such Asserted
Liability. If the Indemnifying Party chooses to defend any claim, the Indemnitee
shall cooperate with and make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense.
SECTION VII.5 Limits on Indemnification. Notwithstanding anything
contained in this Article VII to the contrary, Seller and the Stockholder shall
not have an obligation to indemnify Buyer pursuant to Section 7.2 hereof with
respect to any Losses unless and until Buyer shall have incurred Losses in an
aggregate in excess of $50,000 (the "Stipulated Amount"), in which event Buyers
shall be entitled to be indemnified by such parties for all of its Losses
commencing at $1.00.
ARTICLE VIII
TERMINATION
SECTION VIII.1 Termination. This Agreement may be terminated and the
Contemplated Transactions may be abandoned at any time prior to the Closing:
(a) By mutual written consent of Seller and the
Stockholder, on the one hand, and Buyer on the other;
(b) By Seller and the Stockholder, if (i) there has been
a material misrepresentation or breach of warranty on the part of Buyer in the
representations and warranties contained herein or in any Schedule, document or
instrument delivered in connection with or pursuant hereto and such material
misrepresentation or breach of warranty, if curable, is not cured within 15 days
of written notice thereof from Seller; (ii) Buyer has committed a material
breach of any covenant or agreement imposed upon it hereunder and fails to cure
such breach within 15 days of written notice thereof from Seller; or (iii) any
condition to Seller's or the Stockholder's obligations hereunder becomes
incapable of fulfillment through no fault of such parties and is not waived by
such parties;
(c) By Buyer, if (i) there has been a material
misrepresentation or breach of warranty on the part of Seller or the Stockholder
in the representations and warranties contained herein or in any Schedule,
document or instrument delivered in connection with or pursuant hereto and such
material misrepresentation or breach of warranty, if curable, is not
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cured within 15 days of written notice thereof from Buyer to Seller; (ii) Seller
or the Stockholder has committed a material breach of any covenant imposed upon
it hereunder and fails to cure such breach within 15 days of written notice
thereof from Buyer to Seller; or (iii) any condition to Buyer's obligations
hereunder becomes incapable of fulfillment through no fault of Buyer and is not
waived by Buyer;
(d) By Seller and the Stockholder on the one hand, or
Buyer on the other, if the Closing shall not have occurred on or before October
31, 1996; provided that if the Closing has not occurred by such date because a
Required Consent has not been obtained, such date shall be extended until the
second Business Day following the date such Consent(s) have been obtained or
denied; and provided further that no party may terminate this Agreement pursuant
to this clause if such party's failure to fulfill any of its obligations under
this Agreement is the reason that the Closing shall not have occurred on or
before said date.
SECTION VIII.2 Effect of Termination; Right to Proceed. In the event
that this Agreement shall be terminated pursuant to Section 8.1, all further
obligations of the parties under the Agreement shall terminate without further
liability of any party hereunder except: (i) in the case of Buyer, to the extent
provided in Article IX; (ii) (A) to the extent that Seller and/or Stockholder
has made a material misrepresentation hereunder or committed a material breach
of the covenants and agreements imposed upon it hereunder; or (B) to the extent
that any condition to Buyer's obligations hereunder became incapable of
fulfillment because of the breach by Seller and/or Stockholder of its
obligations hereunder, in either of such event, Buyer shall have all of its
rights and remedies at law or in equity. Notwithstanding the foregoing, the
agreements contained in Sections 5.8 and 5.9 shall survive the termination
hereof. In the event that a condition precedent to its obligation is not met,
nothing contained herein shall be deemed to require any party to terminate this
Agreement, rather than to waive such condition precedent and proceed with the
Contemplated Transactions.
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ARTICLE IX
LIQUIDATED DAMAGES
Notwithstanding anything to the contrary contained in this Agreement,
if the Contemplated Transactions are not consummated because of a material
default by Buyer of its obligations hereunder and provided Seller and
Stockholder are not in material default of their obligations hereunder and
Seller and Stockholder have terminated this Agreement pursuant to Section
8.1(b), then the Deposit shall be paid to Seller and Stockholder as liquidated
damages and as Seller's and Stockholder's sole and exclusive remedy, it being
agreed that the Deposit shall constitute full payment for any and all damages
suffered by Seller and Stockholder by reason of Buyer's failure to close this
Agreement. Buyer, Seller and Stockholder agree in advance that the Deposit is a
fair and equitable amount to reimburse Seller and Stockholder for damages
sustained due to Buyer's failure to consummate this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION X.1 Notices. (a) Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally by
hand, telecopied or mailed (by overnight courier or registered or certified
mail, postage prepaid) as follows:
(i) if to Buyer, one copy to:
Mr. Vincent J. Caruso
Executive Vice President and Chief
Administrative Officer
Transworld Home HealthCare, Inc.
75 Terminal Avenue
Clark, New Jersey 07066
Telecopier: (908) 340-9170
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with a copy to:
Leslie J. Levinson, Esq.
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Telecopier: (212) 702-5941
(ii) if to Seller or the Stockholder, one copy to:
Mr. Gerald J. Boisvert, Jr.
U.S. HomeCare Corporation
750 Main Street, 12th Floor
Hartford, Connecticut
with a copy to:
Ellen B. Corenswet, Esq.
Brobeck, Phleger & Harrison LLP
1301 Avenue of the Americas
New York, New York 10019
Telecopier: (212) 586-7878
(b) Each such notice or other communication shall be effective
(i) if given by telecopier, when such telecopy is transmitted to the telecopier
number specified in Section 9.1(a) (with confirmation of transmission) or (ii)
if given by any other means, when delivered at the address specified in Section
9.1(a). Any party by notice given in accordance with this Section 9.1 to the
other party may designate another address (or telecopier number) or person for
receipt of notices hereunder.
SECTION X.2 Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) and the other Transaction Documents executed in connection
with the consummation of the Contemplated Transactions contain the entire
agreement between the parties with respect to the subject matter hereof and
related transactions and supersede all prior agreements, written or oral, with
respect thereto.
SECTION X.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, cancelled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the parties hereto or, in the case of a waiver, by the
party waiving compliance. No delay on the
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part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof. Nor shall any waiver on the part of any party of
any such right, power or privilege, nor any single or partial exercise of any
such right, power or privilege, preclude any further exercise thereof or the
exercise of any other such right, power or privilege. Except as otherwise
provided herein, the rights and remedies herein provided are cumulative and are
not exclusive of any rights or remedies that any party may otherwise have at law
or in equity. The rights and remedies of any party based upon, arising out of or
otherwise in respect of any inaccuracy in or breach of any representation,
warranty, covenant or agreement contained in, this Agreement shall in no way be
limited by the fact that the act, omission, occurrence or other state of facts
upon which any claim of any such inaccuracy or breach is based may also be the
subject matter of any other representation, warranty, covenant or agreement
contained in this Agreement (or in any other agreement between the parties) as
to which there is no inaccuracy or breach.
SECTION X.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflict of laws rules thereof.
SECTION X.5 Consent to Jurisdiction and Service of Process. The parties
hereto irrevocably: (a) agree that any suit, action or other legal proceeding
arising out of this Agreement may be brought in the courts of the State of New
York or the courts of the United States located in New York County, New York,
(b) consent to the jurisdiction of each court in any such suit, action or
proceeding, (c) waive any objection which they, or any of them, may have to the
laying of venue of any such suit, action or proceeding in any of such courts,
and (d) waive the right to a trial by jury in any such suit, action or other
legal proceeding.
SECTION X.6 Designated Buyer. It is understood and agreed between the
parties that Buyer may cause one or more Affiliates, direct or indirect
Subsidiaries or other entities designated by it (the "Designated Buyer") to
carry out all or part of the Contemplated Transactions to be carried out by
Buyer.
SECTION X.7 Binding Effect; No Assignment. This Agreement and all of
its provisions, rights and obligations shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors, heirs and
legal representatives. Except as otherwise provided in Section 10.6, this
Agreement may not be assigned by a party without the express written consent of
the others and any purported assignment, unless so consented to, shall be void
and without effect. Nothing herein express or implied is intended or shall
-51-
<PAGE> 57
be construed to confer upon or to give anyone other than the parties hereto and
their respective heirs, legal representatives and successors any rights or
benefits under or by reason of this Agreement. Accordingly, no party that has
not executed this Agreement shall have any right to enforce any of the
provisions of this Agreement.
SECTION X.8 Severability. If any provisions of this Agreement for any
reason shall be held to be illegal, invalid or unenforceable, such illegality
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such illegal, invalid or unenforceable provision had never
been included herein.
SECTION X.9 Counterparts. The Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts hereof, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the signatories.
-52-
<PAGE> 58
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
U.S. HomeCare Infusion Therapy
Services Corporation of New Jersey
By:____________________________________
Name:
Title:
U.S. HomeCare Corporation
By:____________________________________
Name:
Title:
Transworld Acquisition Corp.
By:____________________________________
Name:
Title:
Transworld Home HealthCare, Inc.
By:____________________________________
Name:
Title:
-53-
<PAGE> 59
Schedule 4.3
Buyer's Consents
1. Consent of Transworld's senior lenders
-54-
<PAGE> 1
EXHIBIT 10.34
SETTLEMENT AGREEMENT
AGREEMENT dated as of the 27th day of November, 1996 by and
between U.S. HomeCare Infusion Therapy Products Corporation and U.S. HomeCare
Corporation (collectively, "USHC"), on the one hand, and Edward J. Abel, Abel
Health Management Services, Inc. and Home Infusion Pharmaceutical Services, Inc.
(collectively, "Abel"), on the other.
WHEREAS Abel and USHC have asserted certain claims each
against the other in actions titled Kingsland Associates v. Abel Health
Management Services, Inc., Index No. 14294/93, pending in the Supreme Court of
the State of New York for the County of Nassau; Home Infusion Pharmaceutical
Services, Inc. v. U.S. HomeCare Infusion Therapy Products Corporation, Index No.
121053/93, pending in the Supreme Court of the State of New York for the County
of New York; and U.S. HomeCare Infusion Therapy Products Corporation v. Home
Infusion Pharmaceutical Services, Inc., Index No. 117835/93, also pending in the
Supreme Court for New York County (the "Actions"); and
WHEREAS the parties to this Agreement desire to avoid the
expense of further litigation and resolve fully and forever all claims and
disputes between them;
WHEREAS for good and valuable consideration, including the
covenants and promises exchanged herein;
IT HEREBY IS STIPULATED AND AGREED THAT:
1. USHC shall pay to Home Infusion Pharmaceutical Services,
Inc. ("HIPS"), or such other party as HIPS may hereafter designate in writing,
sums aggregating One Million Three Hundred Thousand Dollars ($1,300,000.00) (the
"Payments") and deliver to Home Infusion Pharmaceutical Services, Inc. 200,000
shares of USHC Common Stock (the "Shares"), in accordance with Paragraphs 2 and
5 of this Agreement.
<PAGE> 2
2. The Payments shall be paid by check to the order of Home
Infusion Pharmaceutical Services, Inc. according to the following schedule, and
shall be delivered to the law firm of Robinson Brog Leinwand Greene Genovese &
Gluck, P.C., 1345 Avenue of the Americas, New York, New York 10105-0143 ("Abel's
Counsel"), provided, however, that if the indicated date is a weekend or
holiday, then the applicable payment shall be due on the next business day
thereafter:
<TABLE>
<CAPTION>
<S> <C>
$50,000.00 Upon execution of this Agreement
$55,000.00 November 29, 1996
$55,000.00 December 15, 1996
$55,000.00 January 15, 1997
$55,000.00 February 15, 1997
$55,000.00 March 15, 1997
$20,000.00 The fifteenth (15th) of each month for forty-
eight (48) months beginning April 15, 1997
$15,000.00 April 15, 2001
</TABLE>
Notwithstanding the schedule contained in this Paragraph, the Payments shall be
due and payable immediately upon the consummation of a merger, consolidation,
sale of all or substantially all of the assets of USHC, or a similar transaction
in which USHC is not the surviving corporation ("Acquisition").
3. Simultaneously with the execution of this Agreement, USHC
shall execute an Affidavit For Judgment By Confession (the "Judgment Affidavit")
in the form attached hereto as Exhibit A. USHC and Abel agree that Abel shall be
entitled to obtain a Judgment pursuant to the terms of this Paragraph and as
provided in the Judgment Affidavit in the event that USHC fails to timely remit
the Payments to Abel as provided in this
2
<PAGE> 3
Agreement or as specified in Paragraph 4 below; Abel agrees that as conditions
precedent to obtaining a Judgment it shall (a) provide to Brobeck, Phleger &
Harrison LLP, attention Ellen B. Corenswet, Esq., prior written notice of no
less than fifteen (15) days, during which USHC shall have the opportunity to
cure any claimed default; and (b) deduct from the sum sought in any Judgment,
and accurately represent in any Affidavit it presents to a Court in support of
any application for a Judgment, the amount of the Payment, if any, that has been
paid by USHC to Abel.
4. USHC and Abel recognize that by statute the Judgment
Affidavit expires after three years. Accordingly, in order to provide security
for the monthly payments to be made beyond three years from the date of the
signing of the Judgment Affidavit pursuant to Paragraph 2 above, USHC agrees to
supply to Abel in June 1998, and in no event later than June 30, 1998, an
additional Judgment Affidavit in an amount not to exceed the then outstanding
amount of the Payments (the "Supplementary Judgment Affidavit"). USHC agrees
that failure to deliver the Supplementary Judgment Affidavit shall constitute an
event of default for which Abel may seek entry of Judgment By Confession
pursuant to Paragraph 3 above; Abel agrees that as conditions precedent to
entering such Judgment by Confession it shall (a) provide to Brobeck, Phleger &
Harrison LLP, attention Ellen B. Corenswet, Esq., prior written notice of no
less than fifteen (15) days, during which USHC shall have the opportunity to
cure any claimed default; and (b) deduct from the sum sought in any Judgment,
and accurately represent in any Affidavit it presents to a Court in support of
any application for a Judgment, the amount of the Payment, if any, that has been
paid by USHC to Abel.
5. The Shares shall be delivered to Abel's Counsel on or
before the tenth (10th) business day after execution of this Agreement. USHC
shall file with the Securities
3
<PAGE> 4
and Exchange Commission ("SEC") a registration statement on Form S-1 or S-3
including the Shares no later than 30 days following completion of USHC's audit
for the year ending December 31, 1996, but in no event later than April 30,
1997, and USHC shall diligently pursue obtaining the effectiveness thereof.
Notwithstanding any failure of the SEC to declare the registration statement
effective prior to any Acquisition, Home Infusion Pharmaceutical Services, Inc.
shall receive the same consideration per share of USHC Common Stock in any
Acquisition as is received by any other holder of USHC Common Stock in their
capacity as holders of USHC Common Stock. Notwithstanding the date contained in
this Paragraph for the delivery of the Shares, delivery of the Shares shall be
due immediately upon any Acquisition.
6. This Agreement, and the terms thereof, shall be held
confidential, and shall not be disclosed to anyone except as required by law,
except that the parties may make such disclosure to their respective accountants
and attorneys to the extent needed to obtain financial, tax or legal advice.
7. Simultaneously with the execution of this Agreement, the
parties to this Agreement shall exchange Releases in the form annexed hereto as
Exhibit B.
8. Simultaneously with the execution of this Agreement,
counsel for USHC and Abel shall execute Stipulations of Dismissal in the form
annexed hereto as Exhibit C.
9. The parties agree that nothing contained in this Agreement
or any of the Exhibits hereto is or shall be deemed an admission of liability by
any party. Both of the parties to this Agreement continue to maintain that their
claims and/or defenses asserted in the Actions are meritorious.
4
<PAGE> 5
10. This Agreement may not be clarified, modified, changed or
amended except in a writing signed by each of the parties hereto.
11. All of the parties to this Agreement were represented by
counsel and this Agreement was negotiated by counsel.
12. This Agreement shall be governed by the laws of the State
of New York and jurisdiction and venue shall lie exclusively in the State of New
York regarding any dispute arising hereunder.
13. This Agreement may be executed in one or more
counterparts, each of
5
<PAGE> 6
which shall be an original as against the party who signed it, and all of which
shall constitute one and the same instrument.
November ___, 1996 U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION
By:______________________________
Gerald J. Boisvert as
Corporate Secretary
November ___, 1996 U.S. HOMECARE CORPORATION
By:______________________________
Gerald J. Boisvert as
Corporate Secretary
November ___, 1996 ABEL HEALTH MANAGEMENT
SERVICES, INC.
By:______________________________
Edward J. Abel as
President
November ___, 1996 HOME INFUSION PHARMACEUTICAL
SERVICES, INC.
By:______________________________
Edward J. Abel as
President
November ___, 1996 _________________________________
EDWARD J. ABEL
6
<PAGE> 1
EXHIBIT 10.35
SETTLEMENT AGREEMENT
AGREEMENT dated as of the 27th day of November, 1996 by and
between U.S. HomeCare Corporation and U.S. HomeCare Infusion Therapy Products
Corporation (collectively, "USHC"), on the one hand, and Kingsland Associates
("Kingsland"), on the other hand.
WHEREAS Kingsland has asserted certain claims against U.S.
HomeCare Infusion Therapy Products Corporation and against Abel Health
Management Services, Inc. ("Abel Health") in an action titled Kingsland
Associates v. Abel Health Management Services, Inc., Index No. 14294/93, which
is pending in the Supreme Court of the State of New York for the County of
Nassau (the "Action"); and
WHEREAS the Action arises out of Kingsland's claim for
nonpayment on three leases entered into by Kingsland and Abel Health and dated
July 1, 1992, September 1, 1992, and July 1, 1992 (the "Lease Claims"); and
WHEREAS the parties to this Agreement desire to avoid the
expense of further litigation and resolve fully and forever all claims and
disputes between them including all of the Lease Claims;
IT HEREBY IS STIPULATED AND AGREED THAT:
1. USHC shall pay to Kingsland, pursuant to the schedule
contained in Paragraph 2 of this Agreement, the total sum of Two Hundred Fifty
Thousand Dollars ($250,000) plus interest on that sum at the rate of nine
percent (9%) per annum which accrues beginning November 27, 1996 (collectively
the "Payment"). In addition, USHC shall deliver to Kingsland Twenty-Two Thousand
Five Hundred (22,500) shares of U.S.
<PAGE> 2
HomeCare Corporation Common Stock (the "Shares"), in accordance with Paragraph 4
below.
2. The Payment shall be paid by check to the order of Klein &
Solomon LLP, as attorneys, and delivered to the law firm of Klein & Solomon LLP,
275 Madison Avenue, New York, New York 10015, pursuant to the following
schedule:
<TABLE>
<CAPTION>
<S> <C>
$75,000.00 December 2, 1996
$50,000.00 January 2, 1997
$ 8,333.33 The first business day of each month for
plus accrued fifteen (15) months beginning February 1,
interest to 1997
such date
</TABLE>
3. Simultaneously with the execution of this Agreement, U.S.
HomeCare Corporation shall execute an Affidavit For Judgment By Confession (the
"Judgment Affidavit") in the form attached hereto as Exhibit A. USHC and
Kingsland agree that Kingsland shall be entitled to obtain a Judgment pursuant
to the terms of this Paragraph and as provided in the Judgment Affidavit in the
event that USHC fails to timely remit the Payment, or any part thereof, to
Kingsland as provided in this Agreement; Kingsland agrees that as conditions
precedent to obtaining a Judgment it shall (a) provide to Ellen B. Corenswet,
Esq., at Brobeck, Phleger & Harrison LLP, prior written notice, by Telefax and
First Class Mail, of no less than fifteen (15) days, during which USHC shall
have the opportunity to cure any claimed default; and (b) deduct from the sum
sought in any Judgment, and accurately represent in any Affidavit it presents to
a Court in support of any
2
<PAGE> 3
application for a Judgment, the amount of the Payment, if any, that has been
paid by USHC to Kingsland.
4. The Shares shall be delivered to counsel for Kingsland on
or before the tenth (10th) business day after execution of this Agreement. U.S.
HomeCare Corporation agrees that failure to deliver the Shares as required by
the first sentence of this Paragraph shall constitute an event of default for
which Kingsland may seek entry of Judgment By Confession pursuant to Paragraph 3
above; Kingsland agrees that as a condition precedent to obtaining such a
Judgment it shall provide to Ellen B. Corenswet, Esq., at Brobeck, Phleger &
Harrison LLP, prior written notice, by Telefax and First Class Mail, of no less
than fifteen (15) days, during which USHC shall have the opportunity to cure any
claimed default. U.S. HomeCare Corporation is required to file with the
Securities and Exchange Commission ("SEC") a registration statement on Form S-1
or S-3 including certain shares no later than 30 days following completion of
U.S. HomeCare Corporation's audit for the year ending December 31, 1996, but in
no event later than April 30, 1997 (the "Registration Statement"). U.S. HomeCare
Corporation shall at its own cost and expense include the Shares in the earlier
of the Registration Statement or the first registration statement it files after
the date hereof, and shall diligently pursue obtaining the effectiveness
thereof, provided however that if the Registration Statement is not filed by
April 30, 1997, Kingsland shall have the irrevocable right to elect to return
the Shares to U.S. HomeCare Corporation in exchange for the following payments:
$8,333.33 on May 1, 1998 and $8,333.33 on June 1, 1998.
5. Simultaneously with the execution of this Agreement, USHC
and U.S. HomeCare Infusion Therapy Products Corporation, on the one hand, and
Kingsland, on the other, shall exchange Releases in the form annexed hereto as
Exhibit B.
3
<PAGE> 4
6. Simultaneously with the execution of this Agreement,
counsel for USHC and Kingsland shall execute a Stipulation of Dismissal in the
form annexed hereto as Exhibit C.
7. The parties agree that nothing contained in this Agreement
or any of the Exhibits hereto is or shall be deemed an admission of liability by
any party. Both of the parties to this Agreement continue to maintain that their
claims and/or defenses asserted in the Action are meritorious.
8. This Agreement may not be clarified, modified, changed or
amended except in a writing signed by each of the parties hereto.
9. All of the parties to this Agreement were represented by
counsel and this Agreement was negotiated by counsel.
10. This Agreement shall be governed by the laws of the State
of New York and jurisdiction and venue shall lie exclusively in the State of New
York regarding any dispute arising hereunder.
4
<PAGE> 5
11. This Agreement may be executed in one or more
counterparts, each of which shall be an original as against the party who signed
it, and all of which shall constitute one and the same instrument.
November ___, 1996 U.S. HOMECARE CORPORATION
By:______________________________
Gerald J. Boisvert as
Corporate Secretary
November ___, 1996 U.S. HOMECARE INFUSION
THERAPY PRODUCTS CORPORATION
By:______________________________
Gerald J. Boisvert as
Corporate Secretary
November ___, 1996 KINGSLAND ASSOCIATES
By:______________________________
[ ]
5
<PAGE> 1
EXHIBIT 10.36
FIRST AMENDMENT TO GUARANTEE AGREEMENT
THIS FIRST AMENDMENT TO GUARANTEE AGREEMENT (the "First Amendment") is
entered into as of the 25th day of March, 1997, by and between the Connecticut
Development Authority, a body politic and corporate, constituting a public
instrumentality and political subdivision of the State of Connecticut with its
principal office at 845 Brook Street, Rocky Hill, Connecticut 06067 (the
"Authority"), and Fleet National Bank (successor by merger to Fleet Bank,
National Association), a national banking association with an office at 777 Main
Street, Hartford, Connecticut 06115 ("Lender").
RECITALS
WHEREAS, on or about October 6, 1995, Lender entered into a certain
Credit Agreement with U.S. HomeCare Corporation, a New York corporation, and its
consolidated Subsidiaries which were signatory parties thereto (collectively,
the "Borrower"), pursuant to which Lender agreed to make available to the
Borrower certain revolving credit loans in an amount of up to $3,000,000.00 with
a maturity date of April 15, 1997 (the "Credit Agreement"); and
WHEREAS, on or about October 6, 1995, the Authority executed and
delivered to Lender a Guarantee Agreement pursuant to which the Authority agreed
to guarantee an amount of up to $3,000,000.00 of the aggregate loans from time
to time outstanding under the Credit Agreement (the "Guarantee Agreement"), as
more fully described in Section 8 of the Guarantee Agreement; and
WHEREAS, on or about November 14, 1996, Lender and Borrower entered
into Amendment No. 1 to the Credit Agreement pursuant to which certain terms and
conditions of the Credit Agreement were amended; and
WHEREAS, on the effective date hereof, Lender and the Borrower have
entered into Amendment No. 2 to the Credit Agreement pursuant to which the
maturity date of such loans has been extended to January 15, 1998; and
WHEREAS, the Credit Agreement, as amended by Amendment No. 1 and
Amendment No. 2 thereto, is herein referred to as the "Amended Credit
Agreement"; and
WHEREAS, the Authority is willing to enter into this First Amendment
with Lender to evidence the terms and conditions of its guarantee of the loans
made available by Lender to the Borrower under the terms of the Amended Credit
Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
1. Definitions. The capitalized terms used in this First Amendment
shall have the same meanings as in the Guarantee Agreement unless the context
hereof otherwise provides.
2. Amendments to Guarantee Agreement. From and after the date of this
First Amendment, the Guarantee Agreement shall be amended as follows:
2.1 The following definitions set forth in Section 1 of the Guarantee
Agreement shall be amended in their entirety to hereafter read as follows:
<PAGE> 2
"'Commitment' shall mean the Authority's commitment letters dated
September 14, 1995 and March 21, 1997, setting forth the conditions to the
issuance of its Guarantee of the Lender Loan, and the terms of such Guarantee.
'Guarantee' shall mean the Guarantee Agreement as amended by this First
Amendment."
2.2. Section 8 of the Guarantee Agreement, entitled "Guarantee Amount",
shall be amended in its entirety to hereafter read as follows:
"Section 8. Guarantee Amount
The Guarantee Amount at any given time shall be equal to the
aggregate sum of $3,000,000.00 minus the total of all payments theretofore made
by the Authority under this Guarantee. Upon any payment by the Authority under
this Guarantee, the Guarantee Amount shall be immediately and automatically
reduced by the amount of such payment, except that the Guarantee Amount may be
reinstated as provided in Section 9 hereof. NOTWITHSTANDING THE FOREGOING, THE
GUARANTEE AMOUNT SHALL, AUTOMATICALLY REDUCE TO ZERO AND THIS GUARANTEE SHALL
TERMINATE ON JANUARY 31, 1998, UNLESS PRIOR TO SUCH DATE LENDER HAS DELIVERED TO
THE AUTHORITY UNDER SECTION 9 HEREOF A NOTICE OF DEFAULT OR A NOTICE THAT
BORROWER HAS FAILED TO MAKE A PAYMENT UNDER THE LENDER LOAN DOCUMENTS ON DEMAND
OF LENDER."
2.3 Section 17.3 of the Guarantee Agreement shall be amended in its
entirety to hereafter read as follows:
"17.3 To induce the Authority to enter into this Guarantee in favor
of Lender, the Borrower hereby agrees and covenants to maintain "Total
Employment" (as defined below) in the State of Connecticut in the aggregate
amounts set forth below for the corresponding calendar year;
<TABLE>
<CAPTION>
Year Total Employment
---- ----------------
<S> <C>
1997 200
1998 200
</TABLE>
As used herein, the term "Total Employment" for such calendar year of
determination, shall mean and refer to the four quarter average of the
Borrower's full-time employees employed by the Borrower in the State of
Connecticut as reflected on the Borrower's Connecticut Employee Quarterly
Earnings Report, Form UC-5a, submitted by the Borrower on a quarterly basis to
the State of Connecticut Department of Labor, with respect to each calendar
quarter of the Borrower (the "Connecticut Quarterly Employment Report"). The
Borrower shall submit to the Authority a copy of each Connecticut Quarterly
Employment Report filed by the Borrower within thirty (30) days after the end of
each calendar quarter hereafter, beginning with the calendar quarter ending
September 30, 1995. If Borrower fails to achieve and maintain Total Employment
for such calendar year as set forth above (based on an annual average of the
four Connecticut Quarterly Employment Reports submitted to the Authority in
connection with this Section 17.3), then the Borrower shall pay to the
Authority, in addition to any and all other fees, costs and expenses provided
for in this Guarantee, an additional fee in an amount described below, based on
the difference between the Borrower's actual Total Employment in the State of
Connecticut for such
<PAGE> 3
calendar year and the Borrower's projected Total Employment as set forth above
(the "Employment Shortfall"), as follows:
<TABLE>
<CAPTION>
Amount of Employment Shortfall Amount of Fee
------------------------------ -------------
<S> <C>
1 - 4 $3,850.00
5 - 8 $7,695.00
9 - 12 $11,540.00
13 - 16 $19,230.00
17 and above $23,075.00
</TABLE>
Such additional fee shall be due and payable to the Authority by the Borrower
upon demand by the Authority. The Authority shall furnish to the Borrower a
written calculation of the Borrower's Employment Shortfall for the subject
calendar year simultaneously with its demand for payment of the corresponding
shortfall fee. The Failure of the Borrower to pay such fee to the Authority
within thirty (30) days after written demand by the Authority shall be deemed to
constitute an Event of Default under the Lender Loan Agreement."
2.4 Section 13 of the Guarantee Agreement, entitled "Fees and Expenses
of Authority", shall be amended to provide that the following fees are to be
paid by the Borrower to the Authority on or before the date of this First
Amendment: (i) a commitment fee of $15,000.00; (ii) a guarantee fee of
$30,000.00; and (iii) a fee of $60,000.00 for failure to achieve the "Total
Employment" parameters set forth in Section 17.3 of the Agreement for the
calendar year ending December 31, 1996.
3. Effect of this First Amendment. Except as otherwise amended hereby,
the terms of the Guarantee Agreement shall remain in full force and effect. The
rights, privileges, duties and obligations of the parties under the Guarantee
Agreement shall, except as modified by this First Amendment, remain unchanged
and in full force and effect.
4. Governing Law. This First Amendment is made, executed and delivered
in the State of Connecticut and it is the specific intent of the parties hereto
that it shall be in all respects be construed under the laws of the State of
Connecticut.
5. Entire Agreement. This First Amendment sets forth the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements between the parties, written or oral,
specifically relating to such matters.
6. Binding Effect. This First Amendment shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
officers, have executed this First Amendment as of the date first above written.
CONNECTICUT DEVELOPMENT AUTHORITY
By:__________________________________________
Francis T. Gagliardo
Its Vice President and Senior Loan Officer
<PAGE> 4
FLEET NATIONAL BANK
(successor by merger to Fleet Bank, National Association)
By:______________________________________________________
Christopher R. Zell
Its Vice President
Acknowledged and agreed to as of the ____ day of March, 1997;
U.S. HOMECARE CORPORATION AND ITS CONSOLIDATED SUBSIDIARIES LISTED ON SCHEDULE 1
HERETO
By:_______________________________
Gerald J. Boisvert, Jr.
Its Chief Financial Officer
<PAGE> 5
SCHEDULE I
New York Corporations:
Affiliated Home Care of Westchester, Inc.
U.S. Homecare Corporation of Northern Westchester
U.S. Homecare Corporation of Manhattan
U.S. Homecare Corporation of the Bronx
U.S. Homecare Certified Corporation of New York
U.S. HomeCare Corporation of Albany
U.S. Homecare Medical Equipment Corp.
U.S. Homecare Infusion Therapy Products Corporation
Pennsylvania Corporations:
U.S. Homecare Corporation of Pennsylvania
U.S. Homecare Certified Corporation of Pennsylvania
Connecticut Corporations:
U.S. Homecare Corporation of Connecticut
U.S. HomeCare Infusion Therapy Services Corporation of Connecticut
U.S. Homecare Certified Corporation of Connecticut
Maryland Corporation:
U.S. Homecare Corporation of the MidAtlantic Region
Michigan Corporation:
U.S. Homecare Corporation of Michigan
New Jersey Corporation:
U.S. Homecare Infusion Therapy Services Corporation of New Jersey
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS DATED AS OF DECEMBER 3, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 647
<SECURITIES> 0
<RECEIVABLES> 11,768
<ALLOWANCES> 3,843
<INVENTORY> 0
<CURRENT-ASSETS> 9,797
<PP&E> 11,602
<DEPRECIATION> 9,024
<TOTAL-ASSETS> 15,545
<CURRENT-LIABILITIES> 13,308
<BONDS> 0
0
328
<COMMON> 94
<OTHER-SE> (7,477)
<TOTAL-LIABILITY-AND-EQUITY> 15,545
<SALES> 56,483
<TOTAL-REVENUES> 56,483
<CGS> 0
<TOTAL-COSTS> 39,213
<OTHER-EXPENSES> 24,578
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,092
<INCOME-PRETAX> (8,400)
<INCOME-TAX> 150
<INCOME-CONTINUING> (8,550)
<DISCONTINUED> 15,243
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,793)
<EPS-PRIMARY> (2.68)
<EPS-DILUTED> 0
</TABLE>
