<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended April 30, 1996
Commission File Number 1-11570
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Transworld Home HealthCare, Inc.
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(Exact name of Registrant as specified in its charter)
New York 13-3098275
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11 Skyline Drive, Hawthorne, New York 10532
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (914) 345-8880
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at June 11, 1996
- --------------------- ----------------------------
<S> <C>
Common Stock 6,131,094 Shares
</TABLE>
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Transworld Home HealthCare, Inc.
Second Quarter Report On Form 10-Q
Table of Contents
<TABLE>
<CAPTION>
Part I. Page
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<S> <C>
Item 1. Financial Statements (Unaudited) . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets
April 30, 1996 and October 31, 1995 . . . . . . . . . . . 4
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended
April 30, 1996 and April 30, 1995 . . . . . . . . . . . . 5
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended April 30, 1996
and April 30, 1995 . . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . 14
Part II.
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . 23
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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Part I
Item 1. Financial Statements
The financial statements of Transworld Home HealthCare, Inc. (the
"Company") begin on page 4.
Page 3
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TRANSWORLD HOME HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1996 1995
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<S> <C> <C>
ASSETS
Current assets:
Cash and temporary investments $ 777 $ 915
Accounts receivable, less allowance for doubtful
accounts of $5,042 and $5,137 2l,606 18,906
Inventories 1,409 1,556
Prepaid income taxes 291
Prepaid expenses and other current assets 4,488 4,116
-------- --------
Total current assets 28,571 25,493
Property & equipment, net 3,874 4,062
Intangible assets, net 41,260 42,037
Other assets 3,960 3,320
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$ 77,665 $ 74,912
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 10,000
Short-term debt 1,000 $ 1,000
Current portion of long-term debt, including
obligations under capital leases 3,960 3,908
Accounts payable and accrued expenses 8,541 9,533
Acquisitions payable 1,206 15,062
Income taxes payable 696
-------- --------
Total current liabilities 24,707 30,199
Long-term debt, including obligations under capital leases 23,552 20,264
Deferred income taxes and other 367 363
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Total liabilities 48,626 50,826
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Commitments and contingencies
Stockholders' equity
Preferred stock, $.01 par value; authorized
2,000 shares, issued and outstanding - none
Common stock, $.01 par value; authorized
30,000 shares, issued and outstanding
5,511 and 5,060 shares 55 51
Additional paid-in capital 23,722 19,713
Retained earnings 5,262 4,322
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Total stockholders' equity 29,039 24,086
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$ 77,665 $ 74,912
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
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TRANSWORLD HOME HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended April 30, Ended April 30,
------------------------ ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Net patient services $ 4,654 $ 4,711 $ 9,468 $ 9,563
Net infusion services 2,495 2,538 4,891 5,220
Net respiratory, medical equipment and supplies sales 10,373 9,799 22,807 19,970
-------- -------- -------- --------
Total revenues 17,522 17,048 37,166 34,753
-------- -------- -------- --------
Cost of revenues:
Patient services 2,443 2,422 4,947 4,910
Infusion services 1,423 1,331 2,899 2,729
Respiratory, medical equipment and supplies sales 4,034 3,880 8,998 7,955
-------- -------- -------- --------
Total cost of revenues 7,900 7,633 16,844 15,594
-------- -------- -------- --------
Gross profit 9,622 9,415 20,322 19,159
Selling, general and administrative expenses 7,992 6,764 16,143 13,636
-------- -------- -------- --------
Operating income 1,630 2,651 4,179 5,523
Interest expense, net 1,424 903 2,558 1,653
-------- -------- -------- --------
Income before income taxes 206 1,748 1,621 3,870
Provision for income taxes 87 721 681 1,561
-------- -------- -------- --------
Net income $ 119 $ 1,027 $ 940 $ 2,309
======== ======== ======== ========
Net income per share of common stock:
Primary $ .02 $ .15 $ .15 $ .35
======== ======== ======== ========
Fully diluted $ .02 $ .15 $ .15 $ .34
======== ======== ======== ========
Weighted average number of common shares outstanding:
Primary 6,763 6,781 6,750 6,615
======== ======== ======== ========
Fully diluted 6,763 6,781 6,750 6,737
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5
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TRANSWORLD HOME HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
----------------------------------------
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 940 $ 2,309
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 1,848 1,697
Provision for doubtful accounts 3,082 2,282
Changes in assets and liabilities, excluding
the effect of businesses acquired:
Increase in accounts receivable ( 5,782 ) ( 7,577 )
Decrease in inventories 147 157
Increase in prepaid expenses and other assets ( 833 ) ( 332 )
Decrease in accounts payable and other liabilities ( 1,993 ) ( 1,375 )
----------- -----------
Net cash used in operating activities: ( 2,591 ) ( 2,839 )
----------- -----------
Cash flows (used in) provided by investing activities:
Capital expenditures ( 385 ) ( 642 )
Acquisitions -- net of cash acquired ( 445 )
Notes receivable -- related parties 136
Payment on acquisition payable ( 10,025 ) ( 5,877 )
----------- -----------
Net cash used in investing activities ( 10,410 ) ( 6,828 )
----------- -----------
Cash flows provided by (used in) financing activities:
Proceeds from notes payable 10,000
Payments on short-term debt ( 1,000 ) ( 5,000 )
Proceeds from short-term debt 1,000
Payments on revolving loan ( 3,086 )
Borrowing under revolving loan 5,265 8,850
Proceeds from long-term debt 18 7,416
Payments on long-term debt ( 2,269 ) ( 2,374 )
Payments on notes payable-related parties ( 3,000 )
Payments for financing fees and issuance costs ( 349 ) ( 513 )
Stock options and warrants exercised, including tax benefit 198 1,875
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Net cash provided by financing activities 12,863 4,168
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Decrease in cash ( 138 ) ( 5,499 )
Cash and temporary investments, beginning of period 915 6,310
----------- -----------
Cash and temporary investments, end of period $ 777 $ 811
=========== ===========
Supplemental cash flow information:
Cash paid for interest $ 1,625 $ 1,181
=========== ===========
Cash paid for income taxes $ 1,666 $ 2,248
=========== ===========
Supplemental disclosure of non-cash
investing and financing activities:
Details of business acquired in purchase transactions:
Fair value of assets acquired $ 5,712
===========
Liabilities assumed or incurred $ 5,130
===========
Cash paid for acquisitions (including related expenses) $ 582
Cash acquired 137
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Net cash paid for acquisition $ 445
===========
Common stock issued for payment on acquisition payable $ 3,831
===========
</TABLE>
See notes to condensed consolidated financial statements.
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
Note 1: Basis of Presentation
Transworld Home HealthCare, Inc. (the "Company") is a regional
provider of a broad range of alternate site health care services and products.
The Company provides the following services and products to patients in their
homes or in an outpatient setting: (i) patient services, including nursing and
para-professional services and radiation therapy; (ii) infusion therapy; and
(iii) respiratory therapy, home medical equipment and specialized mail-order
pharmaceuticals and medical supplies, including respiratory and diabetic
medications and supplies, wound care dressings and ostomy and orthotic
products.
The Condensed Consolidated Financial Statements included herein are
unaudited and include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations of the interim
period pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed financial
statements should be read in conjunction with the Company's Form 10-K for the
year ended October 31, 1995. Although the Company's operations are not highly
seasonal, the results of operations for the three and six months ended April
30, 1996 and 1995 are not necessarily indicative of the operating results for
the full year. Prior year's financial statements have been reclassified to
conform with the current year's presentation.
Note 2: Net Income per Common Share
Net income per common share is computed based on the weighted average
number of shares of common stock outstanding during the periods. The effect of
dilutive stock options and warrants (common stock equivalents) has been
included in the computation of net income per share using the treasury stock
method.
Page 7
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 2: Net Income per Common Share (cont.)
The earnings per share calculations for the three and six months ended
April 30, 1996 and 1995 were computed as follows:
<TABLE>
<CAPTION>
PRIMARY COMPUTATION
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THREE MONTHS ENDED APRIL 30, SIX MONTHS ENDED APRIL 30,
---------------------------- ----------------------------
1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net income $ 119 $ 1,027 $ 940 $ 2,309
Add: Interest on long-term debt, net of tax effect,
after application of treasury stock method 34 - 51 -
---------- ---------- --------- ----------
Net income, as adjusted $ 153 $ 1,027 $ 991 $ 2,309
========== ========== ========= ==========
Weighted average number of shares outstanding
during applicable periods 5,473 4,930 5,272 4,851
Weighted average number of shares contingently
issuable per acquisition agreements 244 416 429 416
Incremental shares, after application of treasury
stock method, of stock options and warrants 1,046 1,435 1,049 1,348
---------- ---------- --------- ----------
Shares used in calculation of net income per common share 6,763 6,781 6,750 6,615
========== ========== ========= ==========
Net income per common share $ 0.02 $ 0.15 $ 0.15 $ 0.35
========== ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
FULLY DILUTED COMPUTATION
----------------------------------------------------------------
THREE MONTHS ENDED APRIL 30, SIX MONTHS ENDED APRIL 30,
---------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Net income $ 119 $ 1,027 $ 940 $ 2,309
Add: Interest on long-term debt, net of tax effect,
after application of treasury stock method 23 - 41 -
---------- ---------- --------- ----------
Net income, as adjusted $ 142 $ 1,027 $ 981 $ 2,309
========== ========== ========= ==========
Weighted average number of shares outstanding
during applicable periods 5,473 4,930 5,272 4,851
Weighted average number of shares contingently
issuable per acquisition agreements 244 416 429 416
Incremental shares, after application of treasury
stock method, of stock options and warrants 1,046 1,435 1,049 1,470
---------- ---------- --------- ----------
Shares used in calculation of net income per common share 6,763 6,781 6,750 6,737
========== ========== ========= ==========
Net income per common share $ 0.02 $ 0.15 $ 0.15 $ 0.34
========== ========== ========= ==========
</TABLE>
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations
RADAMERICA
On August 5, 1994, the Company acquired all of the issued and
outstanding capital stock of Radamerica, Inc., for $8,000 in cash and 250
shares of the Company's common stock valued at $5,000 based on a $20 per share
market price guarantee. The measurement date for such guarantee will be August
5, 1997, at which point any deficiency between the market value of the
Company's common stock, as defined in the purchase agreement, and the $20 per
share guarantee may be paid to the selling shareholders either in common stock
of the Company, in cash or a combination of stock and cash. Such payment, if
any, is due within 30 days following a selling shareholder's demand, which must
be exercised by February 5, 1998. To the extent amounts owed are not paid when
due, interest will accrue on the unpaid portion at a rate of 12% per annum.
Any cash payment in settlement of this contingency is subject to applicable
restrictions under the Company's Credit Agreement.
The total cost of the acquisition recorded in the financial statements
will not change as a result of any payments which may be required as a result
of the market price guarantee, however, an adjustment will be made to the
amount previously recorded for the issuance of the 250 shares. For purposes of
earnings per share calculations, contingently issuable shares of the Company's
common stock which arise as a result of the difference between the market price
at each balance sheet date and the $20 guaranteed price are included in both
primary and fully diluted earnings per share calculations.
DERMAQUEST
Effective November 1, 1994, the Company acquired all of the issued and
outstanding capital stock of DermaQuest, Inc. ("DermaQuest"), for $3,000 in
promissory notes which were repaid during fiscal 1995. Additional
consideration is provided for in the purchase agreement, as amended, whereby
the Company may be required to make additional payments based on the 1995 and
1996 earnings levels of DermaQuest. On October 31, 1995, the Company recorded
$8,832 in both acquisitions payable and goodwill, based on the applicable
formula applied to DermaQuest's 1995 pretax earnings. If an additional amount
is payable pursuant to DermaQuest 1996 earnings levels, the cost of the
acquisition and related goodwill will be increased by such amount in the period
that the contingency is resolved.
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations (cont.)
The Company paid the $8,832 acquisition payable as follows: (i) on
January 16, 1996 a $4,000 letter of credit, which was issued as collateral for
DermaQuest contingent payments, was drawn and paid to the sellers in cash; (ii)
on February 1, 1996 $3,832 was paid through the issuance of 370 shares of
common stock valued (per the acquisition agreement) at $10.35 per share; and
(iii) on May 30, 1996 the remaining $1,000 plus accrued interest of $27 from
February 1, 1996 was paid in cash with proceeds from the Initial Closing (see
Note 7).
An additional payment will be made on February 1, 1997 to the extent
that DermaQuest pretax earnings for the year ending October 31, 1996 multiplied
by four exceeds the total of all amounts previously paid to the shareholders
pursuant to the purchase agreement ($11,832 to date). The total amounts of the
DermaQuest acquisition cannot exceed $14,000. Any additional payments due can
be paid in either cash (subject to applicable restrictions under the Credit
Agreement) or common stock at the Company's option at a valuation price, as
defined in the purchase agreement.
PENDING ACQUISITION
VIP COMPANIES
On June 30, 1994, the Company entered into stock purchase agreements,
as amended, to acquire all of the issued and outstanding capital stock of VIP
Health Services, Inc. and Kwik Care, Ltd. (collectively, the "VIP Companies")
for $11,000, consisting of $7,150 in cash, $3,100 in promissory notes (or cash
if certain events occur) and 146 shares of the Company's common stock (valued
at $750 after taking into account restrictions on transfer). The promissory
notes bear interest at 7% per annum and are payable on the second anniversary
of the execution of the Company's acquisition of the VIP Companies (provided,
however, that if the Company consummates financings of at least $45 million
between June 30, 1994 and the VIP closing, then the Company will pay such
amounts in cash rather than pursuant to the notes or if such financings are
consummated following the VIP closing, then a portion of the proceeds of such
financings will be applied to prepay the notes). The Company placed in escrow
$1,500 ($750 in cash and 146 shares of Company common stock) during July 1994
as a down payment on the VIP acquisition, which amounts are included in "Other
Assets."
The VIP Companies provide temporary nursing and related home health
care services in the City of New York and surrounding areas through both a
licensed and a Medicare certified agency. The consummation of the VIP
acquisition is subject to, among
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations (cont.)
other things, various closing conditions, including receipt of necessary
governmental approvals and the approval of the required lenders under the
Credit Agreement and could occur by mid 1996. In addition, consummation of the
VIP acquisition is subject to the review of the accuracy at closing of the
various representations and agreements of the sellers, and actions of the
sellers to insure compliance with such representations and agreements. For the
years ended December 31, 1994 and 1995, the VIP Companies generated
approximately $33,000 and $35,000, respectively, in revenues and, for the same
periods, pro forma net income (loss) (net income after consideration of pro
forma provision for income taxes) of $850 and $(978), respectively. The 1995
amounts include a special one-time bonus of $3,000 (pretax) to one of the VIP
Companies' officers.
Note 4: Debt
On January 10, 1996, an institutional investor purchased from the
Company $10,000 of 20% subordinated notes (the "Subordinated Notes") due
October 10, 1996. The Subordinated Notes are required to be repaid out of the
proceeds of any subsequent equity offerings or through a refinancing approved
by the required banks under the Credit Agreement, without premium or penalty.
On May 30, 1996 the interest rate on the Subordinated Notes was reduced to 12%
(see Note 7).
On January 10, 1996, the Credit Agreement was amended to permit the
issuance of equity units under the unit purchase agreement (see Note 5), to
permit the issuance of the 20% Subordinated Notes described above, to allow the
payment in cash of the remaining $5,973 RespiFlow/ MK acquisition payable (plus
interest from its due date of August 15, 1995), which was paid on January 10,
1996, and to amend and modify certain definitions and covenants in the Credit
Agreement which would allow the Company to be in compliance with its covenants
as of October 31, 1995.
Note 5: Unit Purchase Agreement
On November 20, 1995 the Company entered into a unit purchase
agreement, as amended, with the same institutional investor (see Note 4) under
which the Company will sell an aggregate of 4,400 units at a purchase price of
$9.00 per unit (for an aggregate purchase price of $39,600) to the
institutional investor in two separate closings, subject to receipt of
necessary shareholder and governmental approvals. The unit purchase agreement
contains certain covenants that restrict the Company from entering into
transactions not in the ordinary course of business, including making
acquisitions and issuing capital stock, without the consent of the
institutional investor.
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 5: Unit Purchase Agreement (cont.)
The initial closing (the "Initial Closing") (see Note 7) will occur
following the receipt of shareholder approval (which was obtained at the
Company's annual meeting of shareholders on April 16, 1996), at which time the
Company will sell (i) 550 equity units or an amount not to exceed 9.9% of the
issued and outstanding shares of the Company, after giving effect to the sale,
at a purchase price of $9.00 per unit, each equity unit comprised of one share
of the Company's restricted common stock and a 0.6818 non-callable, five year
stock purchase warrant with each whole warrant entitling the holder to purchase
an additional share of the Company's common stock at $12.45 per share (the
"Warrants"), and, if approved by the required banks under the Credit Agreement,
(ii) 1,894 debt units at a purchase price of $9.00 per unit, each debt unit
comprised of $9.00 in principal amount of 15% convertible subordinated notes
due nine months subsequent to issuance and convertible into one share of common
stock and 0.6818 of a Warrant for an aggregate purchase price of $22,000. The
second closing will occur following receipt of New York State Department of
Health approval of the transaction, at which time the Company will sell an
additional 1,956 equity units (described above) for an aggregate purchase price
of $17,600. In addition, any outstanding convertible subordinated notes issued
prior to the second closing shall automatically convert into common stock at
the second closing and interest thereon shall be forgiven. The institutional
lender may also, at its option, purchase additional debt units between the
first and second closings, in which case the amount of equity units sold at the
second closing would be reduced accordingly.
Note 6: Commitments and Contingencies
On November 2, 1994, an action was filed in the Supreme Court of the
State of New York, County of Westchester against the Company, alleging that one
of its drivers negligently caused the death of the plaintiff's husband while
operating his motor vehicle during a delivery for the Company. The plaintiffs
are seeking $12,580 in damages for wrongful death, pain and suffering, loss of
consortium and related claims. The Company has tendered defense of this action
to its insurance carrier and management of the Company and counsel to the
insurance carrier intend to vigorously defend this lawsuit. As the case is in
a preliminary stage, the Company is not able to estimate any potential exposure
or range of exposure and has not recorded any amounts in its financial
statements. It is reasonably possible that irrespective of insurance coverage,
the ultimate outcome of this action may be materially unfavorable to the
Company's consolidated results of operations, financial position or cash flows.
However, the Company believes that the ultimate liability, if any, will be
within the policy limits of its insurance policies, and will not have a
material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.
Page 12
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TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 7: Subsequent Events
Pursuant to the Unit Purchase Agreement (see Note 5), on May 30, 1996
the Initial Closing was completed. The Company sold 600 equity units at a
purchase price of $9.00 per unit, each equity unit comprised of one share of
the Company's restricted common stock and a 0.6818 non-callable, five year
stock purchase warrant with each whole warrant entitling the holder to purchase
one share of the Company's common stock at an exercise price of $12.45 per
share. The 600 equity units represents 9.8% of the issued and outstanding
shares of the Company, after giving effect to the purchase. No debt units were
issued at such closing. In addition, as of May 30, 1996 the interest rate on
the Subordinated Notes was reduced from 20% to 12% per annum (see Note 4).
On May 28, 1996, the required lenders under the Credit Agreement (see
Note 4) consented to the use of the $5,400 proceeds from the Initial Closing
to: (i) pay $1,000 plus accrued interest for the remainder of the DermaQuest
acquisition payable; (ii) pay interest accrued through the Initial Closing on
the Subordinated Notes; and (iii) to use the remainder for general corporate
and working capital purposes.
Page 13
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
THREE MONTHS ENDED APRIL 30, 1996 VS. THREE MONTHS ENDED APRIL 30, 1995
Revenues. Total revenues increased by $474,000 or 2.8% to $17,522,000
for the three months ended April 30, 1996 from $17,048,000 for the three months
ended April 30, 1995. This increase was primarily attributable to an increase
of $574,000 or 5.9% in net respiratory, medical equipment and supply sales
resulting from an increase in the number of patients serviced.
Cost of Revenues. Cost of revenues increased by $267,000 or 3.5% to
$7,900,000 for the three months ended April 30, 1996 from $7,633,000 for the
three months ended April 30, 1995. As a percentage of total revenues, cost of
revenues remained relatively flat at 45.1% and 44.8% for the three months ended
April 30, 1996 and 1995, respectively. Cost of revenues as a percentage of
sales remained relatively flat for patient services (52.5% for the three months
ended April 30, 1996 versus 51.4% for the corresponding 1995 period) and
respiratory and medical equipment and supplies sales (38.9% for the three
months ended April 30, 1996 versus 39.6% for the corresponding 1995 period),
but increased for infusion services. The increase in infusion services (57.0%
for the three months ended April 30, 1996 versus 52.4% for the corresponding
1995 period) was due primarily to reductions in reimbursement rates from third
party payors. The effect of the increase in infusion services cost of revenues
as a percentage of sales was offset by the relative increase in the mix of net
respiratory and medical equipment and supplies sales to total sales which
increased to 59.2% from 57.5% of sales for the three months ended April 30,
1996 and 1995, respectively, which sales have a lower cost of revenues (45.1%)
than do infusion services revenues (57.0%).
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $1,228,000 or 18.2% to $7,992,000 for the
three months ended April 30, 1996 from $6,764,000 for the comparable 1995
period. This increase was primarily attributable to an increase in selling,
general and administrative expenses at the Company's specialty mail order
pharmacy operations ($1,148,000) as a result of an increase in bad debt expense
($647,000) which varies with sales as well as increases in general and
administrative expenses to support increased patient volumes ($442,000), and to
a lesser extent, from increases in amortization of intangibles due to the
increase in goodwill at October 31, 1995 for DermaQuest ($59,000).
Page 14
<PAGE> 15
Results of Operations (cont.)
Interest Expense, Net. Interest expense, net increased by $521,000 to
$1,424,000 for the three months ended April 30, 1996 from $903,000 for the
comparable 1995 period. This increase was primarily attributable to an
increase in interest expense due to borrowings under the Subordinated Loan (as
defined in Liquidity and Capital Resources) ($500,000).
Provision for Income Taxes. Provision for income taxes as a
percentage of income before income taxes was 42.2% for the three months ended
April 30, 1996 and 41.2% for the three months ended April 30, 1995. The
increase in the effective tax rate from the 1995 period to the 1996 period was
attributable to higher levels of non-deductible expenses, primarily goodwill
amortization, as well as to a shift in the percentage mix of the Company's
profits to jurisdictions with higher state tax rates.
Net Income. As a result of the foregoing, net income decreased by
$908,000 or 88.4% to $119,000 for the three months ended April 30, 1996 from
$1,027,000 for the three months ended April 30, 1995.
SIX MONTHS ENDED APRIL 30, 1996 VS. SIX MONTHS ENDED APRIL 30, 1995
Revenues. Total revenues increased by $2,413,000 or 6.9% to
$37,166,000 for the six months ended April 30, 1996 from $34,753,000 for the
six months ended April 30, 1995. This increase was primarily attributable to
an increase of $2,837,000 or 14.2% in net respiratory, medical equipment and
supply sales resulting from an increase in the number of patients serviced.
Net infusion service revenues declined by $329,000 or 6.3% due primarily to a
decline in reimbursement rates from third party payors.
Cost of Revenues. Cost of revenues increased by $1,250,000 or 8.0% to
$16,844,000 for the six months ended April 30, 1996 from $15,594,000 for the
six months ended April 30, 1995. As a percentage of total revenues, cost of
revenues remained relatively flat at 45.3% and 44.9% for the six months ended
April 30, 1996 and 1995, respectively. Cost of revenues as a percentage of
sales remained relatively flat for patient services (52.2% for the six months
ended April 30, 1996 versus 51.3% for the corresponding 1995 period) and
respiratory and medical equipment and supplies sales (39.5% for the six months
ended April 30, 1996 versus 39.8% for the corresponding 1995 period), but
increased for infusion services. The increase in infusion services (59.3% for
the six months ended April 30, 1996 versus 52.3% for the corresponding 1995
period) was due primarily to reductions in reimbursement rates from third party
payors. The effect of the increase in infusion services cost of revenues as a
percentage of sales was offset by the relative increase in the mix of net
respiratory and medical equipment and supplies sales to total sales which
increased to 61.4% from 57.5% of sales for the six months ended April 30, 1996
and 1995, respectively, which sales have a lower cost of revenues (39.5%) than
do infusion services revenues (59.3%).
Page 15
<PAGE> 16
Results of Operations (cont.)
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $2,507,000 or 18.4% to $16,143,000 for the
six months ended April 30, 1996 from $13,636,000 for the comparable 1995
period. This increase was primarily attributable to an increase in selling,
general and administrative expenses at the Company's specialty mail order
pharmacy operations ($2,362,000) as a result of increased expenses that vary
with sales and profitability (e.g.: bad debt expenses ($817,000) and incentive
fees ($206,000) under a management agreement) of $1,023,000 as well as
increases in general and administrative expenses to support increased patient
volumes ($1,221,000), and to a lesser extent, from increases in amortization of
intangibles due to the increase in goodwill at October 31, 1995 for DermaQuest
($118,000).
Interest Expense, Net. Interest expense, net increased by $905,000 to
$2,558,000 for the six months ended April 30, 1996 from $1,653,000 for the
comparable 1995 period. This increase was primarily attributable to: (i) an
increase in interest expense due to borrowings under the Subordinated Loan
($622,000); and (ii) an increase in interest expense due to higher average
borrowings under the Credit Agreement ($178,000).
Provision for Income Taxes. Provision for income taxes as a
percentage of income before income taxes was 42.0% for the six months ended
April 30, 1996 and 40.3% for the six months ended January 31, 1995. The
increase in the effective tax rate from the 1995 period to the 1996 period was
attributable to higher levels of non-deductible expenses, primarily goodwill
amortization, as well as to a shift in the percentage mix of the Company's
profits to jurisdictions with higher state tax rates.
Net Income. As a result of the foregoing, net income decreased by
$1,369,000 or 59.3% to $940,000 for the six months ended April 30, 1996 from
$2,309,000 for the six months ended April 30, 1995.
Page 16
<PAGE> 17
Liquidity and Capital Resources
During the six months ended April 30, 1996, the Company generated
negative cash flow from operations of $2,591,000 primarily as a result of an
increase in accounts receivable of $2,700,000 (net of increases in allowance
for doubtful accounts) (see Accounts Receivable below). The Company utilized
approximately $10,410,000 in investing activities, including approximately
$10,025,000 for payments on acquisitions payable, and $385,000 for capital
expenditures. Cash requirements during the six months ended April 30, 1996 for
operating and investing activities were met through borrowings under the Credit
Agreement and the $10,000,000 Subordinated Loan from Hyperion Partners II L.P..
Accounts Receivable. The Company maintains a cash management program
that focuses on the reimbursement function, as growth in accounts receivable
has been the main operating use of cash historically. At April 30, 1996 and
October 31, 1995, $21,606,000 (27.8%) and $18,906,000 (25.2%), respectively, of
the Company's total assets consisted of accounts receivable, substantially from
third-party payors. Such payors generally require comprehensive documentation
in order to process claims. The collection time for accounts receivable is
typically the longest (up to 180 days) for services that relate to new patients
or additional services requiring medical review for existing patients.
Accounts receivable increased by $2,700,000 from October 31, 1995 to
April 30, 1996. This increase is primarily due to an increase in accounts
receivable at the Company's specialized mail order pharmacy and medical
supplies operation ("Mail Order"). Mail Order is experiencing a significant
increase in the length of the medical review process by Medicare intermediaries
(which accounts for approximately 72.3% of Mail Order revenues), resulting in
increased accounts receivable and increased days sales outstanding ("DSO's"),
as discussed below.
Management's goal is to maintain accounts receivable levels equal to
or less than 90 days sales outstanding (which the Company believes to be within
industry averages), which will tend to mitigate the risk of recurrence of
negative cash flows from operations by reducing the required investment in
accounts receivable and thereby increasing cash flows from operations. DSO's is
a measure of the average number of days taken by the Company to collect its
accounts receivable, calculated from the date services are performed. At April
30, 1996, and October 31, 1995, the Company's DSO's were 113 and 97,
respectively, with the increase in DSO's attributable to the factors previously
discussed. As the proportion of third-party payors' claims related to
alternate site health care increases, the Company believes that third-party
payors are likely to increase their review of such claims, the effect of which
would be to generally increase DSO's.
Credit Agreement. In March 1995, the Company entered into an amended
and restated credit agreement with Banque Paribas, as agent (the "Credit
Agreement"), which provides the Company with a $35,000,000 senior secured
credit facility. The Credit Agreement includes a $23,000,000 term loan and up
to $12,000,000 in revolving loans. As of April 30, 1996, the Company had
outstanding $18,750,000 under the term loan and $11,265,000 under the
Page 17
<PAGE> 18
Liquidity and Capital Resources (cont.)
revolving loans. Availability under the revolving loan was $735,000 as of
April 30, 1996. The revolving loans mature on October 31, 1999. As of April
30, 1996 the revolving loans and term loan bore interest at the rate of
approximately 8.75% per annum (based on the weighted average of amounts
outstanding under the Credit Agreement).
RespiFlow/MK. The remaining acquisition payable of $5,973,000 as of
October 31, 1995 was paid to the sellers on January 10, 1996 in cash, plus
interest from its due date of August 15, 1995.
Radamerica Price Support Payment. In connection with the Company's
acquisition of Radamerica, the Company agreed that in the event the market
value of its common stock on August 5, 1997 is less than $20 per share, the
Company will pay to each Radamerica seller, for each share of common stock held
by them at such time, an amount equal to the difference between the market
value on such date and $20 (the "Radamerica Price Support Payment"). Based
upon the closing price of the common stock on April 30, 1996, the Company's
obligation under the Radamerica Price Support Payment would have been
$2,467,500. The Company may pay the Radamerica Price Support Payment in whole
or in part in shares of common stock or in cash (subject to applicable
restrictions under the Credit Agreement) within 30 days following a seller's
demand therefor, which demand must be exercised by February 5, 1998. Any
portion of the Radamerica Price Support Payment not paid when due will bear
interest at the rate of 12% per annum.
Pending VIP Acquisition. Pursuant to the VIP acquisition, the Company
will pay to the sellers at closing $10,250,000 in cash (of which $750,000 is
being held in escrow) and 145,455 shares of Common Stock valued at $750,000
(all of which is being held in escrow). In addition, the Company will be
assuming all stated liabilities of the VIP Companies as of the VIP Closing
(approximately $11,600,000 at December 31, 1995, which includes approximately
$3,000,000 due to officers/shareholders). The Company expects that some
portion of such liabilities will be repaid with cash flows generated through
operating activities of the VIP Companies. However, to the extent such cash
flows are not sufficient, it may be necessary for the Company to use its own
funds or obtain additional financing to repay such assumed liabilities,
principally amounts due to the former officers/shareholders. The Company has
not received approvals from its lenders under the Credit Agreement to
consummate the acquisition of the VIP Companies or a financing commitment from
any other source with respect to the cash required to be paid at the VIP
Closing. Although the Company is seeking to obtain such approval from its
senior lenders, there can be no assurance that such approval will be obtained
or, if obtained, will be on terms satisfactory to the Company. In addition,
the consummation of the VIP acquisition is subject to other closing conditions,
including the review of the accuracy at closing of the various representations
and agreements of the sellers, and actions of the sellers to insure compliance
with such representations and agreements. In the event that the Company
defaults under the VIP acquisition agreements, the
Page 18
<PAGE> 19
Liquidity and Capital Resources (cont.)
Company could suffer a loss of its $1,500,000 contract deposit (consisting of
$750,000 in cash and 145,455 shares of Common Stock) which sums have been
posted as liquidated damages. However, in such event the Company's liquidity
will not be impacted as the cash portion of the escrow being held was paid by
the Company in the 1994 fiscal year.
DermaQuest Acquisition. In connection with the Company's acquisition
of DermaQuest, the Company recorded an acquisition payable of $8,832,000 at
October 31, 1995 based on a formula applied to DermaQuest's 1995 pretax
earnings. The Company paid $7,832,000 of the $8,832,000 acquisition payable
during the six months ended April 30, 1996 as follows: (i) $4,000,000 was paid
in cash through drawing of the letter of credit which was issued as collateral
for any DermaQuest contingent payments; and (ii) $3,832,000 was paid through
the issuance of 370,000 shares of common stock valued at $10.35 per share. On
May 30, 1996 the Company paid the remaining $1,000,000 acquisition payable
balance plus accrued interest in cash through proceeds from the Initial Closing
(as discussed below).
Any additional payments to the DermaQuest sellers due based on 1996 earnings
(which payment may not exceed $2,168,000) (the "Second DermaQuest Payment")
will be paid in registered shares of common stock valued at the average of the
closing price as reported on the Nasdaq National Market for the 90 days ending
on the day prior to the date the payments are due or, at the Company's option,
in whole or in part in cash subject to certain restrictions under the Credit
Agreement.
If, by the first anniversary of the issuance of shares, the sellers
have sold any such shares and the sale price of such shares is less than 90% of
their initial valuation on the date of issuance, then the amount of such
difference shall be paid to the sellers either in whole or in part at the
option of the Company, in cash (subject to restrictions under the Credit
Agreement) or in additional shares of common stock. If the sale price exceeds
the initial valuation by more than 110%, then the difference shall be deducted,
first, from the Second DermaQuest Payment, and then, paid to the Company by the
sellers in cash and/or shares of common stock in the same proportion of cash
and common stock as the Second DermaQuest Payment is paid.
Hyperion Transaction. On November 20, 1995, the Company entered into
a Purchase Agreement with Hyperion Partners II L.P. ("HPII") pursuant to which
HPII agreed, subject to the conditions stated in the Purchase Agreement, to
purchase up to an aggregate of 4,400,000 units (the "Units"), at a purchase
price of $9.00 per Unit for an aggregate purchase price of up to $39,600,000.
The Units consist of (A) equity units (the "Equity Units") which in turn are
comprised of (i) one share of the Company's restricted common stock and (ii)
0.6818 of a
Page 19
<PAGE> 20
Liquidity and Capital Resources (cont.)
stock purchase warrant (each whole warrant entitles the holder thereof to
purchase one share of the Company's common stock at an exercise price of $12.45
per share (the "Warrants")) and, if approved by the Company's senior lenders,
(B) debt units (the "Debt Units") which in turn are comprised of (i) $9.00 in
principal amount of a subordinated convertible debenture of the Company which
is convertible into one share of the Company's restricted common stock (the
"Convertible Debentures") and (ii) 0.6818 of a Warrant. Consummation of the
HPII transaction is subject to, among other things, receipt of shareholder
approval of the Purchase Agreement (which approval was obtained at the annual
meeting of shareholders of the Company on April 16, 1996), and New York State
Department of Health ("DOH") approval with respect to ownership by HPII of more
than 9.9% of the common stock of the Company. The Warrants and Convertible
Debentures can only be exercised or converted, as the case may be, following
DOH approval.
If the DOH approves the transactions contemplated by the Purchase
Agreement and if all other conditions to closing are satisfied, the total
number of Units to be sold to HPII will be 4,400,000 which represents 4,400,000
shares of common stock (or Convertible Debentures convertible into common
stock) and Warrants to purchase an additional 2,999,920 shares of common stock.
The aggregate number of shares represented, therefore, by all of the Units
which may be sold to HPII in connection with the Purchase Agreement is
7,399,920.
On May 30, 1996 HPII purchased from the Company at the initial closing
(the "Initial Closing") an aggregate 600,000 Equity Units for $5,400,000. The
use of the proceeds of the issuance was as follows: (i) $1,027,000 to satisfy
the remaining balance plus accrued interest on the DermaQuest acquisition
payable; (ii) $802,000 of accrued interest on the Subordinated Loan; (iii)
$1,350,000 to satisfy accounts payable; (iv) $340,000 for expenses related to
the HPII transaction; and (v) the balance of $1,881,000 to be used for general
corporate and working capital purposes.
Following such time that the DOH approves the transactions
contemplated by the Purchase Agreement and if all other conditions to closing
are satisfied, the Company will sell to HPII at a second closing (the "Second
Closing") an aggregate of 3,800,000 Equity Units (the "Additional Equity
Units") for $34,200,000, in addition to the Units sold at the Initial Closing
described above. The Purchase Agreement provides that, from and after the
Initial Closing and prior to the Second Closing, HPII has the right, in its
sole discretion, to purchase, if approved by the Company's senior lenders, up
to 3,800,000 Debt Units in lieu of some or all the Additional Equity Units, in
which event a proportionally smaller number of Additional Equity Units would be
sold to HPII at the Second Closing.
Page 20
<PAGE> 21
Liquidity and Capital Resources (cont.)
The Warrants contained in the Units grant the holder thereof the right
to purchase a share of common stock upon payment of the Exercise price of
$12.45 per whole share of common stock. The Warrants are exercisable at any
time after issuance thereof until the fifth anniversary of the original
issuance date. The Warrants contain provisions that protect the holders
thereof against dilution by adjustment of the exercise price therefore (and, in
certain instances, a related change in the number of shares of common stock
underlying each Warrant) upon the occurrence of certain events, such as stock
dividends, stock splits, mergers, a sale of substantially all of the Company's
assets and other extraordinary events, as well as the issuance by the Company
of shares of common stock at a purchase price below the then effective exercise
price of the Warrants (which initially is $12.45 per share). The Warrants may
be exercised only following DOH approval.
Pursuant to a Registration Rights Agreement entered into at the
Initial Closing (the "Registration Agreement"), the Company granted to HPII
registration rights with respect to the shares of common stock included in the
Units and other shares of common stock, if any, acquired by HPII (collectively,
the "Registrable Securities"). The Registration Agreement also grants to the
holders of Registrable Securities certain "piggyback" rights to have
Registrable Securities included in a registration statement to be filed by the
Company for either its own benefit or for the registration of securities for
the account of other shareholders of the Company. The Company will bear all
expenses, other than underwriting discounts and commissions, in connection with
any such registrations.
On January 10, 1996, HPII loaned to the Company the principal amount
of $10,000,000 (the "Subordinated Loan"). The Subordinated Loan is unsecured,
is subordinated to the Company's obligations under its Credit Agreement,
matures nine months after the issuance thereof, bears interest at the rate of
20% per annum through May 29, 1996 and 12% thereafter and is required to be
prepaid from any subsequent equity or, if permitted under the Credit Agreement,
debt financings or refinancing completed prior to the maturity date.
Litigation. On November 2, 1994, an action was filed in the Supreme
Court of the State of New York, County of Westchester by Celia M. Consiglio,
individually and as administratrix of her husband's estate against the Company,
alleging that one of its drivers negligently caused the death of the
plaintiff's husband while operating his motor vehicle during a delivery for the
Company. The plaintiffs are seeking $12,580,000 in damages for wrongful death,
pain and suffering, loss of consortium and related claims. The Company has
tendered a
Page 21
<PAGE> 22
Liquidity and Capital Resources (cont.)
defense of this action to its insurance carrier and management of the Company
and counsel to the insurance carrier intend to vigorously defend this lawsuit.
As the case is in a preliminary stage, the Company is not able to estimate any
potential exposure or range of exposure and has not recorded any amounts in its
financial statements. It is reasonably possible that irrespective of insurance
coverage, the ultimate outcome of this action may be materially unfavorable to
the Company's consolidated results of operations, financial position or cash
flows. However, the Company believes that the ultimate liability, if any, will
be within the policy limits of its insurance and will not have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows.
Page 22
<PAGE> 23
PART II
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual meeting of shareholders on April 16, 1996
(the "Annual Meeting"). The proposals voted upon at the Annual Meeting and the
results with respect to each proposal are set forth below:
Proposals Voted Upon
1. To approve and adopt the Purchase Agreement between the
Company and HPII;
2. To approve and adopt an amendment to the Company's Restated
Certificate of Incorporation and Bylaws;
3. To elect five directors to serve for a term of one year and
until their respective successors are duly elected and qualified;
4. To approve an amendment to the Company's 1992 Stock Option
Plan to increase the number of shares of the Company's common stock for which
options may be granted under such Plan; and
5. To approve the appointment by the Board of Directors of
Coopers & Lybrand L.L.P. as independent accountants of the Company for the
fiscal year ended October 31, 1996.
<TABLE>
<CAPTION>
Voting Results
--------------
Abstain / Not
Proposal For Against Voting
- ------------------------------ ----------------- ------------------ ----------------------
<S> <C> <C> <C>
No. 1 3,514,126 53,225 1,585,792
No. 2 3,455,937 103,174 1,594,031
No. 3 (election of
Directors)
Messrs.
Joseph J. Raymond 4,843,638 -- 309,504
Robert W. Fine 4,843,629 -- 309,513
Richard A. Yoken 4,843,638 -- 309,504
Elliott H. Vernon 4,848,638 -- 304,504
Scott A. Shay 4,848,138 -- 305,004
No. 4 3,206,054 373,464 157,622
No. 5 5,117,173 20,234 15,735
</TABLE>
Page 23
<PAGE> 24
Item 5. Other Information.
In connection with the resignation of Joseph J. Raymond as Chief
Executive Officer of the Company, on May 14, 1996, the Company entered into an
agreement with Mr. Raymond which provided for among other things, (i) a cash
payment to Mr. Raymond of $350,000 (which payment was made on May 23, 1996),
(ii) the vesting of 46,667 unvested stock options previously granted to Mr.
Raymond, (iii) until April 30, 2000, the voting of all shares of common stock
held by Mr. Raymond in the same proportion as the votes cast by other
shareholders at all meetings of shareholders, and (iv) the continuation of
certain non-compete provisions applicable to him as well as other provisions
customarily found in agreements of this kind. The Company also entered into a
consulting agreement with Mr. Raymond, whereby among other things, Mr. Raymond
will provide consulting services to the Company until April 30, 2000. For such
services, Mr. Raymond will be compensated at a rate equal to $150,000 per annum
less the amount by which certain amounts paid to or on his behalf exceed
$60,000 per annum. In addition, TWHH Funds L.P., a subsidiary of Hyperion
Partners II L.P. has agreed to loan Mr. Raymond for up to 364 days from
funding, $1,100,000 secured by a pledge of 150,000 shares of the Company's
common stock owned by him.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10.1. Agreement dated May 14, 1996 between the
Company and Joseph J. Raymond relating to
resignation.
10.2 Agreement dated May 14, 1996 between the
Company and Joseph J. Raymond relating to
consulting services.
10.3 Agreement dated May 14, 1996 between HPII and
Joseph J. Raymond relating to loan transaction.
10.4 Amendment dated February 16, 1996 to
Subordinated Note Purchase Agreement, dated
January 10, 1996, between the Company and
HPII.
10.5 Amendment dated May 30, 1996 to Subordinated
Note Purchase Agreement, dated as of January
10, 1996, as Amended on February 16, 1996,
between the Company and HPII.
27 Financial Data Schedule
(b) Reports on Form 8-K.
None
Page 24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
Dated: June 11, 1996
TRANSWORLD HOME HEALTHCARE, INC.
By: \s\Wayne A. Palladino
-------------------------------------------------
Wayne A. Palladino
Sr. Vice President and Chief Financial Officer
(Principal Financial Officer and Officer
Duly Authorized to Sign on Behalf of
Registrant)
Page 25
<PAGE> 26
EXHIBIT INDEX
Exhibit Description
10.1 Agreement dated May 14, 1996 between
the Company and Joseph J. Raymond
relating to resignation.
10.2 Agreement dated May 14, 1996 between
the Company and Joseph J. Raymond
relating to consulting services.
10.3 Agreement dated May 14, 1996 between
HPII and Joseph J. Raymond relating to
loan transaction.
10.4 Amendment dated February 16, 1996 to
Subordinated Note Purchase Agreement,
dated January 10, 1996, between the
Company and HPII
10.5 Amendment dated May 30, 1996 to
Subordinated Note Purchase Agreement,
dated as of January 10, 1996, as
Amended on February 16, 1996, between
the Company and HPII
27 Financial Data Schedule
<PAGE> 1
Transworld Home HealthCare, Inc.
11 Skyline Drive
Hawthorne, New York 10532
May 14, 1996
Mr. Joseph J. Raymond
17140 Coral Cove Way
Boca Raton, Florida 37496
Dear Joe:
We write to set forth our agreement with respect to your resignation
as an employee, officer and director of Transworld Home HealthCare, Inc., a New
York corporation (the "Company"), and all of its subsidiaries (collectively,
with the Company, the "Companies").
1. RESIGNATION. You hereby resign as an employee, officer and director
of each of the Companies, and from any other position you hold with any of the
Companies or any of their benefit or other plans or trusts, effective
immediately, except that (i) through August 15, 1996, you may retain your
position as a director of the Company (it being understood that you hereby
resign as a director of the Company effective that date) and (ii) through August
15, 1996, you may retain the title of "Chairman of the Board" of the Company (it
being understood that concurrently herewith the bylaws of the Company are being
amended so that the title "Chairman of the Board" shall denote solely a director
of the Company whose sole function is to preside at meetings of the Board of
Directors of the Company, and no longer shall denote the position of chief
executive officer, or any other officer, of the Company). Commencing August 16,
1996, you shall have the strictly honorary title of "Chair-Emeritus". You
recognize that your resignation is irrevocable, and that neither your employment
nor your other positions with the Companies will be resumed at any time. You
agree that you will not seek to be re-employed by, or to become an officer of,
the Companies or, after August 15, 1996, to become a director of the Company.
You agree that you will not hold yourself out as an officer, employee or
authorized representative of any of the Companies or, after
<PAGE> 2
Mr. Joseph J. Raymond
May 14, 1996
Page 2
August 15, 1996, as a director of the Company. You acknowledge that your
agreements in this paragraph are a material inducement for the Company to enter
into this Agreement.
2. PAYMENTS. In consideration of your entering into this Agreement and
performing your obligations hereunder, and in lieu of any other termination or
severance payment or benefit, after the expiration of the seven (7) day
revocation period referred to in paragraph 8 below (the "Revocation Period"))
and subject to the receipt of the bank consent referred to in paragraph 9 below
(the "Bank Consent"), the Company will pay or provide to you the following (in
each case less applicable withholding and other taxes):
a. SEVERANCE COMPENSATION. On the second business day following the
later of the expiration of the Revocation Period and the receipt of the
Bank Consent, you will receive a lump sum cash payment of $350,000.
b. CONTINUED MEDICAL COVERAGE. To the extent permitted by the
medical and hospitalization plan maintained by the Company, by the
underwriter of the plan and by applicable law, through April 30, 2000, the
Company will continue to provide medical and hospitalization insurance to
you, at the Company's cost. The foregoing shall not, however, in any
manner prohibit or restrict the Company, in its sole discretion, at any
time from changing or eliminating such plan or underwriter, even if, as a
result, the Company no longer would be able to provide medical and
hospitalization insurance to you. To the extent the Company is unable to
provide medical and hospitalization insurance to you through April 30,
2000, the Company will pay to you an amount equal to the premium payable
by the Company to maintain family health care coverage for one of its
employees.
c. OPTIONS. You currently hold options for 70,000 shares of common
stock of the Company, of which options for 23,333 shares are vested and
options for 46,667 shares are unvested (the "Unvested Options"). The
Company agrees that the Unvested Options shall vest on the day following
the expiration of the Revocation Period. You may exercise all vested
options (to the extent not previously exercised and provided that the term
of the applicable
<PAGE> 3
Mr. Joseph J. Raymond
May 14, 1996
Page 3
option has not otherwise expired) at any time within three months after
the date hereof.
You acknowledge and agree that the payments and benefits provided for in this
paragraph 2: (i) exceed any payment, benefit or other thing of value to which
you might otherwise be entitled from the Companies, whether under any agreement
with, or any policy, plan, practice or procedure of, any of the Companies and
(ii) are in full discharge of any and all of the Companies' liabilities and
obligations to you, including without limitation any and all obligations arising
under the Employment Agreement dated as of October 31, 1994 between the Company
and you (the "Employment Agreement"), or under any alleged written or oral
agreements, policies, plans, practices or procedures of any of the Companies, or
understandings or arrangements between you and any of the Companies.
3. PUBLIC RELATIONS. You and the Company have issued the press release
annexed as Exhibit A, its language having been agreed upon by you and the
Company. You and the Company have agreed that, except as otherwise required by
law, any public disclosure regarding the facts and circumstances of your
resignation, and any responses to inquiries regarding your resignation, will be
to the effect set forth in the press release. You agree that you will not
originate any written or oral statement, news release or other public
announcement relating to any of the Companies, its customers or personnel, or
your employment by the Company.
4. CONFIDENTIALITY AND NON-COMPETITION. You acknowledge and agree that
Sections 11, 12(a)-(d) and 13 of your Employment Agreement are, and shall
remain, in full force and effect, and that the provisions of Section 12(e) of
your Employment Agreement are not applicable and shall be deemed null and void.
You agree to perform in all respects your obligations under Sections 11 and
12(a)-(d) of your Employment Agreement.
5. VOTING OF COMMON STOCK. You agree that, through April 30, 2000, you
will vote all shares of common stock of the Company ("Common Stock") held by you
in the same proportions as the votes cast by other holders of Common Stock that
are represented at each meeting of shareholders. You also agree that, through
April 30, 2000, you will not (i) make or participate in any solicitation of
proxies, or seek to advise or influence any person or entity, with respect to
the voting of
<PAGE> 4
Mr. Joseph J. Raymond
May 14, 1996
Page 4
Common Stock; (ii) form, join or in any way participate in a "group" with
respect to the Common Stock; or (iii) otherwise act, alone or in concert with
others, to seek to control or influence the management, board of directors, or
policies of the Company.
6. RELEASES, COVENANTS NOT TO SUE AND NONDISPARAGEMENT.
a. RELEASE OF YOU. The Companies, for themselves and their
successors and assigns (collectively, the "Company Releasors"), hereby
release, remise and forever discharge you and each of your heirs,
executors, administrators, legal representatives and assigns
(collectively, the "Raymond Releasees") of and from any and all actions,
causes of action, suits, debts, liabilities, claims and potential claims,
sums of money, covenants, agreements, promises, damages, judgments and
demands whatsoever, in law or equity, which against the Raymond Releasees
or any of them, any of the Company Releasors ever had, now has, or which
it hereafter can, shall or may have, for, upon or by reason of any fact,
matter, cause or thing whatsoever from the beginning of the world to the
date of this Agreement provided that such fact, matter, cause or thing is
now known to the Board of Directors of the Company (the "Discharged
Raymond Matters"). The Company covenants that it shall never commence,
institute, maintain, prosecute or participate in as a party any action or
proceeding of any kind, judicial or administrative, based in whole or in
part on any of the Discharged Raymond Matters. The Company represents
that, as of the date of this Agreement, it has not taken any action
referred to in the preceding sentence.
b. RELEASE OF THE COMPANIES. You, for yourself and your heirs,
dependents, executors, administrators, legal representatives, successors
and assigns (collectively, the "Raymond Releasors"), hereby release,
remise and forever discharge each of the Companies, each of its
predecessors, successors and assigns, each of its employee benefit and/or
pension plans or funds, each of the foregoing's present and former
directors, officers, partners, stockholders, employees, agents,
fiduciaries and trustees and each of the foregoing's heirs, executors,
administrators, legal representatives, successors and assigns
(collectively, the "Company Releasees") of and from any and all actions,
causes
<PAGE> 5
Mr. Joseph J. Raymond
May 14, 1996
Page 5
of action, suits, debts, liabilities, claims and potential claims, sums of
money, covenants, agreements, promises, damages, judgments and demands
whatsoever, in law or equity, whether known or unknown, which against the
Company Releasees or any of them, any of the Raymond Releasors ever had,
now has, or which he or it hereafter can, shall or may have, for, upon, or
by reason of any fact, matter, cause or thing whatsoever from the
beginning of the world to the date of this Agreement (collectively, with
the matters referred to in the following sentence, the "Discharged Company
Matters"). Without limiting the generality of the foregoing, the Raymond
Releasors hereby release, remise and forever discharge the Company
Releasees of and from any and all claims arising out of or in connection
with your employment with the Company or the termination of such
employment, including, without limitation (i) any claim for employment
discrimination or retaliation under the Age Discrimination in Employment
Act, the Older Workers Benefit Protection Act, Title VII of the Civil
Rights Act, the Americans with Disabilities Act, the Employee Retirement
Income Security Act, the New York State Human Rights Law, the New Jersey
Law Against Discrimination or any other federal, state or local law
prohibiting employment discrimination; and (ii) any claim for breach of
contract, wrongful discharge, defamation, emotional distress, compensatory
or punitive damages, attorney's fees, costs, disbursements and the like.
You covenant that you shall never commence, institute, maintain, prosecute
or participate in as a party any action or proceeding of any kind,
judicial or administrative, based in whole or in part on any of the
Discharged Company Matters. You represent that, as of the date of this
Agreement, you have not taken any action referred to in the preceding
sentence.
c. NONDISPARAGEMENT. You agree that you will not disparage (or
induce or encourage others to disparage) any of the Companies or its
officers, directors, employees or shareholders, and the Company agrees
that it will not disparage (or induce or encourage others to disparage)
you. As used herein, the term "disparage" includes, without limitation,
comments or statements to the press, any of the Companies' employees or
any person with whom you or any of the Companies has a business
relationship which would adversely affect in any manner the conduct of
your or any of
<PAGE> 6
Mr. Joseph J. Raymond
May 14, 1996
Page 6
the Companies' business or the business reputation of you, the Companies
or any of the Companies' officers, directors, employees or shareholders.
d. RELIEF. Any breach of the public disclosure provisions of
paragraph 3 above, the confidentiality and non-competition provisions of
paragraph 4 above, the voting provisions of paragraph 5 above, or the
covenants not to sue contained in the second sentence of paragraph 6.a. or
third sentence of paragraph 6.b. above, shall be considered a material
breach of this Agreement. In the event of any such breach, or any breach
of the nondisparagement provision in paragraph 6.c. above, due to the
difficulty of calculating the damages that might be sustained directly or
indirectly as a result of such breach, each of the parties specifically
consents to the entry of injunctive relief against the breaching party, in
addition to any and all other remedies at law or in equity, and further
agrees that such injunctive relief shall not require the posting of a
bond. The breaching party also agrees to pay the other party's reasonable
attorneys' fees and costs incurred in enforcing this paragraph 6.d. and in
defending against any action brought in violation of this Agreement.
7. MISCELLANEOUS.
a. The making of this Agreement is not intended, and shall not be
construed, as an admission that any of the Companies or any of the Company
Releasees has violated any federal, state or local law, ordinance or
regulation, breached any contract or committed any wrong whatsoever
against you.
b. You acknowledge that you have read this Agreement in its
entirety, fully understand all of its terms and their significance and
knowingly and voluntarily assent to all the terms and conditions contained
herein.
c. The parties shall cooperate and take such actions, and execute
such other documents, as either party may reasonably request in order to
carry out the provisions or purposes of this Agreement.
<PAGE> 7
Mr. Joseph J. Raymond
May 14, 1996
Page 7
d. If any clause or provision of this Agreement shall be held to be
invalid or unenforceable, such clause or provision shall be construed and
enforced as if it had been more narrowly drawn so as not to be invalid or
unenforceable and such invalidity or unenforceability shall not affect or
render invalid or unenforceable any other clause or provision of this
Agreement; provided, however, that upon a finding by a court of competent
jurisdiction that the release in paragraph 6.b. above is illegal or
unenforceable in whole or in part, this Agreement shall be voidable in the
discretion of the Company and, if voided by the Company, you shall be
required to repay and return to the Company all amounts paid or provided
to you pursuant to this Agreement. In addition, if you seek to challenge
the validity of, or otherwise vitiate, this Agreement (in whole or in
part), you shall be required, as a precondition, to repay and return to
the Company all amounts paid or provided to you by the Company pursuant to
this Agreement.
e. This Agreement sets forth the parties' final and entire
agreement, and supersedes any and all prior understandings, with respect
to its subject matter. This Agreement can be amended, supplemented or
changed, and any provision hereof can be waived, only by a written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, change or
waiver is sought.
f. The paragraph headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
g. This Agreement shall be governed by and construed and
interpreted in accordance with the internal law of the State of New York
(without reference to its rules as to conflicts of law). Any legal action
or proceeding with respect to or arising out of this Agreement shall be
brought in the courts of the State of New York or of the United States of
America, located in the County, City and State of New York, and, by
execution and delivery of this Agreement, each of the parties hereby
accepts, generally and unconditionally, the exclusive jurisdiction of such
courts. Each of the parties hereby irrevocably waives, in connection with
any such action or proceeding, any objection, including without
limitation, any objection to the laying of venue or
<PAGE> 8
Mr. Joseph J. Raymond
May 14, 1996
Page 8
based on the grounds of forum non conveniens, which he or it may now or
hereafter have to the bringing of any such action or proceeding in such
jurisdiction. IN ANY ACTION OR PROCEEDING ARISING UNDER THIS AGREEMENT,
EACH PARTY HERETO WAIVES TRIAL BY JURY IN SUCH ACTION OR PROCEEDING.
h. Each of the parties understands and agrees that this Agreement
is the result of extensive negotiations between them. Accordingly, it is
understood and agreed that each of the parties shall be deemed to have
drawn this Agreement in order to avoid any negative inference by a court
against the preparer of this Agreement.
i. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, but both of which taken together shall
constitute one and the same instrument.
8. REVOCATION. You have twenty-one (21) calendar days from your
receipt of this Agreement to sign this Agreement and return it to the Company.
We advise you to consult with an attorney before signing this Agreement. You may
sign this Agreement prior to the expiration of such twenty-one (21) day period.
In addition, you will have seven (7) days after signing this Agreement to revoke
your acceptance of its terms by giving written notice of revocation by personal
delivery to Robert W. Fine at the address of the Company shown above. This
Agreement will not become effective (and you will not receive any payments or
other benefits under this Agreement) until you have signed this Agreement and
the revocation period has passed.
9. BANK CONSENT. This Agreement will not become effective (and you
will not receive any payments or other benefits under this Agreement) until the
Company shall have received, in form and substance satisfactory to the Company,
the consent under the Amended and Restated Credit Agreement, dated as of March
1, 1995, among the Company, Various Banks and Banque Paribas, as Agent, of the
"Required Banks" (as therein defined).
<PAGE> 9
Mr. Joseph J. Raymond
May 14, 1996
Page 9
If the foregoing correctly sets forth your understanding of our
agreement, please so indicate by signing and returning to us a copy of this
Agreement within twenty-one (21) calendar days.
Very truly yours,
Transworld Home HealthCare, Inc.
By: /s/ Robert W. Fine
----------------------------
Name: Robert W. Fine
Title: President
Accepted and agreed to on
the 15th day of May, 1996
/s/ Joseph J. Raymond
- ---------------------------
Joseph J. Raymond
Sworn to before me on this
15th day of May, 1996
Dolores M. Lessone
- ---------------------------
Notary Public
DOLORES M. LESSONE
A Notary Public of New Jersey
My Commission Expires 3/6/97
<PAGE> 1
Transworld Home HealthCare, Inc.
11 Skyline Drive
Hawthorne, New York 10532
May 14, 1996
Mr. Joseph J. Raymond
17140 Coral Cove Way
Boca Raton, Florida 37496
Dear Joe:
We write to set forth our agreement with respect to your engagement by
Transworld Home HealthCare, Inc., a New York corporation (the "Company"), as a
consultant and adviser.
1. ENGAGEMENT. You have today resigned as an employee, officer and
director of the Company and each of its subsidiaries (it being understood that
your resignation as a director of the Company is effective August 15, 1996). So
that the Company may continue to have the benefit of your knowledge and
experience, and in consideration of the payments specified in paragraph 2 below,
you have agreed to be available to the Companies through April 30, 2000 to
consult and assist on matters relating to the Companies. To facilitate such
consultation and assistance, the Company will make available to you an office in
its facility at Tri-Parkway Corporate Park, 200 Schulz Drive, Red Bank, New
Jersey (or a comparable office) and a secretary through April 30, 2000. The
Company acknowledges and agrees that you may hold other full-time employment,
either for another entity or in a self-employed capacity during such period. You
will provide consultation and assistance as reasonably requested by the Company
at such times as shall be reasonably requested by the Company. You shall at all
times be an independent contractor, rather than an employee.
2. PAYMENTS. As full compensation for all of your services in
connection with your engagement hereunder, and subject to satisfaction of the
conditions set forth in paragraph 4 below, the Company will pay or provide to
you the following (in each case less applicable withholding and other taxes):
<PAGE> 2
Mr. Joseph J. Raymond
May 14, 1996
Page 2
a. CONSULTING COMPENSATION. During the period from May 15, 1996
through April 30, 2000, you will receive a consulting fee, payable in
accordance with the normal payroll practices of the Company, at a rate per
annum equal to $150,000 less the amount, if any (the "Offset Amount"), by
which the sum of the following amounts exceeds $60,000: (i) any other fees
or compensation paid to you by the Company and (ii) the cost to the
Company (as determined by the Board of Directors of the Company in its
good faith discretion) of providing to you continued medical coverage (or
paying to you amounts in lieu thereof), of making available to you an
office and a secretary as described in paragraph 1 above, of assigning to
you the insurance policy described in paragraph 2.b. below and paying the
insurance premiums thereon, of providing to you an automobile (and bearing
insurance, gasoline, maintenance, repair or similar costs in connection
therewith), of reimbursing you for travel, entertainment or similar
business expenses or credit card charges, and of providing or making
available to you any other benefit or service. The Offset Amount will be
applied to reduce each periodic payment of the consulting fee that
otherwise would be payable to you and, to the extent that the Offset
Amount exceeds any periodic payment, the excess will be applied against
subsequent periodic payments.
b. INSURANCE POLICY. The Company owns an insurance policy on your
life in the amount of $1,000,000. To the extent permitted by the terms of
the policy, by the underwriter of the policy and by applicable law, the
Company will assign the policy to you and through April 30, 2000 will pay
the insurance premiums thereon, in an amount not to exceed $6,500 per
annum.
3. MISCELLANEOUS.
a. Any breach by you of the severance agreement between you and the
Company of even date herewith shall be deemed to be a breach by you of
your obligations under this Agreement. Except as described in the
preceding sentence, this Agreement sets forth the parties' final and
entire agreement, and supersedes any and all prior understandings, with
respect to its subject matter. This Agreement can be amended, supplemented
or changed, and any provision hereof can be waived, only by a written
instrument making specific reference to this Agreement signed by the party
against whom
<PAGE> 3
Mr. Joseph J. Raymond
May 14, 1996
Page 3
enforcement of any such amendment, supplement, change or waiver is sought.
b. The paragraph headings in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
c. This Agreement shall be governed by and construed and
interpreted in accordance with the internal law of the State of New York
(without reference to its rules as to conflicts of law). Any legal action
or proceeding with respect to or arising out of this Agreement shall be
brought in the courts of the State of New York or of the United States of
America, located in the County, City and State of New York, and, by
execution and delivery of this Agreement, each of the parties hereby
accepts, generally and unconditionally, the exclusive jurisdiction of such
courts. Each of the parties hereby irrevocably waives, in connection with
any such action or proceeding, any objection, including without
limitation, any objection to the laying of venue or based on the grounds
of forum non conveniens, which he or it may now or hereafter have to the
bringing of any such action or proceeding in such jurisdiction. IN ANY
ACTION OR PROCEEDING ARISING UNDER THIS AGREEMENT, EACH PARTY HERETO
WAIVES TRIAL BY JURY IN SUCH ACTION OR PROCEEDING.
d. Each of the parties understands and agrees that this Agreement
is the result of extensive negotiations between them. Accordingly, it is
understood and agreed that each of the parties shall be deemed to have
drawn this Agreement in order to avoid any negative inference by a court
against the preparer of this Agreement.
e. This Agreement may be executed in two counterparts, each of
which shall be deemed an original, but both of which taken together shall
constitute one and the same instrument.
4. CONDITIONS. This Agreement will not become effective (and you will
not be entitled to receive any payments or other benefits under this Agreement)
until the later of (i) the date on which the revocation period has expired
(without your revocation right having been exercised) under the severance
agreement between you and the Company of even date herewith and (ii) the date on
which the Company shall have received, in form and substance satisfactory to the
Company, the consent under the Amended and Restated Credit Agreement, dated as
of March 1, 1995,
<PAGE> 4
Mr. Joseph J. Raymond
May 14, 1996
Page 4
among the Company, Various Banks and Banque Paribas, as Agent, of the "Required
Banks" (as therein defined).
If the foregoing correctly sets forth your understanding of our
agreement, please so indicate by signing and returning to us a copy of this
Agreement.
Very truly yours,
Transworld Home HealthCare, Inc.
By: /s/ Robert W. Fine
-----------------------------
Name: Robert W. Fine
Title: President
Accepted and agreed to on
the 15 day of May, 1996
/s/ Joseph J. Raymond
- ---------------------------
Joseph J. Raymond
Sworn to before me on this
15th day of May, 1996
/s/ Dolores M. Lessone
- ---------------------------
Notary Public
DOLORES M. LESSONE
A Notary Public of New Jersey
My Commission Expires 3/6/97
<PAGE> 1
Hyperion Partners II L.P.
50 Charles Lindbergh Blvd., Suite 500
Uniondale, New York 11553
May 14, 1996
Mr. Joseph J. Raymond
17140 Coral Cove Way
Boca Raton, Florida 37496
Dear Joe:
This will confirm that, subject to the satisfaction of the conditions
described below, we (or our subsidiary) would be prepared to lend to you
$1,100,000. The loan would be due in 364 days (or, if earlier, upon an event
of default); would bear interest at a floating rate of 2% over the prime rate
of The Bank of New York (or another major bank selected by us); and would be
secured by an exclusive, first priority security interest in and pledge of
150,000 shares of the common stock of Transworld Home HealthCare, Inc. (the
"Company").
Our making of the loan would be subject to: (i) your execution of
loan documentation in form and substance satisfactory to us; (ii) the loan
complying with all applicable laws and regulations (you have represented to us
in this regard that the loan would not be a "purpose loan" for purpose of
Regulation G); (iii) there having occurred no material adverse change in your
financial condition; and (iv) the expiration of the revocation period under your
severance agreement with the Company of even date herewith (without you having
exercised your right to revoke) and the receipt by the Company of the bank
consent referred to in such severance agreement on or before May 31, 1996.
Very truly yours,
Hyperion Partners II L.P.
By: Hyperion Ventures II L.P.,
its General Partner
By: Hyperion Funding II Corp.,
its General Partner
By: Scott A. Shay
Name: Scott A. Shay
Title: EVP
<PAGE> 1
Hyperion Partners II L.P.
50 Charles Lindbergh Blvd.
Suite 500
Uniondale, New York 11553
February 16, 1996
Transworld Home HealthCare, Inc.
11 Skyline Drive
Hawthorne, New York 10532
Gentlemen:
Reference is made to the $10,000,000 Subordinated Note dated
January 10, 1996, made by Transworld Home HealthCare, Inc. in favor of Hyperion
Partners II L.P..
This will confirm our agreement that Section 2.2 of the Subordinated
Note shall be amended and restated to read in its entirety as set forth in
Exhibit A hereto.
Except as amended hereby the Subordinated Note is, and shall remain, in
full force and effect.
Very truly yours,
Hyperion Partners II L.P.
By: Hyperion Ventures II L.P.,
its general partner
By: Hyperion Funding II Corp.,
its general partner
By: /s/ Scott A. Shay
------------------------------
Name: Scott A. Shay
-------------------------
Title: Executive Vice President
-------------------------
Accepted and Agreed to:
Transworld Home HealthCare, Inc.
By: /s/ Wayne A. Palladino
------------------------------
Name: Wayne A. Palladino
-------------------------
Title: Chief Financial Officer
------------------------
<PAGE> 2
Exhibit A
2.2 Mandatory Prepayment. If the Company shall complete any
equity financings, or, to the extent approved by the agent for the holders of
the Senior Debt, any debt financings or refinancings the proceeds of which debt
financing or refinancing are not needed to meet working capital requirements of
the Company or to fund the day-to-day operations of the Company (each such
equity financing and debt financing and refinancing is sometimes hereinafter
referred to as a "Section 2.2 Financing"), the Company shall, immediately upon
receipt of proceeds from each such financing or refinancing, make or cause to
be made a mandatory prepayment of this Note in an amount equal to 100% of the
net proceeds, without premium or penalty. Any mandatory prepayments shall be
applied first to interest and the remainder to principal.
<PAGE> 1
Hyperion Partners II L.P.
50 Charles Lindbergh Blvd.
Suite 500
Uniondale, New York 11553
May 30, 1996
Transworld Home HealthCare, Inc.
11 Skyline Drive
Hawthorne, New York 10532
Gentlemen:
Reference is made to the $10,000,000 Subordinated Note dated January
10, 1996, as amended on February 16, 1996, made by Transworld Home HealthCare,
Inc. in favor of Hyperion Partners II L.P. (the "Subordinated Note").
You are today paying to us all of the interest accrued on the
Subordinated Note through the date hereof. This will confirm our agreement that
the Subordinated Note shall be amended so that interest shall accrue on the
principal amount of the Subordinated Note from the date hereof (computed with
monthly compounding and on the basis of a 360-day year of twelve, 30-day
months) at the rate of 12% per annum (but in no event to exceed the maximum
rate permitted under applicable provisions of law); provided, however, that
from and after the earlier to occur of October 10, 1996 and an Event of
Default, interest shall accrue at the rate of 20% per annum (but in no event to
exceed the maximum rate permitted by applicable provisions of law).
Except as amended hereby the Subordinated Note is, and shall remain, in
full force and effect.
Very truly yours,
Hyperion Partners II L.P.
By: Hyperion Ventures II L.P.,
its general partner
By: Hyperion Funding II Corp.,
its general partner
By: /s/ Scott A. Shay
-------------------------------
Name: Scott A. Shay
--------------------------
Title: Executive Vice President
-------------------------
Accepted and Agreed to:
Transworld Home HealthCare, Inc.
By: /s/ Wayne A. Palladino
-----------------------------
Name: Wayne A. Palladino
------------------------
Title: Chief Financial Officer
-----------------------
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<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
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0
0
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<SALES> 17,522
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