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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 COMMISSION FILE NO. 1-11570
TRANSWORLD HOME HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-3098275
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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75 TERMINAL AVENUE
CLARK, NEW JERSEY (908) 340-1144 07066
(Address of principal executive offices) (Registrant's telephone number, (Zip Code)
including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.01 par value
(Title of Class)
Warrants, each entitling the holder to
purchase one share of Common Stock, $.01 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant as of January 22, 1997 was approximately
$50,919,360 based on the closing sale price of $10.8125 on such date, as
reported by the Nasdaq National Market(R).
The number of shares outstanding of the registrant's Common Stock, as
of January 22, 1997, was 10,017,443.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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TRANSWORLD HOME HEALTHCARE, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended October 31, 1996
TABLE OF CONTENTS
PART I
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Item 1. Business................................................................................................. 1
General.................................................................................................. 1
History of the Company................................................................................... 1
Strategy................................................................................................. 6
Services and Products.................................................................................... 6
Respiratory Therapy, Home Medical Equipment and Specialized
Mail-Order Pharmacy and Medical Supplies Operations...................................................... 7
Patient Services......................................................................................... 8
Infusion Therapy......................................................................................... 8
Quality Assurance; JCAHO, CHAP and Other Accreditations.................................................. 9
Sales and Marketing Activities........................................................................... 9
Recruiting and Training of Personnel..................................................................... 10
Third-Party Reimbursement................................................................................ 10
Government Regulation.................................................................................... 12
Suppliers................................................................................................ 14
Insurance................................................................................................ 14
Competition.............................................................................................. 15
Patents and Trademarks................................................................................... 15
Employees................................................................................................ 15
Certain Additional Information Concerning HMI............................................................ 15
Item 2. Properties............................................................................................... 19
Item 3. Legal Proceedings........................................................................................ 20
Item 4. Submission of Matters to a Vote of Security Holders...................................................... 23
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................................... 23
Item 6. Selected Financial Data.................................................................................. 24
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................................... 26
General.................................................................................................. 26
Results of Operations.................................................................................... 29
Year Ended October 31, 1996 vs. Year Ended October 31, 1995.............................................. 29
Year Ended October 31, 1995 vs. Year Ended October 31, 1994.............................................. 30
Liquidity and Capital Resources.......................................................................... 32
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Impact of Recent Accounting Standards.................................................................... 39
Inflation................................................................................................ 40
Item 8. Financial Statements and Supplementary Data.............................................................. 40
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure................................................................................. 40
PART III
Item 10. Directors and Officers of the Registrant................................................................. 40
Board Committees......................................................................................... 44
Compliance With Section 16(a) of the Securities Exchange Act of 1934..................................... 45
Item 11. Executive Compensation................................................................................... 45
Summary Compensation Table............................................................................... 45
Option Grants in Fiscal 1996............................................................................. 47
Aggregate Option Exercises in Fiscal 1996 and 1996 Fiscal Year-End Option Values......................... 48
Employment Agreements; Termination of Employment and Change-in-Control
Arrangements............................................................................................. 48
Compensation Committee Interlocks and Insider Participation.............................................. 49
Stock Option Plans....................................................................................... 49
Executive Bonus Plan..................................................................................... 51
Indemnification.......................................................................................... 51
Item 12. Security Ownership of Certain Beneficial Owners and Management........................................... 52
Item 13. Certain Relationships and Related Transactions........................................................... 53
Transactions with Principal Shareholders................................................................. 53
Transactions with Directors and Executive Officers....................................................... 55
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K......................................... 56
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The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forwardlooking statements. This Annual Report contains certain
forwardlooking statements and information that are based on the beliefs of
management as well as assumptions made by and information currently available to
management. The statements contained in this Annual Report relating to matters
that are not historical facts are forwardlooking statements that involve risks
and uncertainties, including, but not limited to, future demand for the
Company's products and services, general economic conditions, government
regulation, competition and customer strategies, capital deployment, the impact
of pricing and reimbursement and other risks and uncertainties. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected.
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PART I
ITEM 1. BUSINESS.
GENERAL
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) 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; (ii) patient services, including
nursing and paraprofessional services and radiation therapy; and (iii) infusion
therapy. During fiscal 1996, the Company derived 61.8% of its revenues from
respiratory therapy, home medical equipment and specialized mail-order sales,
25.1% from patient services, and 13.1% from infusion therapy. The Company
provides services and products in New York, New Jersey, Florida and Maryland and
the Company's specialized mail-order pharmacy and medical supplies operations
provide products to patients nationwide. In January 1997, the Company acquired a
49% interest in Health Management, Inc. ("HMI"), and has entered into an
agreement providing for the acquisition of the remainder of HMI, subject to the
satisfaction of the conditions contained therein. HMI provides integrated
pharmaceutical management services to patients with chronic medical conditions.
The Company believes that as a full-service alternate site health care provider
it can be more responsive and flexible in dealing with the needs of referral
sources, patients and attending physicians, distinguishing it from competitors
who provide a more limited range of services.
The Company's principal executive offices are located at 75
Terminal Avenue, Clark, New Jersey 07066, and the Company's telephone number at
that location is (908) 340-1144.
HISTORY OF THE COMPANY
The Company was incorporated in New York in November 1981 and
commenced operations in May 1982 through its wholly-owned subsidiary,
Steri-Pharm, Inc. ("Steri"), a provider of infusion therapy and related services
in the New York metropolitan area.
TNI and CHCS Acquisitions. During the later part of 1991, the
Company embarked on a strategy to broaden the range of services it could offer.
In furtherance of this strategy, on June 8, 1992, a wholly-owned subsidiary of
the Company merged with Transworld Nurses, Inc. ("TNI") (now known as Transworld
Home HealthCare-Nursing Division, Inc.), a provider of nursing and
para-professional services to patients in their homes in New Jersey and in
Orlando and Melbourne, Florida. In connection with the merger, TNI exchanged
100% of its outstanding shares (1,159,000 shares) for 2,425,000 shares of common
stock, par value $0.01 per share (the "Common Stock") of the Company. The merger
combined the home infusion therapy services of the Company with the home nursing
and para-professional services of TNI. In June 1993, the Company acquired
substantially all of the assets and assumed certain liabilities of Complete
Health Care Services, Inc. ("CHCS") for $1,000,000 in cash. CHCS provided
nursing and para-professional services to patients in their homes through
offices in East Brunswick, Morristown and Eatontown, New Jersey. The Company
believes that the CHCS acquisition enabled it to further develop its geographic
coverage area for nursing services in New Jersey by adding two incremental
nursing service branches in central and northern New Jersey to the Company's
existing New Jersey operations.
PromptCare Acquisition. In September 1993, the Company
acquired The PromptCare Companies, Inc. ("PromptCare") for an aggregate
consideration of $3,419,000, consisting of $2,051,000 in cash and 228,146 shares
of Common Stock valued at $1,368,000. The acquisition of PromptCare added
infusion therapy and respiratory therapy (approximately 80% of revenues) as well
as home medical equipment capabilities in New Jersey to the Company's operations
and provided the Company with a geographically important presence in central and
northern New Jersey.
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RespiFlow/MK Acquisition. Effective April 1, 1994, the Company
acquired all of the issued and outstanding capital stock of RespiFlow, Inc.
("RespiFlow") and MK Diabetic Support Services, Inc. ("MK"). RespiFlow is a
specialized mail-order pharmacy, which provides home health care patients with
respiratory, diabetic, ophthalmic and other commonly prescribed medications. MK
provides home health care patients with diabetic supplies, such as glucose
monitors and ancillary supplies. The Company consummated the acquisition for
$16,850,000, consisting of $1,000,000 in cash, $4,000,000 in promissory notes
(which were paid in full in August 1994) and an additional payment of
$11,850,000. During fiscal 1995, the Company paid $5,877,000 of the additional
payment and on January 10, 1996 paid the balance of $5,973,000. In addition, on
August 5, 1994, the Company paid in full the indebtedness of RespiFlow and MK to
the sellers in the aggregate principal amount of $2,504,000, which principal
amount had been evidenced by promissory notes bearing interest at the rate of 7%
per annum.
Radamerica Acquisition. On August 5, 1994, the Company
acquired all of the issued and outstanding capital stock of Radamerica, Inc.
("Radamerica"). Radamerica operates five radiation therapy centers in the
Baltimore, Maryland metropolitan area. The aggregate purchase price for
Radamerica was $13,000,000, consisting of $8,000,000 in cash and 250,000 shares
of Common Stock valued at $5,000,000. The Company also agreed, under certain
circumstances, to make certain price support payments with respect to the value
of the shares of Common Stock when sold by the sellers. At closing, the Company
loaned to two Radamerica sellers an aggregate of $1,100,000 in connection with
the repayment of certain indebtedness owed to a former shareholder of Radamerica
whose shares had been purchased by them. The principal and interest of the loans
are due and payable on the date any price support payment is paid to these
sellers, or if no price support payment is due, on February 1, 1998, and are
secured by a pledge of an aggregate of 83,334 shares of Common Stock. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
DermaQuest Acquisition. Effective November 1, 1994, the
Company acquired all of the issued and outstanding capital stock of DermaQuest
Surgical Supply, Inc. ("DermaQuest") (now known as DermaQuest, Inc.). The
selling shareholders of DermaQuest are the same individuals as the selling
shareholders of RespiFlow and MK. DermaQuest provides home care patients and
nursing homes with wound care dressings and ostomy products through its
mail-order operations. The Company consummated the acquisition for $11,832,000,
consisting of $3,000,000 in promissory notes (which were paid in full in March
1995) and an additional payment of $8,832,000. The additional payment was
satisfied in fiscal 1996 and consisted of $5,000,000 in cash and 370,219 shares
of Common Stock valued (per the acquisition agreement) at $10.35 per share. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
DVLC Acquisition. Effective January 1, 1995, the Company
acquired certain of the assets and assumed certain liabilities of the Pulmonary
Division of the Delaware Valley Lung Center, P.A. ("DVLC"), a pulmonary
rehabilitation and diagnostics center, for a purchase price of $500,000. The
DVLC operations serve patients in New Jersey's Camden, Gloucester and Burlington
counties and treat patients with chronic obstructive pulmonary diseases such as
emphysema, chronic bronchitis and asthma.
Precision Acquisition. Effective March 1, 1995, the Company
acquired certain of the assets and assumed certain liabilities of Precision
Health Care, Inc. ("Precision"), an orthotics distribution company. In addition,
Precision provides trained nurses who assess patients' needs, recommend
appropriate orthotics to the patients' physicians and render on-site clinical
support for wound care dressings. Pursuant to the Precision purchase agreement,
as amended, the purchase price for the assets acquired from Precision was
$360,000. Of such amount, $30,000 was paid on June 6, 1995 with the balance
payable in 33 equal monthly installments.
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Health Meds Acquisition. Effective October 1, 1996, the
Company acquired certain of the assets and assumed certain liabilities of Health
Meds, Inc. ("Health Meds"), which operates a respiratory mail-order pharmacy in
Florida. The aggregate consideration paid in connection with the acquisition was
$1,400,000.
USNJ Acquisition. Effective October 1, 1996, the Company
acquired certain of the assets and assumed certain liabilities of U.S. HomeCare
Infusion Therapy Services Corporation of New Jersey ("USNJ"), a subsidiary of
U.S. HomeCare Corporation. USNJ provides infusion therapy products, skilled
nursing and other related services to patients in their homes in the New York
metropolitan area. The aggregate consideration paid in connection with such
acquisition was $2,000,000, subject to adjustment as provided in the purchase
agreement.
Pending Acquisitions. The VIP Companies. In June 1994, the
Company entered into two 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"). The VIP Companies provide
temporary nursing and related home health services in the New York metropolitan
area. The aggregate consideration payable in connection with the acquisition of
the VIP Companies (the "VIP Acquisition") is $11,000,000, consisting of
$10,250,000 in cash, payable at the closing of the VIP Acquisition (the "VIP
Closing") (of which $750,000 has been paid by the Company as a contract deposit
with the balance of $9,500,000 to be paid at the VIP Closing) and 145,455 shares
of Common Stock valued at $750,000 (also issued as a contract deposit and being
held in escrow to be delivered at the VIP Closing). The cash portion of the
contract deposit has, with the Company's consent, been loaned to the VIP
Companies to be used for working capital purposes. In addition, the Company will
assume all stated liabilities of the VIP Companies as of the VIP Closing
($8,434,000 at September 30, 1996, which includes approximately $3,000,000 of
amounts due to officers/shareholders). The consummation of the VIP Acquisition
is subject to, among other things, various closing conditions, including the
receipt of necessary governmental approvals (including the submission and
approval of a plan of financing), the approval of the lenders under the Credit
Facility, the accuracy at closing of various representations and warranties and
the compliance by the sellers with certain covenants and agreements contained in
the stock purchase agreements. In July 1996, the Company announced that the
consummation of the VIP Acquisition would not occur concurrently with the Second
Closing (as defined herein) under the Purchase Agreement (as defined herein)
with HPII (as defined herein), in that, among other things, the approvals and
consents necessary to consummate the transactions had not been and could not be
obtained at that time. The Company believes that the sellers are not in
compliance with certain provisions contained in the stock purchase agreements
concerning the VIP Companies and has notified the sellers of the VIP Companies
regarding the same. The Company cannot predict when or whether all of the
requisite consents and approvals will be obtained and the other closing
conditions will be satisfied, and, regardless, when or whether the transaction
will ultimately be consummated. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."
HMI. On November 13, 1996, the Company entered into a series
of agreements providing for the acquisition of HMI by the Company in a series of
transactions described herein. As described more fully below, HMI is a Buffalo
Grove, Illinois based provider of integrated pharmacy management services to
patients with chronic medical conditions and to health care professionals, drug
manufacturers and third-party payors involved in such patients' care. For the
year ended April 30, 1996 and the six months ended October 31, 1996 (unaudited),
HMI reported $158,860,000 and $40,523,000 of net sales and net (loss) income of
($10,927,000) and $432,000, respectively. Included in the year ended April 30,
1996 net loss are charges of $16,840,000, resulting from: (i) a write-off of
medical device inventory ($2,840,000); (ii) an additional provision reflecting a
change in the estimation of the allowance for doubtful accounts ($8,400,000);
(iii) costs associated with organizational consolidation and other cost
reduction programs ($3,600,000); and (iv) professional fees related to HMI's
litigation and restatement of fiscal 1995 financial statements ($2,000,000).
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On November 13, 1996, the Company acquired from HMI's senior
lenders (collectively the "Lenders") for a purchase price of $21,262,500, the
senior secured indebtedness of HMI under the credit agreement (the "HMI Credit
Agreement") dated March 31, 1995 between HMI, its subsidiaries and the Lenders.
In addition, subject to the terms and conditions of an agreement between the
Company and HMI dated November 13, 1996, as amended (the "Supplemental
Agreement"), the Company also agreed to lend to HMI from time to time, up to
$5,000,000 for working capital purposes and to forebear from exercising any
remedies under the HMI Credit Agreement until January 31, 1997. As of January
22, 1997, the Company had advanced $4,649,285 to HMI for working capital
purposes.
On November 13, 1996, the Company and HMI also entered into a
stock purchase agreement, as amended (the "Stock Purchase Agreement"), pursuant
to which the Company acquired on January 14, 1997, 8,964,292 newly issued HMI
common shares representing approximately 49% of HMI's outstanding common stock
for a cash purchase price of $8,964,292, which actual cash outlay was reduced by
the $4,649,285 advanced for working capital purpose pursuant to the Supplemental
Agreement. At the closing of the Stock Purchase Agreement, the Company and HMI
also entered into a registration rights agreement (the "HMI Registration
Agreement") providing for the registration under the Securities Act of 1933,
commencing on the earlier of June 30, 1997 or the date on which the Merger
Agreement (as defined and described below) is terminated, of the shares of HMI
common stock acquired by the Company pursuant to the Stock Purchase Agreement
and issuable upon exercise of the Option (as defined and described below). On
November 13, 1996, HMI also issued to the Company an option (the "Option"),
until January 14, 1998, to purchase newly issued shares representing up to an
additional 2% of HMI's then outstanding common stock for a purchase price of
$1.00 per share (less amounts advanced pursuant to the Supplemental Agreement
and not deducted under the Stock Purchase Agreement).
On November 13, 1996, the Company and HMI also entered into an
agreement and plan of merger, as amended (the "Merger Agreement"), whereby HMI
will be acquired by the Company at a purchase price of $1.50 per share for each
outstanding share of HMI common stock not already owned by the Company.
Consummation of the Merger Agreement is subject to various conditions, including
receipt of financing by the Company sufficient to complete the merger and
approval of the lenders under the Company's senior secured revolving credit
facility, receipt of certain regulatory approvals and approval by HMI's
shareholders. See "--Certain Additional Information Concerning HMI."
Financings. On December 14, 1992, the Company completed an
initial public offering of 1,600,000 units, each unit consisting of one share of
Common Stock and one public stock purchase warrant (the "Public Warrants")
entitling the holder thereof to purchase one share of Common Stock at a price of
$6.50 per share. The Public Warrants expire on December 6, 1997. During 1994,
the Company repurchased 500,000 of the Public Warrants. The Company received
$6,691,000 in net proceeds from the initial public offering.
In August 1994, the Company entered into a credit agreement
with Banque Paribas, as agent (the "Paribas Credit Agreement"), which provided
the Company with a $28,000,000 senior secured credit facility, which was amended
and restated in March 1995 to increase the amount available to $35,000,000.
On July 31, 1996, the Company completed a new $100,000,000
senior secured revolving credit facility, underwritten by Bankers Trust Company
who is also acting as Agent Bank (the "Credit Facility"). The new Credit
Facility replaced the Company's existing Paribas Credit Agreement. On July 31,
1996, the Paribas Credit Agreement was repaid out of proceeds from the Second
Closing and borrowings under the Credit Facility (which closed concurrently). In
connection with the repayment of the Paribas Credit Agreement, the Company
recorded a non-cash, after-tax, extraordinary charge of $1,435,000 (net of tax
benefit of $879,000), in the fiscal year ended October 31, 1996, relating to the
write-off of the deferred financing costs and discount associated with the
Paribas Credit Agreement. Pursuant to the Credit Facility and subject to the
terms thereof, up to
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$85,000,000 of the total facility may be used by the Company for the acquisition
of other alternate site health care providers with the balance not used for
acquisitions to be used for working capital. The loans under the Credit Facility
are secured by, among other things, a lien on substantially all of the Company's
and its subsidiaries' assets, a pledge of the Company's ownership interest in
its subsidiaries and guaranties by the Company's subsidiaries. The loans mature
on July 31, 2001 with reductions in availability of funds commencing on July 31,
1998 through maturity. The Credit Facility provides that subject to the terms
thereof, the Company may make borrowings either at the Base Rate (as defined in
the Credit Facility), plus 1% or the Eurodollar Rate, plus 2%. As of January 22,
1997, Eurodollar Rate borrowings were at a rate of 7.5% per annum. As of
January 22, 1997, the Company had outstanding borrowings of $43,838,857 under
the Credit Facility. Availability under the Credit Facility was $56,161,143 as
of January 22, 1997.
HPII Transaction. On November 20, 1995, the Company entered
into a purchase agreement (the "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 consisted of one share of the Company's
restricted Common Stock and 0.6818 of a stock purchase warrant (each whole
warrant entitles the holder thereof to purchase one share of Common Stock at an
exercise price of $12.45 per share (the "Warrants"). The Warrants are
exercisable at any time after issuance thereof until the fifth anniversary of
the original issuance date. Consummation of the HPII transaction was 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 Company's
Common Stock (which approval was received in June 1996).
On May 30, 1996, HPII purchased from the Company at the
initial closing (the "Initial Closing") an aggregate of 600,000 Units for
$5,400,000. On July 31, 1996, the Company sold to HPII at a second closing (the
"Second Closing") an aggregate of 3,800,000 Units for $34,200,000. The total
number of Units sold to HPII was 4,400,000 for an aggregate purchase price of
$39,600,000, which represents 4,400,000 shares of Common Stock (representing
approximately 44% of the issued and outstanding shares of the Company) and
Warrants to purchase an additional 3,000,000 shares of Common Stock. The
aggregate number of shares represented (assuming all the Warrants are
exercised), therefore, by all of the Units sold to HPII in connection with the
Purchase Agreement was 7,400,000.
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. The Company
will bear all expenses, other than underwriting discounts and commissions, in
connection with any such registrations.
The Purchase Agreement obligates the Company to grant to HPII
certain directorships on the Company's Board of Directors and contains certain
voting agreements with respect to: the voting of HPII's shares; the voting of
the shares of certain officers and directors of the Company for the approval of
HPII's directors; and the establishment of super-majority approval requirements
for certain actions of the Board of Directors.
On January 10, 1996, HPII loaned to the Company the principal
amount of $10,000,000 (the "Subordinated Loan"). The Subordinated Loan bore
interest at the rate of 20% per annum through May 29, 1996 and 12% thereafter
and was repaid on July 31, 1996 with proceeds from the Second Closing.
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On January 8, 1997, the Company entered into a stock purchase
agreement with HPII pursuant to which HPII agreed, subject to the conditions
stated therein, to purchase 898,877 shares of the Company's Common Stock (the
"Additional Shares") at a purchase price of $11.125 per share for an aggregate
purchase price of $10,000,000. Consummation of this transaction is subject to,
among other things, receipt of applicable regulatory approvals and may be
completed at the Company's request, either prior to or concurrent with the HMI
Merger Agreement subject to the terms of the stock purchase agreement. The
Additional Shares are also covered by the Registration Agreement.
STRATEGY
The Company's growth strategy is to capitalize on
consolidation in the alternate site health care industry by aggressively
pursuing acquisitions of alternate site health care companies in selected
services, products and markets where the Company believes it has the opportunity
to create a comprehensive delivery network. Once it enters a new market, the
Company's strategy is to use its acquired operations as a platform to: (i) offer
comprehensive services and products by cross-marketing its various businesses;
(ii) compete aggressively by traditional referral sources and entering into
managed care contracts as a preferred provider; and (iii) leverage its sales and
marketing efforts, maximize referral networks and achieve operational
efficiencies. The Company further seeks to develop market concentrations in each
of its services in order to achieve levels of coverage which make the services
attractive to a variety of payors and patients.
Consistent with this business strategy, over the past four
years the Company has, among other things, expanded its services in New Jersey
and New York, introduced respiratory therapy services and pulmonary
rehabilitation and diagnostic services in New Jersey and radiation therapy in
Baltimore, Maryland. It also has expanded the range of products it offers
through the acquisitions of a specialized mail-order pharmacy in Jacksonville
and Quincy, Florida and medical supplies operations in Philadelphia,
Pennsylvania and contracted to purchase a company which provides nationally,
integrated pharmacy management services to patients with chronic medical
conditions and to healthcare professionals, drug manufacturers and third-party
payors involved in such patients' care and two home nursing companies serving
the New York metropolitan area. See "--History of the Company."
SERVICES AND PRODUCTS
The Company derives substantially all its revenues from the
alternate site health care segment of the domestic health care industry and
provides the following services and products: (i) 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; (ii) patient services,
including nursing and para-professional services and radiation therapy; and
(iii) infusion therapy. The Company provides patients with a variety of services
and related products, many of which are essential to the proper implementation
of a physician's treatment plan. The services provided by the Company include
training patients and their caregivers at home, monitoring patient compliance
with the treatment plan, reporting to physicians, maintaining equipment and
processing claims to third-party payors. During fiscal 1996, the Company derived
61.8% of its revenues from respiratory therapy, home medical equipment and
specialized mail-order sales, 25.1% from patient services, and 13.1% from
infusion therapy.
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RESPIRATORY THERAPY, HOME MEDICAL EQUIPMENT AND SPECIALIZED MAIL-ORDER
PHARMACY AND MEDICAL SUPPLIES OPERATIONS
Respiratory Therapy. The Company provides home respiratory
services to patients with a variety of conditions, including chronic obstructive
pulmonary disease (e.g., emphysema, chronic bronchitis and asthma), cystic
fibrosis and neurologically-related respiratory conditions. The Company employs
a clinical staff of six full and part-time respiratory care professionals to
provide support to its home respiratory therapy patients. These professionals
manage the needs of the Company's patients according to physician-directed plans
of care. The Company's respiratory therapy revenues are derived primarily from
the provision of oxygen systems, nebulizers (devices to aerosolize medication),
home ventilators and respiratory medication on a unit dose basis. The Company
offers its respiratory therapy services principally in New Jersey and the New
York metropolitan area.
Home Medical Equipment. The Company's product offerings in
home medical equipment consist of patient room equipment (such as hospital beds,
patient lifts and commodes), ambulatory aids (such as walkers and canes) and
bathroom safety items. The Company generally purchases this equipment from
manufacturers and rents it to patients. The Company's broad range of product
offerings provides patients requiring either infusion, nursing or respiratory
services access to needed home medical equipment through a single source.
Accordingly, the Company generally promotes its home medical equipment business
as an ancillary product line in each of the markets where it also provides
patient services and infusion or respiratory therapy.
Specialized Mail-Order Pharmacy and Medical Supplies
Operations. The Company operates mail-order pharmacy and medical supplies
operations in Jacksonville and Quincy, Florida and Puerto Rico, which specialize
in supplying diabetic patients with glucose monitors and test strips and with
respiratory, diabetic, ophthalmic and other commonly prescribed medications. The
Company believes that its patients elect to receive their prescription drugs and
supplies via mail-order primarily because of convenience and cost. The Company
provides physician-prescribed respiratory medication in pre-mixed, pre-measured
unit doses thereby reducing the risk of over or underdosing, or contamination
through having to mix the medication with saline. As part of its service to
patients, the Company provides direct billing to Medicare, Medicaid and private
insurance, thereby reducing or eliminating cash outlays for the patient. The
Company also contacts its patients on a regular basis, usually one week before
the last shipment is scheduled to be exhausted, to verify that the patient is
ready to receive the next order and to monitor patient compliance. In addition,
the Company provides free monthly home delivery, eliminating trips to the local
pharmacy. The Company also provides wound care products and ostomy and orthotic
products to nursing homes and patients in their homes through its specialized
mail-order medical supplies operations. The Company provides wound care
dressings, such as hydrogels, calcium alginates, gauze and foam, and ostomy
products such as drainable pouches.
On January 14, 1997, the Company acquired 49% of the
outstanding shares of HMI common stock and has also entered into the Merger
Agreement to acquire the remaining outstanding shares of HMI. Completion of this
acquisition is subject to the satisfaction of various closing conditions,
including the receipt by the Company of financing sufficient to complete the
transaction, approval of the lenders under the Credit Facility, receipt of
applicable governmental approvals and approval of HMI's shareholders. HMI
provides integrated pharmacy management services to patients with chronic
medical conditions. See "History of the Company -- Pending Acquisitions".
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PATIENT SERVICES
Nursing and Para-Professional Services. The Company offers a
broad range of professional nursing and para-professional services to meet a
patient's medical and personal needs, principally in the home. These services
include pediatric and adult care, such as ventilator and dialysis care;
administration of infusion therapies, including chemotherapy, antibiotics,
enteral and parenteral feeding; standard skilled nursing services such as
changing dressings, injections, catheterization and administration of
medication; physical, respiratory, occupational and speech therapy; home health
aide services, such as assistance with personal hygiene, dressing and feeding;
and homemaker services, such as the preparation of meals, light house cleaning
and shopping. The services provided generally are available 24 hours a day,
seven days a week, on a live-in, hourly or shift basis. In addition, the
Company's services include training patients in their own care, monitoring
patient compliance with treatment plans, reporting to physicians and processing
reimbursement claims to third-party payors. The Company offers its nursing
services through four branches in New Jersey and three in Florida.
In addition, the Company has entered into a definitive
agreement to acquire the VIP Companies. Completion of the acquisition is subject
to the satisfaction of various closing conditions, including the review of the
accuracy at closing of various representations and agreements of the sellers,
action by the sellers to insure compliance with such representations and
agreements, and approval of the lenders under the Company's Credit Facility. The
VIP Companies provide temporary nursing and related home health care services
through six branch locations in New York. See "History of the Company -- Pending
Acquisitions".
Radiation Therapy. Radiation therapy, sometimes called
radiotherapy, is the treatment of cancer and other diseases with high-energy
radiation. Radiation therapy is used alone and in conjunction with surgery,
chemotherapy and, to a lesser extent, hormone therapy and immunotherapy.
Radiation therapy is used both to cure cancer by destroying and eliminating
cancer cells and, when curing the cancer is not possible, as a palliative
treatment to shrink the tumors in order to reduce pain and other symptoms.
The Company provides radiation therapy services in the
Baltimore, Maryland metropolitan area through its operation of five centers, all
of which are located in close proximity to major hospitals. Three of these
centers are free standing structures while the other two centers are located
within their respective associated hospitals (Mercy Hospital Center and Good
Samaritan Hospital). The Company employs medical physicists, oncology nurses,
radiotherapy technologists, dosimetrists, radiologic engineers, as well as an
administrative and clerical staff to provide radiotherapy services. The Company
has contracted with physicians to provide radiation oncology services. The
Company's centers utilize technologically advanced radiotherapy equipment. Each
center utilizes a megavoltage linear accelerator for treatment and a
radiographic fluoroscopic simulator for treatment planning. The Company also
provides the following services for specialized clinical situations: high dose
rate remote afterloading, dedicated CAT scanning, radioisotope therapy and
computerized treatment planning.
INFUSION THERAPY
Infusion therapy involves the intravenous administration of
nutrients, antibiotics or other medications to patients in their homes usually
as a continuation of treatment initiated in the hospital. The infusion therapies
provided by the Company include antibiotic and related therapies (therapies used
to treat various infections and diseases); parenteral nutrition therapy (the
intravenous feeding of life sustaining nutrients to patients with impaired or
altered digestive tracts due to gastrointestinal illness, such as an intestinal
obstruction or inflammatory bowel disease); blood products; enteral nutrition
therapy (the administration of nutrients through a feeding tube to patients who
cannot eat as a result of an obstruction to the digestive tract or because
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they are otherwise unable to feed themselves orally); chemotherapy (the
intravenous administration of cancerinhibiting drugs through either rapid or
continuous infusion); pain management (the administration of pain controlling
drugs such as morphine and Demerol to terminally or chronically ill patients);
and other therapies. The Company offers these therapies to patients in the New
York metropolitan area and New Jersey markets from its facility located in
Clark, New Jersey. The Company's related support services include patient
training in the self-administration of infusion therapies, nursing support,
pharmacy operations and related delivery services and insurance reimbursement
assistance.
QUALITY ASSURANCE; JCAHO, CHAP AND OTHER ACCREDITATIONS
The Company maintains quality assurance policies and
procedures and closely monitors operations in order to provide high quality care
with respect to the services it offers. The Joint Commission on Accreditation of
Healthcare Organizations ("JCAHO"), a not-for-profit private organization that
has established standards for health care organizations, has granted
accreditation status to the Company's Clark and Northfield, New Jersey
facilities and has granted accreditation to its Baltimore, Maryland radiation
therapy facilities. All branches of the Company's nursing division are fully
accredited with commendation by the Community Health Accreditation Program, Inc.
("CHAP"), a subsidiary of the National League for Nursing, a national
accreditation organization for home community health care. The Company believes
that accreditations by JCAHO, CHAP and other recognized accreditation
organizations will be an increasingly important prerequisite for entering into
contracts with managed care providers and other intermediaries and for obtaining
and maintaining required licensure or certification.
The Company's radiation therapy facilities also have received
accreditation from the Accreditation Association for Ambulatory Health Care and
the American College of Radiology. The Company voluntarily sought this
accreditation because it believes the accreditation provides its business with a
rating of quality for referral sources to examine, which the Company believes
helps distinguish it from its competitors.
SALES AND MARKETING ACTIVITIES
The Company primarily markets its services and products to
referral sources such as physicians, hospital discharge planners and social
service workers, insurance companies, prepaid health plans, health maintenance
organizations ("HMOs"), county medical services and private charitable
organizations. Fundamental to the Company's ability to obtain and retain
referral sources is establishing and maintaining a reputation for quality
service and responsiveness to the requirements of the referral sources.
The Company currently employs full-time sales representatives
for its infusion therapy, home medical equipment and respiratory products and
services and relies on branch administrators and regional sales directors to
market its nursing and para-professional services. The Company uses primarily
the same sales force to cross-market its products and services. The Company uses
full and part-time sales employees for its mail-order pharmacy and medical
supplies operations.
In general, the sales representatives market the Company's
services through direct contact with referral sources in the form of meetings,
telephone calls and solicitations. The representatives maintain continual
contact with these sources in order to strengthen their relationships. While the
sales representatives strive to develop exclusive provider relationships,
referral sources frequently utilize the services of several alternate site
health care companies. The sales representatives are trained by the Company to
provide information to referral
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sources concerning the quality of the Company's alternate site health care
services and the cost-saving advantages of such services. Primarily due to
escalating pressures to contain health care costs, third-party payors are
participating to a greater extent in decisions regarding health care
alternatives and are consequently becoming more important in the referral and
case management process. The inability to obtain and maintain managed care
contracts may have a material adverse effect on the Company. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
General."
During the latter part of 1996, there continued to be a
changing regulatory environment with respect to certain of the Company's product
lines, including, for example, the prohibition of pharmacy support arrangements
in the respiratory medications segment of the Company's business. The Company
has increased its internal and external sales and marketing staff, as well as
developed new marketing programs in order to meet these new standards. Because
of the recent impact of these changes, there can be no assurance as to the
success of these new marketing initiatives.
RECRUITING AND TRAINING OF PERSONNEL
The Company recruits, trains, provides continuing education
for, and offers benefits and other programs to, its personnel. Recruiting is
conducted primarily through advertising, employment fairs, direct contact with
community groups and employment programs and through the use of competitive
salary and benefit packages.
The health care industry periodically faces shortages of
certain qualified personnel. Accordingly, the Company has experienced and may
experience intense competition from other companies in recruiting qualified
health care personnel for its operations. The Company's success to date has
depended, to a significant degree, on its ability to recruit and retain
qualified health care personnel. Most of the registered and licensed nurses and
health care para-professionals who are employed by the Company also are
registered with, and accept placements from time to time through, competitors of
the Company. The Company believes it is able to compete successfully for nursing
and para-professional personnel by aggressive recruitment through newspaper
advertisements, flexible work schedules and competitive compensation
arrangements. There can be no assurance, however, that the Company will be able
to continue to attract and retain qualified personnel.
THIRD-PARTY REIMBURSEMENT
Substantially all of the Company's revenues are attributable
to third-party payors, including Medicare and Medicaid, private insurers,
managed care plans, and HMOs. The amounts received from government programs and
private third-party payors are dependent upon the specific benefits included
under the program or the patient's insurance policies. Like other medical
service providers, the Company is subject to lengthy reimbursement delays as a
result of third-party payment procedures. The Company generally collects
payments from third-party payors within four months after services are rendered,
but pays its accounts payable and employees currently. Delays in reimbursement
may cause working capital constraints on the Company's operations. In the past,
the Company has been able to obtain financing through bank borrowings and
internally generated funds to meet its working capital requirements. However,
there can be no assurance that bank borrowings or other suitable methods of
financing will be available when needed or, if available, will be on terms
acceptable to the Company. Any substantial delays in reimbursement could
adversely affect the Company's business, financial condition, cash flows and
results of operations. Accordingly, management of accounts receivable through
effective billing and reimbursement procedures is critical to the Company's
results of operations.
The billing and reimbursement process involves the collection,
review and approval of a significant number of required documents. Certain
payors such as Medicare, Medicaid and some managed care plans require very
specific procedures and documentation prior to approving any request for
reimbursement. Regional reimbursement specialists of the Company work together
to assess patient coverage, review the adequacy of documentation, submit
documentation and claims to the third-party payors and expedite payment.
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The Company accepts assignment of insurance benefits from the patient, and in
most instances the third-party payors pay the Company directly.
Because alternate site health care is generally less costly to
third-party payors than hospital-based care, alternate site health care
providers have generally benefited from cost containment initiatives aimed at
reducing the costs of medical care. However, as the alternate site market
becomes a larger percentage of the total health care market, cost containment
initiatives aimed at reducing the costs of delivering services at non-hospital
sites are increasing and may adversely affect the profitability of alternate
site health care providers. A significant reduction in the coverage or payment
rates of third-party payors, or from patients enrolled in the Medicare or
Medicaid programs, would have a material adverse effect on the Company's
revenues and profitability. The level of revenues and profitability of the
Company, like those of other health care companies, are affected by the
continuing efforts of third-party payors to contain or reduce the costs of
health care by lowering reimbursement rates, increasing case management review
of services and negotiating reduced contract pricing.
For the year ended October 31, 1996, 49.8% and 11.8%,
respectively, of the Company's revenues were directly attributable to the
Medicare and Medicaid programs. For the year ended October 31, 1995, 48.1% and
10.8%, respectively, of the Company's revenues were directly attributable to the
Medicare and Medicaid programs. The increase in the percentage of revenues
directly attributable to Medicare during the year ended October 31, 1996 was
primarily the result of an increase in revenues attributable to the Company's
specialized mail-order pharmacy and medical supplies operations which derives a
greater percentage of revenue from Medicare than does the rest of the Company.
The Company's payor mix may fluctuate in the future as a result of any
acquisitions completed by it, and such fluctuations will be dependent, to a
large degree, on the relative payor mix of acquired companies.
Government reimbursement programs are subject to statutory and
regulatory changes, retroactive rate adjustments, administrative rulings and
governmental funding restrictions, all of which may materially increase or
decrease the rate of program payments to the Company for its services. In
addition to being subject to frequent changes in Federal and state laws
governing Medicare and Medicaid coverage and reimbursement policies, the Company
is subject to governmental audit of the reimbursements it receives under the
Medicare and Medicaid programs. Any significant audit adjustment could have a
material adverse effect on the Company's business, financial condition, cash
flows or results of operations. There can be no assurance that payments under
governmental and private third-party payor programs will remain at levels
comparable to present levels or will, in the future, be sufficient to cover the
costs allocable to patients eligible for reimbursement pursuant to such
programs.
Payment reform for post-acute care services is a top Medicare
priority. The U.S. Department of Health and Human Services ("HHS") is studying,
among other things, the feasibility of changing the Medicare reimbursement
system for home health care from cost reimbursement to prospective payment
(i.e., a fixed fee for services rendered per episode of illness). The impact of
such a change, if implemented, on the Company's results of operations cannot be
predicted at this time and will depend, to a large extent, on the reimbursement
methodology ultimately established. The U.S. Congress and President Clinton have
each proposed significant reductions in Medicare and Medicaid spending in
connection with efforts to balance the budget of the United States. Although the
Company cannot predict whether these or other Federal or state cost containment
proposals will be adopted, the adoption of any such proposals could have a
material adverse effect on the Company's business, financial condition, cash
flows and results of operations.
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GOVERNMENT REGULATION
General. The Company's business is subject to extensive
Federal and state regulation. Federal regulation covers, among other things,
Medicare and Medicaid billing and reimbursement, reporting requirements,
certification standards for certain home health agencies and other types of
health care providers, limitations on ownership and other financial
relationships between a provider and its referral sources and approval by the
Food and Drug Administration of the safety and efficacy of pharmaceuticals and
medical devices. In addition, the requirements that the Company must satisfy to
conduct its businesses vary from state to state. The Company believes that its
operations comply with applicable Federal and state laws and regulations in all
material respects. However, changes in the law or new interpretations of
existing laws can have a material effect on permissible activities of the
Company, the relative costs associated with doing business and the amount of
reimbursement for the Company's products and services paid by government and
other third-party payors.
Health Care Reform. Political, economic and regulatory
influences are subjecting the health care industry in the United States to
fundamental change. Although Congress has failed to pass comprehensive health
care reform legislation, the Company anticipates that Congress and state
legislatures will continue to review and assess alternative health care delivery
and payment systems and may in the future propose and adopt legislation
effecting fundamental changes in the health care delivery system. Legislative
debate is expected to continue in the future. The Company cannot predict the
ultimate timing, scope or effect of any legislation concerning health care
reform. Any proposed Federal legislation, if adopted, could result in
significant changes in the availability, delivery, pricing and payment for
health care services and products, including alternate site health care. Various
state agencies also have undertaken or are considering significant health care
reform initiatives. Although it is not possible to predict whether any health
care reform legislation will be adopted or, if adopted, the exact manner and the
extent to which the Company will be affected, it is likely that the Company will
be affected in some fashion, and there can be no assurance that any health care
reform legislation, if and when adopted, will not have a material adverse effect
on the Company's business, financial condition, cash flows or results of
operations.
Permits and Licensure. Certain of the Company's facilities are
subject to state licensure laws. Federal laws require certain of the Company's
facilities to comply with rules applicable to controlled substances. These rules
include an obligation to register with the Drug Enforcement Administration of
the United States Department of Justice and to meet certain requirements
concerning security, record keeping, inventory controls, prescription and order
forms and labeling. The Company's pharmacists, nurses, and certain of its
radiology equipment also are subject to state licensing requirements. The
Company believes that it is in compliance with all applicable licensure
requirements.
Anti-kickback and Fraud and Abuse Laws. The Company is subject
to Federal and state laws prohibiting direct or indirect payments for patient
referrals for items and services reimbursed under Medicare, Medicaid and state
programs as well as in relation to private payors.
The Federal Medicare and Medicaid "Anti-kickback Statute"
prohibits certain conduct involving improper payments in connection with the
delivery of items or services covered by a number of Federal and state health
care programs. Among other things, these prohibitions apply to anyone who
knowingly and willfully solicits, receives, offers, or pays any remuneration in
return for referring an individual to another person for the furnishing, or
arranging for the furnishing, of any item or service that may be paid, in whole
or in part, by the Medicare, Medicaid or other Federal health care programs. To
date, courts have interpreted the Anti-kickback Statute to apply to a broad
range of financial relationships between providers and referral sources,
including physicians and other direct health care providers, as well as persons
who do not have a direct role in the
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provision of health care services. Violations of the statute may result in civil
and criminal penalties, including fines of up to $25,000 for each violation,
exclusion from participation in the Medicare and Medicaid programs, and
imprisonment for up to five years.
HHS has adopted regulations creating "safe harbors" from
Federal criminal and civil penalties under the Anti-kickback Statute by
identifying certain types of ownership interests and other financial
arrangements that do not appear to pose a threat of Medicare and Medicaid
program abuse. Additional safe harbors have also been proposed, and HHS has
recently solicited proposals for developing new and modifying existing safe
harbors. Transactions covered by the Anti-kickback Statute that do not conform
to an applicable safe harbor are not necessarily in violation of the
Anti-kickback Statute, but such arrangements would risk scrutiny and may be
subject to civil sanctions or criminal enforcement action.
The Federal "Stark Law" provides that where a physician has a
"financial relationship" with a provider of "designated health services"
(including, among other things, parenteral and enteral nutrients, equipment and
supplies, home health services, radiation therapy, outpatient prescription drugs
and home medical equipment, which are products and services provided by the
Company), the physician will be prohibited from referring a Medicare or Medicaid
patient to the health care provider, and the provider will be prohibited from
billing Medicare or Medicaid, for the designated health service. In August 1995,
regulations were issued pursuant to the Stark Law as it existed prior to its
amendment in 1993. The preamble to these regulations indicates that the Health
Care Financing Administration ("HCFA") intends to rely on the language and
interpretations in the regulations when reviewing compliance under the Stark
Law, as amended (the "Amended Stark Law"). Certain exceptions from the referral
prohibitions are available under the Amended Stark Law, including the referral
of patients to providers owned by certain qualifying publicly-traded companies
in which a referring physician owns an investment security. At this time,
however, the ownership of investment securities (including common and preferred
stock, bonds, debentures, notes and other debt instruments) in the Company does
not qualify for this exception as the Company does not have presently
shareholder equity of at least $75 million. Submission of a claim that a
provider knows or should know is for services for which payment is prohibited
under the Amended Stark Law could result in refunds of any amounts billed, civil
money penalties of not more than $15,000 for each such service billed, and
possible exclusion from the Medicare and Medicaid programs.
A number of Federal laws impose civil and criminal liability
for knowingly presenting or causing to be presented a false or fraudulent claim,
or knowingly making a false statement to get a false claim paid or approved by
the government. Under one such law, the "False Claims Act," civil damages may
include an amount that is three times the amount of claims falsely made or the
government's actual damages, and up to $10,000 per false claim. In addition, a
civil penalty of up to $15,000 may be assessed for engaging in other activities
prohibited by this statute. Actions to enforce the False Claims Act may be
commenced by a private citizen on behalf of the Federal government, and such
private citizens receive between 15 and 30 percent of the recovery. Efforts have
been made (with mixed success) to assert that any claim resulting from a
relationship in violation of the Anti-kickback Statute or the Amended Stark Law
is false or fraudulent under the False Claims Act. The Company carefully
monitors its submissions of Medicare and Medicaid claims and all other claims
for reimbursement to assure that they are not false or fraudulent, and as noted
above, believes that it is not in violation of the Anti-kickback Statute or the
Amended Stark Law.
The Office of Inspector General ("OIG") of HHS instituted
"Operation Restore Trust" in May 1995 in the five states with the highest
Medicare expenditures (California, Florida, New York, Texas and Illinois).
Operation Restore Trust is intended to counter health care fraud, waste and
abuse in targeted areas that HHS believes to be particularly vulnerable to fraud
and abuse, including home health care, nursing homes and home medical equipment.
In connection with this program, the OIG has issued "Fraud Alerts" relating to
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improper business practices in home health care and the provision of medical
supplies to nursing homes, and is expected to issue additional Fraud Alerts in
the future. In addition, providers of home health care, home medical equipment,
wound care supplies and other products and services are expected to be subject
to increased scrutiny for practices involving fraud and abuse.
Many states, including the states in which the Company
operates, have adopted statutes and regulations prohibiting payments for patient
referrals and other types of financial arrangements with health care providers,
which, while similar in certain respects to the Federal legislation, vary from
state to state. Sanctions for violating these state restrictions may include
loss of licensure and civil and criminal penalties. Certain states also have
begun requiring health care practitioners to disclose to patients any financial
relationship with a provider, including advising patients of the availability of
alternative providers.
The Company continues to review all aspects of its operations
and believes that it complies in all material respects with applicable
provisions of the Anti-kickback Statute, the Amended Stark Law and applicable
state laws, although because of the broad and sometimes vague nature of these
regulations, there can be no assurance that an enforcement action will not be
brought against the Company or that the Company will not be found to be in
violation of one or more of these regulatory provisions. The Company intends to
monitor developments under Federal and state fraud and abuse laws, including the
Amended Stark Law. At this time, the Company cannot anticipate what impact, if
any, subsequent administrative or judicial interpretation of the Amended Stark
Law may have on the Company's business, financial condition, cash flows or
results of operations.
The Company has employment agreements with certain of its
medical advisors. The Company believes that it has structured these arrangements
to comply with applicable Federal and state laws.
SUPPLIERS
The Company purchases its equipment and supplies, including
drugs, home medical equipment, nutritional solutions and other materials
required in connection with its therapies and specialized mail-order pharmacy
and medical supplies operations, from various suppliers. The sole supplier of
generic One Touch(TM) equivalent diabetic testing strips suspended shipments
indefinitely while it reviews with the FDA its quality control procedures.
Approximately 30% of MK patients use this strip. Not knowing how long said
suspension will last, the Company is taking steps to convert the patients using
this product to another brand, which can be provided to such patients at
approximately the same cost. A lengthy suspension of these shipments coupled
with the Company's inability to convert a significant portion of the affected
patients could have a material adverse effect on the Company's results of
operations and cash flows.
INSURANCE
Participants in the health care market are subject to lawsuits
alleging negligence, product liability or other similar legal theories, many of
which involve large claims and significant defense costs. The Company, from time
to time, is subject to such suits as a result of the nature of its business. The
Company maintains general liability insurance, professional liability insurance
and excess liability coverage. Each of these policies provides coverage on an
"occurrence" basis and has certain exclusions from coverage. The Company's
insurance policies must be renewed annually. 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 terms acceptable
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to the Company, if it is available at all. The failure to maintain insurance
coverage or a successful claim not covered by or in excess of the Company's
insurance coverage could have a material adverse effect on the Company's
business, financial condition, cash flows or results of operations. In addition,
claims, regardless of their merit or eventual outcome, may have a material
adverse effect on the Company's reputation. There can be no assurance that the
Company's insurance will be sufficient to cover liabilities that it may incur in
the future.
COMPETITION
The alternate site health care market is highly fragmented and
consists of numerous providers, relatively few of which are national or regional
in scope. The Company competes with a large number of companies in all areas in
which it conducts business. The Company believes that the principal competitive
factors in its industry are quality of care, including responsiveness of
services and quality of professional personnel; breadth of services offered;
referrals from physicians, hospitals and HMOs; general reputation with
physicians, other referral sources and potential patients; and price. The
Company believes that its competitive strengths have been the quality,
responsiveness and breadth of services it offers, and to some extent price
competition, as well as its reputation with physicians, referral sources and
patients.
The Company's home nursing, respiratory and home medical
equipment, mail-order medical supplies and home infusion services compete with
numerous local, regional and national companies. The Company's radiation therapy
services in the Baltimore, Maryland metropolitan area compete with other free
standing and hospital-based radiotherapy centers. The Company believes that
there are no dominant competitors in the diabetic and respiratory generic drug
market. The Company's primary competition for its mail-order sales of diabetic
and respiratory drugs is generated from retail pharmacies. The Company competes
primarily on the basis of convenience.
PATENTS AND TRADEMARKS
The Company owns no patents. The Company owns the following
servicemarks: "Steri-Pharm," "Transworld Nurses, Inc.," "Advocate Home Care,"
"RespiFlow," "DermaQuest," and "Radamerica." The Company does not believe that
its business is dependent upon the use of any patent or trademark or similar
property.
EMPLOYEES
As of January 22, 1997, the Company had approximately 400
full-time employees and approximately 85 part-time employees. In addition, the
Company maintains registries of approximately 170 registered and licensed nurses
and approximately 155 nurses' aides and home health care aides available for
staffing home nursing assignments on a temporary basis. The Company considers
its relationship with its employees to be satisfactory.
CERTAIN ADDITIONAL INFORMATION CONCERNING HMI
The following information relating to HMI is derived from
information contained in HMI's Annual Report on Form 10-K for the fiscal year
ended April 30, 1996 (the "HMI 10-K"), filed with the Securities
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and Exchange Commission (the "Commission") on or about July 29, 1996 and HMI's
Quarterly Report on Form 10-Q for the quarter ended October 31, 1996 (the "HMI
10-Q"), filed with the Commission on or about December 20, 1996. The
information contained herein is qualified in its entirety by reference to the
HMI 10-K and the HMI 10-Q.
Business of HMI
General
HMI provides integrated pharmaceutical management services to
patients with chronic medical conditions, which may be complicated by a higher
risk of patient non-compliance with the prescribed pharmaceutical regimen, and
to the health care professionals, pharmaceutical manufacturers and third-party
payors involved in the care of such patients. Services offered include the
distribution of prescription drugs, drug utilization review, patient compliance
monitoring, psychosocial support and assistance in insurance coverage,
verification and reimbursement. HMI also services the oncology, HIV/AIDS,
infertility, multiple sclerosis, schizophrenia and neurology markets.
Lifecare(TM) Program. Through its Lifecare(TM) Program, HMI
provides integrated pharmaceutical management programs servicing specific
patient populations. These services include patient education programs, the
preparation, delivery and administration of prescribed outpatient drug
therapies, patient compliance programs and data management. HMI provides
continuity of care to patients as they move from acute care hospital settings to
home-based care programs.
Pharmaceutical Therapies. HMI provides services to individuals
with chronic medical conditions who require at least one continual drug therapy
and may also require additional oral and/or injectable drug therapies. For
example, organ transplant recipients require a continual drug therapy consisting
of immunosuppressants and other drugs in order to prevent rejection of the
transplanted organ. These individuals also require other oral and, on occasion,
injectable drug therapies to combat or control other conditions arising from
transplant surgery, the disease or medical condition that led to the transplant
or side effects of the immunosuppressant drugs. HMI's licensed pharmacists and
other health care professionals are available via a toll-free number 24 hours
per day for assistance of consultation. HMI's pharmacists prepare and dispense
all drug therapies in compliance with the regimen prescribed by each patient's
physician.
Drug Monitoring and Screening. According to HMI, a substantial
portion of the costs associated with treating the chronically ill is
attributable to hospitalizations and medical procedures necessitated by
non-compliance and adverse drug interactions. In addition to the direct costs
associates with non-compliance, including hospital admissions or organ
rejections, there are indirect costs associated with non-compliance which result
from work disability and deteriorated health status. To monitor patient
compliance, HMI maintains a proprietary patient database that contains patient
profiles, including demographics, listings of all medications with dosages and
directions for use, laboratory results and drug delivery schedules with the aim
of enhancing compliance. An HMI pharmacist consults with the patient's
physician or primary health care professional to determine the patient's plan of
treatment, including drug therapy, support service and delivery requirements.
Throughout the course of treatment, an HMI pharmacist reviews each patient's
drug profile, evaluates patient compliance with the physician's orders and
screens for potential interactions among new drug orders or with existing
medications in the patient's profile.
Psychosocial Support. According to HMI, it has designed a
regimen of support services to meet the psychological and social needs of its
patients and their families. These services are designed to complement
-16-
<PAGE> 20
each patient's medical care program and assist both the patient and the
patient's family in managing the psychological and social challenges presented
by the patient's chronic and sometimes lifelong conditions. Such patients and
their families often may need reliable and immediate information, counseling on
a wide range of concerns regarding treatment, and assistance with insurance and
financial matters. The support services offered by HMI include: (1) education
seminars and videotapes for the patients and others involved in their care; (2)
creation, direction and/or sponsorship of patient support groups that provide
patients with support and information exchange; (3) newsletters containing
medical and non-medical information relevant to patients and health care
professionals; and (4) a national, toll-free, 24 hours per day telephone hotline
providing counseling and educational information to patients.
Services Provided to Pharmaceutical Companies. HMI has several
current contracts with pharmaceutical companies to provide a variety of
services, such as health care reimbursement investigation and verification for
both patients and professionals, compliance monitoring and data management
services related to specific drugs or clinical programs. HMI believes that these
services will enable it to establish, maintain and expand its relationships with
pharmaceutical companies and to become an integral component of future
comprehensive disease management programs.
Organ Transplantation. In order to promote growth in the
referrals of transplant recipients, HMI selectively targets hospital-based
transplant programs that direct the outpatient care of their transplant
recipients to outside, third-party service groups. HMI has increased the number
of transplant programs that it serves from 25 at the end of fiscal year 1991 to
100 at the end of fiscal year 1996. HMI has established contractual arrangements
with a number of health care providers and payors to provide services at
negotiated rates and HMI also intends to continue to expand its Lifecare(TM)
Program by continuing to work with medical professionals and organizations to
educate the public on the need for organ donations.
Schizophrenia. Schizophrenia is a psychotic disorder. HMI's
services include distribution and monitoring of antipsychotic medications
including, clozapine and risperidone. Monitoring services include data
administration, phlebotomy services and laboratory analysis. Clozapine is
prescribed primarily for schizophrenia patients who have not responded to
first-line antipsychotic medications. Because of potentially severe side effects
associated with clozapine, patients receiving clozapine require close weekly
monitoring of their white blood cell levels. HMI's Clozaril(R) Patient
Management Business contains multiple components, including weekly blood draws
to test for side effects associated with the drug clozapine. HMI understands
that the FDA may be contemplating a reduction in blood draw monitoring, which,
with no other changes in the way that HMI participates in this market, could
have a substantial negative impact on HMI's earnings and cash flow. HMI expects
several new antipsychotic drugs to be introduced by pharmaceutical companies in
the next year. HMI anticipates providing these new drugs to schizophrenic
patients as it broadens its Lifecare(TM) Program to treat additional mental
health patients.
Infertility. According to HMI, the primary treatments for
infertility are ovulatory induction and artificial reproductive technology,
often coupled with the use of fertility drugs to maximize success rates and the
average number of monthly cycles of treatment per year for women seeking such
treatment is approximately 2.5.
-17-
<PAGE> 21
Neurology. HMI has initiated several programs in this market.
Target markets include amyotrophic lateral sclerosis (Lou Gehrig's disease),
multiple sclerosis ("MS"), Alzheimer's Disease and Parkinson's Disease. Primary
drug therapies for MS patients are Betaseron (R) and Avonex (R) . These drug
therapies and related services are currently being provided through HMI's MS
Lifecare(TM) Program.
Oncology. Drug therapies provided by HMI include: oral
medications such as etoposide, methotrexate, melphalan and cyclophosphamide;
intravenous therapies such as 5-fluorouracil and Taxol(R); and injectables such
as Neupogen(R) and Intron-A(R).
HIV and AIDS. According to HMI, available drug protocols
believed to slow the progression of the disease include first line drugs like
AZT and the new protease inhibitors (Invirase(R), Norvir(R) and Crixivan(R)). In
addition, drugs like pentamidine, intravenous and oral antibiotics, parenteral
nutrition, Neupogen(R) and Doxil(R) are used to treat opportunistic infections
and counteract adverse reactions from the disease and its therapies,
respectively.
Competition
According to HMI, the markets in which it operates are highly
competitive and are experiencing substantial consolidation. Although HMI
believes that its package of services distinguishes it from its competition,
there are several other companies that deliver prescription and non-prescription
medications to its patient populations. These companies include regional and
national pharmacies, some of which have greater financial resources and name
recognition than HMI. Competition is based on a number of factors, including
price, quality of care and service, reputation within the medical community, the
ability to develop and maintain relationships with patients and referral sources
and geographical scope. Competition has also been affected by the decisions of
third-party payors and case managers to become more active in monitoring and
directing the care delivered to their beneficiaries. Relationships with such
groups, as well as inclusion within a contracted network has affected and will
continue to affect HMI's ability to serve many of its patients. The introduction
of new services, the enhancement of current services and the development of
strategic relationships by HMI's competitors could cause a significant decline
in sales, the loss of market acceptance of HMI's services, intense price
competition, or render HMI's services noncompetitive. HMI expects to continue
to encounter increased competition in the future, which, if not matched by HMI
initiatives, could limit its ability to maintain or increase its market share.
Such increased competition could have a material adverse effect on the business,
financial condition and results of operations of HMI.
Recent Events Concerning HMI
Financial Condition. As a result of the restatements and
special charges recorded in HMI's financial statements for the fiscal years
ended April 30, 1995 and 1996, HMI recorded significant charges to its balance
sheet including reductions of HMI's working capital, retained earnings and
stockholders' equity. As of January 22, 1997, HMI was also in default under its
credit agreement, which was acquired by the Company on November 13, 1996.
Additionally, concerns about HMI's financial condition have resulted in less
favorable credit terms from HMI's vendors and may, in HMI's opinion, result in
declining customer referrals. According to HMI, if it is unsuccessful in
consummating the Merger Agreement, or in continuing satisfactory relationships
with its suppliers, it is likely that HMI will seek protection under the Federal
Bankruptcy laws.
-18-
<PAGE> 22
Introduction of New Antipsychotic Drugs. In October, 1996,
Olanzapine, a new antipsychotic agent for the treatment of schizophrenia, was
introduced into the market. HMI also expects several additional antipsychotic
drugs to be introduced in the next year. HMI anticipates providing these new
drugs to schizophrenic patients as it broadens its Lifecare(TM) Program. To
date, management of HMI believes that the introduction of Olanzapine has been a
factor in the recent decline of HMI's Clozapine customer base as physicians
preferentially prescribe Olanzapine for treatment of schizophrenia. Because
Olanzapine does not require weekly blood monitoring, and therefore is less
costly than Clozapine, and because the relative efficacy of Olanzapine is still
uncertain, HMI cannot predict the ultimate effect on its customer base and, in
turn, its financial condition from the introduction of Olanzapine. HMI also
cannot predict the effect on its financial condition of the introduction of
other antipsychotic drugs.
Changes in Management. HMI has experienced substantial
turnover of its senior management group over the past twelve months and several
of HMI's executive officers have been in their current positions for only a
limited period of time. Paul S. Jurewicz, HMI's Executive Vice President and
Chief Financial Officer, resigned, effective January 10, 1997, to assume a new
position. HMI expects that W. James Nicol, the President and Chief Executive
Officer of HMI, will assume, on an interim basis, the additional duties of Chief
Financial Officer.
Reimbursement. According to HMI, to date, HMI's arrangements
with managed care organizations have mostly been on a discounted fee-for-service
basis and according to HMI, it does not currently have any significant capitated
arrangements. In addition, HMI has experienced downward pricing pressures and an
inability to participate in certain managed care networks and HMI may continue
to experience these pressures in the future.
See "Legal Proceedings" with respect to certain legal
proceedings concerning HMI.
ITEM 2. PROPERTIES.
The Company leases a total of 20 facilities in four states and
Puerto Rico. The Company believes that its existing leases will be renegotiated
as they expire or that alternative properties can be leased on acceptable terms.
The Company also believes that its present facilities are well maintained and
are suitable for it to continue its existing operations.
-19-
<PAGE> 23
The following table describes the location and current use of
each of the Company's leased facilities as of January 22, 1997:
<TABLE>
<CAPTION>
LOCATION DESCRIPTION
<S> <C>
FLORIDA FACILITIES
Orlando.................................. Nursing and Para-Professional Services
West Melbourne........................... Nursing and Para-Professional Services
Jacksonville............................. Mail-Order Pharmacy and Medical Supplies
Quincy................................... Mail-Order Pharmacy and Medical Supplies
Daytona Beach............................ Nursing and Para-Professional Services
MARYLAND FACILITIES
Baltimore (three facilities)............. Radiation Therapy
Glen Burnie.............................. Radiation Therapy
Fallston................................. Administration
Towson................................... Radiation Therapy
NEW JERSEY FACILITIES
Clark (two facilities)................... Corporate Offices, Infusion Therapy,
Respiratory Therapy and
Home Medical Equipment
East Brunswick........................... Nursing and Para-Professional Services
Fair Lawn................................ Nursing and Para-Professional Services
Toms River............................... Nursing and Para-Professional Services
Wall Township............................ Nursing and Para-Professional Services
Cherry Hill.............................. Respiratory Therapy and Rehabilitation
Services
NEW YORK FACILITY
Hawthorne................................ Infusion Therapy and Corporate Offices
PUERTO RICO FACILITY
Santurce................................. Mail-Order Pharmacy and Medical Supplies
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
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
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
-20-
<PAGE> 24
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.
The Company is involved in various other legal proceedings
incidental to its business, none of which the Company believes will have a
material adverse effect on its business.
---------------
The following information relating to certain legal
proceedings concerning HMI is derived from information contained in the HMI
10-K, filed with the Commission on or about July 29, 1996 and the HMI 10-Q,
filed with the Commission on or about December 20, 1996. The information
contained herein is qualified in its entirety by reference to the HMI 10-K and
the HMI 10-Q.
HMI and certain of its past and current directors and officers
have been named as defendants in a consolidated securities fraud
lawsuit filed in the United States District Court for the Eastern District of
New York entitled In re Health Management, Inc. Securities Litigation, Master
File No. 96 Civ. 0889 (ADS). This lawsuit alleges claims under
Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, arising out of
alleged misrepresentations and omissions by HMI in connection with certain of
its securities filings. HMI entered into a stipulation of partial
settlement with the plaintiffs' counsel and, on September 18, 1996, such
stipulation received preliminary court approval (the "Original Settlement"). The
Original Settlement was subsequently amended to, among other things, reduce the
consideration being paid by HMI to the plaintiff class. As a condition to the
Company's obligation to close the Stock Purchase Agreement and the Merger
Agreement, preliminary court approval and final court approval, respectively, is
required with respect to the amended settlement providing for a $7,200,000 cash
payment in lieu of the consideration provided in the Original Settlement. An
amended stipulation of partial settlement to this effect was executed on
December 19, 1996, preliminary approval by the U.S. District Court for the
Eastern District of New York thereof was granted on December 20, 1996, and a
hearing for final approval is currently scheduled for March 14, 1997.
Certain of HMI's current and former officers and directors
have been named as defendants, and HMI has been named as a nominal defendant, in
a consolidated derivative action filed in the United States District Court for
the Eastern District of New York entitled In re Health Management, Inc.
Stockholders' Derivative Litigation, Master File No. 96 Civ. 1208 (TCP). The
consolidated action alleges claims for breach of fiduciary duty and contribution
against the individual director defendants arising out of alleged
misrepresentations and omissions contained in certain of HMI's securities
filings as more fully alleged in the lawsuit described above. The consolidated
action seeks unspecified monetary damages on behalf of HMI, as well as
declaratory and injunctive relief. An amended consolidated complaint was served
on HMI on August 12, 1996. HMI has not yet filed its response to the amended
consolidated complaint. Under HMI's Certificate of Incorporation and Bylaws,
certain officers and directors may be entitled to
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<PAGE> 25
indemnification, or advancement of expenses for legal fees in connection with
the above suits from HMI.
BDO Seidman, LLP has been named as a defendant, and
HMI has been named as a nominal defendant, in a derivative lawsuit filed in the
Supreme Court for the State of New York, County of New York entitled Howard
Vogel, et al. v. BDO Seidman, LLP, et al., Index No. 96-603064. The complaint
alleges claims for breach of contract, professional malpractice, negligent
misrepresentation, contribution and indemnification against BDO Seidman, LLP
arising out of alleged misrepresentations and omissions contained in certain of
HMI's previous securities filings. BDO Seidman, LLP was HMI's auditor at the
time those filings were made and has continued to serve as such. The complaint
seeks unspecified monetary damages on behalf of HMI, as well as declaratory and
injunctive relief. Pursuant to stipulation, HMI's time to answer or otherwise
move against the complaint in this action has been adjourned without date.
The parties to the above described derivative actions have
reached settlement in principle of all claims against all defendants. HMI
expects that a fully executed settlement agreement will be submitted to the
courts for approval on or before February 7, 1997.
The enforcement division of the Commission has a formal order
of investigation relating to matters arising out of HMI's public announcement on
February 27, 1996 that HMI would have to restate its financial statements for
prior periods as a result of certain accounting irregularities. HMI is
cooperating fully with this investigation and has responded to the Commission's
requests for documentary evidence.
On April 3, 1995, American Preferred Prescription, Inc.
("APP") filed a complaint against HMI, Preferred Rx, Inc., Community
Prescription Services and Sean Strub in the New York Supreme Court for tortious
interference with existing and prospective contractual relationships, for lost
customers and business opportunities resulting from allegedly slanderous
statements and for allegedly false advertising and promotions. Four separate
causes of action are alleged, each for up to $10 million in damages. APP had
previously filed a similar suit against HMI in the United States Bankruptcy
Court of the Eastern District of New York, which was dismissed and the court
abstained from exercising jurisdiction. HMI has answered the complaint and
counterclaimed for libel and slander predicated upon a false press release
issued by APP and added as defendants the principals of APP. By stipulation
dated January 29, 1996, HMI discontinued its counterclaim against APP and its
third-party claims against the principals of APP. In addition, by motion dated
March 12, 1996, APP moved, in the Supreme Court of the State of New York, to
amend its complaint to add, among other things, a cause of action against HMI
alleging that a proposed plan of reorganization presented by HMI to the
Bankruptcy Court in APP's bankruptcy case was based on fraudulent financial
statements and to add certain other defendants. These defendants caused the
removal of the state court action to the Bankruptcy Court of the Eastern
District of New York. By motion dated April 12, 1996, APP requested that the
Bankruptcy Court remand the action to the State Court, which the Bankruptcy
Court granted. HMI opposed this motion, which is currently pending before the
State Court. Management of HMI believes APP's suit against it to be without
merit, intends to defend the proceeding vigorously and believes the outcome will
not have a material adverse effect on HMI's results of operations or financial
position.
As a result of a New York State Medicaid audit, HMI is in
discussions with the New York State Department of Social Services regarding
certain overpayments to HMI. HMI has established a reserve of $1.4 million in
respect thereof.
According to HMI, the outcomes of certain of these lawsuits
and the investigation are uncertain and the ultimate outcomes could have a
material adverse effect on HMI.
-22-
<PAGE> 26
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended October 31,
1996, no matters were submitted by the Company to a vote of its stockholders.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The Common Stock is quoted on the Nasdaq National Market (the
"NASDAQ/NM") and is traded under the symbol "TWHH." The following table sets
forth the high and low sales price of the Common Stock on the NASDAQ/NM for the
fiscal years ended October 31, 1995 and 1996, and the first quarter of fiscal
1997, through January 22, 1997.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
<S> <C>
Year Ended October 31, 1995:
First Quarter.................................... $15-7/8 $ 8-1/2
Second Quarter................................... 19-3/4 15-3/8
Third Quarter ................................... 17-3/4 14-1/2
Fourth Quarter................................... 15-1/6 6-3/4
Year Ended October 31, 1996:
First Quarter.................................... 13-1/2 8-1/8
Second Quarter................................... 10-6/8 7-6/8
Third Quarter.................................... 10-3/8 8
Fourth Quarter................................... 11-1/4 8-5/8
Year Ended October 31, 1997:
First Quarter
(through January 22, 1997)....................... 12-5/8 9-3/8
</TABLE>
As of January 22, 1997, there were approximately 207
stockholders of record of the Common Stock.
The Company has neither declared nor paid any dividends on its
Common Stock and does not anticipate paying dividends in respect of its Common
Stock in the foreseeable future. Any payment of future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, the Company's earnings, financial condition, cash flows, capital
requirements and other relevant considerations, including the extent of its
indebtedness and any contractual restrictions with respect to the payment of
dividends. Under the terms of the Company's Credit Facility, the Company is
prohibited from paying dividends or making other cash distributions. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
-23-
<PAGE> 27
ITEM 6. SELECTED FINANCIAL DATA.
The financial data for the years ended October 31, 1996, 1995
and 1994 and balance sheet data as of October 31, 1996 and 1995 as set forth
below have been derived from the audited consolidated financial statements of
the Company and should be read in conjunction with those financial statements
and notes thereto included elsewhere in this Annual Report on Form 10-K. In
addition, the selected financial data should be read in conjunction with
"Business -- General" and "History of the Company" and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
Ten Months
Year Ended Ended
October 31, October 31,
------------------------------------------------------- --------
1996(1) 1995(2) 1994(3) 1993(4) 1992(5)
-------- -------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
FINANCIAL DATA:
Net patient services $ 19,164 $ 18,870 $ 12,150 $ 6,991 $ 4,621
Net infusion services 9,970 9,935 10,551 8,688 2,655
Net respiratory, medical
equipment and supplies sales 47,170 42,782 17,022 732 --
-------- -------- -------- -------- --------
Total revenues 76,304 71,587 39,723 16,411 7,276
Cost of revenues 34,680 32,730 18,809 8,286 4,042
-------- -------- -------- -------- --------
Gross profit 41,624 38,857 20,914 8,125 3,234
Selling, general and administrative
expenses 33,552 29,774 15,968 6,528 2,592
Non-recurring charges -- 3,898 (6) -- -- --
-------- -------- -------- -------- --------
Operating income 8,072 5,185 4,946 1,597 642
Interest expense (income), net 4,352 3,699 809 (90) 107
Provision for income taxes 1,702 627 1,656 736 232
-------- -------- -------- -------- --------
Income before extraordinary item
and cumulative effect of an
accounting change 2,018 859 2,481 945 303
Extraordinary item (1,435)(7) -- -- -- 36
Cumulative effect of an
accounting change -- -- 300 -- --
-------- -------- -------- -------- --------
Net income $ 583 $ 859 $ 2,781 $ 945 $ 339
======== ======== ======== ======== ========
Income per share before extra-
ordinary item and
cumulative effect of an
accounting change:
Primary $ 0.26 $ 0.13 $ 0.50 $ 0.25 $ 0.18
======== ======== ======== ======== ========
Fully diluted $ 0.26 $ 0.13 $ 0.47 $ 0.25 $ 0.18
======== ======== ======== ======== ========
Net income per share:
Primary $ 0.08 $ 0.13 $ 0.56 $ 0.25 $ 0.20
======== ======== ======== ======== ========
Fully diluted $ 0.07 $ 0.13 $ 0.53 $ 0.25 $ 0.20
======== ======== ======== ======== ========
Weighted average number of shares
outstanding:
Primary 7,741 6,776 5,006 3,766 1,662
======== ======== ======== ======== ========
Fully diluted 7,833 6,832 5,205 3,847 1,662
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
October 31,
-------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital..................... $26,201 $(4,706)(8) $(4,113)(9) $6,597 $1,854
Accounts receivable, net............ 24,414 18,906 10,514 5,988 3,088
Total assets........................ 90,727 74,912 58,249 17,442 4,678
Long-term debt...................... 12,505 20,264 13,758 530 16
Total shareholders' equity.......... 67,225 24,086 20,371 11,026 2,022
</TABLE>
- ------------------------------------
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<PAGE> 28
(1) The financial data for the year ended October 31, 1996 includes the
results of operations of Health Meds and USNJ from their dates of
acquisition (effective October 1, 1996).
(2) The financial data for the year ended October 31, 1995 includes the
results of operations of DermaQuest (effective November 1, 1994), DVLC
(effective January 1, 1995) and Precision (effective March 1, 1995) from
their respective dates of acquisition.
(3) The financial data for the year ended October 31, 1994 includes the
results of operations of RespiFlow and MK (effective April 1, 1994) and
Radamerica (acquired August 5, 1994) from their respective dates of
acquisition.
(4) The financial data for the year ended October 31, 1993 includes the
results of operations of CHCS (acquired in June 1993) and PromptCare
(acquired in September 1993) from their respective dates of
acquisition.
(5) The financial data for the ten months ended October 31, 1992 includes the
results of operations of the Company with TNI from the date of the merger
(June 8, 1992). TNI became a wholly-owned subsidiary of the Company on
June 8, 1992 pursuant to the merger. The merger was accounted for as a
reverse acquisition of the Company by TNI under the purchase method of
accounting. Accordingly, the financial data for the ten months ended
October 31, 1992 are that of TNI and include the results of operations of
the Company from the date of the merger.
(6) The Company reported non-recurring charges totaling $3,898,000 resulting
from a write-off of expenses related to an abandoned public offering
($2,808,000), a write-off of expenses related to abandoned acquisitions
($605,000) and expenses related to the consolidation of certain of the
Company's facilities ($485,000).
(7) The Company recorded a non-cash, after-tax, extraordinary charge of
$1,435,000 (net of tax benefit of $879,000) in the fiscal year ended
October 31, 1996 in connection with the repayment of the Paribas Credit
Agreement.
(8) Includes a $5,973,000 acquisition payable in connection with the
acquisition of RespiFlow and MK and a $8,832,000 acquisition payable in
connection with the acquisition of DermaQuest.
(9) Includes a $10,750,000 acquisition payable in connection with the
acquisition of RespiFlow and MK.
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<PAGE> 29
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
GENERAL
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) 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; (ii) patient services, including nursing and para-professional
services and radiation therapy; and (iii) infusion therapy. During fiscal 1996,
the Company derived 61.8% of its revenues from respiratory therapy, home medical
equipment and specialized mail-order sales, 25.1% from patient services and
13.1% from infusion therapy.
The Company's growth strategy is to capitalize on
consolidation in the alternate site health care industry by aggressively
pursuing acquisitions of alternate site health care companies in selected
services, products and markets where the Company believes it has the opportunity
to create a comprehensive delivery network. Once it enters a new market, the
Company's strategy is to use its acquired operations as a platform to: (i) offer
comprehensive services and products by cross-marketing its various businesses;
(ii) compete aggressively by traditional referral sources and entering into
managed care contracts as a preferred provider; and (iii) leverage its sales and
marketing efforts, maximize referral networks and achieve operational
efficiencies. The Company further seeks to develop market concentrations in each
of its services in order to achieve levels of coverage which make the services
attractive to a variety of payors and patients.
Since its merger with TNI in June 1992, the Company has
completed the following ten acquisitions of alternate site health care
providers.
Company Date of Acquisition Nature and Location of Business
CHCS June 1993 Nursing and para-professional services -
New Jersey
PromptCare September 1993 Respiratory therapy, infusion therapy and
home medical equipment - New Jersey
RespiFlow April 1994 Specialized mail-order pharmacy - National
MK April 1994 Mail-order diabetic supplies - National
Radamerica August 1994 Radiation therapy - Maryland
DermaQuest November 1994 Mail-order medical supplies - National
DVLC January 1995 Pulmonary therapy - New Jersey
-26-
<PAGE> 30
Company Date of Acquisition Nature and Location of Business
Precision March 1995 Mail-order orthotic products - National
Health Meds October 1996 Respiratory mail order pharmacy -
National
USNJ October 1996 Infusion therapy - New York Metropolitan
area
These ten completed acquisitions contributed in the aggregate
approximately $65,110,000 or 85.3% of fiscal 1996 net revenues, while enhancing
the Company's presence in the New York Metropolitan market place, establishing
its presence in Maryland and adding the following products and services: (i)
specialized mail-order pharmaceuticals and medical supplies, including
respiratory and diabetic medications and supplies, wound care dressings and
ostomy and orthotic products; (ii) respiratory therapy and home medical
equipment; and (iii) radiation therapy services. On January 14, 1997, the
Company acquired 8,964,292 newly issued HMI common shares representing
approximately 49% of HMI's outstanding common stock for a purchase price of
$8,964,292. The Company has also entered into the Merger Agreement to acquire
the balance of HMI not already owned by the Company and stock purchase
agreements to acquire the VIP Companies. See "-- Liquidity and Capital
Resources." The Company believes that a substantial number of acquisition
opportunities may continue to arise as managed care and other competitive
pressures encourage further industry consolidation.
The Company's revenue mix and payor mix will be influenced to
a significant degree by the relative contribution of acquired businesses and
their respective payor profiles. The following table shows the percentage of net
revenues represented by each of the Company's product lines:
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Net patient services............................ 25.1% 26.3% 30.5%
Net infusion services........................... 13.1 13.9 26.6
Net respiratory, medical
equipment and supplies sales.................. 61.8 59.8 42.9
------ ------ ------
Total revenues......................... 100.0% 100.0% 100.0%
====== ====== ======
</TABLE>
The increase in net respiratory, medical equipment and
supplies sales (and corresponding decline in net patient services and net
infusion services as a percentage of total revenues) from the year ended October
31, 1994 to October 31, 1995 resulted primarily from the acquisition of
DermaQuest (effective November 1, 1994) and inclusion of Respiflow and MK
(effective April 1, 1994) for an entire fiscal year, which collectively
contributed approximately $38,447,000 or 53.7% of total revenues for
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fiscal 1995. Subsequent acquisitions, when completed, will continue to impact
the relative mix of revenues. Assuming the Company owned 100% of HMI on November
1, 1995, HMI would have accounted for approximately 67.9% of the combined pro
forma revenue ($237,858,000) for the year ended October 31, 1996.
The following table shows the payor mix for the Company's net
revenues for the periods presented.
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------
1996 1995 1994
------- ------ ------
Payor
- -----
<S> <C> <C> <C>
Medicare............................... 49.8% 48.1% 35.6%
Medicaid............................... 11.8 10.8 15.7
Private payors*........................ 38.4 41.1 48.7
------- ------ ------
Total revenues................ 100.0% 100.0% 100.0%
======= ====== ======
</TABLE>
The increase in Medicare as a percentage of total revenues for
the year ended October 31, 1996 as compared to 1995 and 1994 is primarily a
result of an increase in revenues attributable to the Company's specialized
mail-order pharmacy and medical supplies operations, which derives a
greater percentage of revenues from Medicare than does the rest of the Company.
The Company believes that its payor mix in the future will be determined
primarily by the payor profile of completed acquisitions and, to a lesser
extent, from shifts in existing business among payors. On a pro forma basis,
assuming the Company owned 100% of HMI on November 1, 1995, the payor mix for
the year ended October 31, 1996 (including HMI) would have been as follows:
Medicare 22.2%; Medicaid 27.5%; and private payors 50.3%.
The Company's revenues and profitability are affected by the
on-going efforts of third-party payors to contain health care costs by lowering
reimbursement rates, increasing case management review and negotiating reduced
contract pricing. In addition, certain private payors, such as managed care
providers, are able to negotiate lower rates than those paid by other payors.
The Company believes that a substantial portion of its revenues derived from
private payors in fiscal 1996 was subject to case management and managed care
and that this relationship will continue in the future. The Company maintains a
diversified offering of alternate site services and products in an attempt to
insulate the Company against potential reimbursement reductions for specific
products or services. Additionally, the Company is continuously exploring
alternatives to lower its operating costs, such as negotiating more favorable
supply contracts and identifying operating efficiencies at the branch level.
After years of consideration, a specific policy relating to
the coverage of respiratory medications has finally been released by Medicare.
This policy appears to reduce somewhat the number of patients qualifying for
Medicare coverage, sets specific reimbursement rates for compounded, generic and
branded respiratory medications, and requires, effective December 1, 1996, that
only licensed pharmacies may bill Medicare for Part B Medicare reimbursed
medications, including, but not limited to, respiratory medications. While the
implementation of this policy should reduce the overall number
- --------
* Includes managed care payors.
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<PAGE> 32
of competitors in the respiratory medications market place over the next year or
so, the Company cannot predict at this time the extent of the positive or
negative effect that this policy may have on the number of patients serviced,
Respiflow's pharmacy based operations or the marketing opportunities created
thereby.
The Company's gross margins will be influenced by the revenue
mix of its product lines and by changes in reimbursement rates. The Company
historically has recognized higher gross margins from its specialized mail-order
and medical supplies pharmacy, respiratory therapy and radiation therapy
operations than from its nursing and infusion therapy operations. Upon the
consummation of the pending acquisition of HMI, the Company believes that it
will derive a greater percentage of its revenues from chronic care
operations. As a result, the Company anticipates a reduction in the overall
gross margin with the amount of the reduction being dependent upon the ultimate
contribution of chronic care to the total mix of revenues. On a pro forma
basis, assuming the Company owned 100% of HMI on November 1, 1995, the gross
profit margin for the year ended October 31, 1996 (including HMI) would have
been 32.8% versus the actual 54.5% for the same period. Subsequent
acquisitions, when completed, will continue to impact the relative mix of
revenues and overall gross margin.
The Company amortizes goodwill over a period of 40 years. The
Company has selected the forty-year amortization convention based on the likely
period of time over which related economic benefits will be realized. The
Company believes its estimated goodwill life is reasonable given, among other
factors, the continuing movement of patient care to non-institutional settings,
expanding demand due to demographic trends, the emphasis of the Company on
establishing coverage in each of its local and regional markets and the
consistent practice of other alternate site health care companies. At each
balance sheet date, management assesses whether there has been a permanent
impairment in the value of goodwill and the amount of any impairment by
comparing anticipated undiscounted future cash flows from operating activities
with the carrying value of goodwill. The factors considered by management in
estimating future cash flows include current operating results, trends and
prospects of acquired businesses, as well as the effect of demand, competition,
market and other economic factors.
RESULTS OF OPERATIONS
YEAR ENDED OCTOBER 31, 1996 VS. YEAR ENDED OCTOBER 31, 1995
Revenues. Total revenues increased by $4,717,000 or 6.6% to
$76,304,000 for the year ended October 31, 1996 from $71,587,000 for the year
ended October 31, 1995. This increase was primarily attributable to an increase
of $4,388,000 or 10.3% in net respiratory, medical equipment and supplies sales
resulting primarily from an increase in the number of patients serviced in the
Company's specialty mail-order pharmacy and medical supplies operations.
Cost of Revenues. Cost of revenues increased by $1,950,000 or
6.0% to $34,680,000 for the year ended October 31, 1996 from $32,730,000 for the
year ended October 31, 1995. As a percentage of total revenues, cost of revenues
remained relatively constant at 45.5% and 45.7% for the year ended October 31,
1996 and 1995, respectively. Cost of revenues as a percentage of sales remained
relatively constant for respiratory, medical equipment and supplies sales (39.2%
for the year ended October 31, 1996 versus 39.3% for the corresponding 1995
period), but increased for patient services
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<PAGE> 33
(53.1% for the year ended October 31, 1996 versus 52.1% for the corresponding
1995 period) and decreased for infusion services (60.4% for the year ended
October 31, 1996 versus 61.4% for the corresponding 1995 period).
Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased by $3,778,000 or 12.7% to $33,552,000 for
the year ended October 31, 1996 from $29,774,000 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 and
medical supplies operations ($2,816,000) which increased principally as a
result of the building of infrastructure (such as payroll and payroll
related expenses and office expenses) in order to support the increased patient
volumes ($1,849,000). The remaining increase was primarily attributable to an
increase of $978,000 in corporate expenses including a charge of $456,000 in
connection with the resignation of the Company's former Chief Executive
Officer.
Interest Expense, Net. Interest expense, net increased by
$653,000 to $4,352,000 for the year ended October 31, 1996 from $3,699,000 for
the comparable 1995 period. This increase was primarily attributable to an
increase in interest expense due to borrowings under the Subordinated Loan
($1,003,000), partially offset by a decrease in interest expense due to lower
average borrowings and lower average interest rates under the senior secured
credit facilities ($262,000).
Provision for Income Taxes. Provision for income taxes as a
percentage of income before income taxes was 45.8% for the year ended October
31, 1996 and 42.2% for the year ended October 31, 1995. The increase in the
effective tax rate from the 1995 period to the 1996 period was primarily
attributable to higher levels of non-deductible expenses, primarily goodwill
amortization.
Net deferred tax assets, net of a valuation allowance, were
$2,425,000 at October 31, 1996, an increase of $200,000 from net deferred tax
assets of $2,225,000 at October 31, 1995, primarily as a result of an increase
in the provision for doubtful accounts. A valuation allowance, as required by
Statements of Financial Accounting Standards ("SFAS") No. 109, was provided for
deferred tax assets where it was not likely that such assets would be realized
through future income levels nor future or prior tax liabilities. During fiscal
1996, the Company decreased the valuation allowance by $155,000 primarily
due to the realization of state deferred tax assets based on current levels of
income. Based on current levels of income, management expects that levels of
future income should be sufficient to realize the net deferred tax assets.
Income Before Extraordinary Loss. As a result of the
foregoing, income before extraordinary loss increased by $1,159,000 to
$2,018,000 for the year ended October 31, 1996 from $859,000 for the year ended
October 31, 1995. Income before extraordinary loss for 1995 includes
non-recurring charges of $2,376,000 after tax. Income before extraordinary loss
decreased by $1,217,000 to $2,018,000 for the year ended October 31, 1996 from
$3,235,000 for the year ended October 31, 1995, excluding the nonrecurring
charges.
Extraordinary Loss - Early Extinguishment of Debt. An
extraordinary loss (net of tax benefit of $879,000) of $1,435,000 was recorded
in the 1996 results of operations, as a result of the write-off of the deferred
financing costs and discount associated with the early extinguishment of
borrowings under the Paribas Credit Agreement.
Net Income. As a result of the foregoing, net income decreased
by $276,000 or 32.1% to $583,000 for the year ended October 31, 1996 from
$859,000 for the year ended October 31, 1995. Net income in 1996 includes an
extraordinary loss on early extinguishment of debt of $1,435,000 after tax,
while net income for 1995 includes non-recurring charges of $2,376,000 after
tax. Excluding this loss and charges, net income for the year ended October 31,
1996 would have been $2,018,000, a decrease of $1,217,000 or 37.6% from
$3,235,000 for the year ended October 31, 1995.
YEAR ENDED OCTOBER 31, 1995 VS. YEAR ENDED OCTOBER 31, 1994
Revenues. Total revenues increased by $31,864,000 or 80.2% to
$71,587,000 for the year ended October 31, 1995 from $39,723,000 for the year
ended October 31, 1994. This increase was attributed to: (i) the inclusion of
DermaQuest for the year ended October 31, 1995 ($11,643,000 or 29.3%); (ii) the
inclusion of RespiFlow and MK for the year ended October 31, 1995 (whereas
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<PAGE> 34
RespiFlow and MK were only included for seven months in the year ended October
31, 1994) ($10,552,000 or 26.5% for the five months ended March 31, 1995 and an
increase of $3,167,000 or 8.0% for the seven months ended October 31, 1995 over
the comparable period in 1994 due to increased volumes of respiratory and
diabetic sales); (iii) the inclusion of Radamerica for the year ended October
31, 1995 (whereas Radamerica was only included for three months in the year
ended October 31, 1994) ($5,491,000 or 13.8% for the nine months ended July 31,
1995 with relatively flat revenues for the three months ended October 31, 1995
over the comparable period in 1994); and (iv) the remaining $1,011,000 or 2.6%,
primarily as a result of increased revenues in TNI's nursing and
para-professional services due to higher levels of patients serviced ($1,252,000
or 3.2%) and, to a lesser extent, due to the inclusion of DVLC for seven months
from the date of acquisition ($364,000 or .9%). These increases were offset by a
decline of $616,000 or 1.6% in comparable infusion service revenues.
Cost of Revenues. Cost of revenues increased by $13,921,000 or
74.0% from $18,809,000 for the year ended October 31, 1994 to $32,730,000 for
the year ended October 31, 1995. As a percentage of total revenues, cost of
revenues decreased from 47.4% to 45.7% for the years ended October 31, 1994 and
1995, respectively. This decrease was due to the higher mix of respiratory,
medical equipment and supply sales as a result of the inclusion of RespiFlow, MK
and DermaQuest for the year ended October 31, 1995, which generally have lower
cost of revenues as a percentage of revenues (39.3%) than revenues derived from
patient services (52.1%) and infusion services (61.4%). Respiratory, medical
equipment and supply sales increased from 42.9% of total revenues for the year
ended October 31, 1994 to 59.8% in the comparable 1995 period.
Selling, General and Administrative Expenses. Selling, general
and administrative expenses increased by $13,806,000 or 86.5% from $15,968,000
for the year ended October 31, 1994 to $29,774,000 for the comparable 1995
period. This increase was attributable to: (i) the inclusion of DermaQuest for
the year ended October 31, 1995 ($5,498,000 or 34.4%); (ii) the inclusion of
RespiFlow and MK for the year ended October 31, 1995 (whereas RespiFlow and MK
were only included for seven months in the year ended October 31, 1994)
($4,115,000 or 25.8% for the five months ended March 31, 1995 and an increase of
$906 or 5.7% for the seven months ended October 31, 1995 over the comparable
period in 1995 due primarily to an increase in incentive compensation under a
management agreement); and (iii) the inclusion of Radamerica for the year ended
October 31, 1995 (whereas Radamerica was only included for three months in the
year ended October 31, 1994) (approximately $2,825,000 or 17.7%).
Non-Recurring Charges. The Company recorded non-recurring
charges totaling $3,898,000 in fiscal 1995 related to the write-off of costs
related to an abandoned public offering ($2,808,000), abandoned acquisitions
($605,000) and the consolidation of certain of the Company's facilities
($485,000).
Interest Expense, Net. Interest expense, net increased from
$809,000 for the year ended October 31, 1994 to $3,699,000 for the comparable
1995 period. This increase was attributable to: (i) an increase in interest
expense due primarily to interest expense on borrowings under the Paribas Credit
Agreement ($2,758,000) which includes amortization of discounts and deferred
financing costs ($902,000 in fiscal 1995); (ii) an increase in interest
expense-related parties, net ($95,000); and (iii) a decrease in interest income
primarily due to lower average cash balances ($37,000). See "--Liquidity and
Capital Resources."
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<PAGE> 35
Provision for Income Taxes. Provision for income taxes as a
percentage of income before income taxes and cumulative effect of an accounting
change was 42.2% for the year ended October 31, 1995 and 40.0% for the year
ended October 31, 1994. The increase in the effective tax rate from the 1994
period to the 1995 period was attributable to a shift in the percentage mix of
the Company's profits to jurisdictions with higher state tax rates.
Net deferred tax assets, net of a valuation allowance, were
$2,225,000 at October 31, 1995, an increase of $1,866,000 from net deferred tax
assets of $359,000 at October 31, 1994, primarily as a result of an increase in
the provision for doubtful accounts. A valuation allowance, as required by
SFAS No. 109, was provided for deferred tax assets where it was not likely that
such assets would be realized through future income levels nor future or prior
tax liabilities. During fiscal 1995, the Company increased the valuation
allowance by $232,000 primarily as a result of the establishment of state net
operating loss carryforwards. Based on current levels of income, management
currently expects that levels of future income should be sufficient to realize
the net deferred tax assets.
Net Income. As a result of the foregoing, net income decreased
by $1,922,000 or 69.1% from $2,781,000 for the year ended October 31, 1994 to
$859,000 for the year ended October 31, 1995. Net income for 1995 includes
non-recurring charges of $2,376,000 after tax, while net income for 1994
includes a $300,000 benefit for the cumulative effect of an accounting change
for the adoption of SFAS No. 109. Excluding these charges and benefit, net
income for the year ended October 31, 1995 would have been $3,235,000, an
increase of $754,000 or 30.4% from $2,481,000 for the year ended October 31,
1994.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1996, the Company experienced cash outflows from
operations of $3,263,000, primarily as a result of an increase in accounts
receivable of $5,032,000 (net of increases in allowance for doubtful accounts
and receivables acquired in purchase transactions). The Company utilized
$13,903,000 in investing activities, consisting of $11,078,000 for payments on
acquisitions payable, $1,785,000 for acquisitions (primarily the acquisition of
Health Meds), net of cash acquired, and $1,040,000 for capital expenditures.
During fiscal 1995, the Company experienced cash outflows from operations
of $1,335,000, primarily as a result of an increase in accounts receivable of
$6,258,000 (net of increases in allowance for doubtful accounts and receivables
acquired in purchase transactions). The Company utilized $10,391,000 in
investing activities, consisting of $5,957,000 for payments on acquisitions
payable, $3,529,000 for acquisitions, net of cash acquired, and $1,066,000 for
capital expenditures, offset by $161,000 of payments received on notes
receivable-related parties. During fiscal 1994, the Company generated positive
cash flow from operations of $3,748,000 and utilized $15,163,000 in investing
activities (including $12,832,000 for acquisitions, net of cash acquired, and
$456,000 for capital expenditures).
Cash requirements during the year ended October 31, 1996 for
operating and investing activities were met through borrowings under the Paribas
Credit Agreement, the Credit Facility and the $10,000,000 Subordinated Loan from
HPII as well as with proceeds from the issuance of 4,400,000 Units to HPII at
the Initial and Second Closings. Additional cash requirements in the 1995 and
1994 fiscal years were met through borrowings under the Paribas Credit
Agreement.
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<PAGE> 36
At October 31, 1996, the Company had positive working capital
of $26,201,000 reflecting an increase of $30,907,000 from October 31, 1995 as a
result of the payment of $14,805,000 of acquisitions payable and current
maturities of long-term debt primarily due to the proceeds from issuance of
Common Stock to HPII. At October 31, 1995, the Company had a working capital
deficit of $4,706,000 as a result of acquisitions payable of $15,062,000
(including $5,973,000 related to RespiFlow/MK and $8,832,000 related to
DermaQuest). Excluding acquisitions payable, the Company had positive working
capital of $10,356,000. On January 10, 1996, the $5,973,000 acquisition payable
related to Respiflow/MK was paid in cash. The Company paid the $8,832,000
acquisition payable during the fiscal year ended October 31, 1996 as follows:
$4,000,000 was paid in cash through drawing of the letter of credit which was
issued as collateral for DermaQuest contingent payments; $3,832,000 was paid
through the issuance of 370,219 shares of Common Stock valued at $10.35 per
share; and the remaining $1,000,000 acquisition payable balance plus accrued
interest in cash through proceeds from the Initial Closing.
The Company does not have pending any material commitments
regarding capital expenditures, and any additional capital expenditures will be
subject to applicable restrictions under the Credit Facility. Based on current
planned capital expenditures, the Company believes it has adequate capital
resources to conduct its operations for the next twelve months.
It is anticipated that, until the acquisition of HMI is
consummated by the Company pursuant to the Merger Agreement, HMI will be able to
meet its ordinary cash operating needs. If, however, HMI incurs additional or
unusual costs, payment on its receivables slows, and/or it does not receive
ordinary credit terms for the purchase of pharmaceutical product, as
anticipated, it may require additional cash to fund operations, and there can be
no assurance that such funds will be available to the Company, or if available,
will be on terms acceptable to the Company. According to HMI, if the Merger
Agreement is not consummated or HMI does not continue satisfactory relationships
with its suppliers, it is likely that HMI will seek protection under the Federal
Bankruptcy laws.
Further expansion of the Company's business (particularly
through acquisitions) may require the Company to incur additional debt or offer
additional equity if cash generated from operations, cash on hand and amounts
available under the Credit Facility are inadequate or not available to meet its
needs. There can be no assurance that any such additional debt or equity will be
available to the Company, or if available, will be on terms acceptable to the
Company. In addition, covenants contained in the Credit Facility restrict the
Company from entering into transactions not in the ordinary course of business,
including making acquisitions and issuing capital stock, without consent.
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 October 31,
1996 and 1995, $24,414,000 (26.9%) 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 required substantial documentation in
order to process claims. The collection time for accounts receivable is
typically the longest for services that relate to new patients or additional
services requiring medical review for existing patients.
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<PAGE> 37
Accounts receivable increased by $5,508,000 from October 31,
1995 to October 31, 1996 principally for the following reasons: (i) an increase
of $3,332,000 at DermaQuest, discussed below; and (ii) an increase of $2,961,000
at RespiFlow and MK related primarily to higher sales levels, partially offset
by; (iii) a decrease of $785,000 in other miscellaneous activity.
During fiscal 1996, the Company experienced a significant
increase in accounts receivable at its DermaQuest operation whose main product
lines include wound care and orthotic products. Medicare, to whom substantially
all DermaQuest claims are initially submitted for payment, has subjected these
claims to an extensive review process and, in many cases, has required
DermaQuest to pursue payment through the fair hearing process of the Medicare
intermediary. This has created significant delays in payments, in many cases
extending beyond twelve months, leading to the significant buildup in accounts
receivable and corresponding negative impact on cash flow. The Company believes
that this trend will continue through the 1997 fiscal year. In establishing the
net realizable value of its accounts receivable for DermaQuest, the Company has
relied on its historical payment experience which includes its highly favorable
outcomes in the fair hearing process. The Company believes that based on such
prior favorable payment experience, current regulations and its billing and
related documentation practices, there is no current basis to indicate that
DermaQuest would be any less successful in the collection of its accounts
receivable as reported.
Management's goal is to maintain accounts receivable levels
equal to or less than 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. Days sales outstanding ("DSOs") is a measure of the average
number of days taken by the Company to collect its accounts receivable,
calculated from the date services are rendered. For each of the years ended
October 31, 1996, 1995 and 1994, the Company's average DSOs were 109, 97 and 65,
respectively, with the increase for the year ended October 31, 1996 principally
due 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 DSOs.
Credit Facility. In March 1995, the Company amended and
restated the Paribas Credit Agreement with Banque Paribas, as agent, which
provided the Company with a $35,000,000 senior secured credit facility. On July
31, 1996, the Company completed a new $100,000,000 senior secured revolving
credit facility, underwritten by Bankers Trust Company who is also acting as
Agent Bank. The new Credit Facility replaced the Company's existing Paribas
Credit Agreement, which was repaid out of proceeds from the Second Closing with
HPII and borrowings under the Credit Facility (which closed concurrently). In
connection with the repayment of the Paribas Credit Agreement, the Company
recorded a non-cash, after-tax, extraordinary charge of $1,435,000 (net of tax
benefit of $879,000) in the fiscal year ended October 31, 1996, relating to the
write-off of the deferred financing costs and discount associated with the
Paribas Credit Agreement.
Pursuant to the Credit Facility and subject to the terms
thereof, up to $85,000,000 of the total facility may be used by the Company for
the acquisition of other alternate site health care providers with the balance
not used for acquisitions to be used for working capital. Unused portions of the
revolving loans may be borrowed and reborrowed at the Company's discretion
subject to applicable provisions of the Credit Facility. The loans under the
Credit Facility are secured by, among other things, a lien on substantially all
of the Company's and its subsidiaries assets, a pledge of the Company's
ownership interest in its subsidiaries and guaranties by the Company's
subsidiaries. The
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<PAGE> 38
loans mature on July 31, 2001 with reductions in availability of funds
commencing on July 31, 1998 through maturity. The Credit Facility provides that
subject to the terms thereof, the Company may make borrowings either at the Base
Rate (as defined in the Credit Facility), plus 1% or the Eurodollar Rate, plus
2%. As of October 31, 1996 and January 22, 1997, Eurodollar Rate borrowings bore
interest at a rate of 7.375% and 7.5% per annum, respectively. As of January 22,
1997, the Company had outstanding borrowings of $43,838,857 under the Credit
Facility. Availability under the Credit Facility was $56,161,143 as of
January 22, 1997.
The Company agreed to changes to its Credit Facility with its
senior lenders in order to accommodate the purchase of the senior secured
indebtedness of HMI and the 8,964,292 shares of HMI common stock purchased by
the Company pursuant to the Stock Purchase Agreement. The principal changes
include temporary adjustments to certain financial covenants until April 30,
1997, by which time the Company believes it will have either consummated the
acquisition pursuant to the Merger Agreement and/or have obtained additional
capital, such that it will be in compliance with the terms of the Credit
Facility at that time. The Company also agreed that, until the acquisition of
HMI has been consummated, any additional acquisitions would be subject to the
specific approval of its senior lenders.
Subject to certain exceptions, the Credit Facility prohibits
or restricts, among other things, the incurrence of liens, the incurrence of
indebtedness, certain fundamental corporate changes, dividends, the making of
specified investments and certain transactions with affiliates. In addition, the
Credit Facility contains affirmative and negative financial covenants
customarily found in agreements of this kind, including the maintenance of
certain financial ratios, such as interest coverage, debt to earnings before
interest, taxes, depreciation and amortization ("EBITDA") and minimum EBITDA. At
October 31, 1996, the Company was in compliance with all financial covenants
contained in the Credit Facility.
RespiFlow/MK. During fiscal 1995, the Company paid
approximately $5,877,000 of the $11,850,000 acquisition payable to the sellers
in cash. 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 the 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 January 22, 1997, the Company's
obligation under the Radamerica Price Support Payment would have been
$2,296,875. The Company may pay the Radamerica Price Support Payment in whole or
in part in shares of Common Stock or in cash 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.
At the Radamerica closing, the Company loaned to two
Radamerica sellers an aggregate of $1,100,000 in connection with the repayment
of certain indebtedness owed to a former shareholder of Radamerica whose shares
had been purchased by them. The principal and interest of the loans are due and
payable on the date the Radamerica Price Support Payment is paid, or if no
Radamerica Price Support Payment is due, on February 1, 1998, and are secured by
a pledge of an aggregate of 83,334
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<PAGE> 39
shares of Common Stock. $136,000 of the loans had been repaid as of October 31,
1996. See "Business -- History of the Company."
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 such acquisition payable as follows: on
January 16, 1996, $4,000,000 was paid in cash through drawings of the letter of
credit which was issued as collateral for any DermaQuest contingent payments;
$3,832,000 was paid through the issuance of 370,219 shares of Common Stock on
February 1, 1996 valued at $10.35 per share; and 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.
There are no additional payments required to be paid to the
DermaQuest sellers based upon 1996 pretax earnings.
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 or in additional shares of Common Stock. If the sale
price exceeds the initial valuation by more than 110%, then the difference shall
be paid to the Company by the sellers in cash and shares of Common Stock in the
same proportion of cash and Common Stock as the $8,832,000 was paid.
The Company has agreed that from November 1, 1995 to October
31, 1999, RespiFlow, MK and DermaQuest will be managed by E/L Associates, an
affiliate of certain selling shareholders of those entities. Pursuant to a
management agreement, E/L Associates is entitled to receive an annual management
fee of $240,000 for the fiscal year commencing November 1, 1995, increasing to
$390,000 on November 1, 1996 and $490,000 on November 1, 1997 and an incentive
fee with respect to RespiFlow, MK and DermaQuest equal to 7% of their
annual pretax earnings, payable based on achieving minimum pretax earnings of
$3,800,000 at RespiFlow and MK combined and $3,000,000 at DermaQuest (in each
case, without giving effect to interest charged on the Company's investment
in RespiFlow, MK and DermaQuest). The Company has guaranteed the obligations of
RespiFlow, MK and DermaQuest under this management agreement.
Pending VIP Acquisition. Pursuant to the stock purchase
agreements, the Company is required to pay to the sellers of the VIP Companies
at the VIP Closing, $10,250,000 in cash (of which $750,000 and 145,455 shares of
Common Stock valued at $750,000 has been posted as a contract deposit). The cash
portion of the contract deposit has, with the Company's consent, been loaned to
the VIP Companies to be used for working capital purposes. In addition, at the
VIP Closing the Company will assume all stated liabilities of the VIP Companies
as of the VIP Closing ($8,434,000 at September 30, 1996, 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 the balance of such assumed
liabilities, principally the amounts due to the former officers/shareholders.
As of January 22, 1997, the Company has not received approval
from its lenders under the Credit Facility to consummate the VIP Acquisition and
there can be no assurance that such
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<PAGE> 40
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,
among other things, various closing conditions, including the receipt of
necessary governmental approvals (including the submission and approval of a
plan of financing), the accuracy at closing of various representations and
warranties and the compliance by the sellers with certain covenants and
agreements contained in the stock purchase agreements. In July 1996, the Company
announced that the consummation of the VIP Acquisition would not occur
concurrently with the Second Closing under the Purchase Agreement with HPII, in
that, among other things, the approvals and consents necessary to consummate the
transactions had not been and could not be obtained at that time. The Company
believes that the sellers are not in compliance with certain provisions
contained in the stock purchase agreements concerning the VIP Companies and has
notified the sellers of the VIP Companies regarding the same. The Company cannot
predict when or whether all of the requisite consents and approvals will be
obtained and the other closing conditions will be satisfied, and, regardless,
when or whether the transaction will ultimately be consummated.
If the Company defaulted under the VIP Acquisition agreements,
it could suffer a loss of its contract deposit which has been posted as
liquidated damages. In the event that the transaction is not consummated for
reasons other than a Company default, the deposit is refundable to the Company.
In any event, the Company's liquidity will not be materially adversely impacted
because the cash portion of the deposit was paid by the Company in the 1994
fiscal year.
HPII Transaction. On November 20, 1995, the Company entered
into the Purchase Agreement with 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, at a purchase price of $9.00 per Unit for an aggregate
purchase price of up to $39,600,000.
On January 10, 1996, HPII loaned to the Company the principal
amount of $10,000,000. The Subordinated Loan bore interest at the rate of 20%
per annum through May 29, 1996 and 12% thereafter and was repaid on July 31,
1996 with proceeds from the Second Closing. The use of the proceeds of the loan
was as follows: (i) $6,217,000 to satisfy the remaining balance, plus accrued
interest on the RespiFlow/MK acquisition payable; (ii) $350,000 for expenses
relating to the HPII transaction; and (iii) the balance of $3,433,000 to be used
for general corporate and working capital purposes.
On May 30, 1996, HPII purchased from the Company at the
Initial Closing an aggregate of 600,000 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.
On July 31, 1996, the Company sold to HPII at a Second Closing
an aggregate of 3,800,000 Units for $34,200,000, in addition to the Units sold
at the Initial Closing described above. The use of the $34,200,000 proceeds of
the issuance plus borrowings of $8,992,000 under the Credit Facility (which
closed concurrently) were as follows: (i) $29,832,000 to satisfy the remaining
balance plus accrued interest and fees under the Paribas Credit Agreement; (ii)
$10,201,000 to satisfy the remaining balance plus accrued interest on the
Subordinated Loan; (iii) $3,012,000 for expenses related to the Credit Facility;
(iv) $125,000 to satisfy accounts payable; and (v) $22,000 for expenses related
to the HPII transaction.
The total number of Units sold to HPII was 4,400,000 which
represents 4,400,000 shares of Common Stock and Warrants to purchase an
additional 3,000,000 shares of Common Stock. The
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<PAGE> 41
aggregate number of shares represented (assuming all the Warrants are
exercised),therefore, by all of the Units sold to HPII in connection with the
Purchase Agreement was 7,400,000.
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 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).
Pursuant to the Registration Agreement entered into at the
Initial Closing, 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 8, 1997, the Company entered into a stock purchase
agreement with HPII pursuant to which HPII agreed, subject to the conditions
stated therein, to purchase 898,877 shares of the Company's Common Stock (the
"Additional Shares") at a purchase price of $11.125 per share for an aggregate
purchase price of $10,000,000. Consummation of this transaction is subject to,
among other things, receipt of applicable regulatory approvals and may be
completed at the Company's request, either prior to or concurrent with the HMI
Merger Agreement subject to the terms of the stock purchase agreement. The
Additional Shares are also covered by the Registration Agreement.
Pending HMI Acquisition. On November 13, 1996, the Company
acquired the senior secured indebtedness of HMI from HMI's Lenders. In addition,
subject to the terms and conditions of the Supplemental Agreement, the Company
also agreed to lend to HMI from time to time, up to $5,000,000 for working
capital purposes and to forebear from exercising any remedies under the HMI
Credit Agreement until January 31, 1997. As of January 22, 1997, the Company had
advanced $4,649,285 to HMI for working capital purposes. Pursuant to the Stock
Purchase Agreement, on January 14, 1997, the Company acquired 8,964,292 shares
of HMI common stock, representing approximately 49% of HMI's outstanding common
stock for a cash purchase price of $8,964,292, which actual cash outlay
was reduced by the $4,649,285 advanced for working capital purposes pursuant to
the Supplemental Agreement. At the closing of the Stock Purchase Agreement, the
Company and HMI also entered into the HMI Registration Agreement providing for
the registration under the Securities Act of 1933, commencing on the earlier of
June 30, 1997 or the date on which the Merger Agreement is terminated, of the
shares of HMI common stock acquired by the Company pursuant to the Stock
Purchase Agreement and issuable upon the exercise of the Option. On November
13, 1996, HMI also issued to the Company the Option and the Company and HMI
entered into the Merger Agreement, as amended, whereby HMI will be acquired by
the Company at a price of $1.50 per share for each outstanding share of HMI
common stock not already owned by the Company.
Consummation of the Merger Agreement is subject to various
conditions, including receipt of financing by the Company sufficient to complete
the merger and approval
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<PAGE> 42
of the lenders under the Credit Facility, receipt of certain regulatory
approvals and approval by HMI's shareholders. See "Business -- History of the
Company."
The aggregate amount necessary to complete all aspects of the
pending HMI acquisition (after giving effect to the purchase of HMI's senior
debt, the Stock Purchase Agreement, the Merger Agreement (including professional
fees) and settlement of certain shareholder litigation, but exclusive of trade
payables aggregating approximately $10,000,000) is approximately $60,000,000,
all of which has been, or the Company anticipates, will be provided through
borrowing's under the Credit Facility and the sale of $10,000,000 of the
Additional Shares to HPII.
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 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.
See "Legal Proceedings" with respect to certain legal
proceedings concerning HMI.
IMPACT OF RECENT ACCOUNTING STANDARDS
In March 1995, the FASB issued SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires that long-lived assets and certain identifiable intangible
assets' carrying values be evaluated based on the future (undiscounted and
without interest charges) cash flows expected to be realized from the use of the
asset and its eventual disposition. If the sum of the expected future cash flows
from an asset is less than the carrying value, an impairment loss must be
recognized. SFAS No. 121 is effective for fiscal years commencing after December
15, 1995. The impact of adopting SFAS No. 121 in fiscal 1997, is not expected to
have any impact on the Company's financial position or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation," which prescribes a new method of accounting for
stock-based compensation that determines compensation expense based on fair
value measured at the grant date. SFAS No. 123 gives companies that grant stock
options or other equity instruments to employees, the option of either
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<PAGE> 43
adopting the new rules or continuing current accounting under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
however disclosure would be required of the pro forma amounts as if the new
rules had been adopted. SFAS No. 123 is effective for transactions entered into
in fiscal years beginning after December 15, 1995. The Company intends to
continue current accounting and provide the disclosure only, as permitted under
SFAS No. 123, beginning with its annual financial statements for the year ending
October 31, 1997.
INFLATION
Inflation has not had a significant impact on the Company's
operations to date.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements and required financial
statements schedule of the Company are located beginning on page F-i of this
Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT.
The following table sets forth certain information concerning
the Company's directors and officers:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
<S> <C> <C>
Timothy M. Aitken............................ 52 Chairman of the Board and Chief Executive
Officer
Robert W. Fine............................... 60 President, Chief Operating Officer and Director
Vincent J. Caruso............................ 49 Executive Vice President and Chief
Administrative Officer
Wayne A. Palladino........................... 38 Senior Vice President and Chief Financial
Officer
H. Gene Berger............................... 56 Executive Vice President
Michael P. Garippa........................... 41 Vice President
Kevin M. Buhrman............................. 45 Vice President
Leslie J. Levinson........................... 41 Secretary
Richard A. Yoken............................. 46 Director
Elliott H. Vernon............................ 54 Director
Scott A. Shay................................ 39 Director
David M. Golush.............................. 52 Director
Robert Zalaznick............................. 39 Director
</TABLE>
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<PAGE> 44
Certain biographical information regarding each director and
officer of the Company is set forth below:
Timothy M. Aitken has served as Chairman of the Board and
Chief Executive Officer of the Company since January 15, 1997. Prior to joining
the Company, Mr. Aitken served as an independent consultant to the health care
industry from November 1996 until January 1997. From June 1995 until November
1996, Mr. Aitken served as the vice chairman and president of Apria Healthcare
Group, Inc., a California based home health care company. Since September 1995,
he has also served as chairman of the board of Omnicare Plc, a publicly listed
company in the United Kingdom. From 1990 until June 1995, Mr. Aitken served as
chairman of the board, president and chief executive officer of Abbey Healthcare
Group Inc., a California based home health care company.
Robert W. Fine has been a Director of the Company since July
1988. Mr. Fine has served as Chief Operating Officer since June 1993, President
of the Company since August 1995 and Acting Chief Executive Officer from May
1996 to January 1997. From June 1993 until August 1995, he also served as a Vice
President of the Company. From November 1990 until June 1993, Mr. Fine was the
president of the domestic operations of Fortress Company, a manufacturer of
wheelchairs and related equipment. Since September 1988, Mr. Fine has been the
president and a principal shareholder of Alternative Care Systems, Inc., a
company which provides consulting services to the health care industry,
including the Company. Prior thereto, he served as president of Conac Corp.,
which also provides consulting services to the health care industry.
Vincent J. Caruso has been Executive Vice President and Chief
Administrative Officer of the Company since January 1996. From 1988 through
1995, Mr. Caruso served in various executive capacities at the Travelers Group
(formerly The Travelers Companies) and several of its subsidiaries, including:
executive vice president, chief financial and operations officer and director of
The Copeland Companies; vice president finance and group chief financial officer
- -- investment operations of The Travelers Companies; and executive vice
president and chief financial officer of The Travelers Mortgage Services Inc.
From 1987 through 1988, Mr. Caruso was chief financial and administrative
officer and a director of TSG Holdings, Inc., the U.S. management company of a
London Stock Exchange listed investment company. From 1975 through 1987, Mr.
Caruso served in various financial management positions at Long Island Trust
Company, N.A. and NABAC Investment Services Corp., including senior vice
president and chief financial officer.
Wayne A. Palladino has been a Vice President and Chief
Financial Officer of the Company since February 1991 and Senior Vice President
since September 1996. From September 1989 until joining the Company, he served
as the vice president-finance and chief financial officer of ESC Electronics
Corp., an electronics manufacturer. From December 1985 until January 1991, he
was a principal in Pennwood Capital Corporation, a private investment concern.
From January 1984 through
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<PAGE> 45
December 1985, Mr. Palladino was a senior associate in the business development
unit of W.R. Grace & Co., Inc.
H. Gene Berger has been Executive Vice President of the
Company since July 1995 and served as a Vice President from June 1992 until July
1995. From June 1992 until November 1993, Mr. Berger was the principal officer
in charge of operations at Steri, a subsidiary of the Company. From October 1991
to June 1992, Mr. Berger was the President, Chief Operating and Executive
Officer of the Company. Prior thereto, from January 1990, Mr. Berger was
president of Jayile Associates, a consulting firm to the health care industry.
Beginning in January 1987, Mr. Berger was employed by Biotech Capital
Corporation, a venture capital firm, and was designated by such firm to serve as
president of three affiliated companies in the health care sector. From January
1984 through November 1986, Mr. Berger was chairman of the board, chief
executive officer and president of Clinical Sciences, Inc., a company in the
immunodiagnostics and biotechnology fields.
Michael P. Garippa has been a Vice President of the Company
and the principal officer in charge of the Company's infusion therapy,
respiratory therapy and home medical equipment operations since September 1993.
Since June 1985, Mr. Garippa has been the president of PromptCare, a subsidiary
of the Company.
Kevin M. Buhrman has been a Vice President of the Company
since June 1992. Since November 1993, Mr. Buhrman has been the principal officer
in charge of the Company's nursing and para-professional operations. From June
1992 until November 1993, Mr. Buhrman was the principal officer in charge of
TNI's operations. From February 1990 to June 1992, Mr. Buhrman was executive
vice president of TNI. From February 1988 to 1990, Mr. Buhrman was the corporate
administrator of TNI's New Jersey offices. From 1970 through 1988, he managed
the Respiratory Care Department of Riverview Medical Center in Red Bank, New
Jersey.
Leslie J. Levinson has served as Secretary of the Company
since October 1990. Since June 1991, he has been a partner in the law firm of
Baer Marks & Upham LLP, which firm serves as counsel to the Company. From
January 1988 until June 1991, he was a partner in the law firm of Dow, Lohnes &
Albertson, which firm served as counsel to the Company.
Richard A. Yoken has been a Director of the Company since June
1992. Since May 1990, Mr. Yoken has been the chairman, president and chief
executive officer of The Portfolio Strategy Group, Inc., an investment
consulting firm. Since July 1984, he also has been the president and principal
shareholder of Yoken & Company, Inc., a corporate and personal financial
consulting firm.
Elliott H. Vernon has been a Director of the Company since
December 1992. Since July 1992, he has been the chairman of the board, president
and chief executive officer of HealthCare Imaging Services, Inc., a medical
diagnostic imaging services company. Since January 1993, Mr. Vernon has been of
counsel to the New Jersey law firm of Schottland, Aaron & Manning, Esqs.
(formerly Schottland, Vernon, Aaron, Plaza & Costanzo, Esqs., of which he was a
senior partner for more than
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<PAGE> 46
five years). Additionally, Mr. Vernon was the executive vice president and
general counsel of Aegis Holdings Corporation, a company offering financial
services through its investment management subsidiary and its capital markets
consulting subsidiary on an international basis.
Scott A. Shay has been a Director of the Company since January
1996 and served as Acting Chairman of the Board from September 1996 until
January 1997. Since March 1995, Mr. Shay has been the executive vice president
of Hyperion Funding II Corp., the general partner of the general partner of
HPII. Since 1988, Mr. Shay has been a control person of Hyperion Partners L.P.,
an affiliate of HPII, and has at various times acted as a director of various
entities owned directly and indirectly by Hyperion Partners L.P., including,
currently, Bank United Corp. and Hyperion Capital Management, Inc. Since 1988,
Mr. Shay also has been a managing director of Ranieri & Co., Inc., an investment
consulting firm. Prior to joining Ranieri & Co., Mr. Shay was a director of
Salomon Brothers Inc where he was employed from 1980 until 1988, and where he
was responsible at various times for the firm's thrift mergers and acquisition
practice and for mortgage banking financing and mergers and acquisitions.
David M. Golush has been a Director of the Company since July
1996. Since January 1988, Mr. Golush has been a managing director of Ranieri &
Co., Inc. He is an officer of direct and indirect subsidiaries of Hyperion
Partners L.P. and HPII and is currently a director of Bank United Corp. Prior to
joining Ranieri & Co., Inc., Mr. Golush was vice president of Salomon Brothers
Inc., where he was employed from 1972 until 1988. From 1984 until 1987, he was
chief administrative officer of Salomon's Mortgage and Real Estate Department.
Robert Zalaznick has been a Director of the Company since July
1996. Since July 1996, Mr. Zalaznick has been the administrator of the Gene
Therapy Core Facility at Cornell University Medical College. He also serves as
the divisional administrator, Department of Medicine/Division of Pulmonary and
Critical Care Medicine at the New York Hospital -- Cornell Medical Center, a
position he has also held since April 1994. Since July 1992, he has been the
president of Robert Zalaznick Associates, Inc., a healthcare consulting firm.
From 1988 until 1994, Mr. Zalaznick was associated with St. Luke's - Roosevelt
Hospital Center as consultant to the Faculty Practice Plan; business manager,
West Side Medical Emergency Services, P.C., and consulting business manager to
Psychiatric Associates of Manhattan, P.C.
All directors of the Company are elected by the shareholders
for a one-year term and hold office until the next annual meeting of
shareholders of the Company and until their successors are elected and
qualified. There are no family relationships among the directors and officers of
the Company. All directors who are not employees of the Company are entitled to
receive a fee of $10,000 per annum. In addition, all directors are reimbursed
for all reasonable expenses incurred by them in acting as a director or as a
member of any committee of the Board of Directors. Officers are chosen by and
serve at the discretion of the Board of Directors. All of the Company's
executive officers other than Kevin M. Buhrman have employment agreements with
the Company. See "Executive Compensation -- Employment Agreements; Termination
of Employment and Change-in-Control Arrangements."
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<PAGE> 47
In May 1996, Joseph J. Raymond resigned as Chief Executive
Officer of the Company. In order to facilitate an orderly transition of
responsibilities, Mr. Raymond remained as Chairman of the Board until August 15,
1996. Effective with Mr. Raymond's resignation, Mr. Fine assumed the additional
role of Acting Chief Executive Officer and in September 1996, Mr. Shay became
Acting Chairman. Messrs. Fine and Shay relinquished such additional duties
effective January 15, 1997, when Mr. Aitken joined the Company.
In connection with Mr. Raymond's resignation 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: a cash
payment to Mr. Raymond of $350,000 (which payment was made on May 23, 1996); the
vesting of 46,667 unvested stock options previously granted to Mr. Raymond;
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 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. Mr. Raymond will be compensated
for such services 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, on June 7, 1996, TWHH Funds L.P., a subsidiary of HPII, loaned the sum
of $1,100,000 to Mr. Raymond until May 29, 1997, which loan is secured by a
pledge of 150,000 shares of Common Stock owned by him.
Pursuant to a shareholders' agreement, dated as of August 5,
1994, by and among the Company, Paribas Principal, Inc., an affiliate of Banque
Paribas, the Company's former principal senior lender ("Paribas Principal") and
Mr. Raymond, upon the request of Paribas Principal, the Company and Mr. Raymond
have agreed to use their best efforts to cause a representative of Paribas
Principal to be elected to the Board of Directors.
Concurrent with the closing of, and pursuant to the terms of,
the Subordinated Loan, Scott A. Shay, a designee of HPII, became a Director of
the Company. Concurrent with the Second Closing of the Purchase Agreement,
Messrs. Golush and Zalaznick, two additional designees of HPII became members of
the Company's Board of Directors. See "Certain Relationships and Related
Transactions -- Transactions with Principal Shareholders."
BOARD COMMITTEES
The Company's Board of Directors has an Audit Committee and a
Compensation Committee but does not have a nominating committee. The members of
each committee are appointed by the Board of Directors.
Audit Committee. The Audit Committee recommends to the Board
of Directors the auditing firm to be selected each year as independent auditors
of the Company's financial statements and to perform services related to the
completion of such audit. The Audit Committee also has responsibility for: (i)
reviewing the scope and results of the audit; (ii) reviewing the Company's
financial condition and results of operations with management; (iii) considering
the adequacy of the internal accounting and control procedures of the Company;
and (iv) reviewing any non-audit services and special engagements to be
performed by the independent auditors and considering the effect of such
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<PAGE> 48
performance on the auditors' independence. Messrs. Golush, Zalaznick and Vernon
currently serve as members of the Audit Committee.
Compensation Committee. The Compensation Committee reviews and
approves overall policy with respect to compensation matters, including such
matters as compensation plans for employees and employment agreements and
compensation for executive officers. The Compensation Committee currently
consists of Messrs. Shay and Yoken.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
The Commission has comprehensive rules relating to the
reporting of securities transactions by directors, officers and shareholders who
beneficially own more than 10% of the Company's Common Stock (collectively, the
"Reporting Persons"). These rules are complex and difficult to interpret. Based
solely on a review of Section 16 reports received by the Company from Reporting
Persons, the Company believes that no Reporting Person has failed to file a
Section 16 report on a timely basis during the most recent fiscal year other
than (i) Wayne A. Palladino, the Senior Vice President and Chief Financial
Officer of the Company, who filed a Form 4 late with respect to two transactions
that occurred in December 1995, (ii) H. Gene Berger, an Executive Vice President
of the Company, who filed a Form 4 late with respect to one transaction that
occurred in March 1996, (iii) Joseph J. Raymond, the former Chairman and Chief
Executive Officer of the Company, who filed a Form 4 late with respect to one
transaction that occurred in April 1996, (iv) Michael P. Garippa, a Vice
President of the Company, who filed two Form 4s late with respect to two
transactions that occurred in December 1995 and April 1996, and (v) Kevin M.
Buhrman, a Vice President of the Company, who filed a Form 4 late with respect
to one transaction that occurred in April 1996.
ITEM 11. EXECUTIVE COMPENSATION.
The following table summarizes all compensation earned by or
paid to the Company's Chief Executive Officer and each of the four other most
highly compensated executive officers of the Company whose annual salary and
bonus exceeded $100,000 (collectively, the "Named Officers") for services
rendered in all capacities to the Company for the three years ended October 31,
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
Annual Restricted Securities
NAME AND Fiscal Compensation Stock Underlying ALL OTHER
PRINCIPAL POSITION Year Salary Bonus Awards Options COMPENSATION
- -------------------------------- ------ ------ -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Joseph J. Raymond(1) 1996 $158,654 $ -- $-- -- $415,577 (2)
Former Chairman of the Board 1995 272,621 -- -- 70,000 --
and Chief Executive Officer 1994 151,036 150,000 -- -- --
Robert W. Fine(3) 1996 $228,461 $ -- $-- -- $ --
President and 1995 218,000 -- -- 15,000 --
Chief Operating Officer 1994 135,000 100,000 -- 100,000 --
</TABLE>
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<PAGE> 49
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
Annual Restricted Securities
NAME AND Fiscal Compensation Stock Underlying ALL OTHER
PRINCIPAL POSITION Year Salary Bonus Awards Options COMPENSATION
- ------------------ ------ ------ -------- ---------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Caruso(4) 1996 $161,538 $ -- $-- 50,000 $ 10,267 (5)
Executive Vice President 1995 -- -- -- -- --
and Chief Administrative Officer 1994 -- -- -- -- --
H. Gene Berger 1996 $181,731 $ -- $-- -- $ --
Executive Vice President 1995 175,293 -- -- 15,000 --
1994 151,250 50,000 -- 25,000 --
Wayne A. Palladino 1996 $181,731 $ -- $-- -- $ --
Senior Vice President and 1995 174,134 -- -- 15,000 --
Chief Financial Officer 1994 126,677 50,000 -- 50,000 --
Michael P. Garippa 1996 $129,087 $ 87,500 $-- 10,000 $ --
Vice President 1995 125,000 87,500 -- -- --
1994 123,154 87,500 -- -- --
</TABLE>
- ------------------------------------
(1) Mr. Raymond resigned as Chief Executive Officer of the Company
effective May 1996 and as Chairman of the Board effective August 1996.
(2) Includes $65,577 earned in respect of consulting services provided to
the Company from May through October 1996 and $350,000 in a one-time
payment pursuant to Mr. Raymond's termination agreement.
(3) Mr. Fine served as Acting Chief Executive Officer from May 1996 until
January 1997.
(4) Mr. Caruso has been an Executive Vice President of the Company since
January 1996.
(5) Reflects reimbursements for moving expenses.
The following table sets forth certain information regarding
individual options granted in fiscal 1996 to each of the Named Officers pursuant
to the Company's 1992 Stock Option Plan. In accordance with the rules of the
Commission, the table sets forth the hypothetical gains or "option spreads" that
would exist for the options at the end of their respective terms. These gains
are based on assumed rates of annual compound stock price appreciation of 5% and
10% from the date the option was granted to the end of the option's term.
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<PAGE> 50
OPTION GRANTS IN FISCAL 1996
<TABLE>
<CAPTION>
Percentage of Potential Realizable Value at
Securities Total Options Assumed Annual Rates of
Underlying Granted to Stock Price Appreciation for
Options Employees in Exercise Price Expiration Option Term(3)
NAME Granted Fiscal Year Per Share Date 5% 10%
---- --------- ------------- ----------- ------ ------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vincent J. Caruso........ 50,000(1) 71.4% $ 8.875 1/10/01 $122,600 $270,914
Michael P. Garippa....... 10,000(2) 14.3 10.000 4/26/01 26,628 61,051
</TABLE>
- ------------------------------------
(1) Exercisable in three equal installments commencing immediately and then
on the next two successive anniversaries of January 10, 1996.
(2) Exercisable in three equal installments commencing on the next three
successive anniversaries of April 26, 1996.
(3) The 5% and 10% assumed annual compound rates of stock price
appreciation are mandated by the Commission and do not represent the
Company's estimate or projection of future Common Stock prices.
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<PAGE> 51
AGGREGATE OPTION EXERCISES IN FISCAL 1996 AND 1996 FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
<S> <C> <C> <C> <C>
Joseph J. Raymond 70,000 $183,750 0 / 0 $ 0 / $ 0
Robert W. Fine -- -- 128,045 / 5,000 762,337 / 12,813
Vincent J. Caruso -- -- 16,667 / 33,333 26,041 / 52,084
H. Gene Berger 49,941 354,331 94,768 / 5,000 610,829 / 12,813
Wayne A. Palladino 4,781 30,335 114,987 / 5,000 735,219 / 12,813
Michael P. Garippa -- -- 33,334 / 10,000 201,921 / 4,375
</TABLE>
- ------------------------------------
(1) Calculated on the basis of $10.4375 per share, the closing sale price
of the Common Stock as reported on the NASDAQ/NM on October 31, 1996,
minus the exercise price.
EMPLOYMENT AGREEMENTS; TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
In January 1997, the Company entered into an employment
agreement with Mr. Aitken, which expires in January 1998. The agreement will
renew for one-year terms absent notice of non-renewal from either party. This
agreement provides for a base salary of $250,000, increasing to $300,000 if the
agreement is renewed. The agreement contains, among other things, customary
confidentiality and termination provisions and provides that in the event of the
termination of the executive following a "change of control" of the Company (as
defined therein), Mr. Aitken will be entitled to receive a cash payment of up to
2.9 times his average annual base salary during the preceding five years.
The Company has three-year employment agreements with Messrs.
Fine, Palladino and Berger, each of which expires in October 1997. These
employment agreements provide for base salaries of $220,000, $175,000 and
$175,000, respectively, which base salaries are subject to review and adjustment
by the Board of Directors of the Company. Each agreement contains, among other
things, customary non-compete, non-solicitation, confidentiality and termination
provisions and also provides that in the event of the termination of the
executive following a "change of control" of the Company (as defined therein) or
a significant change in the responsibilities of such person, each of Messrs.
Fine, Palladino and Berger will be entitled to receive a cash payment of up to
2.9 times his base salary then in effect plus any accrued and unpaid bonuses and
unreimbursed expenses.
In January 1996, the Company entered into a three-year
employment agreement with Mr. Caruso, which expires in January 1999. This
employment agreement provides for a base salary of $200,000, which base salary
is subject to review and adjustment by the Board of Directors of the Company.
The agreement contains, among other things, customary non-compete,
non-solicitation, confidentiality and termination provisions and also provides
that in the event of the termination of the executive, Mr. Caruso will be
entitled to receive a cash payment of one times his base salary then in effect,
except that, following a "change of control" of the Company (as defined therein)
or a significant change in the responsibilities of such person, Mr. Caruso will
be entitled to receive a cash payment of
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<PAGE> 52
two times his base salary then in effect, plus any awarded and unpaid bonuses
and unreimbursed expenses.
The Company had a three-year employment agreement with Michael
P. Garippa which expired in October 1996 subject to automatic one-year
extensions absent notice of non-renewal from either party. Pursuant to such
agreement, Mr. Garippa's agreement has been extended for an additional one-year
period. The agreement provides for base compensation to Mr. Garippa of $125,000.
In addition, Mr. Garippa's base salary will be reviewed periodically by the
Compensation Committee and may be increased, subject to approval by such
committee. Under the employment agreement, Mr. Garippa may receive bonuses from
time to time as determined by the Compensation Committee. Mr. Garippa also is
entitled to an advance of $87,500 in each year, to be credited against any
bonuses he earns under his employment agreement. In the event Mr. Garippa fails
to earn a bonus sufficient to cover any advances taken in any given year, any
such deficiency will be carried forward to the next year and applied against
future bonuses, if any. In the event that, among other things, Mr. Garippa's
responsibilities are significantly diminished or upon his termination following
a "change of control" of the Company (as defined therein), Mr. Garippa will be
entitled to receive the remainder of his salary as then in effect together with
any unpaid bonuses for the remainder of the term of the agreement. The agreement
also contains, among other things, customary non-compete, non-solicitation,
confidentiality and termination provisions.
Concurrent with the closing of the Subordinated Loan, each of
Messrs. Fine, Palladino, Berger and Garippa waived any rights such individual
may have had under his employment agreement with the Company to terminate such
agreement and/or receive any severance payments thereunder as a result of any
transactions with HPII.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Until his resignation in August 1996, Mr. Raymond, the former
Chairman of the Board and Chief Executive Officer of the Company, was also a
member of the Compensation Committee. Mr. Raymond's prior employment agreement
(which was terminated in May 1996 in connection with Mr. Raymond's resignation
from the Company) was approved by the Compensation Committee and ratified by the
Board of Directors, although Mr. Raymond did not vote on the approval of his
employment agreement. Mr. Raymond's termination arrangement were approved by the
Board of Directors. See "Certain Relationships and Related Transactions" and
"Directors and Officers of the Registrant."
STOCK OPTION PLANS
1992 Stock Option Plan. In July 1992, the Company's Board of
Directors and shareholders approved the Company's 1992 Stock Option Plan (the
"1992 Option Plan"). The 1992 Option Plan provides for the grant of options to
key employees, officers, directors and non-employee independent contractors of
the Company. The 1992 Option Plan is administered by the Compensation Committee
of the Board of Directors. The number of shares of Common Stock available for
issuance thereunder is 1,500,000 shares.
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<PAGE> 53
Options granted under the 1992 Option Plan may be either
incentive stock options ("Incentive Options"), which are intended to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended, or
options that do not qualify as Incentive Options ("NonQualified Stock Options").
Under the 1992 Option Plan, the Compensation Committee may grant (i) Incentive
Options at an exercise price per share which is not less than the fair market
value of a share of Common Stock on the date on which such Incentive Options are
granted (and not less than 110% of the fair market value in the case of any
optionee who beneficially owns more than 10% of the total combined voting power
of the Company) and (ii) Non-Qualified Stock Options at an exercise price per
share which is determined by the Compensation Committee (and which may be less
than the fair market value of a share of Common Stock on the date on which such
Non-Qualified Stock Options are granted). The 1992 Option Plan further provides
that the maximum period in which options may be exercised will be determined by
the Compensation Committee, except that Incentive Options may not be exercised
after the expiration of ten years from the date the Incentive Option was
initially granted (and five years in the case of any optionee who beneficially
owns more than 10% of the total combined voting power of the Company). Under the
1992 Option Plan, if an optionee's employment is terminated, generally the
unexercised Incentive Options must be exercised within three months after
termination. However, if the termination is due to the optionee's death or
permanent disability, the option must be exercised within one year of the
termination of employment. If the optionee's employment is terminated for cause
by the Company, or if the optionee voluntarily terminates his employment, his
options will expire as of the termination date. Any option granted under the
1992 Option Plan will be nontransferable, except by will or by the laws of
descent and distribution, and may be exercised upon payment of the option price
in cash or by delivery of shares of Common Stock with a fair market value equal
to the option price.
Shares delivered under the 1992 Option Plan will be available
from authorized but unissued shares of Common Stock or from shares of Common
Stock reacquired by the Company. Shares of Common Stock that are subject to
options under the 1992 Option Plan which have terminated or expired unexercised
will return to the pool of shares available for issuance under the 1992 Option
Plan.
Effective January 10, 1996 and January 14, 1997, respectively,
the Company granted to Mr. Caruso options under the 1992 Option Plan to purchase
50,000 shares and 25,000 shares of Common Stock at an exercise price of $8.875
per share and $12.00 per share, respectively.
On April 26, 1996 the Company granted to each of Messrs.
Garippa and Buhrman options under the 1992 Option Plan to purchase 10,000
shares of Common Stock at an exercise price of $10.00 per share.
Effective January 15, 1997, the Company granted to Mr. Aitken
options under the 1992 Option Plan to purchase 500,000 shares of Common Stock at
an exercise price of $11.375 per share.
1987 Stock Option Plan. The Company had a non-qualified stock
option plan pursuant to which 203,007 shares of Common Stock were reserved for
issuance (the "1987 Plan"). No additional options may be granted under the 1987
Plan and, as of January 22, 1997, there were no options outstanding under the
1987 Plan.
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<PAGE> 54
EXECUTIVE BONUS PLAN
The Company has adopted a performance-based bonus plan
pursuant to which it may grant bonuses to each of the Company's executive
officers and certain other employees of the Company as may be designated by the
Board of Directors. Under the bonus plan, participants may receive a bonus of up
to 50% of their base salary. The grant of any bonus is within the sole
discretion of the Compensation Committee and such bonuses may be paid, in whole
or in part, in cash or in shares of Common Stock.
INDEMNIFICATION
As permitted under the Business Corporation Law of the State
of New York, the Company's Restated Certificate of Incorporation provides that a
director of the Company will not be personally liable to the Company or its
shareholders for monetary damages for breach of a fiduciary duty owed to the
Company or its shareholders. By its terms and in accordance with the law of the
State of New York, however, this provision does not eliminate or otherwise limit
the liability of a director of the Company for any breach of duty based upon (i)
an act or omission (A) resulting from acts committed in bad faith or involving
intentional misconduct or involving a knowing violation of law or (B) from which
the director personally derived a financial benefit to which he was not legally
entitled, or (ii) an improper declaration of dividends or purchases of the
Company's securities.
The Company's Restated Certificate of Incorporation and
By-Laws provide that the Company shall indemnify its directors and officers to
the fullest extent permitted by New York law. The Company also has entered into
indemnification agreements with each of its directors and officers.
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<PAGE> 55
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the number and percentage of
shares of Common Stock beneficially owned, as of January 22, 1997, by (i) all
persons known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock; (ii) each director of the Company; (iii) each of the
"named executive officers" as defined under the rules and regulations of the
Securities Act of 1933, as amended (the "Securities Act"); and (iv) all
directors and executive officers of the Company as a group (12 persons).
<TABLE>
<CAPTION>
Numbers of Shares
Beneficially Percentage
NAME Owned Beneficially Owned
---- ------- ------------------
<S> <C> <C>
Timothy M. Aitken(1) ........................... 100,000 *
Joseph J. Raymond(2)(3) ........................ 702,970 7.0%
Robert W. Fine(4) .............................. 148,621 1.5%
Vincent J. Caruso(5) ........................... 41,667 *
Elliott H. Vernon(6) ........................... 21,376 *
Richard A. Yoken(6) ............................ 18,000 *
Wayne A. Palladino ............................. 89,190 *
H. Gene Berger(7)(8) ........................... 163,515 1.6%
Michael P. Garippa(9) .......................... 40,752 *
Scott A. Shay(10) .............................. 7,400,000 56.8%
David M. Golush ................................ -- --
Robert Zalaznick ............................... -- --
Hyperion Partners II L.P.(11) .................. 7,400,000 56.8%
All executive officers and directors as
a group (12 persons)(8)(10)(12) .......... 8,085,361 59.9%
</TABLE>
- ------------------------------------
* Less than one percent.
(1) Includes 100,000 shares subject to options exercisable within 60 days
from January 22, 1997.
(2) The address of Mr. Raymond is 17140 Coral Cove Way, Boca Raton, Florida
33496.
(3) Includes an aggregate of 37,764 shares held by the following trusts:
(i) the James Richard Raymond Irrevocable Trust; (ii) the Jeffrey
Raymond Children's Irrevocable Trust; (iii) the Joseph J. Raymond
Children's Irrevocable Trust; and (iv) the Lori Mulligan Children's
Irrevocable Trust. Mr. Raymond and his wife are the sole trustees of
each of the foregoing trusts. Mr. Raymond disclaims beneficial
ownership of the shares held by each of the foregoing trusts.
(4) Includes 128,045 shares subject to options exercisable within 60 days
from January 22, 1997.
(5) Includes 41,667 shares subject to options exercisable within 60 days
from January 22, 1997.
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<PAGE> 56
(6) Includes 15,000 shares subject to options exercisable within 60 days
from January 22, 1997.
(7) Includes 94,768 shares subject to options exercisable within 60 days
from January 22, 1997.
(8) Includes an aggregate of 2,000 shares and 3,100 shares issuable upon
exercise of the Company's Public Warrants owned by the wife and one
child of Mr. Berger, an Executive Vice President of the Company, as to
which Mr. Berger disclaims beneficial ownership. Also includes an
aggregate of 372 Public Warrants owned jointly by Mr. Berger and his
wife.
(9) Includes 33,334 shares subject to options exercisable within 60 days
from January 22, 1997.
(10) Includes 4,400,000 shares of Common Stock and the 3,000,000 shares of
Common Stock underlying the Warrants included in the Units which HPII
(an affiliate of Mr. Shay) has purchased and as to which Mr. Shay
disclaims beneficial ownership. Excludes any shares of Common Stock
included in the Additional Shares. See "Certain Relationships and
Related Transactions -- Transactions with Principal Shareholders".
(11) Includes 3,000,000 shares subject to Warrants exercisable within 60
days from January 22, 1997. The address of Hyperion Partners II L.P. is
50 Charles Lindbergh Parkway, Uniondale, New York 11553. Excludes any
shares of Common Stock included in the Additional Shares. See
"Certain Relationships and Related Transactions -- Transactions with
Principal Shareholders".
(12) Includes all shares held by Messrs. Aitken, Fine, Caruso, Vernon,
Yoken, Palladino, Berger, Garippa and one other executive officer, and
those shares subject to publicly traded warrants or options held by
such individuals exercisable within 60 days from January 22, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
TRANSACTIONS WITH PRINCIPAL SHAREHOLDERS
Effective January 7, 1994, Joseph J. Raymond, Elliott H.
Vernon, Kinder Investments, L.P. and a former director of the Company
(collectively, the "Holders") have been granted demand and piggyback
registration rights which presently cover approximately 709,346 shares of Common
Stock. The registration rights will expire on February 7, 1999. The Holders have
the right to cause the Company, on two separate occasions (the first at the
Company's expense and the second at the Holders' expense) to use its best
efforts to effect registration under the Securities Act of the shares of Common
Stock of the demanding Holders. Holders who in the aggregate hold at least 50%
of the subject Common Stock must make such demand in order for the Company to be
required to effect such registration. In addition, if the Company proposes to
register any of its Common Stock under the Securities Act, the Company is
required to notify the Holders and to use its best efforts to include in such
registration all shares of Common Stock of the Holders requested to be included
therein by the Holders.
On November 20, 1995, the Company entered into a Purchase
Agreement with HPII pursuant to which HPII purchased an aggregate of 4,400,000
Units, at a purchase price of $9.00 per Unit for an aggregate purchase price of
$39,600,000. Such Units represent an aggregate of 4,400,000 shares of Common
Stock and Warrants to purchase an additional 3,000,000 shares of Common Stock.
The aggregate number of shares represented (assuming all the Warrants are
exercised), therefore, by all of the Units sold to HPII in connection with the
Purchase Agreement was 7,400,000.
The Warrants issued to HPII 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
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<PAGE> 57
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).
Pursuant to the Registration Agreement entered into at the
Initial Closing, the Company granted to HPII registration rights with respect to
the Registrable Securities. The Registration Agreement also grants to the
holders certain "piggyback" rights to have 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. The Registration Agreement precludes the
Company from granting any further registration rights without the consent of
HPII.
On January 10, 1996, HPII loaned to the Company the
Subordinated Loan. The Subordinated Loan bore interest at the rate of 20% per
annum through May 29, 1996 and 12% thereafter and was repaid on July 31, 1996
with proceeds from the Second Closing.
The Subordinated Loan provided that at the closing thereof the
number of directors constituting the Company's Board of Directors would be
increased to seven (7) and that HPII would have the right to designate one
director. Pursuant to such rights, HPII designated Mr. Shay to serve as a
director of the Company.
Concurrent with the Second Closing, the Purchase Agreement
provided that the Company's Board of Directors would continue to be comprised of
seven (7) members with two (2) additional designees to be appointed by HPII. At
the Second Closing, HPII designated Messrs. Golush and Zalaznick to serve on the
Board of Directors. HPII's right to designate such three (3) directors will
expire on the fifth anniversary of the Second Closing.
The Purchase Agreement also provides that for a period of five
(5) years commencing on the Initial Closing, all shares of Common Stock held by
HPII will be voted by HPII on any matter submitted to the shareholders in the
same proportion as the votes cast by the other holders of Common Stock.
Notwithstanding the foregoing, HPII retains its right to vote its shares of
Common Stock in any manner it chooses with respect to the following specified
matters: (i) the election to the Board of Directors of HPII's designees; (ii)
amendments to the Company's By-Laws or Certificate of Incorporation; (iii)
mergers and the sale, lease or exchange of the Company's assets; (iv) the
authorization or issuance of Company securities; (v) a reclassification of
securities or reorganization of the Company; (vi) the liquidation or dissolution
of the Company; and (vii) any affiliated party transaction. The Purchase
Agreement provides that the requirement that HPII votes its shares in proportion
with all other shareholders shall terminate in the event that the aggregate
number of shares of Common Stock owned by Messrs. Raymond, Fine, Palladino and
Berger shall be less than 415,000 shares or on the date when any person or group
unaffiliated with HPII becomes the beneficial owner of 25% or more of the
then-outstanding shares of the Company's capital stock.
Messrs. Raymond, Fine, Palladino and Berger have agreed in
their individual capacities to take all steps necessary, including voting their
shares for the election of HPII's designees to the Board
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<PAGE> 58
of Directors, and to utilize their best efforts, to secure the election by the
Company's shareholders of HPII's designees to the Board of Directors. The
Company has also agreed to such provisions (other than the voting of shares).
The Purchase Agreement further provides that commencing on the
Second Closing, all actions to be taken by the Board of Directors will require
the affirmative vote of a majority of the directors present at a duly
constituted meeting (which is the status currently), except that it shall
require the affirmative vote of 66-2/3% of the entire Board of Directors to
authorize any action taken with respect to a proposed acquisition, whether by
purchase of stock or assets, of another company and any action to increase above
seven (7) the number of directors constituting the entire Board of Directors,
except in connection with the appointment of the Paribas Principal designee. See
"Directors and Officers of the Registrant."
In connection with the pending HMI acquisition, HPII has
purchased certain of HMI's trade payables aggregating approximately $18,000,000
at various discounts. Provided that the HMI acquisition is consummated, HPII has
agreed to extend a 10% discount of the outstanding face amount of such payables
to the Company. The members of the Company's Board of Directors who are not
affiliated with HPII approved such transaction on November 14, 1996.
On January 8, 1997, the Company entered into a stock purchase
agreement with HPII pursuant to which HPII agreed, subject to the conditions
stated therein, to purchase the Additional Shares. Consummation of this
transaction is subject to, among other things, receipt of applicable regulatory
approvals and completion of the HMI acquisition. The Additional Shares are also
covered by the Registration Agreement.
On August 5, 1994, the Company issued to Paribas Principal
225,000 shares of Common Stock and on December 12, 1994, Paribas Principal
purchased an additional 200,000 shares of Common Stock at a price of $8.43 per
share, pursuant to an agreement with the Company. The Company has also entered
into a shareholders agreement and a registration rights agreement with
Paribas Principal. The registration rights agreement precludes the Company from
granting further registration rights with respect to its Common Stock without
the consent of Paribas Principal. In addition, the Company paid approximately
$298,750 to Banque Paribas in fees and expenses in fiscal 1996 in connection
with the Paribas Credit Agreement.
TRANSACTIONS WITH DIRECTORS AND EXECUTIVE OFFICERS
On December 14, 1992, Mr. Fine and Robert P. Giuliano,
formerly a principal shareholder of the Company, each sold 6,666 shares of
Common Stock at a price of $5.00 per share to each of Messrs. Berger, Palladino
and Buhrman, respectively. On such date, the Company loaned Messrs. Berger,
Palladino and Buhrman the funds necessary to consummate such purchases. These
loans bear interest at the prime rate of the Company's principal lender plus 1%
per annum, are secured by a pledge of the purchased stock, but are otherwise
non-recourse to such purchasers. Interest only is payable on these loans, until
April 30, 1997, when the entire principal balance and all accrued interest
shall be due and payable.
Messrs. Raymond, Fine, Berger and Palladino (collectively, the
"Restricted Transferees") have entered into a stock restriction agreement (the
"Restriction Agreement"), pursuant to which they have agreed to limit the
transferability of their shares of Common Stock as well as other "Common
Equivalents" to the extent described therein. Unless otherwise consented to in
writing by HPII, none of the Restricted Transferees may transfer any of his
shares of Common Stock or other Common
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<PAGE> 59
Equivalents owned by him if, at the time of such transfer or after giving effect
thereto, the Restricted Transferee's "Shareholder Percentage" would be less than
the lesser of 0.75 and the "HPII Percentage." For purposes of the Restriction
Agreement, the term "Shareholder Percentage" means a fraction, the denominator
of which is the number of Common Equivalents that such shareholder and his
related persons owned or had the right to acquire on the date of the Purchase
Agreement, and the numerator of which is the numerical amount of the denominator
less the number of Common Equivalents transferred by such Restricted Transferee;
and the term "HPII Percentage" means a fraction, the denominator of which is the
number of Common Equivalents purchased by HPII or which HPII has the right to
purchase pursuant to the Purchase Agreement, and the numerator of which is the
numerical amount of the denominator less the number of Common Equivalents
transferred by HPII. The effect of the Restriction Agreement, in general, is to
limit a Restricted Transferee's ability to sell his shares of Common Stock to
the extent that his shareholdings would be less than 75% of his current holdings
or, if less, the HPII Percentage.
Certain directors and executive officers of the Company have
been granted options to purchase shares of Common Stock under the Company's
stock option plans. See "Executive Compensation -- Stock Option Plans."
Mr. Raymond has received certain payments from the Company in
connection with his resignation as Chief Executive Officer and has also entered
into a consulting agreement with the Company. See "Directors and Officers of the
Registrant."
The Company has agreed to pay to an affiliate of Mr. Aitken,
the sum of $96,000 for consulting services rendered in connection with potential
financing opportunities. Such amount will be paid in fiscal 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
<TABLE>
<CAPTION>
FINANCIAL STATEMENTS INDEX Page
----
<S> <C>
Report of Independent Accountants F-1
Consolidated Balance Sheets -- October 31, 1996 and October 31, 1995 F-2
Consolidated Statements of Operations -- For the Years Ended
October 31, 1996, 1995 and 1994 F-3
Consolidated Statements of Changes in Stockholders' Equity -- For the
Years Ended October 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows -- For the Years Ended
October 31, 1996, 1995 and 1994 F-5
</TABLE>
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<PAGE> 60
<TABLE>
<S> <C>
Notes to Consolidated Financial Statements F-7
Quarterly Financial Information (Unaudited) F-32
(a)(2) Financial Statements Schedule Index
Schedule VIII -- Valuation and Qualifying Accounts S-1
</TABLE>
Schedules other than those listed above are omitted because they are
not required or are not applicable or the information is shown in the audited
financial statements or related notes.
(b) Reports on Form 8-K
The Company filed a Form 8-K dated July 31, 1996 on or about
August 13, 1996, whereby in Item 5 it described the Credit
Facility.
(c) The exhibits listed in the Index to Exhibits below are filed
as part of this Annual Report on Form 10-K.
Exhibit
Number Title
------ -----
3.1 Restated Certificate of Incorporation of the Company,
as amended (incorporated herein by reference to
Exhibit 3.1 to the Company's Registration Statement
(No. 33-50876) on Form S-1).
3.2* Certificate of Amendment to the Restated Certificate
of Incorporation of the Company filed on June 28,
1995.
3.3* Certificate of Amendment to the Restated Certificate
of Incorporation of the Company filed on October 9,
1996.
3.4* Restated By-laws of the Company, as amended.
4.1 Specimen Certificate of Common Stock (incorporated
herein by reference to Exhibit 4.1 to the Company's
Registration Statement (No. 33-50876) on Form S-1).
4.2 Warrant Agreement, including form of Redeemable
Warrant, dated December 7, 1992 (incorporated herein
by reference to Exhibit 4.2 to the Company's
Registration Statement (No. 33-50876) on Form S-1).
4.3 Warrant Agreement, dated December 7, 1992, including
form of Warrant (incorporated herein by reference to
Exhibit 1.2 to the Company's Registration Statement
(No. 33-50876) on Form S-1).
10.1 Amended Credit Agreement, dated as of March 1, 1995,
by and among the Company and Banque Paribas, as Agent
(incorporated herein by reference to
-57-
<PAGE> 61
Exhibit 3 to the Company's Current Report on Form 8-K
dated August 5, 1994).
10.2 Subsidiaries Guaranty, dated as of August 5, 1994,
made by MK, PromptCare, Steri, TNI, RespiFlow and
Radamerica (incorporated herein by reference to
Exhibit 10.2 to the Company's Annual Report on Form
10-K for the year ended October 31, 1994).
10.3 Pledge Agreement, dated as of August 5, 1994, made by
the Company, MK, PromptCare, Steri, TNI, Radamerica,
RespiFlow and Banque Paribas, as Pledgee
(incorporated herein by reference to Exhibit 10.3 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.4 Security Agreement, dated as of August 5, 1994, by
and among the Company, MK, PromptCare, Steri, TNI,
Radamerica, RespiFlow and Banque Paribas
(incorporated herein by reference to Exhibit 10.4 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.5 Shareholders Agreement, dated as of August 5, 1994,
by and among the Company, Joseph J. Raymond and
Paribas Principal (incorporated herein by reference
to Exhibit 10.5 to the Company's Annual Report on
Form 10-K for the year ended October 31, 1994).
10.6 Registration Rights Agreement, dated as of August 5,
1994, by and among the Company and Paribas Principal
(incorporated herein by reference to Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.7 Employment Agreement, dated as of October 31, 1994,
between Joseph J. Raymond and the Company
(incorporated herein by reference to Exhibit 10.7 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.8 Employment Agreement, dated as of October 31, 1994,
between Robert W. Fine and the Company (incorporated
herein by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
10.9 Employment Agreement, dated as of October 31, 1994,
between Wayne A. Palladino and the Company
(incorporated herein by reference to Exhibit 10.9 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.10 Employment Agreement, dated as of October 31, 1994,
between H. Gene Berger and the Company (incorporated
herein by reference to Exhibit 10.10 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
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<PAGE> 62
10.11 Lease Agreement, dated as of January 23, 1995,
between and among Liberty Property Limited
Partnership and RespiFlow & MK (incorporated herein
by reference to Exhibit 10.11 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1994).
10.12 United States Home Health Care Corp. 1987
Nonqualified Stock Option Plan (incorporated herein
by reference to Exhibit 10.5(a) to the Company's
Registration Statement (No. 33-50876) on Form S-1).
10.13 Transworld Home HealthCare, Inc. 1992 Stock Option
Plan, as amended (incorporated herein by reference to
Exhibit 10.13 to the Company's Annual Report on Form
10-K for the year ended October 31, 1994).
10.14 Lease Agreement between RReef USA Fund-III and the
Company commencing April 7, 1995 (incorporated herein
by reference to Exhibit 10.14 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1995).
10.15 Lease Agreement, dated August 28, 1992, between
Cynwyd Investments and TNI, as amended (incorporated
herein by reference to Exhibit 10.8 to the Company's
Registration Statement (No. 33-50876) on Form S-1).
10.16(a) Lease Agreement, dated July 29, 1991, between
Collingwood Plaza Associates and TNI (incorporated
herein by reference to Exhibit 10.9 to the Company's
Registration Statement (No. 33-50876) on Form S-1).
10.16(b) Amendment to Lease Agreement, dated February 4, 1992,
between Collingwood Plaza Associates and TNI
(incorporated herein by reference to Exhibit 10.16(b)
to the Company's Annual Report on Form 10-K for the
year ended October 31, 1994).
10.17 Agreement, dated June 5, 1992, among Kinder
Investments L.P., Richard Elkin, Joseph J. Raymond,
Elliott H. Vernon and United States Home Health Care
Corp. regarding Buy-Out and Registration Rights, as
amended (incorporated herein by reference to Exhibit
10.14 to the Company's Registration Statement (No.
33-50876) on Form S-1).
10.18 Employment Agreement, dated as of October 1, 1993,
between Michael P. Garippa and the Company
(incorporated herein by reference to Exhibit 10.13 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1993).
10.19* Lease Agreement between Transworld Home
HealthCare-Nursing Division, Inc. and Pond View
Associates dated November 4, 1996.
10.20 Lease Agreement, dated February 13, 1993, between
Tices Realty Associates Limited Partnership and CHCS
(incorporated herein by reference to Exhibit
10.14 to the Company's Annual Report on Form 10-K for
the year ended October 31, 1993).
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<PAGE> 63
10.21 Lease Agreement, dated January 30, 1993, between
Villa Contracting Co., Inc. and PromptCare, and
related first lease addendum dated July 21, 1993
(incorporated herein by reference to Exhibit 10.15 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1993).
10.22 Lease Agreement, dated May 29, 1992, between George
and Arlene Groch d/b/a Gear Associates and PromptCare
(incorporated herein by reference to Exhibit 10.16 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1993).
10.23 Amended and Restated Management Agreement, dated as
of November 1, 1994, between MK, RespiFlow,
DermaQuest and E/L Associates (incorporated herein by
reference to Exhibit 10.23 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1994).
10.24 Lease Agreement, dated March 6, 1992, between Saint
Joseph Hospital, Inc. and Radamerica (incorporated
herein by reference to Exhibit 10.24 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
10.25 Lease Agreement, dated October 31, 1989, by and
between GS Properties, Inc. and Radamerica
(incorporated herein by reference to Exhibit 10.25 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.26(a) Lease Agreement, dated December 15, 1984, by and
between Whitesquare Limited Partnership and Seymour
Weiner, M.D., P.A. (incorporated herein by reference
to Exhibit 10.26 to the Company's Annual Report on
Form 10-K for the year ended October 31, 1994).
10.26(b) Addendum to Lease Agreement, dated May 14, 1985, by
and between Whitesquare Limited Partnership and
Seymour Weiner M.D., P.A. (incorporated herein by
reference to Exhibit 10.26(b) to the Company's Annual
Report on Form 10-K for the year ended October 31,
1994).
10.26(c) Assignment of Lease, dated June 10, 1989, by and
between Seymour Weiner, MD, P.A., Radamerica and
Whitesquare Limited Partnership (incorporated herein
by reference to Exhibit 10.26(c) to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
10.26(d) Lease Extension Agreement, dated September 28, 1994,
by and between Whitesquare Limited Partnership and
Radamerica (incorporated herein by reference to
Exhibit 10.26(d) to the Company's Annual Report on
Form 10-K for the year ended October 31, 1994).
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<PAGE> 64
10.27* Commercial Lease between Transworld Home
HealthCare-Nursing Division, Inc. and Ocean County
Investment, Inc. dated November 5, 1996.
10.28 Lease Agreement, dated March 14, 1994, between Watson
and Brutz I and TNI (incorporated herein by reference
to Exhibit 10.28 to the Company's Annual Report on
Form 10-K for the year ended October 31, 1994).
10.29* Sublease Agreement between the Company and Great
Valley Products-M, Inc. dated May 17, 1996.
10.30* Commercial Lease Agreement between the Company and
Goodwin Enterprises dated April 3, 1996.
10.31 Form of Indemnification Agreement with the Company
(incorporated herein by reference to Exhibit 10.31 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1994).
10.32 Incentive Bonus Program of the Company (incorporated
herein by reference to Exhibit 10.32 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
10.33* Lease between Transworld Nurses, Inc. and Pelican Bay
Professional Village Associates dated May 1, 1996.
10.34 Amendment Agreement, dated as of May 19, 1995, to the
Stock Purchase Agreement, dated as of June 30, 1995,
between Shlomo Appel and the Company (incorporated
herein by reference to Exhibit 10.34 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1995).
10.35 Amendment Agreement, dated as of May 19, 1995, to the
Stock Purchase Agreement, dated as of June 30, 1995,
between Jack Schiff and the Company (incorporated
herein by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1995).
10.36 Amendment Agreement, effective as of May 5, 1995, to
the Stock Purchase Agreement, dated as of April 1,
1995, as amended, among the Company, Edward Mashek,
Walter Kraemer and Lorraine Andrews (incorporated
herein by reference to Exhibit 10.36 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1995).
10.37 Amended and Restated Asset Purchase Agreement, dated
as of March 1, 1995, among DermaQuest, Precision, and
Les Capella (incorporated herein by reference to
Exhibit 10.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended April 30, 1995).
10.38 Asset Purchase Agreement between PromptCare and DVLC
effective as of January 1, 1995 (incorporated herein
by reference to Exhibit 2 to the Company's Current
Report on Form 8-K filed on or about February 15,
1995).
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<PAGE> 65
10.39 Lease Agreement, effective as of January 1, 1995,
between PromptCare and DVLC (incorporated herein by
reference to Exhibit 10.39 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1995).
10.40 DermaQuest Amendment Agreement, dated as of March 1,
1995, among the Company, Edward Mashek, Walter
Kraemer, Lorraine Andrews and E/L Associates
(incorporated herein by reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended January 31, 1995).
10.41 Assumption Agreement, dated as of March 1, 1995, made
by DermaQuest to the Company, MK, PromptCare, Steri,
TNI, RespiFlow, Radamerica, and Banque Paribas
(incorporated herein by reference to Exhibit 10.41 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1995).
10.42 Subsidiary Acknowledgement, dated as of March 1,
1995, by MK, PromptCare, Steri, TNI, RespiFlow, and
Radamerica to Banque Paribas (incorporated herein by
reference to Exhibit 10.42 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1995).
10.43 Borrower Acknowledgement, dated as of March 1, 1995,
by the Company to Banque Paribas (incorporated herein
by reference to Exhibit 10.43 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1995).
10.44 Asset Purchase Agreement, dated as of May 28, 1993,
among TNI, CHCS and others (incorporated herein by
reference to Exhibit 2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 30,
1993).
10.45 Exchange Offer and Confidential Investment Summary,
dated August 23, 1993, (incorporated herein by
reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated September 30, 1993).
10.46 Stock Purchase Agreement, dated as of April 1, 1994,
among the Company, Edward Mashek, Walter Kraemer and
Lorraine Andrews (incorporated herein by reference to
Exhibit 1 to the Company's Current Report on Form 8-K
dated May 3, 1994).
10.47 Amendment, dated July 29, 1994, to the Stock Purchase
Agreement (incorporated herein by reference to
Exhibit 2 to the Company's Current Report on Form 8-K
dated August 5, 1994).
10.48 Stock Purchase Agreement, dated as of June 21, 1994,
as amended, among the Company, David P. Spearman,
Cengiz Aygun, M.D., Lawrence J. Scharf, M.D. and
Melvin Jeffers (incorporated herein by reference to
Exhibit 1 to the Company's Current Report on Form 8-K
dated August 5, 1994).
-62-
<PAGE> 66
10.49 Amendment, dated November 28, 1994, to the Stock
Purchase Agreement, as amended (incorporated herein
by reference to Exhibit 1 to Amendment No. 2 to the
Company's Current Report on Form 8-K, originally
filed on May 3, 1994).
10.50 Stock Purchase Agreement, dated as of June 30, 1994,
between the Company and Shlomo Appel (incorporated
herein by reference to Exhibit 2.7 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
10.51 Stock Purchase Agreement, dated as of June 30, 1994,
between the Company and Jack Schiff (incorporated
herein by reference to Exhibit 2.8 to the Company's
Annual Report on Form 10-K for the year ended October
31, 1994).
10.52 Stock Purchase Agreement, dated as of November 1,
1994, by and among the Company, Edward Mashek, Walter
Kraemer and Lorraine Andrews (incorporated herein by
reference to Exhibit 1 to the Company's Current
Report on Form 8-K dated December 28, 1994).
10.53 Employment Agreement, dated as of January 2, 1996,
(and related letter agreement) between the Company
and Vincent J. Caruso. (incorporated herein by
reference to Exhibit 10.53 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1995).
10.54 Amendment to Amended and Restated Management
Agreement, dated as of November 1, 1995, between the
Company and E/L Associates (incorporated herein by
reference to Exhibit 10.54 to the Company's Annual
Report on Form 10-K for the year ended October 31,
1995).
10.55 DermaQuest Amendment Agreement, dated as of November
1, 1995, which amended a Stock Purchase Agreement,
dated as of November 1, 1994, among the Company and
Edward Mashek, Walter Kraemer and Lorraine Andrews
(incorporated herein by reference to Exhibit 10.55 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1995).
10.56 Unit Purchase Agreement, dated as of November 20,
1995, as amended, by and between the Company and HPII
(incorporated herein by reference to Exhibit 10.56 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1995).
10.57 Subordinated Note Purchase Agreement, dated as of
January 10, 1996, between the Company and HPII
(incorporated herein by reference to Exhibit 10.57 to
the Company's Annual Report on Form 10-K for the year
ended October 31, 1995).
10.58 Credit Agreement among the Company, Various Lending
Institutions and Bankers Trust Company, as Agent
dated as of July 31, 1996 (incorporated
-63-
<PAGE> 67
herein by reference to Exhibit 1 to the Company's
Current Report on Form 8-K dated July 31, 1996).
10.59* Pledge Agreement dated as of July 31, 1996 in favor
of Bankers Trust Company, as Collateral Agent.
10.60* Security Agreement among the Company, Various
Subsidiaries and Bankers Trust Company, as Collateral
Agent dated as of July 31, 1996.
10.61* Subsidiaries Guaranty dated as of July 31, 1996.
10.62 Agreement dated May 14, 1996 between the Company and
Joseph J. Raymond relating to resignation
(incorporated herein by reference to Exhibit 10.1 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1996).
10.63 Agreement dated May 14, 1996 between the Company and
Joseph J. Raymond relating to consulting services
(incorporated herein by reference to Exhibit 10.2 to
the Company's Quarterly Report on Form 10-Q for the
quarter ended April 30, 1996).
10.64 Agreement dated May 14, 1996 between HPII and Joseph
J. Raymond relating to loan transaction (incorporated
herein by reference to Exhibit 10.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
April 30, 1996).
10.65 Amendment dated February 16, 1996 to Subordinated
Note Purchase Agreement, dated January 10, 1996,
between the Company and HPII (incorporated herein by
reference to Exhibit 10.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 30,
1996).
10.66 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 (incorporated herein by reference to Exhibit
10.5 to the Company's Quarterly Report on Form 10-Q
for the quarter ended April 30, 1996).
10.67 Purchase and Sale Agreement, dated as of November 12,
1996, between the Company and European American Bank
(incorporated herein by reference to Exhibit 6 to the
Schedule 13D filed by the Company, HPII, Hyperion
Ventures II L.P., Hyperion Funding II Corp., Lewis S.
Ranieri and Scott A. Shay on or about November 22,
1996).
10.68 Purchase and Sale Agreement, dated of November 12,
1996, between the Company and the Chase Manhattan
Bank (incorporated herein by reference to Exhibit 7
to the Schedule 13D filed by the Company, HPII,
Hyperion Ventures II L.P., Hyperion Funding II Corp.,
Lewis S. Ranieri and Scott A. Shay on or about
November 22, 1996).
-64-
<PAGE> 68
10.69 First Amendment to Credit Agreement and to Pledge
Agreement, dated as of November 13, 1996, between the
Company and Bankers Trust Company (incorporated
herein by reference to Exhibit 3 to the Schedule 13D
filed by the Company, HPII, Hyperion Ventures II
L.P., Hyperion Funding II Corp., Lewis S. Ranieri and
Scott A. Shay on or about November 22, 1996).
10.70 Agreement, dated as of November 13, 1996, between the
Company, HMI, Home Care Management, Inc., HMI
Illinois, Inc., HMI Pennsylvania, Inc., Health
Reimbursement Corporation, HMI Retail Corp., Inc.,
HMI PMA, Inc. and HMI Maryland, Inc. (incorporated
herein by reference to Exhibit 8 to the Schedule 13D
filed by the Company, HPII, Hyperion Ventures II
L.P., Hyperion Funding II Corp., Lewis S. Ranieri and
Scott A. Shay on or about November 22, 1996).
10.71* Subsidiary Assumption Agreement, dated as of November
13, 1996, among Transworld Acquisition Corp., IMH
Acquisition Corp. and Bankers Trust Company, as Agent
and as Collateral Agent.
10.72 Agreement and Plan of Merger, dated as of November
13, 1996, among the Company, IMH Acquisition Corp.
and HMI (incorporated herein by reference to Exhibit
4 to the Schedule 13D filed by the Company, HPII,
Hyperion Ventures II L.P., Hyperion Funding II Corp.,
Lewis S. Ranieri and Scott A. Shay on or about
November 22, 1996).
10.73 Stock Purchase Agreement, dated as of November 13,
1996, between HMI and the Company (incorporated
herein by reference to Exhibit 5 to the Schedule 13D
filed by the Company, HPII, Hyperion Ventures II
L.P., Hyperion Funding II Corp., Lewis S. Ranieri and
Scott A. Shay on or about November 22, 1996).
10.74* Lease between Farmacia Santurce and Transworld
Healthcare Puerto Rico, Inc. dated February 14, 1996.
10.75* Lease Agreement between Realty Sites and the Company
dated August 6, 1996.
10.76 Asset Purchase Agreement, dated as of October 14,
1996, between RespiFlow, Health Meds, O.W. Edwards
and Rick Hedrick (incorporated herein by reference to
Exhibit A to the Company's Current Report on Form 8-K
dated October 28, 1996).
10.77 Asset Purchase Agreement, dated as of October 31,
1996, between Transworld Acquisition Corp., the
Company, USNJ and U.S. HomeCare Corporation
(incorporated herein by reference to Exhibit B to the
Company's Current Report on Form 8-K dated October
28, 1996).
10.78 DermaQuest Amendment Agreement, dated as of February
1, 1996, among the Company, DermaQuest, Edward
Mashek, Walter Kraemer and Lorraine
-65-
<PAGE> 69
Andrews (incorporated herein by reference to Exhibit
10 to the Company's Quarterly Report on Form 10-Q for
the quarter ended January 31, 1996).
10.79* Stock Purchase Agreement, dated January 8, 1997, by
and between the Company and HPII.
10.80* Employment Agreement, dated as of January 13, 1997,
between the Company and Timothy M. Aitken.
10.81 Second Amendment to Credit Agreement, dated as of
January 13, 1997, between the Company and Bankers
Trust Company (incorporated herein by reference to
Exhibit 2 to the Company's Current Report on Form
8-K dated January 22, 1997).
10.82 Letter Agreement amending Merger Agreement, dated
January 13, 1997, between the Company and HMI
(incorporated herein by reference to Exhibit 1 to the
Company's Current Report on Form 8-K dated January
22, 1997).
11 Statement re: computation of earnings per share
(computation can be determined clearly from the
material contained in this Annual Report on Form
10-K).
21.1* Subsidiaries of the Company.
23.1* Consent of Coopers & Lybrand L.L.P., independent
accountants of the Company.
27* Financial Data Schedule
- ---------------------------
*Filed herewith.
-66-
<PAGE> 70
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.
TRANSWORLD HOME HEALTHCARE, INC.
By: /s/ Timothy M. Aitken
------------------------------
Timothy M. Aitken
Chairman of the Board and
Chief Executive Officer
Date: January 27, 1997
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.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Timothy M. Aitken Chairman of the Board and Chief Executive January 27, 1997
- --------------------------------------- Officer (Principal Executive Officer)
Timothy M. Aitken
President, Chief Operating Officer and January 27, 1997
/s/ Robert W. Fine Director
- ---------------------------------------
Robert W. Fine
Senior Vice President and Chief Financial January 27, 1997
/s/ Wayne A. Palladino Officer (Principal Financial and Accounting
- --------------------------------------- Officer)
Wayne A. Palladino
/s/ Richard A. Yoken Director January 27, 1997
- ---------------------------------------
Richard A. Yoken
/s/ Elliott H. Vernon Director January 27, 1997
- ---------------------------------------
Elliott H. Vernon
/s/ Scott A. Shay Director January 27, 1997
- ---------------------------------------
Scott A. Shay
/s/ David M. Golush Director January 27, 1997
- ---------------------------------------
David M. Golush
/s/ Robert Zalaznick Director January 27, 1997
- ---------------------------------------
Robert Zalaznick
</TABLE>
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<PAGE> 71
TRANSWORLD HOME HEALTHCARE, INC.
Financial Statements Index Page
Report of Independent Accountants F-1
Consolidated Balance Sheets - October 31, 1996
and October 31, 1995 F-2
Consolidated Statements of Operations - For the
Years Ended October 31, 1996, 1995 and
1994 F-3
Consolidated Statements of Changes in
Stockholders' Equity - For the Years Ended
October 31, 1996, 1995 and 1994 F-4
Consolidated Statements of Cash Flows - For the
Years Ended October 31, 1996, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-7
Quarterly Financial Information (Unaudited) F-32
Financial Statements Schedule Index
Schedule VIII - Valuation and Qualifying Accounts S-1
F-i
<PAGE> 72
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Transworld Home HealthCare, Inc.:
We have audited the consolidated financial statements and the financial
statements schedule of Transworld Home HealthCare, Inc. (the "Company") as
listed in the index on page F-(i) of this Form 10-K. These financial statements
and financial statements schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial statements 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 audits 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, based on our audits, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
the Company as of October 31, 1996 and 1995 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
October 31, 1996 in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statements schedule referred to above,
when considered in relation to the basic financial statement taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
As discussed in Note 2 to the consolidated financial statements, in fiscal 1994
the Company changed its method of accounting for income taxes.
Coopers & Lybrand L.L.P.
New York, New York
December 20, 1996, except as to the
information presented in the last
five paragraphs in Footnote 12 for
which the date is January 14, 1997.
F-1
<PAGE> 73
TRANSWORLD HOME HEALTHCARE, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
October 31, October 31,
1996 1995
----------- -----------
ASSETS
<S> <C> <C>
Current assets:
Cash and temporary investments $ 4,598 $ 915
Accounts receivable, less allowance
for doubtful accounts of $5,471
and $5,137 24,414 18,906
Inventories 1,829 1,556
Deferred income taxes 2,902 2,469
Prepaid expenses and other 600
current assets 2,204 1,647
-------- -------
Total current assets 36,547 25,493
Property & equipment, net 3,934 4,062
Notes receivable, related parties 964 964
Intangible assets, net 44,496 42,037
Other assets 4,786 2,356
-------- -------
Total assets $90,727 $74,912
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt $ $ 1,000
Current portion of long-term debt,
including obligations under
capital leases 21 3,908
Accounts payable 2,975 3,969
Accrued expenses 5,548 5,564
Acquisitions payable 1,802 15,062
Income taxes payable 696
--------- -------
Total current liabilities 10,346 30,199
Long-term debt, including obligations
under capital leases 12,505 20,264
Deferred income taxes and other 651 363
--------- -------
Total liabilities 23,502 50,826
--------- -------
Commitments and contingencies (Note 11)
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 9,940 and 5,060 shares 99 51
Additional paid-in capital 62,221 19,713
Retained earnings 4,905 4,322
--------- -------
Total stockholders' equity 67,225 24,086
---------- -------
Total liabilities and
stockholders' equity $ 90,727 $74,912
========== =======
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 74
TRANSWORLD HOME HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
---------------------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Net patient services $ 19,164 $ 18,870 $ 12,150
Net infusion services 9,970 9,935 10,551
Net respiratory, medical equipment and supplies sales 47,170 42,782 17,022
-------- -------- --------
Total revenues 76,304 71,587 39,723
-------- -------- --------
Cost of revenues:
Patient services 10,174 9,830 7,311
Infusion services 6,025 6,102 4,830
Respiratory, medical equipment and supplies sales 18,481 16,798 6,668
-------- -------- --------
Total cost of revenues 34,680 32,730 18,809
-------- -------- --------
Gross profit 41,624 38,857 20,914
Selling, general and administrative expenses 33,552 29,774 15,968
Non-recurring charges 3,898
-------- -------- --------
Operating income 8,072 5,185 4,946
Interest expense, net 4,352 3,699 809
-------- -------- --------
Income before income taxes, extraordinary loss
and cumulative effect of an accounting change 3,720 1,486 4,137
Provision for income taxes 1,702 627 1,656
-------- -------- --------
Income before extraordinary loss and
cumulative effect of an accounting change 2,018 859 2,481
Extraordinary loss on early extinguishment of debt
(net of income tax benefit of $879) (1,435)
Cumulative effect of change in method of accounting for income taxes 300
-------- -------- --------
Net income $ 583 $ 859 $ 2,781
======== ======== ========
Primary income per share of common stock from:
Income before extraordinary loss and
cumulative effect of an accounting change $ .26 $ .13 $ .50
Extraordinary loss on early extinguishment of debt (.18)
Cumulative effect of change in method of accounting for income taxes .06
-------- -------- --------
Net income per share $ .08 $ .13 $ .56
======== ======== ========
Fully diluted income per share of common stock from:
Income before extraordinary loss and
cumulative effect of an accounting change $ .26 $ .13 $ .47
Extraordinary loss on early extinguishment of debt (.19)
Cumulative effect of change in method of accounting for income taxes .06
-------- -------- --------
Net income per share $ .07 $ .13 $ .53
======== ======== ========
Weighted average number of common shares outstanding:
Primary 7,741 6,776 5,006
======== ======== ========
Fully diluted 7,833 6,832 5,205
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 75
TRANSWORLD HOME HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1993 3,993 $ 40 $10,304 $ 682 $11,026
Net income 2,781 2,781
Issuance of common stock for:
Acquisition of Radamerica, Inc. 250 3 4,997 5,000
Deposit on acquisition of VIP 146 1 749 750
Debt financing fees 225 2 1,242 1,244
Exercise of stock options 27 66 66
Repurchase of warrants (656) (656)
Issuance of stock options for debt
financing 160 160
------- ------- ------- ------- -------
Balance, October 31, 1994 4,641 46 16,862 3,463 20,371
Net income 859 859
Issuance of common stock for:
Exercise of warrants 200 2 1,684 1,686
Exercise of stock options, including
tax benefit 219 3 1,167 1,170
------- ------- ------- ------- -------
Balance, October 31, 1995 5,060 51 19,713 4,322 24,086
Net income 583 583
Issuance of common stock for:
Private offering 4,400 44 38,307 38,351
Payment on acquisition payable 370 4 3,828 3,832
Exercise of stock options and
warrants, including tax benefit 110 373 373
------- ------- ------- ------- -------
Balance, October 31, 1996 9,940 $ 99 $62,221 $ 4,905 $67,225
======= ======= ======= ======= =======
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 76
TRANSWORLD HOME HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------
1996 1995 1994
--------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 583 $ 859 $ 2,781
Adjustments to reconcile net income to net
cash (used in) provided by operating
activities:
Depreciation and amortization 1,191 1,267 684
Amortization of goodwill 1,074 834 186
Amortization of other intangible assets 494 677 284
Amortization of debt discount and
issuance costs 912 902 158
Provision for doubtful accounts 6,394 5,732 2,981
Deferred income taxes (200) (1,866) (286)
Extraordinary loss on early extinguishment of debt 2,314
Cumulative effect of change in
accounting for income taxes (300)
Changes in assets and liabilities, excluding
the effect of businesses acquired:
Increase in accounts receivable (11,426) (11,990) (1,097)
(Increase) decrease in inventories (92) 17 (272)
Increase in prepaid expenses and other assets (1,511) (83) (1,124)
(Decrease) increase in accounts payable (1,123) 2,029 (654)
(Decrease) increase in accrued
expenses and other liabilities (1,873) 287 407
--------- ---------- ----------
Net cash (used in) provided by
operating activities (3,263) (1,335) 3,748
--------- ---------- ----------
Cash flows (used in) provided by investing activities:
Capital expenditures (1,040) (1,066) (456)
Notes receivable - related parties 161 (1,125)
Contract deposit on acquisition (750)
Acquisitions - net of cash acquired (1,785) (3,529) (12,832)
Payment on acquisition payable (11,078) (5,957)
--------- ----------- ----------
Net cash used in investing activities (13,903) (10,391) (15,163)
--------- ----------- ----------
(Continued)
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 77
TRANSWORLD HOME HEALTHCARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------
1996 1995 1994
---------- --------- -----------
<S> <C> <C> <C>
Cash flows provided by (used in) financing activities:
Proceeds from issuance of common stock $ 39,600
Payment of costs associated with
issuance of common stock (1,249)
Payments on notes payable (10,013)
Proceeds from notes payable 10,000
Payments on short-term debt (2,000) $ (5,000) $ (4,749)
Proceeds from short-term debt 1,000 1,000 6,596
Payments on revolving loan (10,990) (3,850) (2,010)
Borrowing under revolving loan 18,482 8,850 2,010
Payments on long-term debt (21,091) (4,391) (2,720)
Proceeds from long-term debt 18 7,400 18,033
Payments for financing fees and issuance costs (3,331) (534) (1,588)
Payments on notes payable - related parties (2,504)
Stock options and warrants exercised,
including tax benefit 423 2,856 66
Repurchase of warrants (656)
---------- --------- -----------
Net cash provided by
financing activities 20,849 6,331 12,478
---------- --------- -----------
Increase (decrease) in cash 3,683 (5,395) 1,063
Cash and temporary investments,
beginning of period 915 6,310 5,247
---------- --------- -----------
Cash and temporary investments,
end of period $ 4,598 $ 915 $ 6,310
========== ========= ===========
Supplemental cash flow information:
Cash paid for interest $ 3,763 $ 2,639 $ 721
========== ========= ===========
Cash paid for income taxes $ 2,086 $ 2,179 $ 1,266
========== ========= ===========
Supplemental disclosure of non-cash investing and financing activities:
Details of business acquired in purchase transactions:
Fair value of assets acquired $ 4,058 $ 14,906 $ 37,901
========== ========= ===========
Liabilities assumed or incurred $ 2,171 $ 11,240 $ 19,396
========== ========= ===========
Cash paid for acquisitions (including
related expenses) $ 1,887 $ 3,666 $ 13,505
Cash acquired 102 137 673
---------- --------- -----------
Net cash paid for acquisition $ 1,785 $ 3,529 $ 12,832
========== ========= ===========
Issuance of common stock $ 5,000
===========
</TABLE>
Additional non-cash activities are disclosed in the notes to the
consolidated financial statements.
See notes to consolidated financial statements.
F-6
<PAGE> 78
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. THE COMPANY:
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) 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; (ii) patient services,
including nursing and para-professional services and radiation therapy; and
(iii) infusion therapy.
During the years ended October 31, 1994, 1995 and 1996, the Company
completed the following acquisitions:
<TABLE>
<CAPTION>
Company Date of Acquisition Nature of Business
------- ------------------- ------------------
<S> <C> <C>
RespiFlow, Inc. ("RespiFlow") April 1994 Specialized mail-order pharmacy
MK Diabetic Support Services, Inc. April 1994 Mail-order diabetic supplies
("MK Diabetic")
Radamerica, Inc. ("Radamerica") August 1994 Radiation therapy
DermaQuest Surgical Supply, Inc. November 1994 Mail-order medical supplies
("DermaQuest")
Delaware Valley Lung Center, P.A. January 1995 Pulmonary therapy
("DVLC")
Precision Health Care, Inc. March 1995 Mail-order orthotic products
("Precision")
Health Meds, Inc. ("Health Meds") October 1996 Respiratory mail-order pharmacy
U.S. HomeCare Infusion Therapy October 1996 Infusion therapy
Services Corporation of New Jersey
("U.S. HomeCare"), a subsidiary of
U.S. HomeCare Corporation
</TABLE>
The consolidated financial statements presented herein are those of the
Company and include the results of the aforementioned acquired companies
from their respective dates of acquisition (Note 3).
F-7
<PAGE> 79
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. Intercompany transactions and balances
are eliminated in consolidation.
CASH AND TEMPORARY INVESTMENTS:
Cash and temporary investments include highly liquid short-term investments
purchased with initial maturities of 90 days or less.
CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject the Company to
concentrations of credit risk are temporary cash investments. The Company
places its temporary cash investments with high credit quality financial
institutions and invests in investment grade commercial paper and time
deposits with several commercial lending institutions with original
maturities of three months or less. The Company believes no significant
concentration of credit risk exists with respect to these temporary cash
investments.
The Company grants credit without collateral to its patients, who are
primarily insured under third-party agreements. Accounts receivable at
October 31, 1996 and 1995 are comprised of amounts due from
Medicaid/Medicare (61% and 51%, respectively) and various other third-party
payors and self-pay patients (none of which comprise greater than 10% of
the balance).
INVENTORIES:
Inventories are valued at the lower of cost (first-in, first-out method) or
market. Inventories, which are primarily finished goods, include
pharmaceuticals, ancillary medical supplies and certain medical equipment.
PROPERTY AND EQUIPMENT:
Property and equipment, including revenue producing equipment, are carried
at cost and are being depreciated over their estimated useful lives of
three to seven years, using primarily the straight-line method. Revenue
producing equipment consists of home medical equipment (e.g., respiratory
equipment, beds, wheelchairs). Maintenance and repairs are charged against
results of operations as incurred. Leasehold improvements are amortized
over the related lease terms or estimated useful lives, whichever is
shorter. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts, and any
resulting gain or loss is reflected in results of operations.
F-8
<PAGE> 80
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
REVENUE RECOGNITION:
Patient and infusion revenues are recognized when services are performed
and are recorded net of estimated contractual adjustments based on
agreements with third-party payors, where applicable. Revenues from home
medical equipment are recognized over the period the equipment is rented
(typically on a month-to-month basis) and approximated $5,072, $4,191 and
$3,896 in 1996, 1995 and 1994, respectively. Revenues from the sale of
pharmaceuticals and supplies are recognized when products are delivered and
are recorded at amounts expected to be paid by third-party payors. The
Company receives a majority of its revenue from third-party insurance
companies and Medicare and Medicaid. The amount paid by third-party payors
is dependent upon the benefits included in the patient's policy or as
allowable amounts set by third-party payors. Certain revenues are subject
to review by third-party payors, and adjustments, if any, are recorded when
determined. For the years ended October 31, 1996, 1995 and 1994, the
Company's net revenues attributable to the Medicare and Medicaid programs
were approximately 62%, 59% and 52%, respectively, of the Company's total
revenues.
INCOME TAXES:
During fiscal 1994, the Company implemented Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, deferred taxes are determined upon the
cumulative differences between financial statement and income tax assets
and liabilities, based on currently enacted tax rates. Deferred tax assets
are recorded if future realization is more likely than not. The cumulative
effect of this accounting change increased the results of operations by
$300 for the year ended October 31, 1994.
Deferred taxes are provided primarily for bad debts, depreciation,
amortization of intangibles and acquisition liabilities, which are reported
for Federal income tax purposes in different periods than for financial
reporting purposes.
INTANGIBLE ASSETS:
Intangible assets primarily includes goodwill, which amounted to $43,950
and $41,198 at October 31, 1996 and 1995, respectively, and is being
amortized on a straight-line basis over forty years. Accumulated
amortization of goodwill at October 31, 1996 and 1995 was $2,109 and
$1,035, respectively. Also included in intangible assets at October 31,
1996 and 1995 are covenants not to compete of $546 and $839, respectively,
which are being amortized over periods ranging from two to three years.
Accumulated amortization of such covenants at October 31, 1996 and 1995 was
$1,276 and $782, respectively.
The Company selected the forty-year amortization period based on the likely
period of time over which the related economical benefit will be realized.
The Company believes the estimated goodwill life is reasonable given the
continuing movement of patient care to noninstitutional settings, expanding
demand due to demographic trends, the emphasis of the Company in
establishing significant coverage in its local and regional markets, the
consistent practice with other alternate site health care companies and
other factors.
F-9
<PAGE> 81
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
At each balance sheet date, management assesses whether there has been a
permanent impairment in the amount of goodwill and the amount of any
impairment by comparing anticipated undiscounted future cash flows from
operating activities with the carrying value of goodwill. Factors
considered by management in estimating future cash flows include current
operating results, trends and prospects of acquired businesses, as well
as the effect of demand, competition, market and other economic factors.
DEFERRED FINANCING COSTS:
Costs incurred in obtaining long-term financing are amortized over the
terms of the long-term financing agreements using the interest method. At
October 31, 1996, other assets include $2,824 of deferred financing costs
associated with the Credit Facility described in Note 5, net of accumulated
amortization of $176.
On July 31, 1996, $740 of unamortized costs associated with the Credit
Agreement was written-off as an extraordinary charge for the early
extinguishment of the Credit Agreement (Note 5). Amortization of deferred
financing costs is included in interest expense in the Statements of
Operations.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The presentation of financial statements in accordance 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. Actual results could differ from these
estimates.
EARNINGS PER SHARE:
Primary and fully diluted earnings per share are computed using the
weighted average number of shares of common stock outstanding, after giving
effect to contingently issuable shares under the acquisition agreements and
dilutive stock options and warrants using the treasury stock method. Fully
diluted earnings per share also reflect the incremental dilution related to
stock options due to the use of the market price at the end of the period
when it is higher than the average price for the period.
The weighted average number of shares of common stock outstanding have been
restated for the years ended October 31, 1995 and 1994 to give effect to
market price guarantees under acquisition agreements. The only effect of
this restatement was to increase previously reported primary earnings per
share from income before cumulative effect of an accounting change and net
income by $0.01 for the year ended October 31, 1994.
F-10
<PAGE> 82
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
The weighted average number of shares used in the primary and fully diluted
earnings per share computation for the years ended October 31, 1996, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------
1996 1995 1994
--------- ------ -------
<S> <C> <C> <C>
Weighted average number of shares used in primary calculation:
Weighted average number of shares outstanding 6,622 4,937 4,159
Weighted average number of shares contingently issuable
per acquisition agreements 321 607 463
Incremental shares, after application of treasury stock
method, of stock options and warrants 798 1,232 384
----- ----- -----
Shares used in calculation of primary
income per common share 7,741 6,776 5,006
===== ===== ======
Weighted average number of shares used in fully diluted calculation:
Weighted average number of shares outstanding 6,622 4,937 4,159
Weighted average number of shares contingently issuable
per acquisition agreements 321 607 463
Incremental shares, after application of treasury stock
method, of stock options and warrants 890 1,288 583
----- ----- -----
Shares used in calculation of fully diluted
income per common share 7,833 6,832 5,205
===== ===== =====
</TABLE>
F-11
<PAGE> 83
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
IMPACT OF RECENT ACCOUNTING STANDARDS:
In December 1991, the FASB issued SFAS No. 107, "Disclosures About Fair
Value of Financial Instruments," which requires that the fair value of such
instruments, except those investments accounted for by the equity method,
be disclosed in the financial statements. The Company adopted SFAS No. 107
in fiscal year 1996. The carrying amounts of such assets and liabilities
approximate fair value.
In March 1995, the FASB issued SFAS No. 121 "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which
requires that long-lived assets and certain identifiable intangible assets'
carrying values be evaluated based on the future (undiscounted and without
interest charges) cash flows expected to be realized from the use of the
asset and its eventual disposition. If the sum of the expected future cash
flows from an asset is less than the carrying value an impairment loss must
be recognized. SFAS No. 121 is effective for fiscal years commencing after
December 15, 1995. The impact of adopting SFAS No. 121 in fiscal 1997,
is not expected to have any impact on the Company's financial position
or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which prescribes a new method of accounting for stock-based
compensation that determines compensation expense based on fair value
measured at the grant date. SFAS No. 123 gives companies that grant stock
options or other equity instruments to employees, the option of either
adopting the new rules or continuing current accounting under the
Accounting Principles Board's Opinion No. 25, "Accounting for Stock Issued
to Employees," however disclosure would be required of the pro forma
amounts as if the new rules had been adopted. SFAS No. 123 is effective for
transactions entered into in fiscal years beginning after December 15,
1995. The Company intends to continue current accounting and provide the
disclosures only, as permitted under SFAS No. 123, beginning with its
annual financial statements for the year ending October 31, 1997.
F-12
<PAGE> 84
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. BUSINESS COMBINATIONS:
During the years ended October 31, 1994, 1995 and 1996, the Company
acquired the entities described below, which were accounted for by the
purchase method of accounting. The results of operations of the acquired
companies are included in the Company's statement of operations from their
respective dates of acquisition.
RESPIFLOW/MK DIABETIC
Effective April 1, 1994, the Company acquired all of the issued and
outstanding capital stock of RespiFlow and MK Diabetic (collectively,
"RespiFlow/MK Diabetic") for $1,000 in cash, $4,000 in notes (which were
paid in full in August 1994) and an additional payment of $11,850. During
fiscal 1995, the Company paid $5,877 of the additional payment and on
January 10, 1996 paid the balance of $5,973. RespiFlow/MK Diabetic provides
home care patients with respiratory, diabetic, ophthalmic and other
commonly prescribed medications and supplies.
The total cost of the acquisition of $16,951 was allocated on the basis of
the fair value of the assets acquired and liabilities assumed and incurred.
Accordingly, assets were assigned a value of $7,042, current liabilities
were $5,652 with the excess allocated to covenants not to compete of $550
and goodwill of $15,011. The covenants and goodwill are being amortized on
a straight-line basis over three and forty years, respectively.
RADAMERICA
On August 5, 1994, the Company acquired all of the issued and outstanding
capital stock of Radamerica, which operates five radiation therapy centers
adjacent to hospitals in and around Baltimore, Maryland, 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.
The $13,262 cost of the acquisition was allocated on the basis of the fair
value of the assets acquired and liabilities assumed and incurred with
$1,837, $2,445 and $2,994 allocated to current assets, property, plant and
equipment and liabilities, respectively. The excess was allocated to
covenants not to compete for $700 and goodwill for $11,274, which are being
amortized on a straight-line basis over three and forty years,
respectively.
F-13
<PAGE> 85
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. BUSINESS COMBINATIONS (CONTINUED):
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.
The Company loaned an aggregate of $1,100 to certain of the selling
shareholders, which is collateralized by 83 shares of the Company's common
stock. Principal and interest, at an annual rate of prime (8.25% and 8.75%
at October 31, 1996 and 1995) plus 0.75%, are due to the Company
concurrently with the due date of any payments to the selling shareholders
resulting from the market price guarantee or if no amounts are required to
be made under the market price guarantee, the date will be February 1,
1998. However, the outstanding amounts may be prepaid in whole or in part
prior to maturity. As of October 31, 1996, $136 of the loans have been
repaid (Note 8).
DERMAQUEST
Effective November 1, 1994, the Company acquired all of the issued and
outstanding capital stock of DermaQuest, a mail-order wound care products
company serving nursing home and home care patients, for $3,000 in
promissory notes which were repaid during fiscal 1995. Additional
contingent consideration is provided for in the purchase agreement, as
amended effective November 1, 1995, whereby the Company may have been
required to make additional payments based on the 1995 and 1996 earnings
levels of DermaQuest as described below. The Company issued a $4,000 letter
of credit under its Credit Agreement, as collateral for any contingent
payments. An additional payment due of $8,832 was recorded as of October
31, 1995 based on the purchase agreement and was satisfied through the
payment of $5,000 in cash and issuance of 370 shares of common stock valued
at $10.35 during the 1996 fiscal year. No additional payment will be made
for the year ending October 31, 1996. The total cost of the DermaQuest
acquisition was $11,832 and was allocated on the basis of the fair value of
the assets acquired and liabilities assumed and incurred, resulting in the
allocation of $1,539 and $1,993 to assets and current liabilities,
respectively. The excess amounts were allocated to covenants not to compete
of $100 and goodwill of $12,186 ($8,832 recorded on October 31, 1995 as a
result of the additional payment) which are being amortized on a
straight-line basis over three and forty years, respectively.
F-14
<PAGE> 86
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. BUSINESS COMBINATIONS (CONTINUED):
COMBINED PRO FORMAS
The following represents the unaudited pro forma results of operations and
related per share information assuming the Company acquired the
aforementioned entities at the beginning of the periods presented. The pro
forma results for the year ended October 31, 1994 are based on the
historical financial statements of the Company for the year ended October
31, 1994 (including RespiFlow/MK Diabetic and Radamerica from the dates of
acquisition), RespiFlow/MK Diabetic for the five months ended March 31,
1994, Radamerica for the nine months ended July 31, 1994 and DermaQuest for
the ten months ended October 31, 1994.
The unaudited pro forma information is not necessarily indicative either of
the results of operations that would have occurred had the acquisitions
been made on the dates indicated or that may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED
OCTOBER 31,
1994
---------------------------
(UNAUDITED)
---------------------------
<S> <C>
Net revenues $60,059
Income before cumulative effect of an accounting change: 2,533
Net income 2,833
Income per share before cumulative effect an accounting change:
Primary 0.46
Fully diluted 0.44
Net income per share:
Primary 0.51
Fully diluted 0.49
</TABLE>
F-15
<PAGE> 87
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. BUSINESS COMBINATIONS (CONTINUED):
DVLC
Effective January 31, 1995, the Company acquired certain assets and assumed
certain liabilities of DVLC for approximately $500. DVLC is a provider of
pulmonary rehabilitation and diagnostics which operates in Cherry Hill, New
Jersey.
The cost of the acquisition was allocated on the basis of the fair value of
the assets acquired and liabilities assumed and incurred, resulting in
goodwill and covenants not to compete of $312 and $200, respectively, which
are being amortized on a straight-line basis over forty and three years,
respectively.
PRECISION
Effective March 1, 1995, the Company acquired certain of the assets and
assumed certain liabilities of Precision, an orthotics distribution company
serving nursing home and home care patients. Pursuant to the Precision
purchase agreement, as amended, the purchase price of the assets acquired
from Precision was $360. On June 6, 1995, $30 was paid with the balance
payable in 33 equal monthly installments. The cost of the acquisition was
allocated on the basis of the fair value of the assets acquired and
liabilities assumed and incurred, resulting in goodwill of $388 which is
being amortized on a straight-line basis over forty years.
HEALTH MEDS
Effective October 1, 1996, the Company acquired certain assets and assumed
certain liabilities of Health Meds, a respiratory mail-order pharmacy for
$1,400 subject to adjustment per the acquisition agreement.
The cost of the acquisition was allocated on the basis of the fair value of
the assets acquired and the liabilities assumed and incurred, resulting in
goodwill of $1,621 which is being amortized on a straight-line basis over
forty years.
U.S. HOMECARE
Effective October 1, 1996, the Company acquired certain assets and assumed
certain liabilities of U.S. HomeCare, a provider of infusion therapy to
patients in their homes for $2,000. As of October 31, 1996, $350 was paid
and $1,650 was recorded in acquisitions payable. The remaining $1,650 plus
accrued interest was paid on November 1, 1996.
The cost of the acquisition was allocated on the basis of the fair value of
the assets acquired and the liabilities assumed and incurred, resulting in
goodwill and covenants not to compete of $2,206 and $50, respectively,
which are being amortized on a straight-line basis over forty and five
years, respectively.
F-16
<PAGE> 88
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
3. BUSINESS COMBINATIONS (CONTINUED):
The pro forma results of operations and related per share information for
DVLC, Precision, Health Meds and U.S. HomeCare have not been presented as
the impact is not material.
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 $10,250 in cash and 146 shares of
the Company's common stock, (valued at $750 after taking into account
restrictions on transfer). 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 acquisition of the VIP Companies (the "VIP Acquisition"),
which amounts are included in "Other Assets." The cash portion of the
contract deposit has, with the Company's consent, been loaned to the VIP
Companies to be used for working capital purposes.
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 other things, various closing conditions,
including receipt of necessary governmental approvals (including the
submission and approval of a plan of financing), the approval of the
lenders under the Credit Facility, the accuracy at closing of various
representations and warranties and the compliance by the sellers with
certain covenants and agreements contained in the stock purchase
agreements. In July 1996, the Company announced that the consummation of
the VIP Acquisition would not occur concurrently with the Second Closing
(as defined in Note 6) under the unit purchase agreement (as described in
Note 6), in that, among other things, the approvals and consents necessary
to consummate the transactions had not been and could not be obtained at
that time. The Company believes that the sellers are not in compliance with
certain provisions contained in the stock purchase agreements concerning
the VIP Companies and has notified the sellers of the VIP Companies
regarding the same. The Company cannot predict when or whether all of the
requisite consents and approvals will be obtained and the other closing
conditions will be satisfied, and, regardless, when or whether the
transaction will ultimately be consummated. For the years ended December
31, 1994 and 1995 and the nine months ended September 30, 1996 (unaudited),
the VIP Companies generated approximately $33,000, $35,000 and $21,930,
respectively, in revenues and pro forma net income (loss) (after
consideration of pro forma provision for income taxes) of $850, $(978) and
$334, respectively. The 1995 net loss includes a special one-time bonus of
$3,000 (pretax) to one of the VIP Companies' officers.
F-17
<PAGE> 89
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
4. PROPERTY AND EQUIPMENT:
Major classes of property and equipment consist of the following:
<TABLE>
<CAPTION>
OCTOBER 31
----------------------------
1996 1995
------ -------
<S> <C> <C>
Revenue producing equipment $2,826 $2,416
Furniture, Fixtures and equipment 4,708 4,264
Leasehold improvements 1,023 915
------ -------
8,557 7,595
Less, accumulated depreciation
and amortization 4,623 3,533
------ ------
$3,934 $4,062
====== ======
</TABLE>
The net book value of revenue producing equipment was $1,232 and $1,080 at
October 31, 1996 and 1995, respectively.
5. DEBT:
On August 5, 1994, the Company entered into a credit agreement with an
institutional lender, as Agent, and various banks (the "Credit Agreement"),
which provided for a term loan of $18,000 and revolving loans of up to
$10,000. On March 2, 1995, such agreement was amended and provided for a
total term loan of $23,000 and revolving loans of up to $12,000.
On January 10, 1996, the Company's Credit Agreement was amended to permit
the issuance of equity units under the unit purchase agreement (Note 6), to
permit the issuance of the 20% Subordinated Notes described below, to allow
the payment in cash of the remaining $5,973 RespiFlow / MK Diabetic
acquisition payable (plus interest from its due date of August 15, 1995),
which was paid on January 10, 1996 (Note 3), and to amend and modify
certain definitions and covenants in the Credit Agreement.
F-18
<PAGE> 90
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. DEBT (CONTINUED):
On January 10, 1996, an institutional investor purchased from the Company
$10,000 of 20% subordinated notes (the "Subordinated Notes") due October
10, 1996. On May 30, 1996 the interest rate on the Subordinated Notes was
reduced to 12%. On July 31, 1996, the Subordinated Notes were repaid with
proceeds from the Second Closing (as defined in Note 6).
On May 28, 1996, the required lenders under the Credit Agreement consented
to the use of the $5,400 proceeds from the Initial Closing (as defined in
Note 6) to: (i) pay $1,000 plus accrued interest for the remainder of the
DermaQuest acquisition payable (Note 3); (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.
On July 31, 1996, the Company completed a new $100,000 senior secured
revolving credit facility, underwritten by a commercial bank who is also
acting as Agent Bank (the "Credit Facility"). This new facility replaced
the Company's existing $35,000 Credit Agreement. On July 31, 1996, the
Credit Agreement was repaid out of proceeds from the Second Closing (Note
6) and borrowings under the Credit Facility. In connection with the
repayment of the Credit Agreement, the Company recorded a non-cash,
after-tax, extraordinary charge of $1,435 (net of tax benefit of $879) in
fiscal 1996, relating to the write-off of the deferred financing costs and
discount associated with the Credit Agreement.
Pursuant to the Credit Facility and subject to the terms thereof, up to
$85,000 of the total facility may be used by the Company for the
acquisition of other alternate site health care providers with the balance
of the Credit Facility not used for acquisitions to be used for working
capital. The loans under the Credit Facility are collateralized by, among
other things, a lien on substantially all of the Company's and its
subsidiaries' assets, a pledge of the Company's ownership interest in its
subsidiaries and guaranties by the Company's subsidiaries. The loans mature
on July 31, 2001 with reductions in availability commencing July 31, 1998
through final maturity.
The Credit Facility provides that subject to the terms thereof, the Company
may make borrowings either at the Base Rate (as defined in the Credit
Facility), plus 1% or the Eurodollar Rate (5.375% at October 31, 1996),
plus 2%. As of October 31, 1996, the Company had $12,492 outstanding under
the Credit Facility and availability under the Credit Facility was $87,508.
F-19
<PAGE> 91
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. DEBT (CONTINUED):
Subject to certain exceptions, the Credit Facility prohibits or restricts,
among other things, the incurrence of liens, the incurrence of
indebtedness, certain fundamental corporate changes, dividends, the making
of specified investments and certain transactions with affiliates. In
addition, the Credit Facility contains affirmative and negative financial
covenants customarily found in agreements of this kind including the
maintenance of certain financial ratios, such as interest coverage, debt to
earnings before interest, taxes, depreciation and amortization ("EBITDA")
and minimum EBITDA. On October 31, 1996, the Company was in compliance with
all financial covenants contained in the Credit Facility.
As of October 31, 1995, $1,000 of the amounts outstanding under the
revolving loans were classified as short-term debt. Such amount was repaid
in November 1995.
Long-term debt, net of unamortized discount, consists of the following:
<TABLE>
<CAPTION>
OCTOBER 31,
---------------------
1996 1995
------- -------
<S> <C> <C>
Credit Facility, due July 31, 2001, with monthly interest at Eurodollar Rate
(5.375% at October 31, 1996), plus 2% collateralized by a lien on all
Company assets $12,492
Bank term and revolving loans, due October 31, 1999, with quarterly principal
payments ranging from $1,000 to $1,625 plus interest at LIBOR (5.875% at October
31, 1995), plus 3.25% net of unamortized discount of $1,936, at October 31,
1995 collateralized by a lien on all Company assets $24,064
Equipment leases with monthly principal plus interest ranging from 7.25% to
12.5% through 1998, collateralized by related equipment 34 108
------- -------
12,526 24,172
Less, current maturities 21 3,908
------- -------
$12,505 $20,264
======= =======
</TABLE>
F-20
<PAGE> 92
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
5. DEBT (CONTINUED):
Annual maturities of long-term debt for each of the next five years are:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 31,
<S> <C>
1997 $ 21
1998 13
2001 12,492
--------
$12,526
========
</TABLE>
6. UNIT PURCHASE AGREEMENT:
On November 20, 1995, the Company entered into a unit purchase agreement,
as amended, with an institutional investor under which the Company sold 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, subsequent to receipt of necessary shareholder and
governmental approval. Each unit is 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").
The initial closing (the "Initial Closing") was completed on May 30, 1996
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 sold 600 units or 9.8% of the issued and outstanding shares of
the Company, after giving effect to the sale, at a purchase price of $9.00
per unit for an aggregate purchase price of $5,400. The second closing (the
"Second Closing"), which was subject to receipt of New York State
Department of Health approval of the transaction, (which was received in
June of 1996) was completed on July 31, 1996. At the Second Closing,
the Company sold an additional 3,800 units for an aggregate purchase price
of $34,200. Gross proceeds of $39,600 were reduced by $1,249 of offering
costs.
F-21
<PAGE> 93
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
7. NON-RECURRING CHARGES:
During the fourth quarter of 1995, the Company recorded non-recurring
charges totaling $3,898 related to the write-off of expenses related to an
abandoned public offering ($2,808), write-off of expenses related to
abandoned acquisitions ($605) and expenses related to the consolidation of
certain of the Company's facilities ($485).
The decision to abandon the proposed public offering was made during the
fourth quarter following management's assessment of the ability to complete
the financing. Financing was subsequently arranged through an institutional
investor (Note 6). The non-recurring charge of $2,808 is primarily made up
of legal, accounting, underwriting, printing, and "roadshow" expenses.
Pursuant to the decision to abandon the public offering, management
assessed the recoverability of deferred expenses related to certain
potential acquisitions which had been capitalized based on the completion
of both the public offering and the acquisitions. Management made the
determination that, as of the balance sheet date, these expenses would not
be recoverable. The non-recurring charge of $605 is primarily made up of
legal and accounting expenses.
The decision to consolidate certain of the Company's facilities was made
during the fourth quarter and relates to the consolidation of redundant
facilities in the New York/New Jersey market into an existing Company
location in New Jersey. Included in the non-recurring charge of $485 are
costs associated with closing down the New York Facility, exclusive of
personnel costs. The Company is in the final phases of the consolidation of
these facilities which could require the remaining $126 to be paid out in
fiscal 1997.
F-22
<PAGE> 94
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
8. RELATED PARTY TRANSACTIONS:
Notes receivable from related parties and stockholders consisted of the
following:
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------
1996 1995
------ ------
<S> <C> <C>
Notes due from officers and employees $ 200 $ 200
Notes due from related parties 964 964
------ ------
1,164 1,164
Less current maturities, (included in prepaid expenses
and other current assets on the balance sheet) 200 200
------ ------
$ 964 $ 964
====== ======
</TABLE>
Interest on the notes due from officers and employees are at rates ranging
from prime (8.25% and 8.75% at October 31, 1996 and 1995) to prime plus 1%
and are due April 30, 1997.
The Company loaned an aggregate of $1,100 to two of the four sellers of
Radamerica. Interest on these notes is at prime (8.25% and 8.75% at October
31, 1996 and 1995) plus 0.75%. As of October 31, 1996, $136 of the loans
have been repaid (Note 3).
Interest expense-related parties, net was $3, $132 and $163 for the years
ended October 31, 1996, 1995 and 1994, respectively.
F-23
<PAGE> 95
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES:
During fiscal 1994, the Company changed its method of accounting for income
taxes in accordance with SFAS No. 109 (Note 2). The provision (benefit) for
income taxes from continuing operations before the extraordinary loss is
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Current:
Federal $ 1,637 $ 1,944 $ 1,625
State 265 549 317
Deferred:
Federal (215) (1,465) (127)
State 15 (401) (159)
------- ------- -------
Provision for income taxes $ 1,702 $ 627 $ 1,656
======= ======= =======
</TABLE>
F-24
<PAGE> 96
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES (CONTINUED):
For 1996, 1995 and 1994, deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and
liabilities recorded for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's deferred
tax assets and liabilities as of October 31, 1996, 1995 and 1994 are as
follows:
<TABLE>
<CAPTION>
OCTOBER 31,
-------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Current
Provision for doubtful accounts $ 2,172 $ 2,006 $ 419
Inventory capitalization 9 11 118
Accrued expenses 677 409 213
Other, net 44 43
Valuation allowance (53)
-------- ------- ------
Current deferred tax assets 2,902 2,469 697
------- ------- -------
Non-current:
State net operating losses 151 312
Other, net 57
Valuation allowance (130) (285)
------- ------- -------
Non-current deferred tax assets,
included in other assets 78 27
------- ------- -------
Deferred tax liabilities:
Non-current:
Depreciation and amortization 490 297 253
Other, net 65 (26) 85
------- ------- -------
Deferred tax liabilities 555 271 338
------- ------- -------
Net deferred tax assets $ 2,425 $ 2,225 $ 359
======= ======= =======
</TABLE>
F-25
<PAGE> 97
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
9. INCOME TAXES (CONTINUED):
The valuation allowance at October 31, 1996 relates to deferred tax assets
established for certain state net operating loss carryforwards which are
not expected to be realized based on historical or future earnings. The net
decrease in the valuation allowance of $155 is primarily due to the
realization of state deferred tax assets based on current levels of income.
Management expects that it is more likely than not that future levels of
income will be sufficient to realize the deferred tax assets, as recorded.
As of October 31, 1996, the Company has state net operating tax losses of
$1,626 which, if unused, will expire in the years 1998 through 2011.
Reconciliations of the differences between income taxes on income from
continuing operations computed at Federal statutory tax rates and
consolidated provisions for income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
Income taxes computed at Federal
statutory tax rate $ 1,265 $ 505 $ 1,406
State income taxes, net of
Federal benefits 350 (187) 105
Nondeductible expenses, primarily
amortization of intangible assets 266 41 271
Valuation allowance, state taxes (155) 232 (170)
Other, net (24) 36 44
------- ------- -------
Provision for income taxes $ 1,702 $ 627 $ 1,656
======= ======= =======
</TABLE>
F-26
<PAGE> 98
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
10. STOCK OPTION PLAN AND WARRANTS:
The Company has a nonqualified stock option plan ( "1987 Plan") and a
stock option plan which provides for either incentive stock options or
nonqualified stock options ("1992 Plan"). The 1992 Plan gives eligible
employees, officers, directors and non-employee independent contractors
options to purchase up to 1,500 shares of stock, of which options to
purchase 725 shares of stock were outstanding as of October 31, 1996.
Under the 1987 Plan, options covering 24 shares have been granted and are
outstanding and no additional options may be granted. Options under the
1992 Plan may be granted by the Compensation Committee of the Board of
Directors which determines the exercise price, vesting provisions and term
of such grants. The vesting provisions provide for vesting of options over
a period of between two and three years. Following is a summary of
transactions under both plans during the years ended October 31, 1994,
1995 and 1996:
<TABLE>
<CAPTION>
STOCK
OPTIONS
-------
<S> <C>
Outstanding - October 31, 1993 at $1.25 to $3.18 per share 465
Granted during 1994 ($4.38 to $8.88 per share) 380
Exercised during 1994 ($1.25 to $3.18 per share) (27)
Canceled during 1994 ($2.78 to $4.38 per share) (59)
----
Outstanding - October 31, 1994 at $1.25 to $8.88 per share 759
Granted during 1995 ($7.88 per share) 260
Exercised during 1995 ($1.25 to $5.50 per share) (148)
Canceled during 1995 ($3.18 to $8.88 per share) (19)
----
Outstanding - October 31, 1995 at $1.25 to $8.75 per share 852
Granted during 1996 ($8.88 to $10.00 per share) 70
Exercised during 1996 ($1.25 to $7.88 per share) (159)
Canceled during 1996 ($3.18 to $8.75 per share) (14)
----
Outstanding - October 31, 1996 $1.25 to $10.00 per share 749
====
Available for future grants 517
====
</TABLE>
F-27
<PAGE> 99
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
10. STOCK OPTION PLAN AND WARRANTS (CONTINUED):
Of the 759 options outstanding as of October 31, 1994, 499 were
exercisable as of that date.
Of the 852 options outstanding as of October 31, 1995, 471 were
exercisable as of that date.
As of October 31, 1996, 583 of the 749 options outstanding were
exercisable.
In connection with the initial public offering, the Company issued
warrants to purchase 1,600 common shares. The warrants are exercisable at
$6.50 per share and expire on December 6, 1997. During 1994, the Company
repurchased 500 of the public warrants, 250 for $1.25 per warrant and 250
at $1.3125 per warrant in open market purchases.
11. COMMITMENTS AND CONTINGENCIES:
The Company has employment agreements with certain of its executive
officers and management personnel which provide for minimum aggregate
annual compensation of $1,175 in fiscal 1997. The contracts expire between
August 1997 and January 1999 and contain customary termination and
non-compete provisions. Certain of the contracts, which amount to $770 of
1997 minimum aggregate compensation, contain change in control provisions
that would entitle each of the individuals up to 2.9 times of their salary
then in effect, except for one individual who is entitled to 2.0 times his
salary, plus any unpaid bonus and unreimbursed expense upon a change of
control of the Company (as defined) or significant change in the
responsibilities of such person.
In fiscal 1996, the Company paid $350 to its former Chairman of the Board
and Chief Executive Officer ("Chairman") in connection with his
resignation. The Company also entered into a consulting agreement with its
former Chairman which provides for annual compensation of $150 less the
amount by which certain amounts paid to or on his behalf exceed $60.
Beginning in fiscal 1995, the Company had adopted a performance based
bonus plan for the Company's executive officers and certain other
employees. Under this plan, amounts granted may be up to 50% of their base
salaries at the sole discretion of the Compensation Committee. Bonuses may
be paid in whole or in part, in cash or shares of common stock.
From November 1, 1994 to March 1, 1999, RespiFlow/MK Diabetic and
DermaQuest will be managed by E/L Associates, an affiliate of certain of
the selling shareholders of those entities. Pursuant to a management
agreement, E/L Associates will receive an annual management fee of $450
per year until March 1, 1999 and is eligible to receive an incentive fee
during each year of the term of the agreement with respect to RespiFlow/MK
Diabetic and DermaQuest as follows: (i) a fee equal to 25% of the annual
pretax earnings of RespiFlow/MK Diabetic in excess of $3,600 ($654 in
1995) and (ii) a fee equal to 25% of the annual pretax earnings of
DermaQuest in excess of $2,400 (in each case, as defined). The Company has
guaranteed the obligations of RespiFlow/MK Diabetic and DermaQuest under
this management agreement.
F-28
<PAGE> 100
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
11. COMMITMENTS AND CONTINGENCIES (CONTINUED):
Effective November 1, 1995, the management agreement with E/L Associates
was amended to change the base compensation under the agreement to $240,
$390, $490 and $490 in fiscal 1996 through 1999, respectively, and to
change the incentive compensation formula to 7% of pretax income (as
defined), payable based on achieving minimum pretax earnings (as defined)
of $3,800 at RespiFlow/MK Diabetic and $3,000 at DermaQuest.
The Company has entered into various operating lease agreements for office
space and equipment. Certain of these leases provide for renewal options
extending to the year 2006.
Future minimum non-cancelable lease payments at October 31, 1996 are as
follows:
<TABLE>
<S> <C>
1997 $1,280
1998 1,214
1999 1,100
2000 588
2001 417
Thereafter 404
------
$5,003
======
</TABLE>
Total rental expense for the year ended October 31, 1996, 1995 and 1994
amounted to $1,645, $1,563 and $753, respectively.
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 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.
The Company is also involved in various other legal proceedings and claims
incidental to its normal business activities. The Company is vigorously
defending its position in all such proceedings. Management and its legal
counsel believe these matters should not have a material adverse impact on
the financial condition, cash flows, or results of operations.
F-29
<PAGE> 101
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
12. SUBSEQUENT EVENT:
On November 13, 1996, the Company entered into a number of agreements
including a stock purchase agreement (the "Stock Purchase Agreement") and
a merger agreement (the "Merger Agreement") to acquire 100% of the issued
and outstanding stock and senior secured indebtedness of Health
Management, Inc. ("HMI") in a series of transactions. HMI is a Buffalo
Grove, Illinois based provider of integrated pharmacy management services
to patients with chronic medical conditions and to health care
professionals, drug manufacturers and third-party payors involved in such
patients' care. For the year ended April 30, 1996 and the six months
ended October 31, 1996 (unaudited), HMI reported $158,860 and $40,523 of
net sales, respectively and net (loss) income of ($10,927) and $432,
respectively. Included in the amounts reported above in the year ended
April 30, 1996 net loss are charges of $16,840, related to (i) a
write-off of medical device inventory ($2,840); (ii) an additional
provision reflecting a change in the estimation of the allowance for
doubtful accounts ($8,400); (iii) costs associated with organizational
consolidation and other cost reduction programs ($3,600); and (iv)
professional fees related to HMI's litigation and restatement of fiscal
1995 financial statements ($2,000).
The acquisition of 49% of the outstanding shares of HMI common stock
will be accounted for by the Company as a purchase and recorded under the
equity method of accounting until such time as the Company gains control
of HMI (greater than 50% ownership of the outstanding common stock of
HMI), at which point HMI will be consolidated with the Company.
Also on November 13, 1996, the Company acquired HMI's senior secured
indebtedness under the credit agreement between HMI and its senior lenders
(the "HMI Credit Agreement") for $21,263 directly from such lenders. The
Company also agreed to lend HMI up to $5,000 for working capital purposes
and to forbear from exercising any remedies under the HMI Credit Agreement
until January 31, 1997.
On January 13, 1997, The Company agreed to changes to its Credit Facility
with its senior lenders in order to accommodate the purchase of the senior
secured indebtedness of HMI and the 8,964 shares of HMI common stock
purchased by the Company pursuant to the Stock Purchase Agreement. The
principal changes include temporary adjustments to certain financial
covenants until April 30, 1997, by which time the Company believes it will
have either consummated the acquisition pursuant to the Merger Agreement
and/or have obtained additional capital, such that it will be in
compliance with the terms of the Credit Facility. The Company also agreed
that, until the acquisition of HMI has been consummated, any additional
acquisitions would be subject to the specific approval of its senior
lenders.
On January 14, 1997, the Stock Purchase Agreement was completed, pursuant
to which the Company acquired 8,964 newly issued shares of HMI's common
stock, representing approximately 49% of HMI's outstanding common stock
for $1 per share or $8,964. The Company also entered into a registration
rights agreement providing for the registration of the aforementioned
shares, which commences on the earlier of June 30, 1997 or the date on
which the Merger Agreement, described below, is terminated. The Company
also received an option to purchase newly issued shares up to an
additional 2% of HMI's then outstanding common stock for $1 per share,
which expires on January 14, 1998. Also as of January 14, 1997, the
Company had advanced $4,649 to HMI for working capital purposes.
The Merger Agreement, as amended on January 13, 1997, provides for the
acquisition by the Company of the remaining issued and outstanding common
shares of HMI, not previously owned by the Company for $1.50 per share.
Consummation of the Merger Agreement is subject to various closing
conditions, including receipt of the financing by the Company necessary to
complete the merger, approval of the lenders under the Credit Facility,
receipt of certain regulatory approvals and approval by HMI's
shareholders.
The aggregate cost of the acquisition is estimated to be $60,000 and the
aggregate amount of capital required to complete the remaining portion of
the acquisition is approximately $30,000, of which the Company expects a
substantial portion will be provided through borrowings under the Credit
Facility. On January 8, 1997, HPII agreed to purchase an additional
899 shares of the Company's Common Stock at a purchase price of $11.125
per share for an aggregate purchase price of $10,000 (subject to, among
other things, receipt of applicable regulatory approvals) and it is
anticipated that these funds may be used to complete the HMI transaction.
The Company anticipates completing this acquisition at the end of the
Company's second fiscal quarter of 1997.
F-30
<PAGE> 102
TRANSWORLD HOME HEALTHCARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
12. SUBSEQUENT EVENT (CONTINUED):
HPII has purchased certain of HMI's trade payables aggregating
approximately $18,000 at various discounts. Provided that the HMI Merger
Agreement is consummated, HPII has agreed to extend a 10% discount of the
outstanding face amount of such payables to the Company.
F-31
<PAGE> 103
TRANSWORLD HOME HEALTHCARE, INC.
QUARTERLY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The following table presents the comparative quarterly results for the years
ended October 31, 1996 and 1995.
<TABLE>
<CAPTION>
January 31, April 30, July 31, October 31, Total
---------- ---------- ---------- -------- ----------
1996 quarter ended
------------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 19,644 $ 17,522 $ 19,236 $ 19,902 $ 76,304
========== ========== ========== ======== ==========
Gross profit $ 10,700 $ 9,622 $ 10,421 $ 10,881 $ 41,624
========== ========== ========== ======== ==========
Income before extraordinary loss(1) $ 821 $ 119 $ 292 $ 786 $ 2,018
========== ========== ========== ======== ==========
Net income (loss) $ 821 $ 119 $ (1,050) $ 693 $ 583
========== ========== ========== ======== ==========
Primary income per share of
common stock(2)(3):
Income before extraordinary loss(1) $ 0.13 $ 0.02 $ 0.04 $ 0.07 $ 0.26
Extraordinary loss on early
extinguishment of debt(1) (0.19) (0.01) (0.18)
---------- ---------- ---------- -------- ----------
Net income (loss) per share of
common stock $ 0.13 $ 0.02 $ (0.15) $ 0.06 $ 0.08
========== ========== ========== ======== ==========
Fully diluted income per share of
common stock(2)(3):
Income before extraordinary loss(1) $ 0.13 $ 0.02 $ 0.04 $ 0.07 $ 0.26
Extraordinary loss on early
extinguishment of debt(1) (0.19) (0.01) (0.19)
---------- ---------- ---------- -------- ----------
Net income (loss) per share of
common stock $ 0.13 $ 0.02 $ (0.15) $ 0.06 $ 0.07
========== ========== ========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
1995 quarter ended January 31, April 30, July 31, October 31, Total
------------------ ----------- --------- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
Total revenues $17,705 $17,048 $18,854 $17,980 $71,587
======= ======= ======= ======= =======
Gross profit $ 9,744 $ 9,415 $10,281 $ 9,417 $38,857
======= ======= ======= ======= =======
Net income $ 1,282 $ 1,027 $ 1,084 $(2,534) $ 859
======= ======= ======= ======= =======
Primary net income (loss) per share
of common stock(2)(3): $ 0.20 $ 0.15 $ 0.16 $ (0.37) $ 0.13
======= ======= ======= ======= =======
Fully diluted net income (loss) per
share of common stock (2)(3): $ 0.19 $ 0.15 $ 0.16 $ (0.37) $ 0.13
======= ======== ======= ======= =======
</TABLE>
(1) See Note 5 to the Consolidated Financial Statements regarding
extraordinary loss. Amounts booked to extraordinary loss in the fourth
quarter of fiscal 1996 relate to a change in estimate for the income tax
benefit.
(2) The sum of the per share amounts for the quarters does not necessarily
equal that of the year because of computations are made independently.
(3) Weighted average shares have been restated for the three months ended
January 31, 1995, April 30, 1995, July 31, 1995, October 31, 1995, January
31, 1996, April 30, 1996 and July 31, 1996 and for the year ended October
31, 1996 to give effect to a market price guarantee under an acquisition
agreement. The only effect of this restatement was to increase previously
reported primary loss per share by $0.01 for the quarter ended October 31,
1995.
F-32
<PAGE> 104
TRANSWORLD HOME HEALTHCARE, INC.
(IN THOUSANDS)
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- -------------------------- ---------------- --------------------------------------- ----------------- ----------------
Additions Charged to
---------------------------------------
Balance at Balance at
Beginning Cost and Other End of
Description of Period Expenses Accounts Deductions Period
- -------------------------- ---------------- ---------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful accounts:
Year ended $5,137 $6,394 $ 70(B) $6,130(A) $5,471
October 31, 1996
Year ended 4,009 5,732 5(B) 4,609(A) 5,137
October 31, 1995
Year ended 1,472 2,977 3,118(B) 3,558(A) 4,009
October 31, 1994
</TABLE>
(A) Doubtful accounts written, off, net of recoveries and amounts related
to acquisitions.
(B) Assumed in acquisitions.
S-1
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TRANSWORLD HOME HEALTHCARE, INC.
(Under Section 805 of the Business Corporation Law)
Baer Marks & Upham
805 Third Avenue
New York, NY 10022
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TRANSWORLD HOME HEALTHCARE, INC.
Under Section 805 of the Business Corporation Law
It is hereby certified that:
FIRST: The name of the corporation is Transworld Home Healthcare, Inc.
The name under which the corporation was formed is United
States Home Healthcare Corp.
SECOND: The certificate of incorporation of the corporation was filed
by the Department of State on November 30, 1981.
THIRD: The amendment of the certificate of incorporation effected by
this certificate of amendment is as follows:
(i) to increase the aggregate number of shares which the
corporation shall have authority to issue from twelve million (12,000,000), with
a par value of $.01 per share to thirty two million (32,000,000) by authorizing
twenty million (20,000,000) additional shares of Common Stock, with a par value
of $.01 per share.
FOURTH: To accomplish the foregoing amendment of the first paragraph of
Article FOURTH of the certificate of incorporation, relating to the aggregate
number of shares which the corporation shall have authority to issue, is hereby
amended to read as follows:
"FOURTH: The aggregate number of shares of all
classes which the corporation shall have the authority to
issue is thirty two million (32,000,000) shares, divided into
two classes of which 30,000,000 shares shall be designated
Common Stock, with a par value of $.01 per share and 2,000,000
shares shall be designated Preferred Stock, with a par value
of $.01 per share."
<PAGE> 3
FIFTH: The foregoing amendment of the certificate of incorporation was
authorized by the consent in writing of all of the members of the Board of
Directors of the corporation followed by the consent of a majority of the
holders of all of the issued and outstanding shares of the corporation entitled
to vote on the said amendment of the certificate of incorporation.
IN WITNESS WHEREOF, the undersigned have subscribed this
document on the date set forth below and do hereby affirm, under the penalties
of perjury, that the statements contained therein have been examined by the
undersigned and are true and correct.
Dated: June 28, 1995.
/s/ Wayne A. Palladino
-------------------------------
Wayne A. Palladino
Vice President
/s/ Leslie J. Levinson
-------------------------------
Leslie J. Levinson
Secretary
-2-
<PAGE> 1
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TRANSWORLD HOME HEALTHCARE, INC.
(Under Section 805 of the Business Corporation Law)
Baer Marks & Upham LLP
805 Third Avenue
New York, NY 10022
<PAGE> 2
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
TRANSWORLD HOME HEALTHCARE, INC.
Under Section 805 of the Business Corporation Law
It is hereby certified that:
FIRST: The name of the corporation is Transworld Home Healthcare, Inc.
The name under which the corporation was formed is United
States Home Healthcare Corp.
SECOND: The certificate of incorporation of the corporation was filed
by the Department of State on November 30, 1981.
THIRD: The amendment of the certificate of incorporation effected by
this certificate of amendment is as follows:
to require the approval of at least 66-2/3% of the
corporation's entire board of directors for (i) any action taken by the
corporation with respect to the proposed acquisition by the corporation, whether
by purchase of stock or assets, of another corporation, and (ii) any increase in
the number of the directors of the corporation to more than seven.
FOURTH: To accomplish the foregoing amendment, the following new
Article ELEVENTH, relating to the restrictions on actions by the Board of
Directors, is added to the certificate of incorporation of the corporation:
"ELEVENTH: (i) any action taken by the Corporation with
respect to the proposed acquisition by the Corporation whether by
purchase of stock or assets of another company or (ii) any increase in
the number of directors of the Corporation to more than seven shall be
approved by at least 66-2/3% of the Corporation's entire board of
directors as then constituted, except that at the option of Paribas
Principal, Inc. ("Paribas") until the satisfaction of certain
conditions contained in the Shareholders Agreement between among
others, Paribas and the Corporation dated
<PAGE> 3
August 5, 1994, Paribas shall have the right to designate one designee
to the Corporation's Board of Directors, without such approval."
FIFTH: The foregoing amendment of the certificate of incorporation was
authorized by the consent in writing of all of the members of the Board of
Directors of the corporation followed by the vote of a majority of the holders
of all of the issued and outstanding shares of the corporation entitled to vote
on the said amendment of the certificate of incorporation.
IN WITNESS WHEREOF, the undersigned have subscribed this
document on the date set forth below and do hereby affirm, under the penalties
of perjury, that the statements contained therein have been examined by the
undersigned and are true and correct.
Dated: May 14, 1996
/s/ Wayne A. Palladino
-------------------------------
Wayne A. Palladino
Vice President
/s/ Leslie J. Levinson
-------------------------------
Leslie J. Levinson
Secretary
-2-
<PAGE> 1
RESTATED
BY-LAWS
OF
TRANSWORLD HOME HEALTHCARE, INC.
ARTICLE 1
STOCKHOLDERS
Section 1.1 Annual Meeting. The Annual Meeting of Stockholders for the
election of directors and the transaction of such other business as may properly
come before it shall be held within one hundred twenty (120) days after the
close of the immediately preceding fiscal year of the Corporation, or such other
date, and at such time and place, within or without the State of New York, as
shall be determined by resolution of the Board of Directors. If the day fixed
for the annual meeting is a legal holiday, such meeting shall be held on the
next succeeding business day.
Section 1.2 Special Meetings. Special meetings of stockholders may be
called by the Board of Directors or the Chief Executive Officer, if any, and
shall be called by the Chief Executive Officer or the Secretary at the request
in writing, stating the purpose or purposes thereof, of holders of at least ten
percent of the voting power of the shares of capital stock of the Corporation
issued and outstanding and entitled to vote thereat. Special meetings of
stockholders may be held at such time and at such places, within or without the
State of New York, as may be determined by resolution of the Board of Directors
or as may be specified in the call of any meeting.
Section 1.3 Notice of Meetings and Adjourned Meetings. Written notice
of every meeting of stockholders stating the place, date, time and purposes
thereof, shall, except when otherwise required by the Certificate of
Incorporation or the laws of the State of New York, be mailed at least ten but
not more than fifty days prior to the meeting to each stockholder of record
entitled to vote thereat. Any meeting at which a quorum of stockholders is
present, in person or by proxy, may adjourn from time to time without notice,
other than announcement at such meeting, until its business is completed. At the
adjourned meeting, the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.4 Quorum. Except as otherwise provided by law or the
Certificate of Incorporation, a quorum shall be deemed to be present at any
meeting of stockholders or purposes of any given matter to be voted upon at such
meeting if such meeting shall be attended
<PAGE> 2
by persons entitled (either personally or by proxy) to vote stock representing a
majority of the potential voting power (as defined in Section 1.8) with respect
to such matter. If at any meeting a quorum is not present for purposes of any
given matter to be voted upon at such meeting, the chairman of such meeting or
the holders of the relevant stock (as defined in Section 1.8) may, by the
affirmative vote of a majority of the voting power represented by such relevant
stock, adjourn the meeting insofar as it relates to the given matter to another
time and/or place without notice other than announcement at such meeting. At the
adjourned meeting, the Corporation may transact any business that might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, of if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting. The stockholders present
or represented at a duly called or held meeting at which a quorum is present may
continue to transact business until final adjournment notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
Section 1.5 Voting. When a quorum is present at any meeting with
respect to any given matter, a majority of the voting power (as defined in
Section 1.8) represented by the relevant stock shall be necessary and sufficient
to approve such matter, unless the vote of a greater number or voting by classes
is required by law,the Certificate of Incorporation or these By-Laws.
Section 1.6 Consent of Stockholders in Lieu of Meeting. Unless
otherwise restricted by the Certificate of Incorporation or these By-Laws or
by-law, any action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by all persons
entitled to vote. Such consents shall be delivered to the Corporation by
delivery to its registered office in the State of New York, its principal place
of business or the Secretary of the Corporation. Such consents shall be filed
with the minutes of proceedings of the stockholders and shall have the same
force and effect as a unanimous vote of stockholders.
Section 1.7 Fixing Date for Determination of Stockholders of Record.
(a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors, and which record date shall
not be more than fifty nor less than ten days before the date of such meeting.
If no record date is fixed by the Board of Directors, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given or is waived, on the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of
-2-
<PAGE> 3
the meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
(b) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without a
meeting, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors, and which date shall not be more than ten days after
the date upon which the resolution fixing the record date is adopted by the
Board of Directors. If no record date has been fixed by the Board of Directors,
the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of
Directors is required by law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered to
the Corporation by delivery to its registered office in the State of New York,
its principal place of business, or the Secretary of the Corporation. Delivery
made to the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the Board of Directors and prior action by the Board of Directors is required by
law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the Board of Directors adopts the resolution taking such
prior action.
(c) In order that the Corporation may determine the
stockholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the stockholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action the Board of Directors may fix a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than fifty days
prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 1.8 Certain Definitions.
(a) Voting Power. The "voting power" of any share of stock
issued by the Corporation with respect to any given matter to be voted upon at
any meeting of the Corporation's stockholders shall be equal to the size of the
vote which such share would entitle its owner of record at the record date for
such meeting to cast at such meeting with respect to a given matter if such
record owner were present at such meeting.
(b) Potential Voting Power. The "potential voting power" with
respect to any given matter to be voted upon at any meeting of any of the
Corporation's stockholders shall be equal to the aggregate voting power of all
shares of stock entitled to be voted with respect to such matter at such
meeting.
-3-
<PAGE> 4
(c) Relevant Stock. Stock issued by the Corporation shall be
deemed to be "relevant stock" with respect to any given matter to be voted upon
at any meeting of any of the Corporation's stockholders if both (i) such stock
is entitled to be voted with respect to the given matter and (ii) one or more of
the persons attending the meeting in person or by proxy has a right to vote such
stock by reason of being the record holder of such stock at the record date
established for such meeting or by reason of holding voting rights assigned by
the record holder entitled to vote such stock.
Section 1.9 Stockholder List. At least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
such meeting, arranged in alphabetical order, and showing the address of each
such stockholder and the number of shares registered in the name of each such
stockholder, shall be prepared by the Secretary. Such list shall be open to
examination by any stockholder of the corporation during ordinary business
hours, for any purpose germane to the meeting, for a period of at least ten days
prior to the meeting, at the office of the Corporation in Hawthorne, New York
(or such other place as designated by the Board or Directors provided notice of
such place has been given at least 20 days prior to the meeting), and the list
shall be produced and kept at the time and place of meeting during the whole
time thereof, and subject to the inspection for any purpose germane to the
meeting of any stockholder who may be present.
Section 1.10 Proxies. At every meeting of the stockholders, each
stockholder having the right to vote thereat shall be entitled to vote in person
or by proxy. Such proxy shall be appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than eleven (11)
months prior to such meeting, unless such proxy provides for a longer period;
and it shall be filed with the Secretary of the Corporation before, or at the
time of, the meeting.
Section 1.11 Voting of Certain Shares. Shares standing in the name of
another corporation, domestic or foreign, and entitled to vote may be voted by
such officer,agent, or proxy as the by-laws of such corporation may prescribe
or, in the absence of such provision, as the board of directors of such
corporation may determine. Shares standing in the name of a deceased person, a
minor or an incompetent and entitled to vote may be voted by his administrator,
executor, guardian or conservator, as the case may be, either in person or by
proxy. Shares standing in the name of a trustee, receiver or pledgee and
entitled to vote may be voted by such trustee, receiver or pledgee either in
person or by proxy as provided by the laws of the State of New York.
Section 1.12 Treasury Stock. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held by this
Corporation, shall not be voted at any meeting and shall not be counted in
determining the total number of outstanding shares for the purpose of
determining whether a quorum is present. Nothing in this section shall be
construed to limit the right of this Corporation to vote shares of its own stock
held by it in a fiduciary capacity.
-4-
<PAGE> 5
ARTICLE 2
DIRECTORS
Section 2.1 Number, Election and Term of Office of Directors. The Board
of Directors of the Corporation shall consist of not less than three (3) or more
than fifteen (15) directors, the exact number of which shall be fixed from time
to time by resolution of the Board of Directors. Directors shall be elected
annually by the stockholders as provided in Section 1.1 of Article 1 of these
By-Laws or in accordance with Section 2 of this Article 2 and each director
elected shall hold office until his successor is elected and qualified or until
his earlier death, resignation or removal. No director need be a stockholder.
Section 2.2 Resignation or Removal. Any director may resign by giving
written notice to the Board of Directors or the Chairman of the Board, any such
resignation shall take effect at the time of receipt of notice thereof or at any
later time specified therein, and, unless expressly required, acceptance of such
resignation shall not be necessary to make it effective. Except as otherwise
required by the laws of the State of New York or the Certificate of
Incorporation, any director may be removed, with or without cause, by the
affirmative vote or consent of the holders of a majority of the directors then
in office or by the affirmative vote or consent of a majority of the voting
power of shares of relevant stock entitled to vote.
Section 2.3 Vacancies. Except as otherwise required by the Certificate
of Incorporation or by law any vacancy in the number of directors may be filled
by a majority of the directors then in office, although less than a quorum, or
by the stockholders. A director elected to fill a vacancy shall hold office
until his successor is elected and qualified or until his earlier death,
resignation or removal. Except as otherwise required by the Certificate of
Incorporation or by law, when one or more directors shall resign from the Board
of Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this Section 2.3 for the filling of other vacancies.
Section 2.4 Place of Meetings. Meetings of the Board of Directors may
be held at such places, within or without the State of New York, as the Board of
Directors may from time to time determine or as may be specified in the call of
any meetings.
Section 2.5 Regular Meetings. A regular annual meeting of the Board of
Directors shall be held without call or notice immediately after and at the same
general place as the annual meeting of stockholders, for the purpose of
organizing the Board of Directors, electing officers and transacting any other
business that may properly come before the meeting. Additional regular meetings
of the Board of Directors may be held without call or
-5-
<PAGE> 6
notice at such place and at such times as shall be fixed by resolution of the
Board of Directors.
Section 2.6 Special Meetings. Special meetings of the Board of
Directors may be called by the Chief Executive Officer or 33-1/3 of the
directors then in office. Notice of special meetings shall either be mailed by
the Secretary to each director at least two days before the meeting or be given
personally or telegraphed or telecopied to each director by the Secretary at
least twenty-four hours before the meeting. Such notice shall set forth the
date, time and place of such meeting but need not, unless otherwise required by
law, state the purpose of the meeting. Any director may waive notice of any
meeting.
Section 2.7 Quorum and Voting. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. The act of the majority of the directors
present at a meeting at which a quorum is present shall be the act of the Board
of Directors unless otherwise provided by the laws of the State of New York, the
Certificate of Incorporation or these By-Laws. A majority of the directors
present at any meeting at which a quorum is present may adjourn the meeting to
any other date, time or place without further notice other than announcement at
the meeting. If at any meeting a quorum is not present, a majority of the
directors present may adjourn the meeting to any other date, time or place
without notice other than announcement at the meeting until a quorum is present.
Section 2.8 Compensation. The directors shall be paid their reasonable
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
and an annual retainer or salary for services as a director. Members of any
committee of the Board of Directors may be allowed like fees and expenses for
service on or attendance at meetings of such committee. No such payment shall
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 2.9 Telephonic Meetings. Members of the Board of Directors or
of any committee designated by the Board of Directors may participate in a
meeting of the Board of Directors or a committee thereof by means of conference
telephone or other similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this Section 2.9 shall constitute presence in person at such
meeting.
Section 2.10 Presumption of Assent. Unless otherwise provided by the
laws of the State of New York, a director of the Corporation who is present at a
meeting of the Board of Directors at which action is taken on any corporate
matter shall be presumed to have assented to the action taken unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as Secretary of the
meeting before the adjournment thereof or shall forward such dissent by
registered mail
-6-
<PAGE> 7
to the Secretary of the Corporation immediately after the adjournment of the
meeting. Such right to dissent shall not apply to a director who voted in favor
of such action.
Section 2.11 Action without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting, if a written consent thereto is signed
by all members of the Board of Directors or of such committee, as the case may
be, and such written consent is filed with the minutes of proceedings of the
Board of Directors or committee.
Section 2.12 Presiding Officer. The presiding officer at any meeting of
the Board of Directors shall be the Chairman of the Board, if any, or, in his
absence, any other director elected chairman by vote of a majority of the
directors present at the meeting.
Section 2.13 Executive Committee. The Board of Directors may, in its
discretion by resolution passed by a majority of the Board of Directors,
designate an Executive committee consisting of such number of directors as the
Board of Directors shall determine, which shall in no event be less than three
directors. The Executive Committee shall have and may exercise all of the
authority of the Board of Directors in the management of the Corporation with
respect to any matter which may require action prior to, or which in the opinion
of the Executive Committee may be inconvenient, inappropriate or undesirable to
be postponed until the next meeting of the Board of Directors; provided, the
Executive Committee shall have no authority to obligate the Corporation to any
expenditure or liability in excess of $100,000 in respect of any one project or
series of related projects unless in furtherance of resolutions or actions
previously adopted by the Board of Directors; and further provided, the
Executive Committee shall not have the power or authority of the Board of
Directors in reference to such matters as are set forth in Section 712 of the
Business Corporation Law of the State of New York, amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or amending
these By-Laws. Any member of the Board of Directors may request the Chairman of
the Executive Committee to call a meeting of the Executive Committee with
respect to a specified subject.
Section 2.14 Other Committees. The Board of Directors may from time to
time, in its discretion, by resolution passed by a majority of the Board of
Directors, designate, and appoint, other committees of one or more directors
which shall have and may exercise such lawfully delegable powers and duties
conferred or authorized by the resolutions of designation and appointment. The
Board shall have power at any time to change the members of any such committee,
to fill vacancies, and to discharge any such committee.
Section 2.15 Alternates. The Board of Directors may from time to time
designate from among the directors alternates to serve on one or more committees
as occasion may require. Whenever a quorum cannot be secured for any meeting of
any committee from
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among the regular members thereof and designated alternates, the member or
members of such committee present at such meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in place of such
absent or disqualified member.
Section 2.16 Quorum and Manner of Acting Committees. The presence of a
majority of members of any committee shall constitute a quorum for the
transaction of business at any meeting of such committee, and the act of a
majority of those present shall be necessary for the taking of any action
thereat.
Section 2.17 Committee Chairman, Books and Records, Etc. The chairman
of each committee shall be elected from among the members of the committee by
the Board of Directors.
Each committee shall keep a record of its acts and proceedings, and all
actions of each committee shall be reported to the Board of Directors at its
next meeting. Each committee shall fix its own rules of procedure not
inconsistent with these By-Laws or the resolution of the Board of Directors
designating much committee and shall meet at such times and places and upon such
call or notice as shall be provided by such rules.
Section 2.18 Reliance upon Records. Every director of the Corporation,
or member of any committee designated by the Board of Directors pursuant to
authority conferred by these By-Laws, shall, in the performance of his duties,
be fully protected in relying in good faith upon the records of the Corporation
and upon such information, opinions, reports or statements presented to the
Corporation by any of the Corporation's officers or employees, or committees of
the Board of Directors, or by any other person as to matters the director or
member reasonably believes are within such other person's professional or expert
competence and has been elected with reasonable care by or on behalf of the
Corporation.
Section 2.19 Approval. Prior to approval of the New York State
Department of Health (the "DOH"), no director designated by Hyperion Partners II
L.P. shall control or participate in the affairs of any home care services
agency regulated by the DOH, unless otherwise permitted by the DOH.
Section 2.20 Certain Actions. Notwithstanding anything to the contrary
contained in these By-Laws (i) any action taken by the Corporation with respect
to the proposed acquisition by the Corporation whether by purchase of stock or
assets of another company or (ii) any increase in the number of directors of the
Corporation to more than seven shall be approved by at least 66 - 2/3% of the
Corporation's entire board of directors as then constituted, except that at the
option of Paribas Principal, Inc. ("Paribas") until the satisfaction of certain
conditions contained in the Shareholders Agreement between among others, Paribas
and the Corporation dated August 5, 1994, Paribas shall have the right to
designate one designee to the Corporation's Board of Directors, without such
approval.
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ARTICLE 3
OFFICERS
Section 3.1 Number and Designation. The officers of the Corporation
shall be a Chairman of the Board, a Chief Executive Officer, a President, one or
more Vice Presidents (the number thereof to be determined by the Board of
Directors and one or more of whom may be designated as Executive Vice Presidents
or Senior Vice Presidents), a Secretary and a Treasurer, and such Assistant
Secretaries, Assistant Treasurers or other officers as may be elected or
appointed by the Board of Directors. Any two or more offices may be held by the
same person, except that no one person may hold the offices of both Chairman of
the Board and Secretary nor both President and Secretary.
Section 3.2 Election and Term of Office. The officers of the
Corporation shall be elected annually by the Board of Directors at the first
meeting of the Board of Directors held after each annual meeting of
stockholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as conveniently may be. Vacancies
may be filled or new offices created and filled at any meeting of the Board of
Directors. Each officer shall hold office until his or her successor shall have
been duly elected and shall have qualified or until his or her earlier death,
resignation or removal.
Section 3.3 Removal-and-Designation. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interests of the Corporation would be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Any officer may resign at any time by giving
written notice to the Board of Directors, to the Chief Executive Officer or to
the Secretary of the Corporation. Any such resignation shall take effect at the
date of the receipt of such notice or at any later time specified therein; and,
unless otherwise specified therein, the acceptance of such resignation shall not
be necessary to make it effective.
Section 3.4 Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise, may be filled by the Board
of Directors for the unexpired portion of the term.
Section 3.5 Chairman of the Board. The Chairman of the Board shall be a
Director of the Corporation who when present, shall preside at all meetings of
the Stockholders of the Corporation and of the Board of Directors. Except as
otherwise provided herein or as expressly authorized or directed by the Board of
Directors, the Chairman of the Board shall have no other duties or
responsibilities and shall have no authority to act for or bind the Corporation
in any manner whatsoever.
Section 3.6 Chief Executive Officer. The Chief Executive Officer shall
be the chief executive officer of the Corporation and shall in general supervise
and control all of the
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business and affairs of the Corporation. The Chief Executive Officer may sign,
alone or with the Secretary or any other proper officer of the Corporation
thereunto authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has authorized to
be executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed, and in general he shall perform all duties incident to the
office of the Chief Executive Officer and such other duties as from time to time
may be prescribed by the Board of Directors.
Section 3.7 President. The President shall be the chief operating
officer of the Corporation, reporting through the Chief Executive Officer to the
Board of Directors. In the absence of the Chief Executive Officer or in the
event of his inability or refusal to act as Chief Executive Officer, the
President shall perform the duties of the Chief Executive Officer and, when to
acting, shall have all the powers of, and be subject to all the restrictions
placed upon the Chief Executive Officer. He may sign, alone or with the
Secretary or authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts or other instruments which the Board of Directors has authorized to be
executed, except in cases where the signing and execution thereof shall be
expressly delegated by the Board of Directors or by these By-Laws to some other
officer or agent of the Corporation, or shall be required by law to be otherwise
signed or executed, and in general he shall perform all duties incident to the
office of President and such other duties as from time to time may be prescribed
by the Board of Directors or the Chief Executive Officer.
Section 3.8 The Vice President. In the absence of the President or in
the event of his or her inability or refusal to act, the Vice President (or in
the event there be more than one Vice President, the Vice Presidents in the
order of their election) shall perform the duties of the President, and when so
acting, shall have all the powers of and be subject to all the restrictions upon
the President. Any Vice President shall perform such duties as from time to time
may be assigned to him by the Chief Executive Officer, the President or by the
Board of Directors.
Section 3.9 The Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. The
Treasurer shall have charge and custody of and be responsible for all funds and
securities of the Corporation, receive and give receipts or moneys due and
payable to the Corporation from any source whatsoever, deposit all such moneys
in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of Article 4
of these ByLaws, disburse the funds of the Corporation as ordered by the Board
of Directors or the Chief Executive Officer or as otherwise required in the
conduct of the business of the Corporation, and render to the Chief Executive
Officer or the Board of Directors, upon request, an account of his transactions
as Treasurer and on the financial condition of the Corporation. The Treasurer
shall in general perform all the duties incident to the office of
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Treasurer and such other duties as from time to time may be assigned to him by
the Chief Executive Officer, the President or by the Board of Directors.
Section 3.10 The Secretary. The Secretary shall(a) keep the minutes of
the stockholders' and of the Board of Directors' meetings and committees of the
Board of Directors in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these By-Laws or
as required by law; (c) be custodian of the corporate records and of the seal of
the Corporation; (d) affix the seal of the corporation or a facsimile thereof,
or cause it to be affixed, to all certificates for shares prior to the issue
thereof and to all documents the execution of which on behalf of the Corporation
under its seal is duly authorized by the Board of Directors or otherwise in
accordance with the provisions of these ByLaws; (e) keep a register of the post
office address of each stockholder, director or committee member, which shall be
furnished to the Secretary by such stockholder, director or member; (f) have
general charge of the stock transfer books of the Corporation; and (g) in
general perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the Chief Executive
Officer, the President or the Board of Directors. He may delegate such details
of the performances of duties of his office as may be appropriate in the
exercise of reasonable care to one or more persons in his stead, but shall not
thereby be relieved of responsibility for the performance of such duties.
Section 3.11 Assistant Treasurers and Secretaries. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Treasurers and
Assistant Secretaries shall, in general, perform such duties as shall be
assigned to them by the Treasurer or the Secretary, respectively; but such
assignment or delegation shall not relieve the principal officer from the
responsibilities and liabilities of his office. In addition, the Assistant
Treasurers and Assistant Secretaries shall, in general, perform such duties as
may be assigned to them by the Chief Executive Officer, the President or the
Board of Directors.
Section 3.12 Salaries. The salaries of the officers shall be fixed from
time to time by the Board of Directors or such officer as it shall designate for
such purpose or as it shall otherwise direct. No officer shall be prevented from
receiving such salary by reason of the fact that he is also a director of the
Corporation.
ARTICLE 4
CONTRACTS, LOANS, CHECKS, AND DEPOSITS
Section 4.1 Contracts. The Board of Directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in
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the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
Section 4.2 Loans. No loans shall be contracted on behalf of the
Corporation and no evidences of indebtedness shall be issued in the name of the
Corporation unless authorized by a resolution of the Board of Directors. Such
authority may be general or confined to specific instances.
Section 4.3 Checks, Drafts, Etc. All checks, drafts or other order for
payment of money issued in the name of the Corporation shall be signed by such
officers, employees or agents of the Corporation as shall from time to time be
designated by the Board of Directors.
Section 4.4 Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as shall be designated from
time to time by the Board of Directors; and such officers may designate any type
of depository arrangement (including but not limited to depository arrangements
resulting in net debits against the Corporation) as from time to time offered or
available.
ARTICLE 5
CERTIFICATES OF STOCK AND THEIR TRANSFER
Section 5.1 Certificates of Stock. Shares of stock of the Corporation
shall be represented by certificates, provided that the Board of Directors may
provide by resolution that some or all of any or all classes or series of its
stock shall be uncertificated shares. Notwithstanding the adoption of such a
resolution, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to a certificate. The
certificates of stock of the Corporation shall be in such form as may be
determined by the Board of Directors, shall be numbered and shall be entered in
the books of the Corporation as they are issued. They shall exhibit the holder's
name and number of shares and shall be signed by the Chairman of the Board, the
Chief Executive Officer, the President or a Vice President and by the Treasurer
or an Assistant Treasurer or the Secretary or an Assistant Secretary. If any
stock certificate is signed (a) by a transfer agent or an assistant transfer
agent or (b) by a transfer clerk acting on behalf of the Corporation and a
registrar, the signature of any officer of the Corporation may be facsimile. In
case any such officer whose facsimile signature has thus been used on any such
certificate shall cease to be such officer, whether because of death,
resignation or otherwise, before such certificate has been delivered by the
Corporation, such certificate may nevertheless be delivered by the Corporation,
as though the person whose facsimile signature has been used thereon had not
ceased to be such officer. All certificates properly surrendered to the
Corporation for transfer shall be cancelled and no new certificate shall be
issued to evidence transferred shares until the former certificate for at least
like number of shares shall have been
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surrendered and cancelled and the Corporation reimbursed for any applicable
taxes on the transfer, except that in the case of a lost, destroyed or mutilated
certificate a new one may be issued therefor upon such terms, and with such
indemnity (if any) to the Corporation, as the Board of Directors may prescribe
specifically or in general terms or by delegation to a transfer agent for the
Corporation.
Section 5.2 Lost, Stolen or Destroyed Certificates. The Board of
Directors in individual cases, or by general resolution or by delegation to the
transfer agent, may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed upon the making of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificates, or his legal representative, to advertise the name in such manner
as it shall require and/or to give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5.3 Transfers of Stock. Upon surrender to the Corporation or
the transfer agent of the Corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or authority to
transfer, and upon payment of applicable taxes with respect to such transfer,
and in compliance with any restrictions on transfer applicable to the
certificate or shares represented thereby of which the Corporation shall have
notice and subject to such rules and regulations as the Board of Directors may
from time to time deem advisable concerning the transfer and registration of
certificates for shares of capital stock of the Corporation, the Corporation
shall issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 5.4 Restrictions on Transfer. Any stockholder may enter into an
agreement with other stockholders or with the Corporation providing for
reasonable limitation or restriction on the right of such stockholder to
transfer shares of capital stock of the Corporation held by him, including,
without limiting the generality of the foregoing, agreements granting to such
other stockholders or to the Corporation the right to purchase for a given
period of time any of such shares on terms equal to terms offered such
stockholders by any third party. Any such limitation or restriction on the
transfer of shares of this Corporation may be set forth on certificates
representing shares of capital stock or notice thereof may be otherwise given to
the Corporation or the transfer agent, in which case the Corporation or the
transfer agent shall not be required to transfer such shares upon the books of
the Corporation without receipt of satisfactory evidence of compliance with the
terms of such limitation or restriction.
Section 5.5 Stockholders of Record. The Corporation shall be entitled
to treat the holder of record of any share or shares of stock as the holder in
fact thereof and accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or
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shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of the State of
New York.
ARTICLE 6
GENERAL PROVISIONS
Section 6.1 Fiscal Year. The fiscal year of the Corporation shall begin
on the first day of November in each year and end on the thirty-first day of
October in each year.
Section 6.2 Seal. The corporate seal shall have inscribed thereon the
name of the Corporation and the words "CORPORATE SEAL" and "NEW YORK"; and it
shall otherwise be in the form approved by the Board of Directors. Such seal
maybe used by causing it, or a facsimile thereof, to be impressed or affixed or
otherwise reproduced.
ARTICLE 7
OFFICES
Section 7.1 Registered Office. The registered office of the Corporation
in the State of New York shall be located at 11 Skyline Drive, Hawthorne, New
York, or at such other place as the Board of Directors may from time to time
designate and the name of its registered agent is United Corporate Service, Inc.
or such other registered agent as the Corporation may from time to time
designate.
Section 7.2 Other Offices. The Corporation may have offices at such
other places both within or without the State of New York as shall be determined
from time to time by the Board of Directors or as the business of the
Corporation may require.
ARTICLE 8
INDEMNIFICATION
Section 8.1 Limitation on Liability. A director of the Corporation
shall not be personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability determined by final judgment (i) resulting from acts committed in bad
faith or involving intentional misconduct or a knowing violation of law (ii)
whereby the director personally gained in fact a financial profit or other
advantage to which he was not legally entitled, or (iii) whereby the director's
acts violated Section 719 of the Business Corporation Law of the State of New
York. If the Business Corporation Law of the State of New York is amended to
authorize corporate action further eliminating
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or limiting the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the Business Corporation Law of the State of New York, as so
amended. Any repeal or modification of this Section 8.1 by the stockholders of
the Corporation shall not adversely affect any right or protection of a director
of the Corporation existing at the time of such repeal or modification.
Section 8.2 Indemnification and Insurance.
(a) Each person who was or is made a party or is threatened to
be made a party to or is or was involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director or officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in any
other capacity while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Business Corporation Law of the State of New York as the same
exists or may hereafter be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment), against all expense, liability and loss (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in subsection (b) of this Section 8.2 with
respect to proceedings seeking to enforce rights to indemnification, the
Corporation shall indemnify any such person seeking indemnification in
connection with a proceeding (or part thereof) initiated by such person only if
such proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation. The right to indemnification conferred in this Section 8.2
shall be a contract right and shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that if the Business Corporation Law
of the State of New York requires, the payment of such expenses incurred by a
director or officer in his or her capacity in which service was or is rendered
by such person while a director or officer, including, without limitation,
service to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking by or on behalf of such director or officer, to repay all amounts so
advanced if it shall ultimately be determined that such director or officer is
not entitled to be indemnified under this Section 8.2 or otherwise. The
Corporation may, by action of its Board of Directors, provide indemnification to
employees and agents of the Corporation with the same scope and effect as the
foregoing indemnification of directors and officers.
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(b) If a claim under subsection (a) is not paid in full by the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expenses of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the applicable standard of conduct set forth in Business Corporation Law
of the State of New York for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he or she has met the
applicable standard of conduct set forth in the Business Corporation Law of the
State of New York, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or stockholders) that the claimant
has not met such applicable standard of conduct.
(c) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Section 8.2 shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute, any provision of the Restated
Certificate of Incorporation of the Corporation, these By-laws, agreement, vote
of stockholders or disinterested directors or otherwise.
(d) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under the Business Corporation Law of the State of New York.
ARTICLE 9
NOTICES
Section 9.1 Manner of Notice. Whenever under the provisions of the laws
of the State of New York, the Certificate of Incorporation or these By-Laws
notice is required to be given to any stockholder, director or member of any
committee designated by the Board of Directors, it shall not be construed to
require personal delivery and such notice may be given in writing by depositing
it, in a sealed envelope, in the United States mail, air mail or first class,
postage prepaid, addressed (or by delivering it to a telegraph company, charges
prepaid, for transmission) or by facsimile to such stockholder, director or
member either at the address of such stockholder, director or member as it
appears on the books of the Corporation or, in the case of such a director or
member, at his business address; and such
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notice shall be deemed to be given at the time when it is thus deposited in the
United States mail or delivered to the telegraph company) or sent by facsimile.
Such requirement for notice shall be deemed satisfied, except in the case of
stockholder meetings with respect to which written notice is mandatorily
required by law, if actual notice is received orally or in writing by the person
entitled thereto as far in advance of the event with respect to which notice is
given as the minimum notice periods required by law or these By-Laws.
Section 9.2 Waiver of Notice. Whenever any notice is required to be
given under the provisions of the laws of the State of New York, the Certificate
of Incorporation or these By-Laws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before, at or after the time
stated therein, shall be deemed equivalent thereto. Attendance by a person at a
meeting shall constitute a waiver of notice of such meeting, except when the
person attends a meeting for the express purpose of objecting, at the beginning
of the meeting, to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the stockholders, directors or
committee of directors need be specified in any written waiver of notice unless
so required by the laws of the State of New York, the Certificate of
Incorporation or these By-Laws.
ARTICLE 10
DIVIDENDS
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and by the Certificate of
Incorporation.
ARTICLE 11
AMENDMENTS
Except to the extent otherwise provided in the Certificate of
Incorporation or these By-Laws, these By-Laws shall be subject to alteration,
amendment or repeal, and new ByLaws may be adopted (i) by the affirmative vote
of the persons entitled to vote stock representing not less than a majority of
the voting power represented by the relevant stock entitled to vote generally in
the election of directors or (ii) by the affirmative vote of not less than a
majority of the members of the Board of Directors at any meeting of the Board of
Directors at which there is a quorum present and voting.
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THIS LEASE AGREEMENT, made the 4th day of November 1996, between Pond View
Associates residing or located at 179 South Maple Avenue in the Village of
Ridgewood in the County of Bergen and State of New Jersey, herein designated as
the Landlord, and Transworld Home HealthCare - Nursing Division, Inc. residing
or located at 4900 Route 33, Suite 100 in the Township of Wall in the County of
Monmouth and State of New Jersey, herein designated as the Tenant; Witnesseth
that, the Landlord does hereby lease to the Tenant and the Tenant does hereby
rent from the Landlord, the following described premises: four and one-half room
office suite located on the second floor facing west of the Plaza Building which
is located at 14-25 Plaza Road, Fair Lawn, New Jersey, commonly known as Suite
#214-216 for a term of three (3) years commencing on December 1, 1996, and
ending on November 30, 1999, to be used and occupied only and for no other
purpose than the standard needs of Transworld Home HealthCare - Nursing
Division, Inc.
Upon the following Conditions and Covenants:
1st: The Tenant covenants and agrees to pay to the Landlord, as rent for
and during the term hereof, the sum of Thirty-Six Thousand Dollars ($36,000.00)
in the following manner: On December 1, 1996 the sum of $1,000.00 per month and
like amount on the first day of each and every month thereafter up to and
including December 1, 1999 except as set forth in paragraph #34.
2nd: The Tenant has examined the premises and has entered into this
lease without any representation on the part of the Landlord as to the
condition thereof. The Tenant shall take good care of the premises and shall at
the Tenant's own cost and expense, make all repairs, including painting and
decorating, and shall maintain the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the rented premises in good order and condition, wear and tear from a reasonable
use thereof, and damage by the elements not resulting from the neglect or fault
of the Tenant, excepted. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs, but shall keep and
maintain the same in a clean condition, free from debris, trash, refuse, snow
and ice.
3rd: In case of the destruction of or any damage to the glass in the
leased premises, or the destruction of or damage of any kind whatsoever to the
said premises, caused by the carelessness, negligence or improper conduct on
the part of the Tenant or the Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors, the Tenant shall repair the said
damage or replace or restore any destroyed parts of the premises, as speedily
as possible, at the Tenant's own cost and expense.
4th: No alterations, additions or improvements shall be made, and no
climate regulating, air conditioning, cooling, heating or sprinkler systems,
television or radio antennas, heavy equipment, apparatus and fixtures, shall be
installed in or attached to the leased premises, without the written consent of
the Landlord. Unless otherwise provided herein, all such alterations, additions
or improvements and systems, when made, installed in or attached to the said
premises, shall belong to and become the property of the Landlord and shall be
surrendered with the premises and as part thereof upon the expiration or sooner
termination of this lease, without hindrance, molestation or injury.
5th: The Tenant shall not place nor allow to be placed any signs of any
kind whatsoever, upon, in or about the said premises or any part thereof,
except of a design and structure and in or at such places as may be indicated
and consented to by the Landlord in writing. In case the Landlord or the
Landlord's agents, employees or representatives shall deem it necessary to
remove any such signs in order to paint or make any repairs, alterations or
improvements in or upon said premises or any part thereof, they may be so
removed, but shall be replaced at the Landlord's expense when the said repairs,
alterations or improvements shall have been completed. Any signs permitted by
the Landlord shall at all times conform with all municipal ordinances or other
laws and regulations applicable thereto.
6th: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx.
7th: The Tenant shall promptly comply with all laws, ordinances, rules,
regulations, requirements and directives of the Federal, State and Municipal
Governments or Public Authorities and of all their departments, bureaus and
subdivisions, applicable to and affecting the said premises, their use and
occupancy, for the correction, prevention and abatement of nuisances,
violations or other grievances in, upon or connected with the said premises,
during the term hereof; and shall promptly comply with all orders, regulations,
requirements and directives of the Board of Fire Underwriters or similar
authority and of any insurance companies which have issued or are about to
issue policies of insurance covering the said premises and its contents, for
the prevention of fire or other casualty, damage or injury, at the Tenant's own
cost and expense.
8th: The Tenant, at Tenant's own cost and expense, shall obtain or
provide and keep in full force for the benefit of the Landlord, during the term
hereof, general public liability insurance, insuring the Landlord against any
and all liability or claims of liability arising out of, occasioned by or
resulting from any accident or otherwise in or about the lease premises, for
injuries to any person or persons, for limits of not less than $1,000,000.00
for injuries to one person and $1,000,000.00 for injuries to more than one
person, in any one accident or occurrence, and for loss or damage to the
property of any person or persons, for not less than $1,000,000.00. The policy
or policies of insurance shall be of a company or companies authorized to do
business in this State and shall be delivered to the Landlord, together with
evidence of the payment of the premiums therefore, not less than fifteen days
prior to the commencement of the term hereof or of the date when the Tenant
shall enter into possession, whichever occurs sooner. At least fifteen days
prior to the expiration or termination date of any policy, the Tenant shall
deliver a renewal or replacement policy with proof of the payment of the
premium therefor. The Tenant also agrees to and shall save, hold and keep
harmless and indemnify the Landlord from and for any and all payments,
expenses, costs, attorney fees and from and for any and all claims and
liability for losses or damage to property or injuries to persons occasioned
wholly or in part by or resulting from any acts or omissions by the Tenant or
the Tenant's agents, employees, guests, licensees, invitees, subtenants,
assignees or successors, or for any cause or reason whatsoever arising out of
or by reason of the occupancy by the Tenant and the conduct of the Tenant's
business.
<PAGE> 2
9th: The Tenant shall not, without the written consent of the
Landlord, assign, mortgage or hypothecate this lease, nor sublet or sublease
the premises or any part thereof.
10th: The Tenant shall not occupy or use the leased premises or any
part thereof, nor permit or suffer the same to be occupied or used for any
purposes other than as herein limited, nor for any purpose deemed unlawful,
disreputable, or extra hazardous, on account of fire or other casualty.
11th: This lease shall not be a lien against the said premises in
respect to any mortgages that may hereafter be placed upon said premises. The
recording of such mortgage or mortgages shall have preference and precedence and
be superior and prior in lien to this lease, irrespective of the date of
recording and the Tenant agrees to execute any instruments, without cost, which
may be deemed necessary or desirable, to further effect the subordination of
this lease to any such mortgage or mortgages. A refusal by the Tenant to
execute such instruments shall entitle the Landlord to the option of cancelling
this lease, and the term hereof is hereby expressly limited accordingly.
12th: If the land and premises leased herein, or of which the leased
premises are a part, or any portion thereof, shall be taken under eminent domain
or condemnation proceedings, or if suit or other action shall be instituted for
the taking or condemnation thereof, or if in lieu of any formal condemnation
proceedings or actions, the Landlord shall grant an option to purchase and or
shall sell and convey the said premises or any portion thereof, to the
governmental or other public authority, agency, body or public utility,
seeking to take said land and premises or any portion thereof, then this lease,
at the option of the Landlord, shall terminate, and the term hereof shall end
as of such date as the Landlord shall fix by notice in writing;
and the Tenant shall have no claim or right to claim or be entitled to any
portion of any amount which may be awarded as damages or paid as the result of
such condemnation proceedings or paid as the purchase price for such option,
sale or conveyance in lieu of formal condemnation proceedings; and all rights
of the Tenant to damages, if any, are hereby assigned to the Landlord. The
Tenant agrees to execute and deliver any instruments, at the expense of the
Landlord, as may be deemed necessary or required to expedite any condemnation
proceedings or to effectuate a proper transfer of title to such governmental or
other public authority, agency, body or public utility seeking to take or
acquire the said lands and premises or any portion thereof. The Tenant
covenants and agrees to vacate the said premises, remove all the Tenant's
personal property therefrom and deliver up peaceable possession thereof to the
Landlord or to such other party designated by the Landlord in the
aforementioned notice. Failure by the Tenant to comply with any provisions in
this clause shall subject the Tenant to such costs, expenses, damages and
losses as the Landlord may incur by reason of the Tenant's breach hereof.
13th: In case of fire or other casualty, the Tenant shall give
immediate notice to the Landlord. If the premises shall be partially damaged by
fire, the elements or other casualty, the Landlord shall repair the same as
speedily as practicable, but the Tenant's obligation to pay the rent hereunder
shall not cease. If, in the opinion of the Landlord, the premises be so
extensively and substantially damaged as to render them untenantable, then the
rent shall cease until such time as the premises shall be made tenantable by
the Landlord. However, if, in the opinion of the Landlord, the premises be
totally destroyed or so extensively and substantially damaged as to require
practically a rebuilding thereof, then the rent shall be paid up to the time of
such destruction and then and from thenceforth this lease shall come to an end.
In no event however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the rent
and the performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be liable to
the Landlord for the damage and loss suffered by the Landlord. If the Tenant
shall have been insured against any of the risks herein covered, then the
proceeds of such insurance shall be paid over to the Landlord to the extent of
the Landlord's costs and expenses to make the repairs hereunder, and such
insurance carriers shall have no recourse against the Landlord for
reimbursement.
14th: If the Tenant shall fail or refuse to comply with and perform
any conditions and covenants of the within lease, the Landlord may, if the
Landlord so elects, carry out and perform such conditions and covenants, at the
cost and expense of the Tenant, and the said cost and expense shall be payable
on demand, or at the option of the Landlord shall be added to the installment
of rent due immediately thereafter but in no case later than one month after
such demand, whichever occurs sooner, and shall be due and payable as such.
This remedy shall be in addition to such other remedies as the Landlord may
have hereunder by reason of the breach by the Tenant of any of the covenants
and conditions in this lease contained.
15th: The Tenant agrees that the Landlord and the Landlord's agents,
employees or other representatives, shall have the right to enter into an upon
the said premises or any part thereof, at all reasonable hours, for the purpose
of examining the same or making such repairs or alterations therein as may be
necessary for the safety and preservation thereof. This clause shall not be
deemed to be a covenant by the Landlord nor be construed to create an
obligation on the part of the Landlord to make such inspection or repairs.
16th: The Tenant agrees to permit the Landlord and the Landlord's
agents, employees or other representatives to show the premises to persons
wishing to rent or purchase the same, and Tenant agrees that on and after three
months next preceding the expiration of the term hereof, the Landlord or the
Landlord's agents, employees or other representatives shall have the right to
place notices on the front of said premises or any part thereof, offering the
premises for rent or for sale; and the Tenant hereby agrees to permit the same
to remain thereon without hindrance or molestation.
17th: If for any reason it shall be impossible to obtain fire and
other hazard insurance on the buildings and improvements on the leased
premises, in an amount and in the form and in insurance companies acceptable to
the Landlord, the Landlord may, if the Landlord so elects at any time
thereafter, terminate this lease and the term hereof, upon giving to the Tenant
fifteen days notice in writing of the Landlord's intention so to do, and upon
the giving of such notice, this lease and the term thereof shall terminate.
If by reason of the use to which the premises are put by the Tenant or
character of or the manner in which the Tenant's business is carried on, the
insurance rates for fire and other hazards shall be increased, the Tenant shall
upon demand, pay to the Landlord, as rent, the amounts by which the premiums for
such insurance are increased. Such payment shall be paid with the next
installment of rent but in no case later than one month after such demand,
whichever occurs sooner.
18th: Any equipment, fixtures, goods or other property of the Tenant,
not removed by the Tenant upon the termination of this lease, or upon any
quitting, vacating or abandonment of the premises by the Tenant, or upon the
Tenant's eviction, shall be considered as abandoned and the Landlord shall have
the right, without any notice to the Tenant, to sell or to otherwise dispose of
the same, at the expense of the Tenant, and shall not be accountable to the
Tenant for any part of the proceeds of such sale, if any.
19th: If there should occur any default on the part of the Tenant in
the performance of any conditions and covenants herein contained, or if during
the term hereof the premises or any part thereof shall be or become abandoned
or deserted, vacated or vacant, or should the Tenant be evicted by summary
proceedings or otherwise, without being liable for prosecution therefor, or
for damages, re-enter the said premises and the same have and again possess
and enjoy; and as agent for the Tenant or otherwise, re-let the premises and
receive the rents therefor and apply the same, first to the payment of such
expenses, reasonable attorney fees and costs, as the Landlord may have been
put to in re-entering and repossessing the same and in making such repairs and
alterations as may be necessary; and second to the payment of the rents due
hereunder. The Tenant shall remain liable for such rents as may be in arrears
and also the rents as may accrue subsequent to the re-entry by the Landlord,
to the extent of the difference between the rents reserved hereunder and the
rents, if any, received by the Landlord during the remainder of the unexpired
term hereof, after deducting the aforementioned expenses, fees and costs; the
same to be paid as such deficiencies arise and are ascertained each month.
20th: Upon the occurrence of any of the contingencies set forth in
the preceding clause, or should the Tenant be adjudicated a bankrupt, insolvent
or placed in receivership, or should proceedings be instituted by or against the
Tenant for bankruptcy, insolvency, receivership, agreement of composition or
assignment for the benefit of creditors, or if this lease or the estate of the
Tenant hereunder shall pass to another by virtue of any court proceedings, writ
of execution, levy, sale, or by operation of law, the Landlord may, if the
Landlord so elects, at any time thereafter, terminate this lease and the term
hereof, upon giving to the Tenant or to any trustee, receiver, assignee
or other person in charge of or acting as custodian of the assets or property
of the Tenant, five days notice in writing, of the Landlord's intention so to
do. Upon the giving of such notice, this lease and the term hereof shall end
on the date fixed in such notice as if the said date was the date originally
fixed in this lease for the expiration hereof; and the Landlord shall have the
right to remove all persons, goods, fixtures and chattels therefrom, by force
or otherwise, without liability for damages.
21st: The Landlord shall not be liable for any damage or injury which
may be sustained by the Tenant or any other person, as a consequence of the
failure, breakage, leakage or obstruction of the water, plumbing, steam, sewer,
waste or soil pipes, roof, drains, leaders, gutters, valleys, downspouts or the
like or of the electrical, gas, power, conveyor, refrigeration, sprinkler,
airconditioning or heating systems, elevators or hoisting equipment; or by
reason of the elements; or resulting from the carelessness, negligence or
improper conduct on the part of any other Tenant or of the Landlord or the
Landlord's or this or any other Tenant's agents, employees, guests, licensees,
invitees, subtenants, assignees or successors; or attributable to any
interference with, interruption of or failure, beyond the control of the
landlord, of any services to be furnished or supplied by the Landlord.
22nd: The various rights, remedies, options and elections of the
Landlord, expressed herein, are cumulative, and the failure of the Landlord to
enforce strict performance by the Tenant of the conditions and covenants of this
lease or to exercise any election or option or to resort or have recourse
to any remedy herein conferred or the acceptance by the Landlord of any
installment of rent after any breach by the Tenant, in any one or more
instances, shall not be construed or deemed to be a waiver or a relinquishment
for the future by the Landlord of any such conditions and covenants, options,
elections or remedies, but the same shall continue in full force and effect.
<PAGE> 3
23rd: This lease and the obligation of the Tenant to pay the rent
hereunder and to comply with the covenants and conditions hereof, shall not be
affected, curtailed, impaired or excused because of the Landlord's inability to
supply any service or material called for herein, by reason of any rule, order,
regulation or preemption by any governmental entity, authority, department,
agency or subdivision or for any delay which may arise by reason of
negotiations for the adjustment of any fire or other casualty loss or because
of strikes or other labor trouble or for any cause beyond the control of the
Landlord.
24th: The terms, conditions, covenants and provisions of this lease
shall be deemed to be severable. If any clause or provision herein contained
shall be adjudged to be invalid or unenforceable by a court of competent
jurisdiction or by operation of any applicable law, it shall not affect the
validity of any other clause or provision herein, but such other clauses or
provisions shall remain in full force and effect.
25th: All notices required under the terms of this lease shall be
given and shall be complete by mailing such notices by certified or registered
mail, return receipt requested, to the address of the parties as shown at the
head of this lease, or to such other address as may be designated in writing,
which notice of change of address shall be given in the same manner.
26th: The Landlord covenants and represents that the Landlord is the
owner of the premises herein leased and has the right and authority to enter
into, execute and deliver this lease; and does further covenant that the Tenant
on paying the rent and performing the conditions and covenants herein
contained, shall and may peaceably and quietly have, hold and enjoy the leased
premises for the term aforementioned.
27th: This lease contains the entire contract between the parties. No
representative, agent or employee of the Landlord has been authorized to make
any representations or promises with reference to the within letting or to vary,
alter or modify the terms hereof. No additions, changes or modifications,
renewals or extensions hereof, shall be binding unless reduced to writing and
signed by the Landlord and the Tenant.
28th: xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
29th: If any mechanics' or other liens shall be created or filed
against the leased premises by reason of labor performed or materials furnished
for the Tenant in the erection, construction, completion, alteration, repair or
addition to any building or improvement, the Tenant shall upon demand, at the
Tenant's own cost and expense, cause such lien or liens to be satisfied and
discharged of record together with any Notices of Intention that may have been
filed. Failure to do so, shall entitle the Landlord to resort to such remedies
as are provided herein in the case of any default of this lease, in addition to
such as are permitted by law.
30th: The Tenant waives all rights of recovery against the Landlord
or Landlord's agents, employees or other representatives, for any loss,
damages or injury of any nature whatsoever to property or persons for which the
Tenant is insured. The Tenant shall obtain from Tenant's insurance carriers and
will deliver to the Landlord, waivers of the subrogation rights under the
respective policies.
31st: The Tenant has this day deposited with the Landlord the sum of
$1,000.00 as security for the payment of the rent hereunder and the full and
faithful performance by the Tenant of the covenants and conditions on the part
of the Tenant to be performed. Said sum shall be returned to the Tenant,
without interest, after the expiration of the term hereof, provided that the
Tenant has fully and faithfully performed all such covenants and conditions and
is not in arrears in rent. During the term hereof, the Landlord may, if the
Landlord so elects, have recourse to such security, to make good any default by
the Tenant, in which event the Tenant shall, on demand, promptly restore said
security to its original amount. Liability to repay said security to the Tenant
shall run with the reversion and title to said premises, whether any change in
ownership thereof be by voluntary alienation or as the result of judicial sale,
foreclosure or other proceedings, or the exercise of a right of taking or entry
by any mortgagee. The Landlord shall assign or transfer said security, for the
benefit of the Tenant, to any subsequent owner or holder of the reversion or
title to said premises, in which case the assignee shall become liable for the
repayment thereof as herein provided, and the assignor shall be deemed to be
released by the Tenant from all liability to return such security. This
provision shall be applicable to every alienation or change in title and shall
in no wise be deemed to permit the Landlord to retain the security after
termination of the Landlord's ownership of the reversion or title. The Tenant
shall not mortgage, encumber or assign said security without the written
consent of the Landlord.
32nd: Landlord shall supply heat, water, air conditioning and
electricity at his expense.
33rd: Landlord will maintain all areas served in common with other
tenants. Tenant must maintain the interior of their office.
34th: Rent hereinbefore set forth shall be adjusted each and every
year, on December 1 of such year, after completion of the first year of this
lease to reflect 100% of any increase in the Cost of Living Index which is
promulgated by the United States Department of Labor and for which purposes
December 1, 1996 represents 100%. The Index for New York, New Jersey, Northeast
Region is applicable.
35th: Landlord shall supply appropriate signs in the entrance lobby,
floor directory and entry door. Tenant must supply the required copy.
36th: Landlord at his expense shall remove in full or in part the
dividing wall that separates the largest room from the smallest room thereby
creating an area to accommodate approximately fifteen people, at Landlord's
sole cost and expense, in a workmanlike manner; Tenant under no responsibility
to restore premises upon expiration of term of lease.
The following revisions apply to the Lease Agreement:
Paragraph # 2, line 3: and expense, make all non-structural repairs...
line 6: Tenant, excepted, and except as set forth in paragraph 36
herein.
Paragraph #4, line 3: without the written consent of the Landlord, which consent
shall not be unreasonably withheld or denied.
Paragraph #9: add the following: Tenant shall not sublet the premises or any
part thereof, or assign, mortgage or hypothecate, or otherwise encumber this
lease or any interest therein nor grant concessions or licenses for the
occupancy of the premises or any part thereof, without Landlord's prior written
consent, which consent may not be unreasonably withheld or denied. Anything
contained in this Paragraph to the contrary notwithstanding, Tenant shall have
the right to assign this Lease or sublet the premises to a (i) corporation,
limited liability company, partnership or other such entity (the "Entity")
which is affiliated with Tenant; or (ii) to an Entity which is a successor to
the Tenant, by way of merger, consolidated or corporate reorganization or by
the sale of substantially all of the assets of Tenant, without obtaining
Landlord's prior written consent thereto; provided Tenant is not then in
default under the terms of this Lease.
Paragraph #15, line 1: ...and the Landlord's agents, upon reasonable notice,
and ...
Paragraph #17, line 4: the Tenant thirty days notice in writing...
Paragraph #21, line 8: furnished or supplied by the Landlord, except for the
gross negligence or willful misconduct of Landlord, any other Tenant, or of any
agent of Landlord or Tenant.
Paragraph #29, line 4: record within thirty days after date of filing of
same,...
11/12/96 POND VIEW ASSOCIATES
By: /s/ Robert L. Puritz
--------------------------
Robert L. Puritz, Landlord
TRANSWORLD HOME HEALTHCARE -- NURSING
DIVISION, INC.
By: /s/ Kevin M. Buhrman
---------------------------------
Kevin M. Buhrman, President
The Landlord may pursue either the relief or remedy sought in any
invalid clause, by conforming the said clause with the provisions of the
statutes or the regulations of any governmental agency in such cause made and
provided as if the particular provisions of the applicable statutes or
regulations were set forth herein at length.
In all references herein to any parties, persons, entities or
corporations the use of any particular gender or the plural or singular number
is intended to include the appropriate gender or number as the text of the
within instrument may require. All the terms, covenants and conditions herein
contained shall be for and shall insure to the benefit of and shall bind the
respective parties hereto, and their heirs, executors, administrators, personal
or legal representatives, successors and assigns.
In Witness Whereof, the parties hereto have hereunto set their hands
and seals, or caused these presents to be signed by their proper corporate
officers and their proper corporate seals to be hereto affixed, the day and
year first above written.
POND VIEW ASSOCIATES
Signed, Sealed and Delivered 11/12/96 By: /s/ Robert L. Puritz
in the presence of ----------------------------------
or Attested by Robert L. Puritz Landlord
/s/ Jeanne Timmerman TRANSWORLD HOME HEALTHCARE - NURSING
- ---------------------------- DIVISION, INC. Tenant
By: /s/ Kevin M. Buhrman
-----------------------------------
Kevin M. Buhrman, President
<PAGE> 1
COMMERCIAL LEASE
THIS LEASE is made this 5th day of November, 1996, BY AND BETWEEN:
Ocean County Investment, Inc.
352 Aldo Drive
Toms River, New Jersey 08753
(hereinafter referred to as "Landlord")
AND:
Transworld Home HealthCare - Nursing Division, Inc.
4900 Rt. 33 Suite 100
Wall, New Jersey 07753-6804
(hereinafter referred to as "Tenant")
IN CONSIDERATION of the mutual promises and covenants contained herein,
the parties agree as follows:
1. Leased Premises: Landlord hereby leases to Tenant a portion of the
building located at 1184 Fischer Blvd., Toms River, New Jersey, Suite 2C.
2. Term: The term of the lease shall be one year. This lease shall
commence on December 1, 1996, and terminate on November 30, 1997. For a period
of six (6) months prior to the expiration of the term or any renewal or
extension thereof, Landlord shall have the right to display on the exterior of
the premises the customary sign "For Rent" and, during such period, Landlord
may show the premises to prospective Tenants during normal business hours, as
long as Landlord's showing of premises does not interfere with Tenant's use of
the premises.
3. Rent: The Tenant shall pay to the Landlord as rent for the premises
as follows:
A) For the first year commencing December 1, 1996, the sum of
$690.00 per month on the first day of each and every month.
In the event the rent due is not received by the Landlord by the 10th
day of each month Tenant shall pay a late charge of $100.00 plus $15.00 per day
for each day past the 15th that the rent continues in
1
<PAGE> 2
arrears. The late charge shall be considered as additional rent and will be
added to each payment for each month it is past due.
B) The Landlord will deliver the premises in the same condition as it
was displayed to the Tenant prior to the execution of the lease.
4. Use: Tenant shall use and occupy the premises solely for the
purposes of office space and ancillary uses. Tenant shall not use or permit the
use of the premises or any part thereof, or suffer or permit anything to be
brought into or kept in the premises which would in anyway:
A) Violate any law or requirement of public authority, and most
specifically, any requirement of the Board of Health, municipal, county or
state agency; or
B) Cause structural injury to the property or any part thereof, or
C) Interfere with the normal operation of the heating, air
conditioning, ventilation, plumbing or other mechanical or electrical systems
of the building.
D) Storage of flammable or hazardous materials are prohibited.
5. End of Term: The Tenant shall, at the expiration of the term,
surrender the premises in as similar condition as the same shall have been at
the time possession was delivered to the Tenant, except for ordinary wear and
tear and except as set forth in paragraph 37 herein.
6. Additional Charges: Upon written notice to Tenant along with
evidence of such cost the Tenant shall pay the utilities associated with water,
sewer, electric and gas used by the Tenant which are or may be assessed or
imposed upon the leased premises or which are or may be charged to the Landlord
by the suppliers during the term hereof. If not paid, such rents or charges
shall be added to and become payable as additional rent with the installment of
rent next due within thirty (30) days of demand, whichever first occurs.
2
<PAGE> 3
7. Repair and Care: The Tenant shall take good care of the premises and
shall, at the Tenant's own cost and expense, make all non-structural repairs
including decorating and shall keep the premises in good condition and state of
repair, and at the end or other expiration of the term hereof, shall deliver up
the premises in good order and condition, wear and tear from reasonable use
excepted. Included in this obligation of the Tenant shall be the maintenance of
the heating, air conditioning, hot water and other mechanical systems located
within the premises. The Tenant shall neither encumber nor obstruct the
sidewalks, driveways, yards, entrances, hallways and stairs. The Landlord shall
keep and maintain the same in a clear condition, free from debris, trash or
refuse. Landlord shall be responsible for maintaining the exterior structure of
the building, including the walls and roof but excluding windows which shall be
the sole responsibility of the Tenant. In the event of damage to the windows,
Tenant shall be responsible for the cost of any and all repairs necessitated by
such damage.
8. Maintenance: The Tenant shall maintain in good condition and repair
the interior of the premise as well as any signs erected on or in front of the
premises with the consent of the Landlord, at Tenant's own cost and expense.
Tenant shall take good care of the premises and the fixtures and appurtenances
therein including the sign, and, in the event of any destruction or damage to
the premises caused by the carelessness, negligence, or improper conduct on the
part of the Tenant or Tenant's agents, guests, employees, Tenant, at its sole
cost and expense, shall make any repairs thereto as and when needed to preserve
them in good working order and condition and maintain the property upon which
the premises are located.
9. Alterations and Improvements: No alterations, additions or
improvements shall be made, and no climate regulating, air conditioning,
cooling, heating or sprinkler systems, television or radio antenna, heavy
equipment, apparatus and fixtures, shall be installed in or attached to the
leased premises, without the prior written consent of the Landlord, which
consent should not be unreasonably withheld or denied. Unless otherwise
provided herein, all such alterations, additions or improvements and systems,
when made, installed in or attached to the leased premises, other than Tenant's
trade fixtures, shall belong
3
<PAGE> 4
to and become the property of the Landlord and shall be surrendered with the
promises as part thereof upon the expiration or sooner termination of this
lease, without hindrance, molestation or injury.
10. SIGNS: Tenant has the right to install two 60" X 12" signs on
the sign marquee. No sign shall be erected on or in front of the premises
without the express written consent of the Landlord.
11. COMPLIANCE WITH LAWS: Landlord represents that the premises meet
all applicable laws, ordinances and regulations at the time of occupancy. The
Tenant, in its use and occupancy of the premises, shall promptly comply with
all laws, ordinances, rules, regulations, requirements and directives of the
federal, state, county and municipal governments or public authorities and of
all their departments, bureaus and subdivisions, applicable to and affecting
the said premises and Tenant's use and occupancy thereof. Tenant shall promptly
comply with all orders, regulations, requirements and directives of the Board
of Fire Underwriters or similar authority and of any insurance companies which
have issued or issue policies of insurance covering the leased premises and its
contents, for the prevention of fire or other casualty, damage or injury, at
the Tenant's own cost and expense.
12. LIENS AND ENCUMBRANCES: Tenant will not do any act which in any
way encumbers the title of Landlord in and to the premises, nor will the
interest or estate of Landlord in the premises be in any way subject to any
claim by way of lien or encumbrance, whether by operation of law or by virtue
of any express or implied contract by Tenant. Any claim to, or lien upon, the
premises arising from any act or omission of the Tenant will accrue only
against the leasehold estate of Tenant and will be subject and subordinate to
the paramount right and title of Landlord in and to the premises. Tenant will
not suffer or permit any liens, including mechanic's liens or construction law
liens, to stand against the premises, the building or any part thereof, by
reason of any work, labor, services or material done for or supplied or claimed
to have been done for or supplied to the Tenant, or anyone holding the
premises, or any part thereof, through or under the Tenant. If any such lien
is at any time filed against the premises or the building, Tenant will cause the
same to be discharged of record within thirty (30) days after the date of the
filing of same, by either payment deposit or bond.
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<PAGE> 5
13. Insurance: The Tenant, at Tenant's own cost and expense, shall obtain
or provide and keep in full force for the benefit of the Landlord, during the
term hereof, general public liability insurance, insuring the Landlord against
any and all liability or claims of liability arising out of, occasioned by or
resulting from any accident or otherwise in or about the leased premises, for
injuries to any person or persons, for limits not less than $1,000,000 for
injuries to one person and $2,000,000 for injuries to more than one person, in
any one accident or occurrence, and for the loss or damage to the property of
any person or persons for not less than $50,000. A copy of the insurance
policy obtained by the Tenant shall be forwarded to the Landlord within ten
(10) days from the execution of this Lease. The Tenant also agrees to and shall
save from, hold and keep harmless and indemnify the Landlord for any and all
payments, expenses, costs, attorney fees and from any and all claims and
liability for losses or damage to property or injury to persons occasioned
totally or in part, by, or resulting from, any acts or omissions by the Tenant
or the Tenant's agents, employees, guests, licensees, invitees, subtenants,
assignees or successors, or for any cause or reason whatsoever arising out of
or by reason of the use and occupancy by Tenant and/or the conduct of Tenant's
business. In case of fire or other casualty, the Tenant shall give immediate
notice to the Landlord. If the premises shall be partially damaged by the fire,
the elements or other casualty, the Landlord shall repair the same as speedily
as practicable, but the Tenant's obligation to pay the rent hereunder shall
not cease. If, in the reasonable opinion of the Landlord, the premises be so
extensively and substantially damaged as to render them untenantable, then the
rent shall cease until such time as the premises shall be made tenantable by
the Landlord. However, if, in the opinion of the Landlord, the premises be
totally destroyed or so extensively and substantially damaged as to require
practically a rebuilding thereof, then the rent shall be paid up to the time of
such destruction and then and from thereforth this Lease shall come to an end.
In no event however, shall the provisions of this clause become effective or be
applicable, if the fire or other casualty and damage shall be the result of the
carelessness, negligence or improper conduct of the Tenant or the Tenant's
agents, employees, guests, licensees, invitees, subtenants, assignees or
successors. In such case, the Tenant's liability for the payment of the rent
and the performance of all the covenants, conditions and terms hereof on the
Tenant's part to be performed shall continue and the Tenant shall be liable to
the Landlord for the damage and loss
5
<PAGE> 6
suffered by the Landlord. If the Tenant shall have been insured against any of
the risks herein covered, then the proceeds of such insurance shall be paid
over to the Landlord to the extent of the Landlord's costs and expenses to make
the repairs hereunder, and such insurance carriers shall have no recourse
against the Landlord for reimbursement.
14. Assignment or Sublet: The Tenant shall not, without the prior written
consent of the Landlord, which consent will not be unreasonably withheld,
anything contained in Paragraph 14 to the contrary notwithstanding, Tenant
shall have the right to assign this Lease or sublet the Premises to a (i) to a
corporation, limited liability company, partnership or other such entity (the
"Entity") which is affiliated with Tenant; or (ii) to an Entity which is a
successor to Tenant, by way of merger, consolidation or corporate
reorganization or by the sale of substantially all of the assets of Tenant,
without obtaining Landlord's prior written consent thereto; provided Tenant is
not then in default under the terms of this Lease; assign, sublet, mortgage or
hypothecate this Lease, nor sublease the premises or any part thereof.
Landlord's consent shall be in its sole discretion based upon the financial
ability of the proposed assignee.
15. Restriction of Use: The Tenant shall not occupy or use the premises
or any part thereof nor permit or suffer the same to be occupied or used for
any purposes other than as herein listed, nor for any purposes deemed unlawful,
disreputable or extra hazardous on account of fire or other casualty.
16. Mortgage Priority: This Lease shall not be a lien against the
premises in respect to any mortgages that may hereafter be placed upon said
premises. The recording of such mortgage or mortgages shall have preference and
precedence and be superior and prior in lien to this Lease, irrespective of the
date of recording and Tenant agrees to execute any instrument without cost
which may be deemed necessary or desirable to further effect the subordination
of this Lease to any such mortgage or mortgages. A refusal by the Tenant to
execute such instrument shall entitle the Landlord to the option of canceling
this Lease, and the term hereof is hereby expressly limited accordingly. The
Landlord will use its best efforts in the event the mortgage is placed on the
premises other than those that are currently in existence in order to obtain an
non-disturbance agreement.
17. Condemnation: If the land and premises leased herein, or of which the
premises are a part, or any portion thereof, shall be taken under Eminent Domain
or condemnation proceedings, or if suit or
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<PAGE> 7
other action shall be instituted for the taking or condemnation thereof, or if
in lieu of any formal condemnation proceedings or actions, the Landlord shall
grant an option to purchase or shall sell and convey the said premises or any
part thereof to the government or other public authority, agency, body or
public utility, seeking to take said land and premises or any portion thereof,
then this Lease, at the option of the Landlord, shall terminate, and the term
hereof shall end as of such date as the Landlord shall fix by notice in
writing. The Tenant shall have no claim or right to claim or be entitled to any
portion of any amount which may be awarded as damages or paid as a result of
such condemnation proceedings or paid as the purchase price for such option,
sale or conveyance in lieu of formal condemnation proceedings. All rights of
the Tenant to damages, if any, are hereby assigned to the Landlord. The Tenant
agrees to execute and deliver any instrument, at the expense of the Landlord,
as may be deemed necessary or required to expedite any condemnation proceedings
or to effectuate a proper transfer of title to such governmental or other
public authority, agency, body or public utility seeking to take or acquire
the said lands and premises or any portion thereof. The Tenant covenants and
agrees to vacate the said premises, remove all of the Tenant's personal
property therefrom and deliver up peaceable possession thereof to the Landlord
or to such other party designated by the Landlord in the aforementioned notice.
Failure by the Tenant to comply with any provisions of this clause shall subject
the Tenant to such costs, expenses, damages, and losses as the Landlord may
incur by reason of the Tenant's breach thereof.
18. Indemnification: Tenant shall, at its own cost and expense, comply
with, indemnify and hold harmless Landlord from and against any loss or damage
in connection with all present and future laws, orders and regulations of any
governmental body, including federal, state, county and local authorities, or
claims by any person arising out of the use of the premises which shall, at any
time during the term, impose any violation, order or duty upon the land,
premises or any building or improvement which is the subject of this Lease or
arising out of Tenant's business operation on the premises, including, without
limitations, the Spill Compensation and Contract Act (N.J.S.A. 58:10-23.11) and
the Industrial Site Recovery Act (N.J.S.A. 13:1-6).
19. Taxes: The Tenant shall be responsible for 0% of the annual
property taxes levied against the premises during the entire initial lease term
as well as the option renewal term.
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<PAGE> 8
20. Reimbursement of Landlord: If the Tenant shall fail or refuse to
comply with and perform any conditions and covenants of the within Lease, the
Landlord may, at the Landlord's option, carry out and perform such conditions
and covenants, at the cost and expense of the Tenant, and the said cost and
expense shall be payable on demand, or at the option of the Landlord, be
added to the installment of rent due immediately thereafter, but in no case
later than one month after such demand, whichever occurs sooner, and shall be
due and payable as such. This remedy shall be in addition to such other
remedies as the Landlord may have hereunder by reason of the breach by the
Tenant of any of the covenants and conditions in this Lease.
21. Inspection and Repair: Tenant agrees that the Landlord and
Landlord's agents, employees or other representatives, shall have the right to
enter into and upon the premises or any part thereof, upon reasonable notice
and at all reasonable hours, for the purpose of examining the same or making
such repairs or alterations therein as may be necessary for the safety and
preservation thereof. This clause shall not be deemed to be a covenant by the
Landlord nor be construed to create an obligation on the part of the Landlord
to make such inspection or repairs.
22. Remedies Upon Tenant's Default: If there should occur any default
on the part of the Tenant in performance of any conditions and covenants herein
contained, or if during the term hereof, the premises or any part thereof shall
be or become abandoned or deserted, vacated or vacant or should the Tenant be
evicted by summary proceedings or otherwise, the Landlord, in addition to any
other remedies herein contained or as may be permitted by law, may re-enter
the premises for Landlord's benefit; and as agent for the Tenant or otherwise,
relet the premises and receive the rents therefor and apply the same, first to
the payment of such expenses, reasonable attorney fees and costs as the
Landlord may have been put to in re-entering and repossessing the premises and
in making such repairs and alterations as may be necessary; and second, to the
payment of such rents due hereunder. The Tenant shall remain liable for such
rents as may be in arrears and also the rents as may accrue subsequent to the
re-entry by the Landlord, to the extent of the difference between the rents
reserved hereunder and the rents, if any, received by the Landlord during the
remainder of the unexpired term hereof, after deducting the
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<PAGE> 9
aforementioned expenses, fees and costs; the same to be paid as such
deficiencies arise and are ascertained each month.
23. Nonliability of Landlord: The Landlord shall not be liable for
any damage or injury which may be sustained by the Tenant or any other person,
as a consequence of the failure, breakage, leakage or obstruction of the water,
plumbing, steam, sewer, waste or soil pipes, roof, drains, leaders, gutters,
valleys, down spouts or the like or of any electrical gas, power, conveyor,
refrigerator, sprinkler, air conditioning or heat systems, or by reason of the
elements, or resulting from the carelessness, negligence or improper conduct on
the part of any other Tenant or of the Landlord or any of the Tenant's agents,
employees, guests, licensees, invitees, subtenants, assignees or successors; or
attributable to any interference with, interruption of or failure, beyond the
control of the Landlord of any services to be furnished or supplied by Landlord
except for gross negligence or willful misconduct of Landlord.
24. Nonwaiver: The various rights, remedies, options and elections of
Landlord expressed herein are cumulative and the failure of the Landlord to
enforce strict performance by the Tenant of the conditions and covenants of
this Lease, or to exercise any election or option, or the restore or have
recourse of any remedy herein conferred, or the acceptance by the Landlord of
any installment of rent after the breach by the Tenant of any one or more
instances, shall not be construed or deemed to be a waiver or relinquishment
for the future by Landlord of any such conditions and covenants, options,
elections or remedies, but the same shall continue in full force and effect.
25. Validity of Lease: The terms, conditions, covenants and
provisions of this Lease shall be deemed to be severable. If any clause or
provision herein contained shall be adjudged to be invalid or unenforceable by
a court of competent jurisdiction or by operation of any applicable law, it
shall not effect the validity of any other clause or provision herein, but such
other clauses or provisions shall remain in full force and effect.
26. Notices: All notices required under the terms of this Lease shall
be given and shall be complete by mailing such notices by certified or
registered mail, return receipt requested, to the address of the parties as
shown in this Lease or to such other address as may be designated in writing,
which notice of change of address shall be given in the same manner.
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<PAGE> 10
27. Title and Quiet Enjoyment: Landlord covenants and represents
that Landlord is the owner of the premises herein leased and has the right and
authority to enter into, execute and deliver this lease and so long as Tenant
pays the rent provided herein for the premises and observes and performs all of
the covenants, conditions and provisions required of it herein, Tenant shall and
may peacefully and quietly have, hold and enjoy the premises free from
disturbances by Landlord, Landlord's successors, assigns or subleases for the
entire term hereof, subject to all provisions of this Lease. Tenant hereby
subordinates Tenant's interest in the premises under this Lease to any mortgage
or deed of trust now or hereafter created by Landlord upon the premises. Tenant
shall, at any time upon request of Landlord, execute for recording, an
agreement, of which a copy shall be delivered to Tenant, further evidencing this
subordination herein made.
28. Entire Contract: This Lease contains the entire contract
between the parties. No representative, agent or employee of the Landlord has
been authorized to make any representations or promises with reference to the
within letting to vary, alter or modify the terms hereof. No additions, changes
or modifications, renewals or extensions hereof shall be binding unless reduced
to writing and signed by the Landlord and Tenant.
29. Security: Tenant has this date deposited with the Landlord the
sum of $1380.00 as security for the payment of rent hereunder and the full and
faithful performance by Tenant of the covenants and conditions on the part of
the Tenant to be performed. Said sum shall be returnable to the Tenant, without
interest, after the expiration of the term herein, provided that Tenant has
fully and faithfully performed all such covenants and conditions and is not in
arrears in rent. During the term hereof, Landlord may, if Landlord so elects,
have recourse to such security to make good any default by the Tenant in which
event Tenant shall, on demand, promptly restore said security to its original
amount. Liability to repay said security to the Tenant shall run with the
reversion and title to the premises, whether any change in ownership thereof be
by voluntary alienation or as the result of judicial sale, foreclosure or other
proceedings, or the exercise of a right to taking or re-entry by any mortgagee.
Landlord shall assign or transfer said security, for the benefit of Tenant, to
any subsequent owner or holder of the reversion of title to said premises, in
which case the assignee shall become liable for repayment thereof as herein
provided,
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and the assignor shall be deemed to be released by Tenant from all liability to
return said security. This provision shall be applicable to every alienation or
change in title. Tenant shall not mortgage, encumber or assign said security
without the written consent of Landlord.
30. Appearance: It is understood and agreed that the Tenant shall
maintain its premises in a neat and clean fashion and free from rubbish, and
shall store all trash and garbage within the premises or in such a place as may
be designated by the Landlord. Landlord to supply outdoor trash receptacle for
Tenant.
31. Parking Areas: The Tenant and its employees shall not park
cars in parking spaces provided for customers on the project site except in
those areas specifically designated by the Landlord. All loading and unloading
of goods shall be made in the loading and unloading zone. The Tenant agrees
that upon written notice from the Landlord, it will provide the Landlord with a
list of the automobile license numbers of each employee and will cooperate in
making sure that all employees park in the designated area. The parking spaces
for the center are not allocated to each Tenant. However, the Tenant has the
right to utilize three (3) parking spaces. The purpose of this clause is to
prevent any one Tenant from using more parking spaces than is appropriate given
the total square footage of the center. Violation of this clause shall be
deemed a breach of this lease.
32. Business Operations: The Tenant shall use the premises in
accordance with the purpose stated in this Lease. The Tenant shall undertake
its business diligently and energetically and shall keep the premises open and
available for business during all usual business hours. It is intended that the
usual business hours of the center shall be from 9:00 a.m. until 9:00 p.m.,
Monday through Friday, 9:00 a.m. to 5:00 p.m. on Saturday. These hours are
basic guidelines and may be modified by the parties.
33. Renewal Option: The Landlord hereby grants unto the Tenant an
option to renew the within Lease for one additional term of two years upon the
same terms, to be exercised by Tenant three(3) months prior to expiration of
term.
34. Closure: In the event the Tenant fails to operate the business
for a period of sixty (60) consecutive days and at the same time fails to pay
the rent on said premises, said act shall be deemed an abandonment by the
Tenant. The execution of this Lease shall allow the Landlord to immediately
take
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possession of the premises without further act. Any and all materials left in
the demised premises may be removed by the Landlord and either stored, sold or
disposed of in any reasonable fashion.
35. Bankruptcy: In the event that the Tenant files bankruptcy the
Tenant agrees to vacate the premises within thirty days.
36. Landlord's Responsibility. At the Landlord's sole cost and
expense, within 14 days of receipt of the executed lease, proper insurance
information, security deposit and first month's rent, Landlord will remove one
non-bearing wall and patch carpet in a workmanlike manner. Tenant has no
responsibility to re-install said wall upon expiration of term of lease.
37. Tenant's Responsibility. Tenant must supply Landlord with
proof of insurance as outlined in this Lease. Execute Lease and return to
Landlord with the first month's rent of $690.00 and security deposit of
$1380.00.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals, or caused these presents to be signed by their corporate officers
and their property corporate seals to be hereto affixed, the day and year first
above written.
/s/ Kevin M. Buhrman 11/13/96
----------------------------------------
Tenant Date
Kevin M. Buhrman, President
/s/ Gary Lotano 11/15/96
-----------------------------------------
Landlord Date
Gary Lotano, President
12
<PAGE> 1
SUBLEASE AGREEMENT
This sublease is made on May 17, 1996, between Transworld Home HealthCare, Inc.
dba DermaQuest ("Sublessor"), whose address is 8400 Baymeadows Way,
Jacksonville, Florida, 32256 and Great Valley Products-M, Inc. ("Sublessee"),
whose address is Independence Court Bay #1, Folcroft, PA 19032-2111 as a
sublease under the lease dated February 23, 1995, entered into by RREEF USA
FUND -- III, a California Group Trust as Landlord and Sublessor under this lease
Tenant, a copy of the lease attached and designated Exhibit A.
1. RECITALS. This sublease is made with reference to the following facts and
objectives:
a. This sublease is subject to all of the terms and conditions of the lease
in Exhibit A and Sublessee shall assume and perform Tenant's obligations
in said lease, and Sublessor shall assume and perform the obligation of
the Landlord in said lease, to the extent said terms and conditions are
applicable to the premises subleased pursuant to this sublease. Sublessee
shall not commit or permit to be committed on the subleased premises any
act or omission which shall violate any term or condition of the lease. In
the event of the termination of Sublessor's interest as Tenant under the
lease for any reason, then this sublease shall terminate coincidently
therewith without any liability of Sublessor to Sublessee.
b. All of the terms and conditions contained in the lease in Exhibit A are
incorporated herein except for paragraphs _____________, as terms and
conditions of this sublease (with each reference therein to Landlord and
Tenant to be deemed to refer to Sublessor and Sublessee) and along with
all of the following paragraphs set out in this sublease, shall be the
complete terms and conditions of this sublease.
c. Landlord shall consent to the proposed sublease in this agreement which
shall take effect on June 1, 1996, and Sublessor shall give possession of
the premises to Sublessee on that date.
2. PREMISES. Sublessor leases to Sublessee and Sublessee hires from said
Sublessor the following described premises together with the appurtenances,
situated in the City of Bensalem, County of Bucks, State of Pennsylvania,
commonly known as 3580 Progress Drive Suite # J, Bensalem, PA 19020.
3. RENTAL. Sublessee shall pay to Sublessor without deduction, setoff, prior
notice or demand, as base rental the sum of One Thousand Eight Hundred Two
50/100 Dollars ($1,802.50) per month in advance on the 1st day of each month
in lawful money of the United States of America, commencing on the 1st day of
June, 1996 and continuing throughout the balance of the term. Monthly rental
for any partial month shall be prorated at the rate of 1/30th of monthly
rental per day. Rent shall be paid to Sublessor at 8400 Baymeadows Way,
Jacksonville, Florida 32256 or at such other place or places as Sublessor may
from time to time direct.
<PAGE> 2
4. PREPAID RENT; SECURITY DEPOSIT. The parties acknowledge that Landlord now
holds the sum of $3,605.00, to be applied subject to the provisions of the
lease. Sublessor releases all claims to that sum, and the sum shall be held
by Landlord for the benefit of Sublessee, subject to the provisions of the
lease.
5. TERM.
a. The term of this sublease shall be for a period of Eleven months (11
months) commencing on the 1st day of June, 1996, and ending on the 30th
day of April, 1997.
b. In the event Sublessor is unable to deliver possession of the premises at
the commencement of the term, Sublessor shall not be liable for any damage
caused thereby, nor shall this sublease be void or voidable but Sublessee
shall not be liable for rent until such time as Sublessor offers to
deliver possession of the premises to Sublessee, but the term hereof
shall not be extended by such delay. If Sublessee, with Sublessor's
consent, takes possession prior to the commencement of the term, Sublessee
shall do so subject to all of the covenants and conditions hereof and
shall pay rent for the period ending with the commencement of the term at
the same rental as that prescribed for the first month of the term,
prorated at the rate of 1/30th thereof per day.
6. USE. Sublessee shall use the premises for Office/Warehouse for computer
circuit board distribution and for no other purpose without the prior written
consent of Sublessor. The use includes the assembly of computers, computer
circuit boards and computer peripherals. Sublessee's business shall be
established and conducted throughout the term hereof in a first class manner.
Sublessee shall not use the premises for, or carry on, or permit to be
carried on, any offensive, noisy or dangerous trade, business, manufacture or
occupation nor permit any auction sale to be held or conducted on or about
the premises. Sublessee shall not do or suffer anything to be done upon the
premises which will cause structural injury to the premises or the building
of which the same form a part. The premises shall not be overloaded and no
machinery, apparatus or other appliance shall be used or operated upon the
premises which will in any manner injure, vibrate or shake the premises or
the building of which it is a part. No use shall be made of the premises
which will in any way impair the efficient operation of the sprinkler system
(if any) within the building containing the premises. Sublessee shall not
leave the premises unoccupied or vacant during the term. No musical
instrument of any sort, or any noise making device will be operated or
allowed upon the premises for the purpose of attracting trade or otherwise.
Sublessee shall not use or permit the use of the premises or any part thereof
for any purpose which will increase the existing rate of insurance upon the
building in which the premises are located, or cause a cancellation of any
insurance policy covering the building or any part thereof. If any act on the
part of Sublessee or use of the premises by Sublessee shall cause directly or
indirectly, any
<PAGE> 3
increase of Sublessor's insurance expense, said additional expense shall
be paid by Sublessee to Sublessor upon demand. No such payment by Sublessee
shall limit Sublessor in the exercise of any other rights or remedies, or
constitute a waiver of Sublessor's right to require Sublessee to
discontinue such act or use.
7. LANDLORD'S CONSENT. Landlord consents to the sublease without waiver of
the restriction concerning further subleases.
8. SUBLESSOR'S LIABILITY. Sublessor shall remain personally liable for the
performance of the provisions of the lease.
9. SUBLESSEE TO HOLD SUBLESSOR HARMLESS. Sublessor warrants that as of the
commencement date of this sublease, there will be no uncured default under
the underlying lease. If Sublessee defaults under the lease, Sublessee
shall indemnify and hold Sublessor harmless from all damages resulting from
the default. If Sublessee defaults in its obligations under the lease and
Sublessor pays rent to Landlord or fulfills any of Sublessee's other
obligations in order to prevent Sublessee from being in default, Sublessee
immediately shall reimburse Sublessor for the amount of rent or costs
incurred by Sublessor in fulfilling Sublessee's obligations under this
sublease, together with interest on those sums at the rate of five percent
(5%) per annum, or the highest legal rate.
10. DEFAULT OF LEASE; NOTICE TO SUBLESSOR.
a. NOTICE TO SUBLESSOR. Landlord will send to Sublessor any notice of
default that Landlord sends to Sublessee.
b. LANDLORD'S REMEDIES AGAINST SUBLESSOR. Upon notice of default by the
Sublessor from the Landlord, the Sublessee agrees to pay rent
directly to the Landlord.
c. RIGHT TO CURE. If Sublessee is in default of the lease, before
Landlord will exercise any of the rights available to Landlord by
reason of any default, Sublessor shall have the right for a period of
five (5) days after the period expires for curing rent defaults, and
ten (10) days after the period expires for curing nonrent defaults, in
which to cure any default, provided the cure is diligently prosecuted
to completion.
d. SUBLESSOR'S REMEDIES AGAINST SUBLESSEE. If Sublessee defaults under
the lease, Sublessor shall have all rights against Sublessee that are
available by law and those contained in the lease, including, without
limitation, Sublessor's right to reenter and retake possession of the
premises from Sublessee.
11. AMENDMENT OF LEASE. Landlord and Sublessee shall not enter into any
agreement that amends the lease without Sublessor's consent. Any
amendment of the lease in violation of this provision shall have no
force or effect on Sublessor.
<PAGE> 4
12. MISCELLANEOUS.
a. ATTORNEY'S FEES. If any party commences an action against any of the
parties arising out of or in connection with this sublease, the
prevailing party or parties shall be entitled to recover from the losing
party or parties reasonable attorney's fees and cost of suit.
b. NOTICE. Any notice, demand, request, consent, approval or communication
that either party desires or is required to give to the other party or
any other person shall be in writing and either served personally or sent
by prepaid, first-class mail. Any notice, demand, request, consent,
approval, or communication that either party desires or is required to
give to the other party shall be addressed to the other party at the
address set forth in the introductory paragraph of this sublease. Either
party may change its address by notifying the other party of the change
of address. Notice shall be deemed communicated with 48 hours from the
time of mailing if mailed as provided in this paragraph.
c. SUCCESSORS. This sublease shall be binding on and inure to the benefit
of the parties and their successors, except as provided in paragraph 34
of the lease.
12. SUBLEASE COST TO TRANSFER. In connection with any sublease, Sublessor
shall pay to Landlord a fee of $250.00 to defray Landlord's costs in effecting
such transfer.
Redress for any claims against Landlord under this Sublease Agreement shall
only be made against Landlord to the extent of Landlord's interest in the
property to which the leased premises are a part. The obligations of Landlord
under this lease shall not be personally binding on, nor shall any resort be
had to the private properties of, any of its trustees or board of directors and
officers, as the case may be, the general partners thereof or any
beneficiaries, stockholders, employees or agents of Landlord, or the investment
manager.
LANDLORD: SUBLESSOR:
RREEF USA FUND - III, Transworld Home HealthCare, Inc.
a California Group Trust dba/DermaQuest Surgical Supply, Inc.
By: RREEF MANAGEMENT COMPANY, 8400 Baymeadows Way
a California corporation Jacksonville, Florida 32256
By: /s/ Barbara J. Gillentine By: /s/ Robert Fine
--------------------------- --------------------------------
Barbara J. Gillentine
Title: V.P., District Manager Title: President
Date: 5-29-96 Date: 5/21/96
SUBLESSEE:
Great Valley Products-M, Inc.
Independence Court Bay #1
Folcroft, PA 19032-2111
By:/s/ Michael Wojciechowski
--------------------------------
Title: President
Date: 29 May 1996
<PAGE> 1
COMMERCIAL LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on April 3, 1996, by and
between GOODWIN ENTERPRISES, whose address is Suite 1, The Ellipse, 4201 Church
Road, Mount Laurel, New Jersey 08054, (hereinafter referred to as "Landlord"),
and TRANSWORLD HOME HEALTH CARE, INC. whose address is 3580 Progress Drive,
Suite J, Bensalem, PA 19020, (hereinafter referred to as "Tenant").
ARTICLE I - GRANT OF LEASE
Landlord, in consideration of the rents to be paid and the covenants
and agreements to be performed and observed by the Tenant, does hereby lease to
the Tenant and the Tenant does hereby lease and take from the Landlord the
property commonly known as Suite 6, Ramblewood Shopping Center more fully
described at Exhibit "A" attached hereto and by reference made a part hereof
(the "Leased Premises"), together with, as part of the parcel, all improvements
located thereon.
ARTICLE II - LEASE TERM
TOTAL TERM OF LEASE. The term of this Lease shall begin on April 23,
1996 and ends on April 30, 1997, unless terminated earlier by default,
operation of law or mutual agreement.
ARTICLE III - EXTENSIONS
Section 1. Extensions by Agreement. The parties hereto may elect to
extend this Agreement upon such terms and conditions as may be agreed upon in
writing and signed by the parties at the time of any such extension.
Section 2. Automatic Renewal. In the event that Tenant fails to
notify Landlord of its intention to surrender and vacate the subject premises
on the termination date as set forth above, said notice being provided no later
than sixty (60) days prior to the termination date, Landlord, at its sole
option, shall have the right to renew the terms and conditions of the Lease for
an additional period of one (1) year. Should Landlord so elect to extend the
Lease for an additional one (1) year period, the rights, duties and obligations
of the parties contained in the within Lease shall remain in full force and
effect provided, however, the annual rent charged shall be increased by the CPI
provided, however, that the minimum increase shall be 5% and the maximum
increase shall be 10%. Landlord shall also have the right to demand that Tenant
quit the premises on the termination date as set forth above. Both Parties must
agree to renewal term, there is no automatic renewal right of the Landlord.
ARTICLE IV - DETERMINATION OF RENT
The Tenant agrees to pay the Landlord and the Landlord agrees to
accept, during the term hereof, at such places as the Landlord shall from time
to time direct by notice to the Tenant, rent at the following rates and times:
Section 1. Annual Rent. Annual rent for the term of the Lease shall
be SIX THOUSAND EIGHT HUNDRED AND FOUR DOLLARS ($6,804.00). Includes utilities,
heat, A/C, water, etc.
Section 2. Payment of Yearly Rent. The annual rent shall be payable
in advance in equal monthly installments of one-twelfth (1/12th) of the total
yearly rent, which shall be FIVE HUNDRED AND SIXTY SEVEN DOLLARS ($567.00), on
the first day of each and every calendar month during the term hereof, and pro
rata for the fractional portion of any month, except that on the first day
of the calendar month immediately following the Commencement Date, the Tenant
shall also pay to the Landlord rent at the said rate for any portion of the
preceding calendar month included in the term of this Lease.
A late fee in the amount of FIFTY DOLLARS ($50.00) shall be assessed if
payment is not received by Landlord on or before the tenth day of each month.
<PAGE> 2
ARTICLE V - SECURITY DEPOSIT
The Tenant has deposited with the Landlord the sum of EIGHT HUNDRED AND
FIFTY DOLLARS AND FIFTY CENTS ($850.50) as security for the full and faithful
performance by the Tenant of all the terms of this lease required to be
performed by the Tenant. Such sum shall be returned to the Tenant after the
expiration of this lease, provided the Tenant has fully and faithfully carried
out all of its terms. In the event of a bona fide sale of the property of which
the leased premises are a part, the Landlord shall have the right to transfer
the security to the purchaser to be held under the terms of this lease, and the
Landlord shall be released from all liability for the return of such security to
the Tenant.
ARTICLE VI - OBLIGATIONS FOR REPAIRS
Section 1. LANDLORD'S Repairs. Subject to any provisions herein to the
contrary, and except for maintenance or replacement necessitated as the result
of the act or omission of sublessees, licensees or contractors, the Landlord
shall be required to repair only defects, deficiencies, deviations or failures
of materials or workmanship in the building. The Landlord shall keep the Leased
Premises free of such defects, deficiencies, deviations or failures during the
term of the Lease.
Section 2. TENANT'S Repairs. The Tenant shall repair and maintain the
Leased Premises in good order and condition, except for reasonable wear and
tear, the repairs required of Landlord pursuant hereto, and maintenance or
replacement necessitated as a result of the act or omission or negligence of the
Landlord, its employees, agents, or contractors.
Section 3. TENANT'S Alterations. The Tenant shall have the right, at
its sole expense, from time to time, to redecorate the Leased Premises and to
make such non-structural alterations and changes in such parts thereof as the
Tenant shall deem expedient or necessary for its purposes; provided, however,
that such alterations and changes shall neither impair the structural soundness
nor diminish the value of the Leased Premises. The Tenant may make structural
alterations and additions to the Leased Premises provided that Tenant has first
obtained the consent thereto of the Landlord in writing. The Landlord agrees
that it shall not withhold such consent unreasonably.
Section 4. Permits and Expenses. Each party agrees that it will
procure all necessary permits for making any repairs, alterations, or other
improvements for installations, when applicable. Each Party hereto shall give
written notice to the other party of any repairs required of the other pursuant
to the provisions of this Article and the party responsible for said repairs
agrees promptly to commence such repairs and to prosecute the same to
completion diligently, subject, however, to the delays occasioned by events
beyond the control of such party.
Each party agrees to pay promptly when due the entire cost of any work
done by it upon the Leased Premises so that the Leased Premises at all times
shall be free of liens for labor and materials. Each party further agrees to
hold harmless and indemnify the other party from and against any and all
injury, loss, claims or damage to any person or property occasioned by or
arising out of the doing of any such work by such party or its employees, agents
or contractors. Each party further agrees that in doing such work that it will
employ materials of good quality and comply with all governmental requirements,
and perform such work in a good and workmanlike manner.
Landlord shall be solely responsible for obtaining the initial
Certificate of Occupancy required at the inception of the Lease.
ARTICLE VII - TENANT'S COVENANTS
Section 1. TENANT'S Covenants. Tenant covenants and agrees as follows:
a. To procure at Tenant's sole cost and expense, any licenses
and permits required for any use made of the Leased
Premises by Tenant, and upon the expiration or termination
of this Lease, to remove its goods and effects and those
of all persons claiming under it, and to yield up peaceably
to Landlord the Leased Premises in good order, repair and
condition in all respects; excepting only damage by fire
and casualty covered by Tenant's insurance
<PAGE> 3
coverage, structural repairs (unless Tenant is obligated to
make such repairs hereunder) and reasonable wear and tear;
b. To permit Landlord and its agents to examine the Leased
Premises at reasonable times and to show the Leased Premises
to prospective purchasers of the Building and to provide
Landlord, if not already available, with a set of keys for
the purpose of said examination, provided that Landlord
shall not thereby unreasonably interfere with the conduct of
Tenant's business;
c. To permit Landlord to enter the Leased Premises to inspect
such repairs, improvements, alterations or additions thereto
as may be required under the provisions of this Lease. If,
as a result of such repairs, improvements, alterations, or
additions, Tenant is deprived of the use of the Leased
Premises, the rent shall be abated or adjusted, as the case
may be, in proportion to that time during which, and to that
portion of the Leased Premises of which, Tenant shall be
deprived as a result thereof.
ARTICLE VIII - INDEMNITY BY TENANT
Section 1. Indemnity and Public Liability. The Tenant shall save
Landlord harmless and indemnify Landlord from all injury, loss, claims or
damage to any person or property while on the Leased Premises, unless caused by
the willful acts or omissions or gross negligence of Landlord, its employees,
agents, licensees or contractors. Tenant shall maintain, with respect to the
Leased Premises, public liability insurance with limits of not less than one
million dollars for injury or death from one accident and $250,000.00 property
damage insurance, insuring Landlord and Tenant against injury to persons or
damage to property on or about the Leased Premises. A copy of the policy or a
certificate of insurance shall be delivered to Landlord on or before the
commencement date and no such policy shall be cancelable without ten (10) days
prior written notice to Landlord.
ARTICLE IX - USE OF PROPERTY BY TENANT
Use. The Leased Premises may be occupied and used by Tenant
exclusively as a business office, to be known as TRANSWORLD HOME HEALTHCARE,
INC. Nothing herein shall give Tenant the right to use the property for any
other purpose or to sublease, assign, or license the use of the property to any
sublessee, assignee, or licensee, which or who shall use the property for any
other use.
ARTICLE X - SIGNAGE
Section 1. Exterior Signs. Unless specifically agreed upon otherwise
by Landlord, Tenant shall have no right to erect any signs on any exterior
portion of the Leased Premises either in common areas on the exterior of the
building within which the Leased premises is located. In the event that both
Landlord and Tenant agree to the erection of signs on any portion of the common
areas or exterior of the Lease premises, Tenant shall pay all costs connected
with the creation, and erection of said signs. Nothing contained herein shall
be construed as forcing Landlord to erect and/or permit any signs on behalf of
Tenant.
Section 2. Interior Signs. Tenant shall have the right, at its sole
risk and expense and in conformity with applicable laws and ordinances, to
erect, maintain, place and install its usual and customary signs and fixtures
in the interior of the Leased Premises.
ARTICLE XI - INSURANCE
Subrogation. Tenant hereby releases Landlord, to the extent of the
insurance coverage provided for the leased premises, from any and all liability
or responsibility (to the other or anyone claiming through or under the other
by way of subrogation or otherwise) for any loss to or damage of property
covered by the fire and extended coverage insurance policies insuring the
Leased Premises and any of Tenant's property, even if such loss or damage shall
have been caused by the fault or negligence of the Landlord.
<PAGE> 4
ARTICLE XII - DAMAGE TO DEMISED PREMISES
Section 1. Abatement or Adjustment of Rent. If the whole or any part
of the Leased Premises shall be damaged or destroyed by fire or other casualty
after the execution of this Lease and before the termination hereof, then in
every case the rent reserved in Article IV herein and other charges, if any,
shall be abated or adjusted, as the case may be, in proportion to that portion
of the Leased Premises of which Tenant shall be deprived on account of such
damage or destruction and the work of repair, restoration, rebuilding, or
replacement or any combination thereof, of the improvements so damaged or
destroyed, shall in no way be construed by any person to effect any reduction
of sums or proceeds payable under any rent insurance policy.
Section 2. Repairs and Restoration. Landlord agrees that in the event
of the damage or destruction of the Leased premises, Landlord forthwith shall
proceed to repair, restore, replace or rebuild the Leased Premises (excluding
Tenant's leasehold improvements), to substantially the condition in which the
same were immediately prior to such damage or destruction. The Landlord
thereafter shall diligently prosecute said work to completion without delay or
interruption except for events beyond the reasonable control of Landlord.
Notwithstanding the foregoing, if such damage or destruction shall occur during
the last year of the term of this Lease, or during any renewal term, and shall
amount to twenty-five (25%) percent or more of the replacement cost, (exclusive
of the land and foundations), this Lease, except as hereinafter provided, may
be terminated at the election of either Landlord or Tenant, provided that
notice of such election shall be sent by the party so electing to the other
within thirty (30) days after the occurrence of such damage or destruction.
Upon termination, as aforesaid, by either party hereto, this Lease and the term
thereof shall cease and come to an end, any unearned rent or other charges paid
in advance by Tenant shall be refunded to Tenant, and the parties shall be
released hereunder, each to the other, from all liability and obligations
hereunder thereafter arising.
ARTICLE XIII - CONDEMNATION
Section 1. Total Taking. If, after the execution of this Lease and
prior to the expiration of the term hereof, the whole of the Leased Premises
shall be taken under power of eminent domain by any public or private
authority, or conveyed by Landlord to said authority in lieu of such taking,
then this Lease and the term hereof shall cease and terminate as of the date
when possession of the Leased Premises shall be taken by the taking authority
and any unearned rent or other charges, if any, paid in advance, shall be
refunded to Tenant.
Section 2. Partial Taking. If, after the execution of this Lease and
prior to the expiration of the term hereof, any public or private authority
shall, under the power of eminent domain, take, or Landlord shall convey to
said authority in lieu of such taking, property which results in a reduction by
fifteen (15%) percent or more of the area in the Leased Premises, or of a
portion of the Leased Premises that substantially interrupts or substantially
obstructs the conducting of business on the Leased Premises; then Tenant may,
at its election, terminate this Lease by giving Landlord notice of the exercise
of Tenant's election within thirty (30) days after Tenant shall receive notice
of such taking.
In the event of termination by Tenant under the provisions of Section 2
of this Article, this Lease and the term hereof shall cease and terminate as
of the date when possession shall be taken by the appropriate authority of that
portion of the Entire Property that results in one of the above takings, and any
unearned rent or other charges, if any, paid in advance by Tenant shall be
refunded to Tenant.
Section 3. Restoration. In the event of a taking in respect of which
Tenant shall not have the right to elect to terminate this lease or, having
such right, shall not elect to terminate this Lease, this Lease and the term
thereof shall continue in full force and effect.
Section 4. The Award. All compensation awarded for any taking, whether
for the whole or a portion of the Leased Premises, shall be the sole property
of the Landlord whether such compensation shall be awarded for diminution in
the value of, or loss of, the leasehold or for diminution in the value of, or
loss of, the fee in the Leased Premises, or otherwise. The Tenant hereby
assigns to Landlord all of Tenant's right and title to and interest in any and
all such compensation.
<PAGE> 5
Section 5. Release. In the event of any termination of this Lease as the result
of the provisions of this Article, the parties, effective as of such
termination, shall be released, each to the other, from all liability and
obligations thereafter arising under this lease.
ARTICLE XIV - DEFAULT
Section 1. LANDLORD'S Remedies. In the event that:
a. Tenant shall be in default in the payment of rent or other
charges herein required to be paid by Tenant (default herein
being defined as payment received by Landlord ten or more
days subsequent to the due date); or
b. Tenant has caused a lien to be filed against the Landlord's
property and said lien is not removed within thirty (30)
days of recordation thereof; or
c. Tenant shall default in the observance or performance of any
of the covenants and agreements required to be performed and
observed by Tenant hereunder for a period of thirty (30)
days after notice to Tenant in writing of such default (or
if such default shall reasonably take more than thirty (30)
days to cure, Tenant shall not have commenced the same
within the thirty (30) days and diligently prosecuted the
same to completion); or
d. Sixty (60) days have elapsed after the commencement of any
proceeding by or against Tenant, whether by the filing of a
petition or otherwise, seeking any reorganization,
arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or future
Federal Bankruptcy Act or any other present or future
applicable federal, state or other statute or law, whereby
such proceeding shall not have been dismiessed (provided,
however, that the non-dismissal of any such proceeding shall
not be a default hereunder so long as all of Tenant's
covenants and obligations hereunder are being performed by
or on behalf of Tenant); then Landlord shall be entitled to
its election (unless Tenant shall cure such default prior to
such election), to exercise concurrently or successively,
any one or more of the following rights:
i. Terminate this Lease by giving Tenant notice of
termination, in which event this Lease shall expire
and terminate on the date specified in such notice
of termination, with the same force and effect as
though the date so specified were the date herein
originally fixed as the termination date of the term
of this Lease, and all rights of Tenant under this
Lease and in and to the Premises shall expire and
terminate, and Tenant shall remain liable for all
obligations under this Lease arising up to the date
of such termination, and Tenant shall surrender the
Premises to Landlord on the date specified in such
notice; or
ii. Terminate this Lease as provided herein and recover
from Tenant all damages Landlord may incur by
reason of Tenant's default; or
iii. Without terminating this Lease, declare immediately
due and payable all rents and amounts due and
coming due under this Lease for the entire
remaining term hereof, together with all other
amounts previously due, at once; provided, however,
that such payment shall not be deemed a penalty or
liquidated damages but shall merely constitute
payment in advance of rent for the remainder of
said term; or
iv. Allow the Premises to remain unoccupied and collect
rent from Tenant as if comes due; or
v. Pursue such other remedies as are available at law
or equity.
<PAGE> 6
e. Landlord's pursuant of any remedy of remedies, including
without limitation, any one or more of the remedies stated
herein shall not (1) constitute an election of remedies or
preclude pursuit of any other remedy or remedies provided
in this Lease or any other remedy or remedies provided by
law or in equity, separately or concurrently or in any
combination, or (2) serve as the basis for any claim of
constructive eviction, or allow Tenant to withhold any
payments under this Lease.
Section 2. LANDLORD'S Self Help. If Tenant shall default in the
performance or observance of any agreement or condition in this Lease and shall
not cure such default within thirty (30) days after notice from Landlord
specifying the default (or if such default shall reasonably take more than
thirty (30) days to cure, shall diligently prosecuted the same to completion),
Landlord may, at its option, without waiving any claim for damages for breach of
agreement, at any time thereafter cure such default for the account of Tenant,
and any amount paid or contractual liability incurred by Landlord in so doing
shall be deemed paid or incurred for the account of Tenant and Tenant agrees to
reimburse Landlord therefor and save Landlord harmless therefrom. Provided,
however, that Landlord may cure any such default as aforesaid prior to the
expiration of said waiting period, without notice to Tenant if any emergency
situation exists, or after notice to Tenant, if the curing of such default
prior to the expiration of said waiting period is reasonably necessary to
protect the Leased Premises or Landlord's interest therein, or to prevent
injury or damage to persons or property. If Tenant shall fail to reimburse
Landlord upon demand for any amount paid for the account of Tenant hereunder,
said amount shall be added to and become due as a part of the next payment of
rent due and shall for all purposes be deemed and treated as rent hereunder.
ARTICLE XV - TITLE
Section 1. Subordination. Tenant shall, upon the request of Landlord in
writing, subordinate this Lease to the lien of any present or future
institutional mortgage upon the Leased Premises irrespective of the time of
execution or the time of recording of any such mortgage.
Section 2. Quiet Enjoyment. Landlord covenants and agrees that upon
Tenant paying the rent and observing and performing all of the terms, covenants
and conditions on Tenant's part to be observed and performed hereunder, that
Tenant may peaceably and quietly have, hold, occupy and enjoy the Leased
Premises in accordance with the terms of this Lease without hindrance or
molestation from Landlord or any persons lawfully claiming through Landlord.
Section 3. Licenses. It shall be the Tenant's responsibility to obtain
any and all necessary licenses and the Landlord shall bear no responsibility
therefor; the Tenant shall promptly notify Landlord of the fact that it has
obtained the necessary licenses in order to prevent any delay to Landlord in
commencing construction of the Leased Premises.
ARTICLE XVI - EXTENSIONS/WAIVERS/DISPUTES
Section 1. Extension Period. Any extension hereof shall be subject to
the provisions of Article III hereof.
Section 2. Holding Over. In the event that Tenant or anyone claiming
under Tenant shall continue occupancy of the Leased Premises after the
expiration of the term of this Lease or any renewal or extension thereof
without any agreement in writing between Landlord and Tenant with respect
thereto, such occupancy shall not be deemed to extend or renew the term of the
Lease, but such occupancy shall continue as a tenancy at will, from month to
month, upon the covenants, provisions and conditions herein contained. The
rental shall be the rental in effect during the term of this Lease as extended
or renewed, prorated and payable for the period of such occupancy, provided,
however, Landlord shall have the right to increase the monthly rental amount by
the amount of the CPI then in effect.
Section 3. Waivers. Failure of either party to complain of any act or
omission on the part of the other party, no matter how long the same may
continue, shall not be deemed to be a waiver by said party of any of its rights
hereunder. No waiver by any other party at any time, express or implied, of any
breach of any provision of this Lease shall be deemed a waiver of a breach of
any other provision of this Lease or a consent to any subsequent breach of the
same or any other
<PAGE> 7
provision. If any action by either party shall require the consent or approval
of the other party, the other party's consent to or approval of such action on
any one occasion shall not be deemed a consent to or approval of said action on
any subsequent occasion or a consent to or approval of any other action on the
same or any subsequent occasion. Any and all rights and remedies which either
party may have under this Lease or by operation of law, either at law or in
equity, upon any breach, shall be distinct, separate and cumulative and shall
not be deemed inconsistent with each other, and no one of them, whether
exercised by said party or not, shall be deemed to be an exclusion of any
other; and any two or more or all of such rights and remedies may be exercised
at the same time.
Section 4. Notices. All notices and other communications authorized
or required hereunder shall be in writing and shall be given by mailing the
same by certified mail, return receipt requested, postage prepaid, and any
such notice or other communication shall be deemed to have been given when
received by the party to whom such notice or other communication shall be
addressed.
ARTICLE XVII - PROPERTY DAMAGE
Section 1. Loss and Damage. Notwithstanding any contrary provisions
of this Lease, Landlord shall not be responsible for any loss of or damage to
property of Tenant or of others located on the Leased Premises, except where
caused by the willful act or omission or negligence of Landlord, or Landlord's
agents, employees or contractors.
Section 2. Force Majeure. In the event that Landlord or Tenant shall
be delayed or hindered in or prevented from the performance of any act other
than Tenant's obligation to make payments of rent, additional rent, and other
charges required hereunder, by reason of strikes, lockouts, unavailability of
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrections, the act, failure to act, or default of the other party,
war or other reason beyond its control, then performance of such act shall be
excused for the period of the delay and the period for the performance of such
act shall be extended for a period equivalent to the period of such delay.
Notwithstanding the foregoing, lack of funds shall not be deemed to be a cause
beyond control of either party.
ARTICLE XVIII - MISCELLANEOUS
Section 1. Assignment and Subletting. Tenant shall have no right to
assign or Sublet this lease or the Leased Premises without the written approval
of the Landlord.
Section 2. Fixtures. All personal property, furnishings and equipment
presently and all other trade fixtures installed in or hereafter by or at the
expense of Tenant and all additions and/or improvements, exclusive of
structural, mechanical, electrical, and plumbing, affixed to the Leased
Premises and used in the operation of the Tenant's business made to, in or on
the Leased Premises by and at the expense of Tenant and susceptible of being
removed from the Leased Premises without damage, unless such damage be repaired
by Tenant, shall remain the property of Tenant and Tenant may, but shall not be
obligated to, remove the same or any part thereof at any time or times during
the term hereof, provided that Tenant, at its sole cost and expense, shall make
any repairs occasioned by such removal.
Section 3. Estoppel Certificates. At any time and from time to time,
Landlord and Tenant each agree, upon request in writing from the other, to
execute, acknowledge and deliver to the other or to any person designated by
the other a statement in writing certifying that the Lease is unmodified and is
in full force and effect, or if there have been modifications, that the same is
in full force and effect as modified (stating the modifications), that the
other party is not in default in the performance of its covenants hereunder, or
if there have been such defaults, specifying the same, and the dates to which
the rent and other charges have been paid.
Section 4. Invalidity of Particular Provision. If any term or
provision of this Lease or the application hereof to any person or circumstance
shall, to any extent, be held invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Lease shall be valid and
be enforced to the fullest extent permitted by law.
<PAGE> 8
Section 5. Captions and Definitions of Parties. The captions of the
Sections of this Lease are for convenience only and are not a part of this
Lease and do not in any way limit or amplify the terms and provisions of this
Lease. The word "Landlord" and the pronouns referring thereto, shall mean,
where the context so admits or requires, the persons, firm or corporation named
herein as Landlord or the mortgagee in possession at any time, of the land and
building comprising the Leased Premises. If there is more than one Landlord,
the covenants of Landlord shall be the joint and several obligations of each of
them, and if Landlord is a partnership, the covenants of Landlord shall be the
joint and several obligations of each of the partners and the obligations of
the firm. Any pronoun shall be read in the singular or plural and in such
gender as the context may require. Except as in this Lease otherwise provided,
the terms and provisions of this Lease shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns.
Section 6. Brokerage. No party has acted as, by or through a broker in
the effectuation of this Agreement, except for Landlord's obligation to Cynthia
Weiner.
Section 7. Entire Agreement. This instrument contains the entire and
only agreement between the parties, and no oral statements or representations
or prior written matter not contained in this instrument shall have any force
and effect. This Lease shall not be modified in any way except by a writing
executed by both parties.
Section 8. Governing Law. All matters pertaining to this agreement
(including its interpretation, application, validity, performance and breach)
in whatever jurisdiction action may be brought, shall be governed by, construed
and enforced in accordance with the laws of the State of New Jersey. In the
event that litigation results from or arises out of this Agreement or the
performance thereof, the parties agree to reimburse the prevailing party's
reasonable attorney's fees, court costs, and all other expenses, whether or not
taxable by the court as costs, in addition to any other relief to which the
prevailing party may be entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day
and year first above written or have caused this Lease to be executed by their
respective officers thereunto duly authorized.
Signed, sealed and delivered in the presence of:
"LANDLORD"
/s/ Sue Di Ienno /s/ Denise DuBois
- ----------------------------------- -----------------------------------
Witness
- -----------------------------------
Witness
"TENANT"
/s/ Fran J. McGlyn /s/ Les Capella
- ----------------------------------- -----------------------------------
Witness
/s/ Patricia Williford
- -----------------------------------
Witness
<PAGE> 1
LEASE AGREEMENT
THIS LEASE AGREEMENT made this 1st day of May, 1996, by and between
PELICAN BAY PROFESSIONAL VILLAGE ASSOCIATES referred to as the Lessor, and
Transworld Nurses, Inc. with its principal offices at 4900 Rt. 33 Suite 100,
hereinafter referred to as the Lessee.
WITNESSETH:
(1) LEASED PREMISES: Lessor hereby leases to the Lessee and the Lessee
hereby leases from the Lessor the premises located at PELICAN BAY PROFESSIONAL
VILLAGE, 1182 Pelican Bay Drive, Daytona Beach, Volusia County, Florida the
premises being a part of a certain shopping center located in and upon the
following described real property situated in Volusia County, Florida to wit:
A portion of Section 35 and 36, Township 15 South, Range 32
East, Volusia County, Florida, and a Portion Daytona Park,
Unit No. 1, as Recorded in Map Book 10, pages 26 through 40,
of the Public Records of Volusia County, Florida.
together with the right of joint use with others of the sidewalk, driveway, and
parking area, but subject to telephone concession rights, present and future.
This demise is also subject to the following:
I. Rights-of-way for streets, alleys, and public utilities;
building restrictions, driveway easements, and party-wall
agreements;
II. Existing leases (recorded and unrecorded) and tenancies
affecting portions of the demised premises*;
III. Any state of facts which an accurate survey and/or a
personal inspection would disclose;
IV. Zoning ordinances of the City of Daytona Beach or of the
County of Volusia, and any municipality in which the
property may hereafter be located, now existing or which
may hereafter exist during the life of this lease*; and,
V. Existing mortgage executed to the Southeast Mortgage Company.
*provided same do not adversely affect use of the demised
premises
(2) TERM: Lessee to have and to hold to the above-described premises
for a term of (3) three years commencing on May 1, 1996, and terminating April
30, 1999, on the terms and conditions as set forth herein.
(3) OPTION TO RENEW: If Lessee is not in default beyond the applicable
grace period with respect to any terms and conditions contained herein, the
Lessee, but not any assignee or sublessee shall have the option to renew this
Lease for an additional term of (3) three years on the same terms and conditions
as are set forth herein, except the rental for the renewed term shall be based
on, at Lessor's option, either the then prevailing rental rate for this
property, or on the change in the Consumer Price Index (CPI), provided that
Lessee gives written notice of renewal not later than six months prior to the
expiration of this Lease.
(4) RENT: Lessee hereby covenants and agrees to pay, together with any
and all sales and use taxes levied upon the use and occupancy of the leased
premises as set forth in this lease, during the term hereof, to the Lessor, in
advance beginning on the commencement date of this Lease and on the first day of
each and every month thereafter, a monthly Base Rent of $656.25 plus sales tax
(presently 6%) in the amount of $39.38, [(750 sq ft x $10.50) divided by 12] for
a total monthly rent of $695.63. Rent shall be paid to:
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PELICAN BAY PROFESSIONAL VILLAGE
P.O. Box 265121
Daytona Beach, Florida 32126-5121
Lessee also covenants and agrees to pay a Late Charge not to exceed
$25.00 for any payment of monthly rent not received by Lessor on or before the
5th day of each month and for any other payment due Lessor pursuant to the
terms and provisions hereof, plus an additional charge not to exceed $2.00 per
day for each day thereafter until the rent is paid, unless prior arrangements
have been made in writing. In the event any Late Charge is due to Lessor,
Lessor shall advise the Lessee in writing, and Lessee shall pay said Late
Charge to Lessor along with and in addition to the next payment of monthly
rent. Time is of the essence in this Lease.
All sums due and payable pursuant to the terms and provisions of this
Lease shall be only in lawful money of the United States of America which shall
be legal tender in payment of all debts and dues, public and private, at
the time of payment without set-off, abatement, or reduction.
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<PAGE> 3
(6) SECURITY: Lessee has deposited with Lessor the sum of $656.25 as
security for the faithful performance and observance by Lessee of the terms,
provisions, and conditions of this Lease; it is agreed that in the event Lessee
defaults in respect to any of the terms, provisions and conditions of this
Lease, including but not limited to, the payment of rent and additional rent,
Lessor may use, apply, or retain the whole or any part of the security so
deposited to the extent required for the payment of any rent and additional
rent or any other sum as to which Lessee is in default or for any sum which
Lessor may expend or may be required to expend by reason of Lessee's default in
respect to any of the terms, covenants, and conditions of this Lease, including
but limited to, any damages or deficiency in the reletting of the leased
premises, whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Lessor. In the event that Lessee shall fully
and faithfully comply with all of the terms, provisions, covenants, and
conditions of this Lease, the security shall be returned to Lessee, with
interest, after the date fixed as the end of the Lease and after delivery of
entire possession of the leased premises to Lessor. In the event of a sale of
the land and building of which the leased premises form a part, hereinafter
referred to as the building, or leasing of the building, Lessor shall have the
right to transfer the security to the vendee or lessee and Lessor shall
thereupon be released by Lessee from all liability for the return of such
security and Lessee agrees to look to the new Lessor solely for the return of
said security; and it is agreed that the provisions hereof shall apply to every
transfer or assignment made of the security to a new Lessor. Lessee further
covenants that it will not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and that neither Lessor nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment, or attempted encumbrance.
In the event of any bankruptcy or other proceeding against or by Lessee
under Paragraph 35 ("ESTOPPEL LETTER") herein, it is agreed that all such
security deposit held hereunder shall be deemed to be applied first to rent and
other charges first due to Lessor for all periods prior to the filing of any
such proceedings.
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(7) NET RENT: It is the intention of the Lessor and the Lessee that the
rent herein specified shall be net to the Lessor throughout the term of this
Lease, except as may be otherwise specifically provided in this Lease. All
taxes, charges, costs and expenses which the Lessee is required to pay
hereunder, together with all interest and penalties that may accrue thereon in
the event of the Lessee's failure to pay such amounts, and all damages, costs
and expenses which the Lessor may incur by reason of any default of the Lessee
or failure on the Lessee's part to comply with the terms of this Lease, shall be
deemed to be additional rent and, in the event of nonpayment by the Lessee, the
Lessor shall have all the rights and remedies with respect thereto as the Lessor
has for the nonpayment of the basic rent.
(8) NOTICES: For the purpose of notice or demand, the respective
parties shall be served by certified or registered mail, return receipt
requested, addressed to the Lessee or to the Lessor at their respective office
address as follows:
LESSEE: LESSOR:
Transworld Nurses, Inc. PELICAN BAY PROFESSIONAL VILLAGE
4900 Rt. 33 Suite 100 P.O. Box 265121
Wall, New Jersey 07753-6804 Daytona Beach, FL 32126-5121
(9) UTILITIES: The Lessee shall pay for electric utilities furnished to
the premises, such as electricity, all of which shall be separately metered,
and shall make all necessary utility deposits. Lessor shall not be responsible
or liable for any interruption or failure of utility service. Lessor
responsible for installation of meters.
(10) SALES AND USE TAX: Lessee hereby covenants and agrees to pay
monthly to the Lessor any sales, use, or other tax, excluding State and/or
Federal Income Tax, now or hereafter imposed upon any and all rents or other
sum due and payable hereunder by the United States of America, the state, or
and political subdivisions thereof, notwithstanding the fact that such statute,
ordinance, or enactment imposing the same, may endeavor to impose the tax on
the Lessor.
(11) USE AND POSSESSION:
(a) It is understood that the leased premises are to be used as an
administrative office and for no other purpose whatsoever without the prior
written consent of Lessor. In the event Lessee uses the leased premises for
purposes not expressly permitted herein, Lessor may terminate this Lease or
without notice to Lessee, restrain said improper use by injunction. Lessee
shall not use the leased premises for any unlawful purpose or so as to
constitute a nuisance. The Lessee, at the expiration of the term, shall deliver
up the leased premises in good repair and condition, damages beyond the control
of the Lessee, reasonable use, ordinary wear and tear excepted.
(b) Lessee shall not use or permit the premises to be used for any
illegal, immoral or improper purposes or permit any waste, nuisance,
disturbance, noise or annoyance whatsoever, detrimental to the premises or to
adjoining properties or their occupants. Lessee shall at its own expense comply
with all requirements of law and with all ordinances, regulations and orders of
any state, county, municipal or other public authority affecting the premises.
(12) ORDINANCES AND REGULATIONS: Lessee hereby covenants and agrees to
comply with all the rules and regulations of the Board of Fire Underwriters,
Officers, or Boards of the City, County, and State having jurisdiction over the
leased premises, and with all ordinances and regulations of governmental
authorities wherein the leased premises are located, at Lessee's sole cost and
expense, but only insofar as any of such rules, ordinances, and regulations
pertain to the manner in which the Lessee shall use the leased premises; the
obligation to comply in every other case and also all cases where such rules,
regulations and ordinances require repairs, alterations, changes, or additions
to the building (including the leased premises, but not caused by Lessee's use
thereof) or building equipment, or any part of either, being hereby expressly
assumed by Lessor, and Lessor covenants and agrees to comply
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<PAGE> 5
with all such rules, regulations, and ordinances with which Lessee has not
herein expressly agreed to comply.**
(13) SIGNS AND DRAPERIES: The Lessee will not place any draperies,
signs, advertising matter, or material on the exterior or on the interior, where
possible to be seen from the exterior of the leased premises of the building in
which the leased premises are located, without the prior written consent of the
Lessor. Any lettering or signs placed on the interior of said building shall be
for directional purposes only, and such sign and lettering shall be of a type,
kind, character, and description to be approved in writing by Lessor.
(14) MAINTENANCE AND ALTERATIONS:
(a) Lessee, by occupancy hereunder, accepts the leased premises
as being in good repair and condition. Lessee shall maintain leased premises and
every part thereof in good repair and condition, damages by causes beyond the
control of the Lessee, reasonable use, ordinary wear and tear excepted. Lessee
shall, at its own cost and expense, repair or replace any damage or injury to
all or any part of the leased premises caused by Lessee or Lessee's agents,
employees, invitees, licensees, or visitors; provided, however, if Lessee fails
to make the repairs or replacements, and Lessee shall reimburse the cost to
Lessor on demand. Repair, maintenance, and replacement of the airconditioning
and heating units shall be Lessor's responsibility.
(b) Lessee shall make no changes in or to the leased premises of
any nature without Lessor's prior written consent. Subject to the prior written
consent of Lessor*, and to the provisions of this paragraph, Lessee, at Lessee's
expense, may make alterations, installations, additions, or improvements which
are non-structural and which do not affect utility services or plumbing and
electrical lines, in or to the interior of the leased premises by using
contractors or mechanics first approved by Lessor. All fixtures and all
paneling, partitions, railings, and like installations, installed in the leased
premises at any time, either by Lessee or by Lessor in Lessee's behalf, shall
become the property of Lessor and shall remain upon and be surrendered with the
leased premises unless Lessor, by notice to Lessee no later than twenty (20)
days prior to the date fixed as the termination of this Lease, elects to have
them removed from the leased premises by Lessee forthwith, at Lessee's expense.
Nothing in this paragraph shall be construed to prevent Lessee's removal of
trade fixtures, but upon removal of any such trade fixtures from the leased
premises or upon removal of other installations as may be required by Lessor,
Lessee shall immediately and at Lessee's expense, repair and restore the leased
premises to the condition existing prior to installation and repair any damage
to the leased premises or the building due to such removal. All property
permitted or required to be removed by Lessee at the end of the term remaining
in the leased premises after Lessee's removal shall be deemed abandoned and may,
at the election of the Lessor, either be retained as Lessor's property or may be
removed from the leased premises by Lessor at Lessee's expense. Lessee shall,
before making any alterations, additions, installations, or improvements, at its
expense, obtain all permits, approvals, and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approval, and certificates to Lessor, and Lessee agrees to carry
worker's compensation, general liability, personal and property damage insurance
as Lessor may require. Lessee agrees to obtain and deliver to Lessor, written
and unconditional waivers of mechanic's liens upon the real property in which
the leased premises are located, for all work, labor, and services to be
performed and materials to be furnished in connection with such work, signed by
all contractors, subcontractors, materialmen, and laborers to become involved in
such work. Notwithstanding the foregoing, if any mechanic's lien is filed
against the leased premises or Lessee, whether or not done pursuant to this
paragraph, the same shall be discharged by Lessee within ten (10) days
thereafter of written notice, at Lessee's expense, by filing the bond required
by law.***
(15) QUIET ENJOYMENT: Subject to the provisions of Paragraph 18
("EMINENT DOMAIN") hereof, the Lessor covenants and agrees that Lessee, on
paying said monthly rent and performing the covenants and conditions
* not to be unreasonably withheld
** Nothing contained in Paragraphs 11, 12 and 14 shall require or obligate
Lessee to perform any structural repairs, alterations or maintenance.
*** Lessor shall be required to maintain in good order and repair parking and
common areas and structured portions of the building and its systems.
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<PAGE> 6
herein, shall and may peaceably and quietly hold and enjoy the leased premises
for the term aforesaid.
(16) LESSOR'S RIGHT TO INSPECT AND DISPLAY: The Lessor shall have the
right, at reasonable times during the term of this Lease, to enter the leased
premises for the purpose of examining or inspecting same and of making such
repairs or alterations therein as the Lessor shall deem necessary. The Lessor
shall also have the right to enter the leased premises upon reasonable notice at
reasonable hours for the purpose of displaying said leased premises to
prospective tenants within ninety (90) days prior to the termination of this
Lease, or at any reasonable time for the purpose of showing the leased premises
to a prospective buyer of the building. If, during the last month of the term,
Lessee shall have removed all or substantially all of Lessee's property, Lessor
may immediately enter the leased premises and prepare them for any future
Lessee. Furthermore, the Lessor may allow such future Lessee to occupy the
leased premises. These acts shall have no effect upon Lessee's obligation under
this lease, and Lessee shall be entitled to no abatement or diminution of rent
as a result thereof, except that in the event Lessee makes any payment for the
period up until the expiration of this Lease, Lessee shall be entitled to a
credit to the extent of such payment.
(17) DAMAGE OR DESTRUCTION:
(a) If by fire or other casualty the leased premises are
totally destroyed or the building is partially damaged or destroyed to the
extent of seventy-five per cent (75%) or more of the replacement cost thereof,
even though the leased premises may not be damaged, Lessor or Lessee shall have
the option of terminating this Lease or any renewal thereof by serving written
notice upon the other within thirty (30) days from the date of the casualty and
any prepaid rent shall be prorated as of the time of destruction and unearned
rent refunded without interest.
(b) If by fire or other casualty the leased premises are
damaged or partially destroyed to the extent of twenty-five per cent (25%) or
more of the replacement cost thereof and the provisions of (a) above are not
applicable, then (1) if the unexpired term of the Lease is less than one year,
excluding any unexercised renewal option, either may terminate this Lease by
serving written notice upon Lessee within ten (10) business days of the date of
destruction or Lessor shall restore the leased premises, or (2) if the unexpired
term is more than one year excluding renewal option, Lessor shall restore the
leased premises, provided same is completed within 45 days of the damage.
(c) If by fire or other casualty the leased premises are
damaged or partially destroyed to the extent of less than Twenty-five percent
(25%) of the replacement cost thereof and the provisions of (a) above are not
applicable, Lessor shall restore the leased premises.
(d) In the event of damage, all rents paid in advance
shall be proportioned as of the date of damage or destruction, and all rent
thereafter accruing shall be equitable and proportionately adjusted according to
the nature and extent of the destruction or damage, pending completion of
rebuilding, restoration or repair by lessor. In the event the destruction or
damage is so extensive as to make it unfeasible for the Lessee to conduct
Lessee's business on the leased premises, the rent shall be completely abated
until the leased premises are restored by the Lessor or until the Lessee resumes
use and occupancy of the leased premises, whichever shall first occur. The
Lessor shall not be liable for any damage to or any inconvenience or
interruption of business of the Lessee or any of its employees, agents, or
invitees occasioned by fire or other casualty.
(e) Said restoration, rebuilding or repairing shall be at
Lessor's sole cost and expense.
(f) Lessor shall not be required to carry fire, casualty,
or extended coverage insurance on the person or property of the Lessee or any
person occupying the leased premises or property which may now or hereafter be
placed in the leased premises. Lessor and Lessee each waive all rights and
liabilities which each may have against the other party, their agents,
employees, and invitees for damage or destruction
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<PAGE> 7
to the real or personal property owned by said party, except for intentional or
malicious destruction or gross negligence. Lessor and Lessee shall provide in
any insurance policy a clause providing for and recognizing such waiver of the
right of subrogation.
(18) EMINENT DOMAIN: If the whole or any part of the leased premises
shall be acquired or condemned by Eminent Domain for any public or quasi-public
use or purpose, then and in that event, the term of this Lease shall cease and
terminate from the date of title vesting in such proceeding and Lessee shall
have no claim against Lessor or against the total award for the value of any
unexpired portion of the Lease term or otherwise, and Lessee shall not be
entitled to any part of any award that may be made for such taking, not to any
damages therefrom except that the rent shall be adjusted as of the date of such
termination of this lease.
(19) ASSIGNMENT OR SUBLETTING: The Lessee shall not:
(a) Assign, encumber, dispose of, or convey this Lease or any
interest under it;
(b) Allow any assignment, subletting, or transfer hereof or any
lien upon the Lessee's interest by operation of law or by voluntary or
involuntary bankruptcy proceedings or otherwise, and in no event shall this
Lease or any rights or privileges hereunder be an asset of Lessee under any
bankruptcy, insolvency, or reorganization proceedings;
(c) Sublet the leased premises or any part thereof; or,
(d) Permit the use or occupancy of the leased premises or any part
thereof by anyone other than the Lessee.
If the Lessor shall consent to any assignment or subletting, assignee shall
assume all obligations of Lessee hereunder, and neither Lessee nor any assignee
shall be relieved of any liability hereunder, and in the event of default by
assignee shall not be relieved of any liability hereunder, and in the event of
default by assignee in the performance of any of the terms hereof, no notice of
such default or demand of any kind need be served on Lessee or assignee to hold
him or them liable to Lessor. Notwithstanding any assignment or sublease,
Lessee shall remain fully liable and shall not be released from performing any
of the terms of this Lease.
Without otherwise limiting Lessor's right to approve or disapprove any
assignment or subletting, Lessor intends to withhold its consent to any
subletting of the premises or any part thereof if (i) such proposed subletting
be to any person, firm, association, or corporation which shall then be a
tenant or sub-tenant of Lessor or an occupant of any part of the building or
(ii) such proposed subletting is at a rental rate less than the rental rates
than being charged under leases being entered into by Lessor for comparable
space in the shopping center, or (iii) such sub-letting is to an agency of any
federal, state, or local government, or is an employment or personnel agency or
school. Any assignment or subletting of the premises by Lessee without the
consent of Lessor shall be, at the option of Lessor, null and void.
(20) HOLDOVER: It is further covenanted and agreed that if the Lessee,
of any approved assignee or sublessee shall continue to occupy the leased
premises after the termination of this Lease, without prior written consent of
the Lessor, such tenancy shall be Tenancy at Sufferance. Acceptance by the
Lessor of rent after such termination shall not constitute a renewal of this
Lease or a consent to such occupancy nor shall it waive Lessor's right of
re-entry or any other right contained herein.
(21) ABANDONMENT OR VACATING PREMISES: Lessee shall, during the term of
this Lease, occupy the leased premises and shall retain and maintain during
normal business hours the furniture, fixtures, and other personal property of
Lessee on the leased premises under the supervision
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<PAGE> 8
or control of one or more officers or employees of Lessee. In the event of a
default in the payment of rent, accompanied by either (i) a removal without
Lessor's written consent of Lessee's furniture or fixtures, or (ii) a failure
of Officers or employees of Lessee to conduct their normal business activities
on and from the leased premises for a period of five (5) business days, then
such event may, at Lessor's option and without notice to Lessee, be deemed a
default and an abandonment by the Lessee of the leased premises and its
contents entitling Lessor to retake possession of the leased premises and
pursue such remedies as set forth in Paragraph 35 ("Estoppel Letter").
(22) SUBORDINATION: This Lease and all of the rights of the Lessee
hereto are hereby made subject and subordinate at all times to all ground or
underlying leases, including any ground leases entered into by the Lessor as
Lessee and to all mortgages which may now or hereafter affect such leases or
the real property of which the leased premises form a part, and to all
renewals, modifications, consolidations, replacements, and extensions thereof.
This clause shall be self-operative, and no further instrument of subordination
shall be required by any ground or underlying lease Lessor or mortgagee. In
confirmation of such subordination, Lessee shall execute promptly any
certificate that the Lessor may request. Lessee hereby constitutes and appoints
Lessor the Lessee's attorney-in-fact, irrevocably, to execute and deliver such
certificate or certificates for and on behalf of the lessee, provided, however,
that notwithstanding the foregoing, any such Lessor aforesaid or the party
secured by any such mortgagee shall have the right to recognize this Lease and,
in the event of re-entry by such Lessor aforesaid or of the party secured by
such mortgage or the purchaser under any such foreclosure sale, and the Lessee
covenants and agrees that it will, at the written request of any such party,
execute, acknowledge, and deliver any instrument that has for its purpose and
effect the subordination of this Lease to the lien or rights of all ground or
underlying leases and to all mortgages.
(23) INDEMNIFICATION: The Lessor shall not be liable for all
damage or injury to any person or property whether it be the person or property
of the Lessee, the Lessee's employees, agents, guests, invitees, or otherwise by
reason of Lessee's occupancy of the leased premises or because of fire, flood,
windstorm, Acts of God, or for any other reason. The Lessee agrees to indemnify
and save harmless the Lessor from and against any and all loss, damage, claim,
demand, liability, or expense by reason of damage to person or property which
may arise or be claimed to have arisen as a result of the occupancy or use of
said leased premises by the Lessee or by reason thereof or in connection
therewith, or in any way arising on account of any injury or damage caused to
any person or property on or in the leased premises providing, however, that
Lessee shall not indemnify as to the loss or damage due to fault of Lessor.
(24) ADMINISTRATIVE CHARGES: In the event any check, bank draft, or
negotiable instrument given for any money payment hereunder shall be dishonored
at any time, and from time to time, for any reason whatsoever not attributable
to Lessor, Lessor shall be entitled, in addition to any other remedy that may
be available, to make an administration charge of $25.00.
(25) EVENTS OF DEFAULT AND LESSOR'S REMEDIES: All rights and
remedies of the Lessor herein enumerated in the event of a default, shall be
cumulative and nothing herein shall exclude any other right or remedy allowed
by law.
(a) If any voluntary or involuntary petition or similar
proceeding under any section or sections of any bankruptcy act shall be filed
by or against Lessee, or any voluntary or involuntary proceeding in any court
or tribunal shall be instituted to declare Lessee insolvent or unable to pay
Lessee's debts, then in any such event Lessor may, if Lessor elects but not
otherwise, and with or without notice of election, and with or without entry or
action by Lessor, forthwith terminate this lease, and, notwithstanding any
other provisions of this lease, Lessor shall forthwith upon such termination be
entitled to recover damages in an amount equal to then present value of the
rent specified in Paragraph 4 of this Lease for the residue of the stated term
hereof.
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<PAGE> 9
(b) If the Lessee defaults in the payment of rent and same is not
cured within ten (10) days or in the prompt and full performance of any
provision of this Lease and same is not cured within thirty (30) days of written
notice thereof, or if the leasehold interest of the Lessee be levied upon under
execution or be attached by process of law, or if the Lessee makes an
assignment for the benefit of creditors, or if a receiver be appointed for any
property of the Lessee, or if the Lessee abandons the leased premises, then and
in any such event the Lessor may, if the lessor so elects but not otherwise,
and with or without notice of such election and with or without any demand
whatsoever, either forthwith terminate this Lease and the Lessee's right to
possession of the leased premises, or without terminating this Lease, forthwith
terminate the Lessee's right to possession of the leased premises, but the
Lessee shall remain liable for damages as permitted by law and as provided for
herein.
(c) Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of the Lessee's right to possession without
termination of the Lease, the Lessee shall surrender possession and vacate the
leased premises immediately and deliver possession thereof to the Lessor and,
without prejudice to any other remedy which Lessor may have, Lessee does hereby
grant to the Lessor in such event, full and free license to enter into and upon
the leased premises (by picking locks and changing locks if deemed necessary by
Lessor) with or without process of law to repossess the leased premises and to
expel or remove the Lessee and any others who may be occupying or within the
leased premises and to remove any and all property therefrom, using such force
as may be necessary, without being deemed in any manner guilty of trespass,
eviction, or forcible entry or detainer, and without relinquishing the Lessor's
right to rent or any right given to the Lessor hereunder or by operation of
law. The Lessee expressly waives the service of any demand for the payment of
rent or for possession and the service of any notice of the Lessor's election
to terminate this Lease or to re-enter the lease premises, including any and
every form of demand and notice prescribed by any statute or other law, and
agrees that the simple breach of any covenant or provision of this Lease by the
lessee shall, of itself, without the service of any notice or demand
whatsoever, permit the exercise by Lessor of any of the remedies provided to
Lessor herein.
(d) If the Lessee abandons the leased premises or otherwise entitles
the Lessor so to elect, and the Lessor elects to terminate the Lessee's right
to possession only, without terminating the Lease, the Lessor may at the
Lessor's option enter into the leased premises, remove the Lessee's signs and
other evidences of tenancy, and take and hold possession thereof as in
Paragraph (c) provided, without such entry and possession terminating the Lease
or releasing the Lessee, in whole or in part, from the Lessee's obligation to
pay the rent hereunder for the full term, and in any such case the Lessee shall
pay forthwith to the Lessor sum equal to the entire amount of the rent
specified in Paragraph 4 of this Lease for the residue of the stated term plus
any other sums then due hereunder. Upon and after entry into possession without
termination of the Lease, the Lessor may, but need not, relet the leased
premises or any part thereof for the account of the Lessee to any person, firm,
or corporation other than the Lessee for such rent, for such time and upon such
terms as the Lessor in the Lessor's sole discretion shall determine and the
lessor shall not be required to accept any tenant offered by the Lessee about
such reletting. In any such case, the Lessor may make repairs, alterations, and
additions in or to the leased premises and redecorate the same to the extent
deemed by the Lessor necessary or desirable and the Lessee shall, upon demand,
pay the cost thereof, together with Lessor's expenses of the reletting. If the
consideration collected by the Lessor upon any such reletting for the Lessee's
account is not sufficient to pay monthly the full amount of the rent reserved
in this Lease, together with the cost of repairs, alterations, additions,
redecorating and the Lessor's expenses, the Lessee shall, pay to the Lessor the
amount of each monthly deficiency upon demand; and if the consideration so
collected from and such reletting is more than sufficient to pay the full
amount of rent reserved herein together with the costs and expenses of the
Lessor, the Lessor, at the end of the stated term of the Lease, shall account
for the surplus to the Lessee.
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(e) The Lessee shall pay upon demand all the Lessor's costs, charges,
and expenses, including the fees of counsel, leasing agents, and obligations
hereunder or incurred by the Lessor in any litigation, negotiation, or
transaction in which the Lessee causes the lessor, without the Lessor's fault,
to become involved or concerned.
(f) Lessee hereby irrevocably appoints Lessor as agent and
attorney-in-fact of Lessee, to enter upon the Leased premises, in the event of
default by Lessee in the payment of any rent herein reserved, or in the
performance of any term, covenant, or condition herein contained to be kept or
performed by Lessee, and to remove any and all furniture and personal property
whatsoever situated upon the leased premises. Any property of Lessee not removed
from the leased premises after the end of the term, however terminated, and all
property which may be removed from the leased premises by the Lessor pursuant to
the authority of this Lease or of law, and to which the Lessee is or may be
entitled, may be handled, removed, or stored by Lessor at the risk, cost, and
expense of Lessee, and Lessor shall in no event be responsible for the value,
preservation, or safekeeping thereof. Lessee shall pay to Lessor, upon demand,
all expenses incurred in such removal and all storage charges against such
property so long as the same shall be in Lessor's possession or under Lessor's
control. Lessor may place such property in storage for the account of, and at
the expense of Lessee, and if Lessee fails to pay the cost of storing such
property after it has been stored for a period of thirty (30) days or more,
Lessor may sell any or all of such property, at public or private sale, in such
manner and at such times and places as Lessor in its sole discretion may deem
proper, without notice to or demand upon Lessee for the payment of any part of
such charges or the removal of any of such property, and shall apply the
proceeds of such sale first to the cost and expenses of such sale, including
reasonable attorneys' fees; second, to the payment of costs and charges of
storing any property; third to the payment of any other sums of money which may
then or thereafter be due to Lessor from Lessee under any terms hereof; and,
fourth, the balance, if any, to Lessee. The removal and storage of Lessee's
property, as above provided, shall not constitute a waiver of Lessor's lien
thereon.
(g) The Lessor may resort to any one or more of such remedies or
rights, and adoption of one or more such remedies or rights shall not
necessarily prevent the enforcement of others concurrently or thereafter.
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<PAGE> 11
(28) INCREASE IN INSURANCE: Lessee shall not do or permit anything to
be done upon, or bring or keep or permit anything to be brought or kept into or
on, the leased premises which shall increase the rate of insurance on the
building or on the property located herein. If by reason of the failure of
Lessee to comply with the terms of this Lease, or by reason of Lessee's
occupancy (even though permitted or contemplated by this lease), the insurance
rate shall at any time be higher than it would otherwise be, the Lessee shall,
at the Lessee's expense, make whatever changes are necessary to comply with the
requirements of the insurance underwriters and governmental authorities having
jurisdiction. Lessee agrees to comply with any requirements or recommendations
made by Lessor's insurance underwriter inspectors.
(29) FLOOR LOAD LIMITS: Lessee shall not place a load upon any floor of
the leased premises exceeding the floor load per square foot area which it was
designed to carry and which is allowed by law. Lessor reserves the right to
prescribe the weight and position of all safes, business machines, and
mechanical equipment. Such installations shall be placed and maintained by
Lessee, at Lessee's expense, in settings sufficient, in Lessor's judgement, to
absorb and prevent vibration, noise, and annoyance.
(30) REPRESENTATIONS: Lessee has examined and knows the condition of
the leased premises and has received the same in good order and repair, and no
representations as to the condition or repair or otherwise have been made by
Lessor or the agent or Lessor prior to or at the execution of this Lease that
are not expressed herein.
(31) DEFAULT UNDER OTHER LEASE: If the terms of any lease, other than
this Lease, made by the Lessee for any premises in the building shall be
terminated or terminable after the making of this Lease because of any default
by the Lessee under such other lease, such fact shall enpower the Lessor, at
the Lessor's sole option, to terminate this Lease by notice to the Lessee.
(32) INSURANCE: The Lessee, at Lessee's own cost and expense, shall
obtain or provide and keep in full force for the benefit of the Lessor, during
the term hereof, general public liability insurance, insuring the Lessee
against any and all liability insurance, insuring the Lessee against any and
all liability or claims of liability arising out of, occasioned by or resulting
from any accident or otherwise in or about the leased premises, for injuries to
any person or persons, for limits of not less than $250,000.00 for injuries to
one person and $500,000.00 for injuries to more than one person, in any one
accident or occurrence, and for loss or damage to the property of any person or
persons, for not less than $25,000.00. The policy or policies of insurance
shall be of a company or companies authorized to do business in Florida and
shall be delivered to the Lessor, together with evidence of the payment of the
premiums therefor, not less than fifteen (15) days prior to the commencement of
the term hereof or of the date when the Lessee shall enter into possession,
whichever occurs sooner. At least fifteen (15) days prior to the expiration or
termination date of any policy, the Lessee shall deliver a renewal or
replacement policy with proof of the payment of the premium therefore. The
Lessee also agrees to and shall save, hold and keep harmless and indemnify the
Lessor from and for any and all payments, expenses, costs, attorney fees and
from and for any and all claims and liability for losses or damage to property
or injuries to persons occasioned wholly or in part by or resulting from
-11-
<PAGE> 12
any acts or omissions by the Lessee or the Lessee's agents, employees, guests,
licensees, invitees, subtenants, assignees or successors, or for any cause or
reason whatsoever arising out of or by reason of the occupancy by the lessee
and conduct of the Lessee's business.
(33) PARTIAL INVALIDITY: If any term of provision of this Lease or
the application thereof to any person or circumstance shall to any extent be
invalid or unenforceable, the remainder of this Lease or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable shall not be affected thereby and such term
and provision of this Lease shall be invalid and be enforced to the fullest
extent permitted by law.
(34) REVISIONS: This Lease shall not be altered, changed, or
amended, except by an instrument in writing signed by both parties hereto.
Lessor may at any time change the name or number of the building, remodel or
alter the same, or the location of any entrance thereto, or any other portion
thereof not occupied by Lessee, and the same shall not constitute a
constructive or actual, total or partial eviction.
(35) ESTOPPEL LETTERS: At any time, and from time to time, upon not
less than fifteen (15) days prior written request by Lessor, Lessee shall
execute, acknowledge, and deliver to the Lessor a statement in writing
certifying whether this Lease is unmodified and in full force and effect (or if
there have been modifications that the same is in full force and effect as
modified) stating the modifications and the dates to which the annual rent and
other charges have been paid and stating whether or not to the best knowledge
of the signer of the certificate, the Lessor is in default in performance of
any other covenants, agreements, or condition contained in this Lease and, if
so, specifying each such default of which the signer may have knowledge. It is
intended that any such statement furnished by Lessee may be relied upon by
Lessor or by any other person or persons having a valid interest therein.
(36) EASEMENTS: It is expressly agreed that the Lessee does not
hereby and shall not by any use hereafter, acquire any right or easement to the
use of any door or passageway in any portion of the building or in any premises
adjoining such building, except the easement of necessity for ingress and
egress, if any, in the doors and passageway directly connecting with leased
premises, provided however, it is expressly agreed that the Lessor shall have
the right to close or obstruct any door or passageway into or from or
connecting with the leased premises and to interfere with the use thereof,
whenever Lessor deems it necessary to effect alterations or repairs thereto
on, in, and about any premises adjoining such doors or passageways. The use of
any door or passageway into or from or connecting with any premises or building
adjoining the building in which the premises hereby leased are situated, may be
regulated, discontinued, or prohibited at any time by the Lessor without notice
to Lessee.
(37) NON-REINSTATEMENT: No receipt of money by the Lessor from the
Lessee after the termination of this lease or after the service of any notice
or after the commencement of any suit or after final judgement for possession
of the leased premises shall reinstate, continue, or extend the term of this
lease or affect any such notice, demand, or suit.
(38) EFFECT OF SUBMISSION: Submission of this instrument for
examination does not constitute a reservation of or option for the premises.
The instrument becomes effective as a lease upon execution and delivery by both
Lessor and Lessee.
(39) LANDLORD-TENANT RELATIONSHIP: Nothing herein contained shall be
deemed or construed by the parties hereto, not by any third party, as creating
the relationship of principle and agent or of partnership or of joint venture
between the parties hereto, it being understood and agreed that neither the
method of computation of rent nor any other provision contained herein, nor any
acts of the parties hereto, shall be deemed to create any relationship between
the parties hereto other than the relationship of Lessor and Lessee.
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<PAGE> 13
(40) LESSOR'S RIGHTS CUMULATIVE: The various rights, powers, options,
elections privileges and remedies of the Lessor, whether provided for in the
special clauses or elsewhere in this lease, or whether provided by law or
equity, are cumulative and no one of them shall be construed as being exclusive
or restrictive of any other.
(41) SUCCESSORS AND PERMITTED ASSIGNS: This lease shall bind and inure
to the benefit of the successors, permitted assigns, heirs, executors,
administrators, and legal representatives of the parties hereto.
(42) NON-WAIVER: No waiver of any covenant or condition of this lease
by either party shall be deemed to imply or constitute a further waiver of the
same covenant or condition or any other covenant or condition of this Lease.
(43) CONSTRUCTION OF LANGUAGE: The term "Lease Agreement," or
"Agreement" shall be inclusive of each other, also to include renewals,
extensions, or modifications of the Lease. Words of any gender used in this
Lease shall be held to include any other gender, and words in the singular
shall be held to include the plural and the plural to include the singular when
the sense requires. The paragraph headings and titles are not a part of this
Lease and shall have no effect upon the construction or interpretation of any
part hereof.
(44) FORCE MAJEURE: Lessor shall be excused for the period of any delay
in the performance of any obligations, hereunder when prevented from so doing
by cause or causes beyond such party's control which shall include without
limitation, all labor disputes, civil commotion, war, war-like operations,
invasion, rebellion, hostilities, usurped power, sabotage, governmental
regulations or controls, fire or other casualty, inability to obtain any
material, services or financing or through acts of God.
(45) BROKERAGE: Lessee covenants, warrants and represents to lessor
that there was no broker instrumental in consummating this Lease and that no
conversation or prior negotiations were had by Lessee with any broker concerning
the renting of the Demised Premises. Lessee agrees to protect, indemnify, save
and keep harmless against and from all claims, loss cost, damage and expense,
including attorney's fees, arising out of or from any claims for brokerage
commissions or finders fees resulting from any conversation or negotiations had
by Lessee with any broker or any other person.
(46) ENTIRE AGREEMENT: This Lease contains and embodies the entire
agreement of the parties hereto, and no representations, inducements,
agreements, oral or otherwise, between the parties not contained and embodied
herein shall be of any force or effect, and that same may not be modified,
changed, or terminated, in whole or in part, orally or in any other manner than
by an agreement in writing duly signed by all of the parties hereto.
IN WITNESS WHEREOF, Lessee and Lessor have caused this instrument to be
executed as of the date first above written, by their respective officers or
parties thereunto duly authorized.
Witnesses: LESSOR:
PELICAN BAY PROFESSIONAL VILLAGE
By: /s/ Douglas K. Wigley
- ------------------------------ ---------------------------------
Douglas K. Wigley, General Partner
LESSEE:
Transworld Nurses, Inc.
4900 Rt. 33 Suite 100,
Wall, New Jersey 07753-6804
By:
- ------------------------------ ---------------------------------
/s/ Jeanne Timmerman By: /s/ Kevin M. Buhrman
- ------------------------------ ---------------------------------
Kevin M. Buhrman
-13-
<PAGE> 1
PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of July 31, 1996 (as amended,
modified or supplemented from time to time, the "Agreement"), made by each of
the undersigned (each, a "Pledgor" and collectively, the "Pledgors"), in favor
of BANKERS TRUST COMPANY, as Collateral Agent (the "Pledgee"), for the benefit
of the Secured Creditors (as defined below). Except as otherwise defined herein,
terms used herein and defined in the Credit Agreement (as defined below) shall
be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Transworld Home HealthCare, Inc. (the "Borrower"),
various financial institutions from time to time party thereto (the "Banks"),
and Bankers Trust Company, as Agent (the "Agent", and together with the Banks
and the Pledgee, the "Bank Creditors"), have entered into a Credit Agreement,
dated as of July 31, 1996, providing for the making of Loans to the Borrower and
the issuance of, and participation in, Letters of Credit for the account of the
Borrower as contemplated therein (as used herein, the term "Credit Agreement"
means the Credit Agreement described above in this paragraph as amended,
modified, extended, renewed, replaced, restated, supplemented, restructured or
refinanced from time to time, and including any agreement extending the maturity
of, refinancing or restructuring (including, but not limited to, the inclusion
of additional borrowers thereunder that are Subsidiaries of the Borrower and
whose obligations are guaranteed by the Borrower thereunder or any increase in
the amount borrowed) all, or any portion of, the Indebtedness under such
agreement or any successor agreements; provided, that with respect to any
agreement providing for the refinancing of Indebtedness under the Credit
Agreement, such agreement shall only be treated as, or as part of, the Credit
Agreement hereunder if (i) either (A) all obligations under the Credit Agreement
being refinanced shall be paid in full at the time of such refinancing, and all
commitments under the refinanced Credit Agreement shall have terminated in
accordance with their terms or (B) the Required Banks shall have consented in
writing to the refinancing Indebtedness being treated, along with their
Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii) the
refinancing Indebtedness shall be permitted to be incurred under the Credit
Agreement being refinanced (if such Credit Agreement is to remain outstanding)
and (iii) a notice to the effect that the refinancing Indebtedness shall be
treated as issued under the Credit Agreement shall be delivered by the Borrower
to the Collateral Agent);
<PAGE> 2
Page 2
WHEREAS, the Borrower may from time to time enter into one or
more (i) interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange contracts, currency swap agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values
and/or (iii) other types of hedging agreements from time to time (each such
agreement or arrangement with an Other Creditor (as hereinafter defined), an
"Interest Rate Protection Agreement or Other Hedging Agreement"), with Bankers
Trust Company in its individual capacity ("BTCo"), any Bank or a syndicate of
financial institutions organized by BTCo or any such Bank, or an affiliate of
BTCo or any such Bank (BTCo, any such Bank or Banks or affiliate or affiliates
of BTCo or such Bank or Banks (even if BTCo or any such Bank subsequently ceases
to be a Bank under the Credit Agreement for any reason) and any such institution
that participates in such Interest Rate Protection Agreements or Other Hedging
Agreements, and their subsequent successors and assigns, collectively, the
"Other Creditors", and together with the Bank Creditors, the "Secured
Creditors");
WHEREAS, pursuant to the Subsidiaries Guaranty, each
Subsidiary Guarantor will have, after execution and delivery thereof, jointly
and severally guaranteed the payment when due of all obligations and liabilities
of the Borrower under or with respect to the Credit Documents and each Interest
Rate Protection Agreement or Other Hedging Agreement with one or more Other
Creditors;
WHEREAS, it is a condition precedent to the making of Loans to
the Borrower and the issuance of, and participation in, Letters of Credit for
the account of the Borrower under the Credit Agreement and to the Other
Creditors entering into Interest Rate Protection Agreements or Other Hedging
Agreements that each Pledgor shall have executed and delivered to the Pledgee
this Agreement; and
WHEREAS, each Pledgor desires to execute this Agreement to
satisfy the conditions described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to
each Pledgor, the receipt and sufficiency of which are hereby acknowledged, each
Pledgor hereby makes the following representations and warranties to the Pledgee
and hereby covenants and agrees with the Pledgee as follows:
1. SECURITY FOR OBLIGATIONS. This Agreement is made by each
Pledgor for the benefit of the Secured Creditors to secure:
<PAGE> 3
Page 3
(i) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and
liabilities (including, without limitation, indemnities, fees and
interest thereon) of such Pledgor owing to the Bank Creditors, now
existing or hereafter incurred under, arising out of or in connection
with any Credit Document to which such Pledgor is a party (including
all such obligations and indebtedness under the Subsidiaries Guaranty
if such Pledgor is a party) and the due performance and compliance by
such Pledgor with the terms, conditions and agreements contained in
each such Credit Document (all such obligations and liabilities under
this clause (i), except to the extent consisting of obligations or
indebtedness with respect to Interest Rate Protection Agreements or
Other Hedging Agreements, being herein collectively called the "Credit
Document Obligations");
(ii) the full and prompt payment when due (whether at the
stated maturity, by acceleration or otherwise) of all obligations and
liabilities (including, without limitation, indemnities, fees and
interest thereon) of such Pledgor owing to the Other Creditors, now
existing or hereafter incurred under, arising out of or in connection
with any Interest Rate Protection Agreement or Other Hedging Agreement,
whether such Interest Rate Protection Agreement or Other Hedging
Agreement is now in existence or hereafter arising, including, in the
case of each Subsidiary Guarantor, all obligations under the
Subsidiaries Guaranty, in each case, in respect of Interest Rate
Protection Agreements or Other Hedging Agreements, and the due
performance and compliance by such Pledgor with all of the terms,
conditions and agreements contained in each such Interest Rate
Protection Agreement or Other Hedging Agreement (all such obligations
and indebtedness under this clause (ii) being herein collectively
called the "Other Obligations");
(iii) any and all sums advanced by the Pledgee in order to
preserve the Collateral (as hereinafter defined) or preserve its
security interest in the Collateral (as hereinafter defined);
(iv) in the event of any proceeding for the collection or
enforcement of any indebtedness, obligations, or liabilities referred
to in clauses (i), (ii) and (iii) above, after an Event of Default
(such term, as used in this Agreement, shall mean any Event of Default
under, and as defined in, the Credit Agreement or any payment default
under any Interest Rate Protection Agreement or Other Hedging Agreement
and shall in any event include, without limitation, any payment default
(after the expiration of any applicable grace period) on any of the
Obligations (as hereinafter defined)) shall have occurred and be
continuing, the reasonable expenses
<PAGE> 4
Page 4
of retaking, holding, preparing for sale or lease, selling or otherwise
disposing or realizing on the Collateral, or of any exercise by the
Pledgee of its rights hereunder, together with reasonable attorneys'
fees and court costs; and
(v) all amounts paid by any Indemnitee to which such
Indemnitee has the right to reimbursement under Section 11 of this
Agreement;
all such obligations, liabilities, sums and expenses set forth in clauses (i)
through (v) of this Section 1 being herein collectively called the
"Obligations"; it being acknowledged and agreed that the "Obligations" shall
include extensions of credit of the types described above, whether outstanding
on the date of this Agreement or extended from time to time after the date of
this Agreement.
2. DEFINITION OF STOCK, NOTES, SECURITIES, ETC. As used
herein: (i) the term "Stock" shall mean (x) with respect to corporations
incorporated under the law of the United States or any State or territory
thereof (each, a "Domestic Corporation), all of the issued and outstanding
shares of stock of any corporation at any time owned by each Pledgor of any
Domestic Corporation and all certificates and instruments evidencing the same
and (y) with respect to corporations not Domestic Corporations (each, a "Foreign
Corporation"), all of the issued and outstanding shares of stock at any time
owned by each Pledgor of any Foreign Corporation and all certificates and
instruments evidencing the same, provided that, except as provided in the last
sentence of this Section 2, such Pledgor (to the extent that it is the Borrower
or a Domestic Subsidiary of the Borrower) shall not be required to pledge
hereunder more than 65% of the total combined voting power of all classes of
capital stock of any Foreign Corporation entitled to vote; (ii) the term "Notes"
shall mean (x) all Intercompany Notes at any time issued to each Pledgor and (y)
all other promissory notes from time to time issued to, or held by, each
Pledgor; and (iii) the term "Securities" shall mean all of the Stock and Notes.
Each Pledgor represents and warrants that on the date hereof (i) each Subsidiary
of such Pledgor, and the direct ownership thereof, is listed on Annex A hereto;
(ii) the Stock held by such Pledgor consists of the number and type of shares of
the stock of the corporations as described in Annex B hereto; (iii) such Stock
constitutes that percentage of the issued and outstanding capital stock of the
issuing corporation as is set forth in Annex B hereto; (iv) the Notes held by
such Pledgor consist of the promissory notes described in Annex C hereto where
such Pledgor is listed as the lender; (v) such Pledgor is the holder of record
and sole beneficial owner of the Stock and Notes held by such Pledgor and there
exist no options or preemptive rights in respect of any such Stock; and (vi) on
the date hereof, such Pledgor owns no other Securities. To the extent provided
in the Credit Agreement, the 65% limitation set forth in clause (i)(y) of this
Section 2 and in Section 3.2 hereof shall no longer be appli-
<PAGE> 5
Page 5
cable and such Pledgor shall duly pledge and deliver to the Pledgee such of the
Securities not theretofore required to be pledged hereunder.
3. PLEDGE OF SECURITIES, ETC.
3.1. Pledge. To secure the Obligations and for the purposes
set forth in Section 1, each Pledgor hereby: (i) grants to the Pledgee a
security interest in all of the Collateral (as hereinafter defined) owned by the
Pledgor; (ii) pledges and deposits as security with the Pledgee the Securities
owned by such Pledgor on the date hereof, and delivers to the Pledgee
certificates or instruments therefor, duly endorsed in blank in the case of
Notes and accompanied by undated stock powers duly executed in blank by such
Pledgor in the case of Stock, or such other instruments of transfer as are
acceptable to the Pledgee; and (iii) assigns, transfers, hypothecates,
mortgages, charges and sets over to the Pledgee all of such Pledgor's right,
title and interest in and to such Securities (and in and to all certificates or
instruments evidencing such Securities), to be held by the Pledgee, upon the
terms and conditions set forth in this Agreement.
3.2. Subsequently Acquired Securities. If any Pledgor shall
acquire (by purchase, stock dividend or otherwise) any additional Securities at
any time or from time to time after the date hereof, the Pledgor will forthwith
pledge and deposit such Securities (or certificates or instruments representing
such Securities) as security with the Pledgee and deliver to the Pledgee
certificates therefor or instruments thereof, duly endorsed in blank in the case
of Notes and accompanied by undated stock powers duly executed in blank in the
case of Stock, or such other instruments of transfer as are acceptable to the
Pledgee, and will promptly thereafter deliver to the Pledgee a certificate
executed by any of the Chairman of the Board, the Chief Financial Officer, the
President, a Vice Chairman, any Vice President or the Treasurer of such Pledgor
describing such Securities and certifying that the same have been duly pledged
with the Pledgee hereunder. Subject to the last sentence of Section 2 hereof, no
Pledgor (to the extent that it is the Borrower or a Domestic Subsidiary of the
Borrower) shall be required at any time to pledge hereunder any Stock which is
more than 65% of the total combined voting power of all classes of capital stock
of any Foreign Corporation entitled to vote.
3.3. Uncertificated Securities. Notwithstanding anything to
the contrary contained in Sections 3.1 and 3.2, if any Securities (whether or
not now owned or hereafter acquired) are uncertificated securities, the
respective Pledgor shall promptly notify the Pledgee thereof, and shall promptly
take all actions required to perfect the security interest of the Pledgee under
applicable law (including, in any event, under Sections 8-313 and 8- 321 of the
New York UCC, if applicable). Each Pledgor further agrees to take such
<PAGE> 6
Page 6
actions as the Pledgee deems necessary or desirable to effect the foregoing and
to permit the Pledgee to exercise any of its rights and remedies hereunder, and
agrees to provide an opinion of counsel reasonably satisfactory to the Pledgee
with respect to any such pledge of uncertificated Securities promptly upon
request of the Pledgee.
3.4. Definition of Pledged Stock, Pledged Notes, Pledged
Securities and Collateral. All Stock at any time pledged or required to be
pledged hereunder is hereinafter called the "Pledged Stock," all Notes at any
time pledged or required to be pledged hereunder are hereinafter called the
"Pledged Notes," all of the Pledged Stock and Pledged Notes together are
hereinafter called the "Pledged Securities," which together with all proceeds
thereof, including any securities and moneys received and at the time held by
the Pledgee hereunder, is hereinafter called the "Collateral."
4. APPOINTMENT OF SUB-AGENTS; ENDORSEMENTS, ETC. The Pledgee
shall have the right to appoint one or more sub-agents for the purpose of
retaining physical possession of the Pledged Securities, which may be held (in
the discretion of the Pledgee) in the name of the Pledgor, endorsed or assigned
in blank or in favor of the Pledgee or any nominee or nominees of the Pledgee or
a sub-agent appointed by the Pledgee.
5. VOTING, ETC., WHILE NO EVENT OF DEFAULT. Unless and until
an Event of Default shall have occurred and be continuing, each Pledgor shall be
entitled to exercise any and all voting and other consensual rights pertaining
to the Pledged Securities and to give consents, waivers or ratifications in
respect thereof; provided, that no vote shall be cast or any consent, waiver or
ratification given or any action taken which would violate or be inconsistent
with any of the terms of this Agreement, any other Credit Document or any
Interest Rate Protection Agreement or Other Hedging Agreement (collectively, the
"Secured Debt Agreements"), or which would have the effect of impairing the
position or interests of the Pledgee or any Secured Creditor. All such rights of
such Pledgor to vote and to give consents, waivers and ratifications shall cease
in case an Event of Default shall occur and be continuing, and Section 7 hereof
shall become applicable.
6. DIVIDENDS AND OTHER DISTRIBUTIONS. Unless an Event of
Default shall have occurred and be continuing, all cash dividends payable in
respect of the Pledged Stock and all payments in respect of the Pledged Notes
shall be paid to the respective Pledgor. The Pledgee shall also be entitled to
receive directly, and to retain as part of the Collateral:
<PAGE> 7
Page 7
(i) all other or additional stock or other securities or
property (other than cash) paid or distributed by way of dividend or
otherwise in respect of the Pledged Stock;
(ii) all other or additional stock or other securities or
property (including cash) paid or distributed in respect of the Pledged
Stock by way of stock-split, spin-off, split-up, reclassification,
combination of shares or similar rearrangement; and
(iii) all other or additional stock or other securities or
property (including cash) which may be paid in respect of the
Collateral by reason of any consolidation, merger, exchange of stock,
conveyance of assets, liquidation or similar corporate reorganization.
Nothing contained in this Section 6 shall limit or restrict in any way the
Pledgee's right to receive proceeds of the Collateral in any form in accordance
with Section 3 of this Agreement. All dividends, distributions or other payments
which are received by any Pledgor contrary to the provisions of this Section 6
and Section 7 shall be received in trust for the benefit of the Pledgee, shall
be segregated from other property or funds of such Pledgor and shall be
forthwith paid over to the Pledgee as Collateral in the same form as so received
(with any necessary endorsement).
7. REMEDIES IN CASE OF EVENT OF DEFAULT. In case an Event of
Default shall have occurred and be continuing, the Pledgee shall be entitled to
exercise all of the rights, powers and remedies (whether vested in it by this
Agreement or by any other Secured Debt Agreement or by law) for the protection
and enforcement of its rights in respect of the Collateral, and the Pledgee
shall be entitled, without limitation, to exercise the following rights, which
each Pledgor hereby agrees to be commercially reasonable:
(i) to receive all amounts payable in respect of the
Collateral payable to such Pledgor under Section 6;
(ii) to transfer all or any part of the Pledged Securities
into the Pledgee's name or the name of its nominee or nominees;
(iii) to accelerate any Pledged Note which may be accelerated
in accordance with its terms, and take any other action to collect upon
any Pledged Note (including, without limitation, to make any demand for
payment thereon);
<PAGE> 8
Page 8
(iv) to vote all or any part of the Pledged Stock (whether or
not transferred into the name of the Pledgee) and give all consents,
waivers and ratifications in respect of the Collateral and otherwise
act with respect thereto as though it were the outright owner thereof
(each Pledgor hereby irrevocably constituting and appointing the
Pledgee the proxy and attorney-in-fact of such Pledgor, with full power
of substitution to do so); and
(v) at any time or from time to time to sell, assign and
deliver, or grant options to purchase, all or any part of the
Collateral, or any interest therein, at any public or private sale,
without demand of performance, advertisement or notice of intention to
sell (except as set forth in the proviso below) or of the time or place
of sale or adjournment thereof or to redeem or otherwise (all of which
are hereby waived by each Pledgor), for cash, on credit or for other
property, for immediate or future delivery without any assumption of
credit risk, and for such price or prices and on such terms as the
Pledgee in its absolute discretion may determine; provided, that at
least 10 days' notice of the time and place of any such sale shall be
given to such Pledgor.
Each purchaser at any such sale shall hold the property so sold absolutely free
from any claim or right on the part of each Pledgor, and each Pledgor hereby
waives and releases to the fullest extent permitted by law any right or equity
of redemption with respect to the Collateral, whether before or after sale
hereunder, and all rights, if any, of marshalling the Collateral and any other
security for the Obligations or otherwise. At any such sale, unless prohibited
by applicable law, the Pledgee on behalf of the Secured Creditors may bid for
and purchase all or any part of the Collateral so sold free from any such right
or equity of redemption. Neither the Pledgee nor any Secured Creditor shall be
liable for failure to collect or realize upon any or all of the Collateral or
for any delay in so doing nor shall any of them be under any obligation to take
any action whatsoever with regard thereto. Notwithstanding anything to the
contrary contained herein, Pledgee shall give to the respective Pledgors three
Business Days' prior notice of any foreclosure effected on any Pledged
Securities of such Pledgor pursuant to the terms of this Agreement.
8. REMEDIES, ETC., CUMULATIVE. Each right, power and remedy of
the Pledgee provided for in this Agreement or any other Secured Debt Agreement
or now or hereafter existing at law or in equity or by statute shall be
cumulative and concurrent and shall be in addition to every other such right,
power or remedy. The exercise or beginning of the exercise by the Pledgee or any
Secured Creditor of any one or more of the rights, powers or remedies provided
for in this Agreement or any other Secured Debt Agreement or now or hereafter
existing at law or in equity or by statute or otherwise shall
<PAGE> 9
Page 9
not preclude the simultaneous or later exercise by the Pledgee or any Secured
Creditor of all such other rights, powers or remedies, and no failure or delay
on the part of the Pledgee or any Secured Creditor to exercise any such right,
power or remedy shall operate as a waiver thereof. No notice to or demand on any
Pledgor in any case shall entitle such Pledgor to any other or further notice or
demand in similar other circumstances or constitute a waiver of any of the
rights of the Pledgee or any Secured Creditor to any other or further action in
any circumstances without demand or notice.
9. APPLICATION OF PROCEEDS. (a) All moneys collected by the
Pledgee upon any sale or other disposition of the Collateral pursuant to the
terms of this Agreement, together with all other moneys received by the Pledgee
hereunder, shall be applied to the payment of the Obligations in the manner
provided in Section 7.4 of the Security Agreement.
(b) It is understood and agreed that the Pledgors shall remain
jointly and severally liable to the extent of any deficiency between the amount
of the proceeds of the Collateral hereunder and the aggregate amount of the
Obligations.
10. PURCHASERS OF COLLATERAL. Upon any sale of the Collateral
by the Pledgee hereunder (whether by virtue of the power of sale herein granted,
pursuant to judicial process or otherwise), the receipt of the Pledgee or the
officer making the sale shall be a sufficient discharge to the purchaser or
purchasers of the Collateral so sold, and such purchaser or purchasers shall not
be obligated to see to the application of any part of the purchase money paid
over to the Pledgee or such officer or be answerable in any way for the
misapplication or nonapplication thereof.
11. INDEMNITY. Each Pledgor jointly and severally agrees (i)
to indemnify and hold harmless the Pledgee, each Secured Creditor and their
respective successors, assigns, employees and agents (hereunder referred to
individually as, an "Indemnitee" and, collectively, as "Indemnities") from and
against any and all claims, demands, losses, judgments and liabilities of
whatsoever kind or nature, and (ii) to reimburse each Indemnitee for all costs
and expenses, including attorneys' fees, growing out of or resulting from this
Agreement or the exercise by any Indemnitee of any right or remedy granted to it
hereunder or under any other Secured Debt Agreement except, with respect to
clauses (i) and (ii) above, for those arising from such Indemnitee's gross
negligence or willful misconduct. In no event shall any Indemnitee hereunder be
liable, in the absence of gross negligence or willful misconduct on its part,
for any matter or thing in connection with this Agreement other than to account
for moneys actually received by it in accordance with the terms hereof. If and
to the extent that the obligations of the Pledgors under this Section 11
<PAGE> 10
Page 10
are unenforceable for any reason, each Pledgor hereby agrees to make the maximum
contribution to the payment and satisfaction of such obligations which is
permissible under applicable law. The indemnity obligations of each Pledgor
contained in this Section 11 shall continue in full force and effect
notwithstanding the full payment of all the Notes issued under the Credit
Agreement, the termination of all Interest Rate Protection Agreements or Other
Hedging Agreements and Letters of Credit and the payment of all other
Obligations and notwithstanding the discharge thereof.
12. FURTHER ASSURANCES; POWER OF ATTORNEY. (a) Each Pledgor
agrees that it will join with the Pledgee in executing and, at such Pledgor's
own expense, file and refile under the UCC such financing statements,
continuation statements and other documents in such offices as the Pledgee may
deem necessary or appropriate and wherever required or permitted by law in order
to perfect and preserve the Pledgee's security interest in the Collateral and
hereby authorizes the Pledgee to file financing statements and amendments
thereto relative to all or any part of the Collateral without the signature of
such Pledgor where permitted by law, and agrees to do such further acts and
things and to execute and deliver to the Pledgee such additional conveyances,
assignments, agreements and instruments as the Pledgee may reasonably require or
deem advisable to carry into effect the purposes of this Agreement or to further
assure and confirm unto the Pledgee its rights, powers and remedies hereunder.
(b) Each Pledgor hereby appoints the Pledgee such Pledgor's
attorney-in-fact, with full authority in the place and stead of such Pledgor and
in the name of such Pledgor or otherwise, from time to time after the occurrence
and during the continuance of an Event of Default, in the Pledgee's discretion
to take such actions and to execute any instrument which the Pledgee may deem
necessary or advisable to accomplish the purposes of this Agreement.
13. THE PLEDGEE AS COLLATERAL AGENT. The Pledgee will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Pledgee as holder of the Collateral and interests therein and with
respect to the disposition thereof, and otherwise under this Agreement, are only
those expressly set forth in this Agreement. The Pledgee shall act hereunder on
the terms and conditions set forth herein and in Section 12 of the Credit
Agreement.
14. TRANSFER BY PLEDGORS. Except for sales of Collateral
permitted (i) prior to the date all Credit Document Obligations have been paid
in full and all Commitments under the Credit Agreement have been terminated
pursuant to the Credit
<PAGE> 11
Page 11
Agreement, and (ii) thereafter, pursuant to the other Secured Debt Agreements,
no Pledgor will sell or otherwise dispose of, grant any option with respect to,
or mortgage, pledge or otherwise encumber any of the Collateral or any interest
therein (except in accordance with the terms of this Agreement).
15. REPRESENTATIONS, WARRANTIES AND COVENANTS OF
PLEDGOR. (a) Each Pledgor represents, warrants and covenants that:
(i) it is the legal, record and beneficial owner of, and has
good and marketable title to, all Securities pledged by it hereunder,
subject to no pledge, lien, mortgage, hypothecation, security interest,
charge, option or other encumbrance whatsoever, except the liens and
security interests created by this Agreement;
(ii) it has full power, authority and legal right to pledge
all the Securities pledged by it pursuant to this Agreement;
(iii) this Agreement has been duly authorized, executed and
delivered by such Pledgor and constitutes a legal, valid and binding
obligation of such Pledgor enforceable in accordance with its terms
except as the enforceability thereof may be limited by bankruptcy,
reorganization, moratorium or similar laws relating to or limiting
creditors' rights generally or by equitable principles (regardless of
whether enforcement is sought in equity or in law);
(iv) no consent of any other party (including, without
limitation, any stockholder, member, limited or general partner or
creditor of such Pledgor or any of its Subsidiaries) and no consent,
license, permit, approval or authorization of, exemption by, notice or
report to, or registration, filing or declaration with, any
governmental authority is required to be obtained by such Pledgor in
connection with (a) the execution, delivery or performance of this
Agreement, (b) the validity or enforceability of this Agreement, (c)
the perfection or enforceability of the Pledgee's security interest in
the Collateral or (d) except for compliance with or as may be required
by applicable securities laws, the exercise by the Pledgee of any of
its rights or remedies provided herein;
(v) the execution, delivery and performance of this Agreement
does not violate any provision of any applicable law or regulation or
of any order, judgment, writ, award or decree of any court, arbitrator
or domestic or foreign governmental authority, or of the certificate of
incorporation, certificate of formation or by-laws, as the case may be,
of such Pledgor or of any securities issued by such Pledgor or
<PAGE> 12
Page 12
any of its Subsidiaries, or of any indenture, mortgage, lease, deed of
trust, credit agreement, loan agreement, agreement or other instrument
to which such Pledgor or any of its Subsidiaries is a party or which
purports to be binding upon such Pledgor or any of its Subsidiaries or
upon any of their respective assets and will not result in the creation
or imposition of any lien or encumbrance on any of the assets of such
Pledgor or any of its Subsidiaries except as contemplated by this
Agreement;
(vi) all the shares of Stock have been duly and validly
issued, are fully paid and nonassessable (other than pursuant to
Section 630 of the New York Business Corporation Law, in the case of
Stock of a Subsidiary that is a New York Corporation) and are subject
to no options to purchase or similar rights;
(vii) each of the Pledged Notes constitute, or, when executed
by the obligor thereof, will constitute, the legal, valid and binding
obligation of such obligor, enforceable in accordance with its terms;
and
(viii) the pledge, assignment and delivery to the Pledgee of the
Securities pursuant to this Agreement, creates a valid and perfected
first security interest in such Securities and the proceeds thereof,
subject to no prior lien or encumbrance or to any agreement purporting
to grant to any third party a lien or encumbrance on the property or
assets of such Pledgor which would include the Securities.
(b) Each Pledgor covenants and agrees that it will defend the
Pledgee's right, title and security interest in and to the Securities and the
proceeds thereof against the claims and demands of all persons whomsoever; and
such Pledgor covenants and agrees that it will have like title to and right to
pledge any other property at any time hereafter pledged to the Pledgee as
Collateral hereunder and will likewise defend the right thereto and security
interest therein of the Pledgee and the Secured Creditors.
(c) Each Pledgor covenants and agrees that it will take no
action which would violate any of the terms of any Secured Debt Agreement.
16. PLEDGORS' OBLIGATIONS ABSOLUTE, ETC. The obligations of
each Pledgor under this Agreement shall be absolute and unconditional and shall
remain in full force and effect (subject to the provisions of Section 18 hereof)
without regard to, and shall not be released, suspended, discharged, terminated
or otherwise affected by, any circumstance or occurrence whatsoever, including,
without limitation: (i) any renewal, extension, amendment or modification of or
addition or supplement to or deletion from any
<PAGE> 13
Page 13
Secured Debt Agreement or any other instrument or agreement referred to therein,
or any assignment or transfer of any thereof; (ii) any waiver, consent,
extension, indulgence or other action or inaction under or in respect of any
such agreement or instrument or this Agreement; (iii) any furnishing of any
additional security to the Pledgee or its assignee or any acceptance thereof or
any release of any security by the Pledgee or its assignee; (iv) any limitation
on any party's liability or obligations under any such instrument or agreement
or any invalidity or unenforceability, in whole or in part, of any such
instrument or agreement or any term thereof; or (v) any bankruptcy, insolvency,
reorganization, composition, adjustment, dissolution, liquidation or other like
proceeding relating to such Pledgor or any Subsidiary of such Pledgor, or any
action taken with respect to this Agreement by any trustee or receiver, or by
any court, in any such proceeding, whether or not such Pledgor shall have notice
or knowledge of any of the foregoing.
17. REGISTRATION, ETC. (a) If an Event of Default shall have
occurred and be continuing and any Pledgor shall have received from the Pledgee
a written request or requests that such Pledgor cause any registration,
qualification or compliance under any Federal or state securities law or laws to
be effected with respect to all or any part of the Pledged Stock, such Pledgor
as soon as practicable and at its expense will use its best efforts to cause
such registration to be effected (and be kept effective) and will use its best
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Stock, including, without limitation, registration
under the Securities Act of 1933 as then in effect (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements; provided, that the Pledgee shall furnish to such Pledgor such
information regarding the Pledgee as such Pledgor may request in writing and as
shall be required in connection with any such registration, qualification or
compliance. Such Pledgor will cause the Pledgee to be kept reasonably advised in
writing as to the progress of each such registration, qualification or
compliance and as to the completion thereof, will furnish to the Pledgee such
number of prospectuses, offering circulars or other documents incident thereto
as the Pledgee from time to time may reasonably request, and will indemnify the
Pledgee and all others participating in the distribution of the Pledged Stock
against all claims, losses, damages and liabilities caused by any untrue
statement (or alleged untrue statement) of a material fact contained therein (or
in any related registration statement, notification or the like) or by any
omission (or alleged omission) to state therein (or in any related registration
statement, notification or the like) a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as the same may have been caused by an untrue statement or omission
based upon information furnished in writing to such Pledgor by the Pledgee
expressly for use therein.
<PAGE> 14
Page 14
(b) If at any time when the Pledgee shall determine to
exercise its right to sell all or any part of the Pledged Securities pursuant to
Section 7, and such Pledged Securities or the part thereof to be sold shall not,
for any reason whatsoever, be effectively registered under the Securities Act of
1933, as then in effect, the Pledgee may, in its sole and absolute discretion,
sell such Pledged Securities or part thereof by private sale in such manner and
under such circumstances as the Pledgee may deem necessary or advisable in order
that such sale may legally be effected without such registration. Without
limiting the generality of the foregoing, in any such event the Pledgee, in its
sole and absolute discretion: (i) may proceed to make such private sale
notwithstanding that a registration statement for the purpose of registering
such Pledged Securities or part thereof shall have been filed under such
Securities Act; (ii) may approach and negotiate with a single possible purchaser
to effect such sale; and (iii) may restrict such sale to a purchaser who will
represent and agree that such purchaser is purchasing for its own account, for
investment, and not with a view to the distribution or sale of such Pledged
Securities or part thereof. In the event of any such sale, the Pledgee shall
incur no responsibility or liability for selling all or any part of the Pledged
Securities at a price which the Pledgee, in its sole and absolute discretion,
may in good faith deem reasonable under the circumstances, notwithstanding the
possibility that a substantially higher price might be realized if the sale were
deferred until after registration as aforesaid.
18. TERMINATION, RELEASE. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 11 hereof shall
survive any such termination) and the Pledgee, at the request and expense of the
respective Pledgor, will promptly execute and deliver to such Pledgor a proper
instrument or instruments acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Pledgee and as has not theretofore been sold or
otherwise applied or released pursuant to this Agreement. As used in this
Agreement, "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note is outstanding (and all Loans have been
paid in full), all Letters of Credit have been terminated, and all other
Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold (x)
at any time prior to the time at which all Credit Document Obligations have been
paid in full and all Commitments under the Credit Agreement have been
terminated, in connection with a sale permitted by Section 9.02 of the Credit
Agreement (other than to the Borrower or a
<PAGE> 15
Page 15
Subsidiary thereof) or is otherwise released at the direction of the Required
Banks (or all the Banks if required by Section 13.12 of the Credit Agreement) or
(y) at any time thereafter, to the extent permitted by the other Secured Debt
Agreements, and in the case of clause (x) and (y), and the proceeds of such sale
or sales or from such release are applied in accordance with the terms of the
Credit Agreement or such other Secured Debt Agreement, as the case may be, to
the extent required to be so applied, the Pledgee, at the request and expense of
such Pledgor will duly assign, transfer and deliver to such Pledgor (without
recourse and without any representation or warranty) such of the Collateral as
is then being (or has been) so sold or released and as may be in possession of
the Pledgee and has not theretofore been released pursuant to this Agreement.
(c) At any time that a Pledgor desires that Collateral be
released as provided in the foregoing Section 18(a) or (b), it shall deliver to
the Pledgee a certificate signed by its chief financial officer or another
Authorized Officer stating that the release of the respective Collateral is
permitted pursuant to Section 18(a) or (b). If requested by the Pledgee
(although the Pledgee shall have no obligation to make any such request), the
relevant Pledgor shall furnish appropriate legal opinions (from counsel, which
may be in-house counsel, reasonably acceptable to the Pledgee) to the effect set
forth in the immediately preceding sentence. The Pledgee shall have no liability
whatsoever to any Secured Creditor as the result of any release of Collateral by
it as permitted by this Section 18.
19. NOTICES, ETC. All notices and other communications
hereunder shall be in writing and shall be delivered by hand or overnight
courier or mailed by certified mail, return receipt requested, postage prepaid,
addressed:
(a) if to any Pledgor, at its address set forth opposite its
signature below;
(b) if to the Pledgee, at:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Patricia Hogan
Telephone No.: (212) 250-5175
Facsimile No.: (212) 250-7218
(c) if to any Bank (other than the Pledgee), at such address
as such Bank shall have specified in the Credit Agreement; and
<PAGE> 16
Page 16
(d) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to each Pledgor and the
Pledgee;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
20. WAIVER; AMENDMENT. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Pledgor directly and adversely
affected thereby and the Pledgee (with the written consent of (x) the Required
Banks (or all the Banks if required by Section 13.12 of the Credit Agreement) at
all times prior to the time at which all Credit Document Obligations have been
paid in full and all Commitments under the Credit Agreement have been
terminated, and (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full and all Commitments under the Credit Agreement have been
terminated; provided, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class (as defined below) of
Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors (as defined below)
of such Class. For the purpose of this Agreement, the term "Class" shall mean
each class of Secured Creditors, i.e., whether (i) the Bank Creditors as holders
of the Credit Document Obligations or (ii) the Other Creditors as holders of the
Other Obligations. For the purpose of this Agreement, the term "Requisite
Creditors" of any Class shall mean each of (i) with respect to the Credit
Document Obligations, the Required Banks and (ii) with respect to the Other
Obligations, the holders of at least a majority of all obligations outstanding
from time to time under the Interest Rate Protection Agreements or Other Hedging
Agreements.
21. MISCELLANEOUS. This Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect, subject to release and/or termination as set forth in Section 18, (ii)
be binding upon each Pledgor, its successors and assigns; provided, however,
that no Pledgor shall assign any of its rights or obligations hereunder without
the prior written consent of the Pledgee (and the prior written consent of the
Required Banks or, to the extent required by Section 13.12 of the Credit
Agreement, each of the Banks), and (iii) inure, together with the rights and
remedies of the Pledgee hereunder, to the benefit of the Pledgee, the Secured
Creditors and their respective successors, transferees and assigns. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK. The headings of the several sections and subsections in this
Agreement are for purposes of reference only and shall not limit or define the
meaning hereof. This Agreement may be executed in any
<PAGE> 17
Page 17
number of counterparts, each of which shall be an original, but all of which
together shall constitute one instrument. In the event that any provision of
this Agreement shall prove to be invalid or unenforceable, such provision shall
be deemed to be severable from the other provisions of this Agreement which
shall remain binding on all parties hereto.
22. RECOURSE. This Agreement is made with full recourse to the
Pledgors and pursuant to and upon all the representations, warranties, covenants
and agreements on the part of the Pledgors contained herein and in the other
Secured Debt Agreements and otherwise in writing in connection herewith or
therewith.
23. ADDITIONAL PLEDGORS. It is understood and agreed that any
Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become a Pledgor hereunder by executing a counterpart hereof and
delivering the same to the Pledgee.
24. LIMITED OBLIGATIONS. It is the desire and intent of each
Pledgor and the Secured Creditors that this Agreement shall be enforced against
each Pledgor to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Notwithstanding anything to the contrary contained herein, in furtherance of the
foregoing, it is noted that the obligations of each Pledgor constituting a
Subsidiary Guarantor have been limited as provided in the Subsidiaries Guaranty.
<PAGE> 18
Page 18
IN WITNESS WHEREOF, each Pledgor and the Pledgee have caused
this Agreement to be executed by their duly elected officers duly authorized as
of the date first above written.
Address
Tri-Parkway Corporate Park TRANSWORLD HOME
200 Schulz Drive HEALTHCARE, INC.,
Red Bank, New Jersey 07701 as a Pledgor
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-----------------------
Title: Senior Vice President
Tri-Parkway Corporate Park DERMAQUEST, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
-----------------------
Facsimile No.: (908) 530-7389 Title: Vice President
Tri-Parkway Corporate Park MK DIABETIC SUPPORT
200 Schulz Drive SERVICES, INC.,
Red Bank, New Jersey 07701 as a Pledgor
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-----------------------
Title: Vice President
Tri-Parkway Corporate Park THE PROMPTCARE COMPANIES,
200 Schulz Drive INC.,
Red Bank, New Jersey 07701 as a Pledgor
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-----------------------
Title: Vice President
<PAGE> 19
Page 19
Tri-Parkway Corporate Park THE PROMPTCARE LUNG CENTER,
200 Schulz Drive INC.,
Red Bank, New Jersey 07701 as a Pledgor
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-----------------------
Title: Vice President
Tri-Parkway Corporate Park STERI-PHARM, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
-----------------------
Facsimile No.: (908) 530-7389 Title: Vice President
Tri-Parkway Corporate Park TRANSWORLD NURSES, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
-----------------------
Facsimile No.: (908) 530-7389 Title: Vice President
Tri-Parkway Corporate Park RADAMERICA, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-----------------------
Title: Vice President
Tri-Parkway Corporate Park RESPIFLOW, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
-----------------------
Facsimile No.: (908) 530-7389 Title: Vice President
<PAGE> 20
Page 20
BANKERS TRUST COMPANY,
as Pledgee
By /s/ Patricia Hogan
--------------------------
Title: Vice President
<PAGE> 1
SECURITY AGREEMENT
among
TRANSWORLD HOME HEALTHCARE, INC.,
VARIOUS SUBSIDIARIES,
and
BANKERS TRUST COMPANY,
as Collateral Agent
Dated as of July 31, 1996
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I SECURITY INTERESTS.......................................... 3
1.1. Grant of Security Interests................................. 3
1.2. Power of Attorney........................................... 4
ARTICLE II GENERAL REPRESENTATIONS, WARRANTIES AND
COVENANTS.................................................. 5
2.1. Necessary Filings........................................... 5
2.2. No Liens.................................................... 5
2.3. Other Financing Statements.................................. 5
2.4. Chief Executive Office; Records............................. 6
2.5. Location of Inventory and Equipment......................... 6
2.6. Recourse.................................................... 7
2.7. Trade Names; Change of Name................................. 7
ARTICLE III SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS.................. 8
3.1. Additional Representations and Warranties................... 8
3.2. Maintenance of Records...................................... 8
3.3. Direction to Account Debtors; Contracting Parties; etc...... 9
3.4. Modification of Terms; etc.................................. 9
3.5. Collection.................................................. 10
3.6. Instruments................................................. 10
3.7 Further Actions............................................. 10
3.8 Paribas Indemnity........................................... 11
ARTICLE IV SPECIAL PROVISIONS CONCERNING TRADEMARKS.................... 11
4.1. Additional Representations and Warranties................... 11
4.2. Licenses and Assignments.................................... 12
4.3. Infringements............................................... 12
4.4. Preservation of Marks....................................... 12
4.5. Maintenance of Registration................................. 12
4.6. Future Registered Marks..................................... 13
4.7. Remedies.................................................... 13
(i)
<PAGE> 3
Page
ARTICLE V SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS................. 14
5.1. Additional Representations and Warranties................... 14
5.2. Licenses and Assignments.................................... 15
5.3. Infringements............................................... 15
5.4. Maintenance of Patents and Copyrights....................... 15
5.5. Prosecution of Patent or Copyright Application.............. 15
5.6. Other Patents and Copyrights................................ 15
5.7. Remedies.................................................... 16
ARTICLE VI PROVISIONS CONCERNING ALL COLLATERAL........................ 16
6.1. Protection of Collateral Agent's Security................... 16
6.2. Warehouse Receipts Non-negotiable........................... 17
6.3. Further Actions............................................. 17
6.4. Financing Statements........................................ 17
ARTICLE VII REMEDIES UPON OCCURRENCE OF EVENT OF
DEFAULT............................................... 18
7.1. Remedies; Obtaining the Collateral Upon Default............. 18
7.2. Remedies; Disposition of the Collateral..................... 19
7.3. Waiver of Claims............................................ 20
7.4. Application of Proceeds..................................... 21
7.5. Remedies Cumulative......................................... 23
7.6. Discontinuance of Proceedings............................... 24
ARTICLE VIII INDEMNITY................................................... 24
8.1. Indemnity................................................... 24
8.2. Indemnity Obligations Secured by Collateral; Survival....... 26
ARTICLE IX DEFINITIONS................................................. 26
ARTICLE X MISCELLANEOUS............................................... 32
10.1. Notices..................................................... 32
10.2. Waiver; Amendment........................................... 32
10.3. Obligations Absolute........................................ 33
10.4. Successors and Assigns...................................... 33
10.5. Headings Descriptive........................................ 34
10.6. Governing Law............................................... 34
10.7. Assignor's Duties........................................... 34
10.8. Termination; Release........................................ 34
(ii)
<PAGE> 4
Page
10.9. Counterparts................................................ 35
10.10. The Collateral Agent........................................ 35
10.11. Severability................................................ 36
10.12. Limited Obligations......................................... 36
10.13. Additional Assignors........................................ 36
ANNEX A Schedule of Chief Executive Offices/Record Locations
ANNEX B Schedule of Inventory and Equipment Locations
ANNEX C Schedule of Trade, Fictitious and Other Names
ANNEX D Schedule of Marks
ANNEX E Schedule of Patents and Applications
ANNEX F Schedule of Copyrights and Applications
ANNEX G Assignment of Security Interest in Patents and Trademarks
ANNEX H Assignment of Security Interest in Copyrights
(iii)
<PAGE> 5
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of July 31, 1996 (as amended,
modified or supplemented from time to time, the "Agreement"), among each of the
undersigned (each, an "Assignor" and, collectively, the "Assignors") and BANKERS
TRUST COMPANY, as Collateral Agent (the "Collateral Agent"), for the benefit of
the Secured Creditors (as defined below). Except as otherwise defined herein,
terms used herein and defined in the Credit Agreement (as defined below) shall
be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Transworld Home HealthCare, Inc. (the "Borrower"),
various financial institutions from time to time party thereto (the "Banks") and
Bankers Trust Company, as Agent (the "Agent", and together with the Banks and
the Collateral Agent, the "Bank Creditors"), have entered into a Credit
Agreement, dated as of July 31, 1996, providing for the making of Loans to the
Borrower and the issuance of, and participation in, Letters of Credit for the
account of the Borrower as contemplated therein (as used herein, the term
"Credit Agreement" means the Credit Agreement described above in this paragraph
as so amended, modified, extended, renewed, replaced, restated, supplemented,
restructured or refinanced from time to time, and including any agreement
extending the maturity of, refinancing or restructuring (including, but not
limited to, the inclusion of additional borrowers thereunder that are
Subsidiaries of the Borrower and whose obligations are guaranteed by the
Borrower thereunder or any increase in the amount borrowed) all, or any portion
of, the Indebtedness under such agreement or any successor agreements; provided,
that with respect to any agreement providing for the refinancing of Indebtedness
under the Credit Agreement, such agreement shall only be treated as, or as part
of, the Credit Agreement hereunder if (i) either (A) all obligations under the
Credit Agreement being refinanced shall be paid in full at the time of such
refinancing, and all commitments under the refinanced Credit Agreement shall
have terminated in accordance with their terms or (B) the Required Banks shall
have consented in writing to the refinancing Indebtedness being treated, along
with their Indebtedness, as Indebtedness pursuant to the Credit Agreement, (ii)
the refinancing Indebtedness shall be permitted to be incurred under the Credit
Agreement being refinanced (if such Credit Agreement is to remain outstanding)
and (iii) a notice to the effect that the refinancing Indebtedness shall be
treated as issued under the Credit Agreement shall be delivered by the Borrower
to the Collateral Agent);
<PAGE> 6
WHEREAS, the Borrower may from time to time enter into one or
more (i) interest rate protection agreements (including, without limitation,
interest rate swaps, caps, floors, collars and similar agreements), (ii) foreign
exchange contracts, currency swap agreements or other similar agreements or
arrangements designed to protect against the fluctuations in currency values
and/or (iii) other types of hedging agreements from time to time (each such
agreement or arrangement with an Other Creditor (as hereinafter defined), an
"Interest Rate Protection Agreement or Other Hedging Agreement"), with Bankers
Trust Company in its individual capacity ("BTCo"), any Bank or a syndicate of
financial institutions organized by BTCo or any such Bank, or an affiliate of
BTCo or any such Bank (BTCo, any such Bank or Banks or affiliate or affiliates
of BTCo or such Bank or Banks (even if BTCo or any such Bank ceases to be a Bank
under the Credit Agreement for any reason) and any such institution that
participates in such Interest Rate Protection Agreements or Other Hedging
Agreements and their subsequent successors and assigns collectively, the "Other
Creditors", and together with the Bank Creditors, the "Secured Creditors");
WHEREAS, pursuant to the Subsidiaries Guaranty, each
Subsidiary Guarantor will have, after the execution and delivery thereof,
jointly and severally guaranteed the payment when due of all obligations and
liabilities of the Borrower under or with respect to the Credit Documents and
each Interest Rate Protection Agreement or Other Hedging Agreement with one or
more Other Creditors;
WHEREAS, it is a condition precedent to the making of Loans to
the Borrower and the issuance of, and participation in, Letters of Credit for
the account of the Borrower under the Credit Agreement and to the Other
Creditors entering into Interest Rate Protection Agreements or Other Hedging
Agreements that each Assignor shall have executed and delivered to the
Collateral Agent this Agreement; and
WHEREAS, each Assignor desires to execute this Agreement to
satisfy the condition described in the preceding paragraph;
NOW, THEREFORE, in consideration of the benefits accruing to
each Assignor, the receipt and sufficiency of which are hereby acknowledged,
each Assignor hereby makes the following representations and warranties to the
Collateral Agent and hereby covenants and agrees with the Collateral Agent as
follows:
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ARTICLE I
SECURITY INTERESTS
1.1. Grant of Security Interests. (a) As security for the
prompt and complete payment and performance when due of all of the Obligations,
each Assignor does hereby assign and transfer unto the Collateral Agent, and
does hereby pledge and grant to the Collateral Agent for the benefit of the
Secured Creditors, a continuing security interest of first priority in, all of
the right, title and interest of such Assignor in, to and under all of the
following, whether now existing or hereafter from time to time acquired:
(i) each and every Receivable;
(ii) all Contracts, together with all Contract Rights arising
thereunder;
(iii) all Inventory;
(iv) the Cash Collateral Account and any other cash collateral
account established for any Assignor and all moneys, securities and
instruments deposited or required to be deposited in such Cash
Collateral Account;
(v) all Equipment;
(vi) all Marks, together with the registrations and right to
all renewals thereof, and the goodwill of the business of such Assignor
symbolized by the Marks;
(vii) all Patents and Copyrights and all reissues, renewals
and extensions thereof;
(viii) all computer programs of such Assignor and all
intellectual property rights therein and all other proprietary
information of such Assignor, including, but not limited to, trade
secrets and Trade Secret Rights;
(ix) all insurance policies;
(x) all other Goods, General Intangibles, Chattel Paper,
Documents and Instruments and other assets of such Assignor (other than
the Pledged Securities); and
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<PAGE> 8
(xi) all Proceeds and products of any and all of the foregoing
(all of the above, collectively, the "Collateral").
(b) Notwithstanding anything else in this Agreement to the
contrary, each Secured Creditor (by its acceptance of the benefits provided
hereunder) agrees with each Assignor that no Secured Creditor is purchasing or
acquiring hereunder any Receivable but only taking a security interest therein,
provided, however, this Agreement shall not restrict the Collateral Agent's
ability to exercise its rights hereunder to the extent permitted by law.
Notwithstanding Section 1.1(a), to the extent that any Contract may be
terminated or a default shall be caused thereunder (in accordance with the terms
thereof after giving effect to any applicable laws) in the event of a granting
of a security interest therein, or in the event the granting of a security
interest in any Contract shall violate applicable law, then the security
interest granted hereby shall be limited to the extent necessary so that such
Contract may not be so terminated or no such violation shall exist, as the case
may be, and all rights for money due or to become due under each such Contract
and other proceeds shall be subject to the security interest.
(c) The security interest of the Collateral Agent under this
Agreement extends to all Collateral of the kind which is the subject of this
Agreement which any Assignor may acquire at any time during the continuation of
this Agreement.
1.2. Power of Attorney. Each Assignor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney, irrevocably, with
full power after the occurrence of and during the continuance of an Event of
Default (in the name of such Assignor or otherwise) to act, require, demand,
receive, compound and give acquittance for any and all monies and claims for
monies due or to become due to such Assignor under or arising out of the
Collateral, to endorse any checks or other instruments or orders in connection
therewith and to file any claims or take any action or institute any proceedings
which the Collateral Agent may deem to be necessary or advisable to accomplish
the purposes of this Agreement, which appointment as attorney is coupled with an
interest.
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<PAGE> 9
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
Each Assignor represents, warrants and covenants, which
representations, warranties and covenants shall survive execution and delivery
of this Agreement, as follows:
2.1. Necessary Filings. All filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by such Assignor to the Collateral Agent hereby in
respect of the Collateral (other than any steps necessary to comply with the
Federal Assignment of Claims Act of 1940 unless and until such steps are or have
been requested by the Agent or the Required Banks pursuant to Section 3.8) have
been accomplished or will be accomplished within five days of the date hereof
and the security interest granted to the Collateral Agent pursuant to this
Agreement in and to the Collateral constitutes a perfected security interest
therein prior to the rights of all other Persons therein and subject to no other
Liens (other than Permitted Liens) and is entitled to all the rights, priorities
and benefits afforded by the Uniform Commercial Code or other relevant law as
enacted in any relevant jurisdiction to perfected security interests.
2.2. No Liens. Such Assignor is, and as to Collateral acquired
by it from time to time after the date hereof such Assignor will be, the owner
of all Collateral free from any Lien, security interest, encumbrance or other
right, title or interest of any Person (other than Permitted Liens and Liens
created under this Agreement) and such Assignor shall defend the Collateral
against all claims and demands of all Persons at any time claiming the same or
any interest therein adverse to the Collateral Agent.
2.3. Other Financing Statements. As of the date hereof, there
is no financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) covering or purporting to cover any interest
of any kind in the Collateral (other than (x) those created under this Agreement
and (y) as may be filed in connection with Liens permitted pursuant to Section
9.03 of the Credit Agreement), and so long as the Total Commitment has not been
terminated or any Note or Letter of Credit remains outstanding or any of the
Obligations remain unpaid or any Interest Rate Protection Agreement or Other
Hedging Agreement remains in effect or any Obligations are owed with respect
thereto, such Assignor will not execute or authorize to be filed in any public
office any financing statement (or similar statement or instrument of
registration under the law of any jurisdiction) or statements relating to the
Collateral, except financing statements filed or to be filed in respect of and
covering the security interests granted hereby by such Assignor or as permitted
by the Credit Agreement.
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<PAGE> 10
2.4. Chief Executive Office; Records. The chief executive
office of such Assignor is located at the address or addresses indicated on
Annex A hereto. Such Assignor will not move its chief executive office except to
such new location as such Assignor may establish in accordance with the last
sentence of this Section 2.4. The originals of all documents evidencing all
Receivables and Contract Rights and Trade Secret Rights of such Assignor and the
only original books of account and records of such As signor relating thereto
are, and will continue to be, kept at such chief executive office or at such new
locations as such Assignor may establish in accordance with the last sentence of
this Section 2.4. All Receivables and Contract Rights and Trade Secret Rights of
such Assignor are, and will continue to be, maintained at, and controlled and
directed (including, without limitation, for general accounting purposes) from,
the office locations described above or such new location established in
accordance with the last sentence of this Section 2.4. No Assignor shall
establish new locations for such offices until (i) it shall have given to the
Collateral Agent not less than 30 days' prior written notice of its intention to
do so, clearly describing such new location and providing such other information
in connection therewith as the Collateral Agent may reasonably request, (ii)
with respect to such new location, it shall have taken all action, satisfactory
to the Collateral Agent, to maintain the security interest of the Collateral
Agent in the Collateral intended to be granted hereby at all times fully
perfected and in full force and effect, (iii) at the request of the Collateral
Agent, it shall have furnished an opinion of counsel acceptable to the
Collateral Agent to the effect that all financing or continuation statements and
amendments or supplements thereto have been filed in the appropriate filing
office or offices, and (iv) the Collateral Agent shall have received evidence
that all other actions (including, without limitation, the payment of all filing
fees and taxes, if any, payable in connection with such filings) have been
taken, in order to perfect (and maintain the perfection and priority of) the
security interest granted hereby.
2.5. Location of Inventory and Equipment. All Inventory and
Equipment held on the date hereof by each Assignor is located at one of the
locations shown on Annex B hereto. Each Assignor agrees that all Inventory and
Equipment now held or subsequently acquired by it shall be kept at (or shall be
in transport to) any one of the locations shown on Annex B hereto, or such new
location as such Assignor may establish in accordance with the last sentence of
this Section 2.5, except as permitted to be sold in accordance with the terms
hereof and in the Credit Agreement, provided that equipment held by an Assignor
may be repaired or rented to customers, in either case (x) in the ordinary
course of business and (y) so long as proper financing statements and any other
necessary filings exist for such Assignor in the location of such equipment such
that the Collateral Agent retains the perfected security interest granted
hereby. Any Assignor may establish a new location for Inventory and Equipment
only if (i) it shall have given to the Collateral Agent not less than 30 days
prior written notice of its intention so to do, clearly describing such new
location and providing
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<PAGE> 11
such other information in connection therewith as the Collateral Agent may
reasonably request, (ii) with respect to such new location, it shall have taken
all action satisfactory to the Collateral Agent to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
at all times fully perfected and in full force and effect, (iii) at the request
of the Collateral Agent, it shall have furnished an opinion of counsel
acceptable to the Collateral Agent to the effect that all financing or
continuation statements and amendments or supplements thereto have been filed in
the appropriate filing office or offices, and (iv) the Collateral Agent shall
have received evidence that all other actions (including, without limitation,
the payment of all filing fees and taxes, if any, payable in connection with
such filings) have been taken, in order to perfect (and maintain the perfection
and priority of) the security interest granted hereby.
2.6. Recourse. This Agreement is made with full recourse to
each Assignor and pursuant to and upon all the warranties, representations,
covenants and agreements on the part of such Assignor contained herein, in the
other Credit Documents, in the Interest Rate Protection Agreements or Other
Hedging Agreements and otherwise in writing in connection herewith or therewith.
2.7. Trade Names; Change of Name. No Assignor has or operates in any
jurisdiction under, or previously has had or has operated in any jurisdiction
within the five year period preceding the date of this Agreement under, any
trade names, fictitious names or other names except its legal name and such
other trade or fictitious names as are listed on Annex C hereto. No Assignor
shall change its legal name or assume or operate in any jurisdiction under any
trade, fictitious or other name except those names listed on Annex C hereto in
the jurisdictions listed with respect to such names and new names (including,
without limitation, any names of divisions or operations) and/or jurisdictions
established in accordance with the last sentence of this Section 2.7. No
Assignor shall assume or operate in any jurisdiction under any new trade,
fictitious or other name or operate under any existing name in any additional
jurisdiction until (i) it shall have given to the Collateral Agent not less than
30 days' prior written notice of its intention so to do, clearly describing such
new name and/or jurisdiction and, in the case of a new name, the jurisdictions
in which such new name shall be used and providing such other information in
connection therewith as the Collateral Agent may reasonably request, (ii) with
respect to such new name and/or jurisdiction, it shall have taken all action to
maintain the security interest of the Collateral Agent in the Collateral
intended to be granted hereby at all times fully perfected and in full force and
effect, (iii) at the request of the Collateral Agent, it shall have furnished an
opinion of counsel acceptable to the Collateral Agent to the effect that all
financing or continuation statements and amendments or supplements thereto have
been filed in the appropriate filing office or offices, and (iv) the Collateral
Agent shall have received evidence that all other actions
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<PAGE> 12
(including, without limitation, the payment of all filing fees and taxes, if
any, payable in connection with such filings) have been taken, in order to
perfect (and maintain the perfection and priority of) the security interest
granted hereby.
ARTICLE III
SPECIAL PROVISIONS CONCERNING
RECEIVABLES; CONTRACT RIGHTS; INSTRUMENTS
3.1. Additional Representations and Warranties. As of the time
when each of its Receivables arises, each Assignor shall be deemed to have
represented and warranted that such Receivable, and all records, papers and
documents relating thereto (if any) are genuine and in all respects what they
purport to be, and that all papers and documents (if any) relating thereto (i)
will represent the genuine legal, valid and binding obligation of the account
debtor evidencing indebtedness unpaid and owed by the respective account debtor
arising out of the performance of labor or services or the sale or lease and
delivery of the inventory, materials, equipment or merchandise listed therein,
or both, (ii) will be the only original writings evidencing and embodying such
obligation of the account debtor named therein (other than copies created for
general accounting purposes), (iii) will evidence true and valid obligations,
enforceable in accordance with their respective terms subject to credits,
discounts or allowances consistent with historical practice and as otherwise
permitted by Section 3.5 hereof and (iv) will be in compliance and will conform
in all material respects with all applicable federal, state and local laws and
applicable laws of any relevant foreign jurisdiction.
3.2. Maintenance of Records. Each Assignor will keep and
maintain at its own cost and expense satisfactory and complete records of its
Receivables and Contracts, including, but not limited to, originals or copies of
all documentation (including each Contract) with respect thereto, records of all
payments received, all credits granted thereon, all merchandise returned and all
other dealings therewith, and such Assignor will make the same available on such
Assignor's premises to the Collateral Agent for inspection, at such Assignor's
own cost and expense, at any and all reasonable times and intervals during
normal business hours on reasonable prior notice as the Collateral Agent may
request. Upon the occurrence and during the continuance of an Event of Default
and at the request of the Collateral Agent, such Assignor shall, at its own cost
and expense, deliver all tangible evidence of its Receivables and Contract
Rights (including, without limitation, all documents evidencing the Receivables
and all Contracts) and such books and records to the Collateral Agent or to its
representatives (copies of which evidence and books and records may be
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retained by such Assignor). If the Collateral Agent so directs, such Assignor
shall legend, in form and manner satisfactory to the Collateral Agent, the
Receivables and the Contracts, as well as books, records and documents of such
Assignor evidencing or pertaining to such Receivables and Contracts with an
appropriate reference to the fact that such Receivables and Contracts have been
assigned to the Collateral Agent and that the Collateral Agent has a security
interest therein.
3.3. Direction to Account Debtors; Contracting Parties; etc.
Upon the occurrence and during the continuance of an Event of Default, and if
the Collateral Agent so directs any Assignor, to the extent permitted by
applicable law, such Assignor agrees (x) to cause all payments on account of the
Receivables and Contracts to be made directly to the Cash Collateral Account,
(y) that the Collateral Agent may, at its option, directly notify the obligors
with respect to any Receivables and/or under any Contracts to make payments with
respect thereto as provided in preceding clause (x), and (z) that the Collateral
Agent may enforce collection of any such Receivables and Contracts and may
adjust, settle or compromise the amount of payment thereof, in the same manner
and to the same extent as such Assignor. Without notice to or assent by any
Assignor, the Collateral Agent may apply any or all amounts then in, or
thereafter deposited in, the Cash Collateral Account which application shall be
effected in the manner provided in Section 7.4 of this Agreement. The costs and
expenses (including attorneys' fees) of collection, whether incurred by the
Assignor or the Collateral Agent, shall be borne by the relevant Assignor.
3.4. Modification of Terms; etc. No Assignor shall rescind or
cancel any indebtedness evidenced by any Receivable or under any Contract, or
modify any term thereof or make any adjustment with respect thereto, or extend
or renew the same, or compromise or settle any material dispute, claim, suit or
legal proceeding relating thereto, or sell any Receivable or Contract, or
interest therein, without the prior written consent of the Collateral Agent,
except as permitted by Section 3.5 or in a manner that does not in any way
materially adversely affect the interests of the Banks. Each Assignor will duly
fulfill all obligations on its part to be fulfilled under or in connection with
the Receivables and Contracts and will do nothing to impair the rights of the
Collateral Agent in the Receivables or Contracts.
3.5. Collection. Each Assignor shall endeavor to cause to be
collected from the account debtor named in each of its Receivables or obligor
under any Contract, as and when due (including, without limitation, amounts,
services or products which are delinquent, such amounts, services or products to
be collected in accordance with generally accepted lawful collection procedures)
any and all amounts, services or products owing under or on account of such
Receivable or Contract, and apply forthwith upon receipt thereof all such
amounts, services or products as are so collected to the outstanding balance of
such
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Receivable or under such Contract, except that, prior to the occurrence of an
Event of Default, any Assignor may allow in the ordinary course of business as
adjustments to amounts, services or products owing under its Receivables and
Contracts (i) an extension or renewal of the time or times of payment or
exchange, or settlement for less than the total unpaid balance, which such
Assignor finds appropriate in accordance with reasonable business judgment and
(ii) a refund or credit due as a result of returned or damaged merchandise or
improperly performed services. The costs and expenses (including, without
limitation, attorneys' fees) of collection, whether incurred by an Assignor or
the Collateral Agent, shall be borne by the relevant Assignor.
3.6. Instruments. If any Assignor owns or acquires any
Instrument constituting Collateral, such Assignor will within 10 days notify the
Collateral Agent thereof, and upon request by the Collateral Agent will promptly
deliver such Instrument to the Collateral Agent appropriately endorsed to the
order of the Collateral Agent as further security hereunder.
3.7 Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such vouchers, invoices, schedules, confirmatory assignments,
conveyances, financing statements, transfer endorsements, powers of attorney,
certificates, reports, notices, requests for acknowledgement and other
assurances or instruments and take such further steps (including any steps
necessary to comply with the Federal Assignment of Claims Act of 1940, but only
if so requested by the Agent or the Required Banks) relating to its Receivables,
Contracts, Instruments and other property or rights covered by the security
interest hereby granted, as the Collateral Agent may reasonably require.
Notwithstanding the foregoing, so long as (x) no Default or Event of Default
then exists and (y) since October 31, 1995, nothing has occurred that has had or
could reasonably be expected to have a Material Adverse Effect, neither the
Agent nor the Required Banks shall be permitted to require the Borrower or any
of its Subsidiaries to give any notice of the Bank's interest in any portion of
the Collateral to any private insurer.
3.8 Paribas Indemnity. Without the consent of the Required
Banks you shall not alter, modify or terminate the Paribas Indemnity. In the
event that the Borrower or any of its Subsidiaries suffers any loss covered by
the Paribas Indemnity, such Credit Party shall fully pursue its claims
thereunder and deliver to the Collateral Agent for the benefit of the Banks any
money recovered thereunder as Collateral hereunder (which monies shall continue
to be held as Collateral hereunder, and shall not be released to the Borrower or
any of its Subsidiaries, except to the extent the Required Banks in their sole
discretion may agree). The Borrower and its Subsidiaries shall direct Banque
Paribas to turn over any and all of the
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Original Instruments which it may subsequently find to the Collateral Agent for
the benefit of the Banks (to be held by it under, and pursuant to the terms of,
the Pledge Agreement) and each Credit Party shall deliver to the Collateral
Agent for the benefit of the Banks (to be held by it under, and pursuant to the
terms of, the Pledge Agreement) any Original Instruments delivered to such
Credit Party; provided that duplicate instruments held by the Collateral Agent
under the Pledge Agreement may be marked "Cancelled" by it and destroyed, in
each case to the satisfaction of the Collateral Agent.
ARTICLE IV
SPECIAL PROVISIONS CONCERNING TRADEMARKS
4.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true, lawful, sole and exclusive owner of
the Marks listed in Annex D hereto and that said listed Marks constitute all the
Marks that such Assignor presently owns or uses in connection with its business
and include all the United States federal registrations or applications
registered in the United States Patent and Trademark Office. Each Assignor
represents and warrants that it owns all Marks that it uses. Each Assignor
further warrants that it has no knowledge as of the date hereof, of any third
party claim that any aspect of such Assignor's present or contemplated business
operations infringes or will infringe any rights in any trademark, service mark
or trade name. Each Assignor represents and warrants that it is the beneficial
and record owner of all trademark registrations and applications listed in Annex
D hereto and that said registrations are valid, subsisting and have not been
cancelled and that such Assignor is not aware of any third-party claim that any
of said registrations is invalid or unenforceable, or that there is any reason
that any of said applications will not pass to registration. Each Assignor
represents and warrants that upon the recordation of an Assignment of Security
Interest in United States Trademarks and Patents in the form of Annex G hereto
in the United States Patent and Trademark Office, together with filings on Form
UCC-1 pursuant to this Agreement, all filings, registrations and recordings
necessary or appropriate to perfect the security interest granted to the
Collateral Agent in the United States Marks covered by this Agreement under
federal law will have been accomplished. Each Assignor agrees to execute such an
Assignment of Security Interest in United States Trademark and Patents covering
all right, title and interest in each United States Mark, and the associated
goodwill, of such Assignor, and to record the same. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the continuance of an Event of Default, any document which
may be required by the U.S. Patent and Trademark Office or secretary of state or
equivalent governmental agency of any State of the United States or any foreign
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jurisdiction in order to effect an absolute assignment of all right, title and
interest in each Mark, and record the same.
4.2. Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right under any Mark, which is material and/or necessary
to its business, absent prior written approval of the Collateral Agent, except
as otherwise permitted by this Agreement or the Credit Agreement.
4.3. Infringements. Each Assignor agrees, promptly upon
learning thereof, to notify the Collateral Agent in writing of the name and
address of, and to furnish such pertinent information that may be available with
respect to, (i) any party who such Assignor believes is infringing or diluting
or otherwise violating in any respect any of such Assignor's rights in and to
any Mark, or (ii) with respect to any party claiming that such Assignor's use of
any Mark violates in any material respect any property right of that party. Each
Assignor further agrees, unless otherwise agreed by the Collateral Agent,
diligently to prosecute any Person infringing any Mark.
4.4. Preservation of Marks. Each Assignor agrees to use any of
its Marks which are material and/or necessary to its business in interstate or
foreign commerce, as the case may be, during the time in which this Agreement is
in effect, sufficiently to preserve such Marks as valid and subsisting
trademarks or service marks under the laws of the United States or the relevant
foreign jurisdiction.
4.5. Maintenance of Registration. Each Assignor shall, at its
own expense, diligently process all documents required by the Trademark Act of
1946, as amended, 15 U.S.C. Sections 1051 et seq. to maintain trademark
registrations, including but not limited to affidavits of continued use and
applications for renewals of registration in the United States Patent and
Trademark Office for all of its registered Marks which are material and/or
necessary to its business pursuant to 15 U.S.C. Sections 1058, 1059 and
1065 and any foreign equivalent thereof, and shall pay all fees and
disbursements in connection therewith and shall not abandon any such filing of
affidavit of use or any such application of renewal prior to the exhaustion of
all administrative and judicial remedies without prior written consent of the
Collateral Agent. Each Assignor agrees to notify the Collateral Agent at least
two (2) months prior to the dates on which the affidavits of use or the
applications for renewal registration are due with respect to any registered
Mark that the affidavits of use or the renewal is being processed.
4.6. Future Registered Marks. If any registration for any Mark
which is material and/or necessary to its business issues hereafter to any
Assignor as a result of any
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application now or hereafter pending before the United States Patent and
Trademark Office, within 30 days of receipt of such certificate, such Assignor
shall deliver to the Collateral Agent a copy of such certificate, and an
assignment for security in such Mark, to the Collateral Agent and at the expense
of such Assignor, confirming the assignment for security in such Mark to the
Collateral Agent hereunder, the form of such security to be substantially the
same as the form hereof or in such other form as may be satisfactory to the
Collateral Agent.
4.7. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent may, by written notice to the relevant
Assignor, take any or all of the following actions: (i) declare the entire
right, title and interest of such Assignor in and to each of the Marks, together
with all trademark rights and rights of protection to the same and the goodwill
of such Assignor's business symbolized by said Marks and the right to recover
for post infringements thereof, vested in the Collateral Agent for the benefit
of the Secured Creditors, in which event such rights, title and interest shall
immediately vest, in the Collateral Agent for the benefit of the Secured
Creditors, and the Collateral Agent shall be entitled to exercise the power of
attorney referred to in Section 4.1 to execute, cause to be acknowledged and
notarized and to record said absolute assignment with the applicable agency;
(ii) take and use or sell the Marks and the goodwill of such Assignor's business
symbolized by the Marks and the right to carry on the business and use the
assets of such Assignor in connection with which the Marks have been used; and
(iii) direct such Assignor to refrain, in which event such Assignor shall
refrain, from using the Marks in any manner whatsoever, directly or indirectly,
and, if requested by the Collateral Agent, change such Assignor's corporate name
to eliminate therefrom any use of any Mark and execute such other and further
documents that the Collateral Agent may request to further confirm this and to
transfer ownership of the Marks and registrations and any pending trademark
applications therefor in the United States Patent and Trademark Office or any
equivalent government agency or office in any foreign jurisdiction to the
Collateral Agent.
ARTICLE V
SPECIAL PROVISIONS CONCERNING
PATENTS, COPYRIGHTS AND TRADE SECRETS
5.1. Additional Representations and Warranties. Each Assignor
represents and warrants that it is the true and lawful exclusive owner of all
rights in (i) all trade secrets and proprietary information necessary to operate
the business of such Assignor (the "Trade Secret Rights"), (ii) the Patents
listed in Annex E hereto and (iii) the Copyrights listed in
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Annex F hereto, that said Patents constitute all the patents and applications
for patents that such Assignor now owns and that are necessary in the conduct of
the business of such Assignor and that such Copyrights constitute all
registrations of copyrights and applications for copyright registrations that
the Assignor now owns and that are necessary in the conduct of the business of
such Assignor. Each Assignor further represents and warrants that it has the
exclusive right to use and practice under all Patents and Copyrights that it
owns, uses or practices under and has the exclusive right to exclude others from
using or practicing under any Patents its owns, uses or practices under. Each
Assignor further warrants that, as of the date hereof it has no knowledge of any
third party claim that any aspect of such Assignor's present or contemplated
business operations infringes or will infringe any rights in any patent or
copyright or such Assignor has misappropriated any trade secret or proprietary
information. Each Assignor represents and warrants that upon the recordation of
an Assignment of Security Interest in United States Trademarks and Patents in
the form of Annex G hereto in the United States Patent and Trademark Office and
the recordation of an Assignment of Security Interest in United States
Copyrights in the form of Annex H hereto in the United States Copyright Office,
together with filings on Form UCC-1 pursuant to this Agreement, all filings,
registrations and recordings necessary or appropriate to perfect the security
interest granted to the Collateral Agent in the United States Patents and United
States Copyrights covered by this Agreement under federal law will have been
accomplished. Each Assignor agrees to execute such an Assignment of Security
Interest in United States Trademarks and Patents covering all right, title and
interest in each United States Patent of such Assignor and to record the same,
and to execute such an Assignment of Security Interest in United States
Copyrights covering all right, title and interest in each United States
Copyright of such Assignor and to record the same. Each Assignor hereby grants
to the Collateral Agent an absolute power of attorney to sign, upon the
occurrence and during the continuance of any Event of Default, any document
which may be required by the U.S. Patent and Trademark Office or equivalent
governmental agency in any foreign jurisdiction or the U.S. Copyright Office or
equivalent governmental agency in any foreign jurisdiction in order to effect an
absolute assignment of all right, title and interest in each Patent and
Copyright, and to record the same.
5.2. Licenses and Assignments. Each Assignor hereby agrees not
to divest itself of any right under any Patent or Copyright which is material
and/or necessary to its business absent prior written approval of the Collateral
Agent, except as otherwise permitted by this Agreement or the Credit Agreement.
5.3. Infringements. Each Assignor agrees, promptly upon
learning thereof, to furnish the Collateral Agent in writing with all pertinent
information available to such Assignor with respect to infringement,
contributing infringement or active inducement to
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infringe in any Patent or Copyright or to any claim that the practice of any
Patent or the use of any Copyright violates any property right of a third party,
or with respect to any misappropriation of any Trade Secret Right or any claim
that practice of any Trade Secret Right violates any property right of a third
party. Each Assignor further agrees, absent direction of the Collateral Agent to
the contrary, diligently to prosecute any Person infringing any Patent or
Copyright or any Person misappropriating any Trade Secret Right.
5.4. Maintenance of Patents and Copyrights. At its own
expense, each Assignor shall make timely payment of all post-issuance fees
required pursuant to 35 U.S.C. Section 41 and any foreign equivalent thereof to
maintain in force rights under each Patent which is material and/or necessary to
its business, and to apply as permitted pursuant to applicable law for any
renewal of each Copyright which is material and/or necessary to its business
absent prior written consent of the Collateral Agent.
5.5. Prosecution of Patent or Copyright Application. At its
own expense, each Assignor shall diligently prosecute all applications for
Patents listed in Annex E hereto which are material and/or necessary to its
business and for Copyrights listed in Annex F hereto which are material and/or
necessary to its business and shall not abandon any such application prior to
exhaustion of all administrative and judicial remedies, absent written consent
of the Collateral Agent.
5.6. Other Patents and Copyrights. Within 30 days of the
acquisition or issuance of a Patent or of a Copyright registration, or of filing
of an application for a Patent or Copyright registration, in each case, which is
material and/or necessary to its business, the relevant Assignor shall deliver
to the Collateral Agent a copy of said Copyright registration or Patent or
certificate or registration of, or application therefor, as the case may be,
with an assignment for security as to such Patent or Copyright, as the case may
be, to the Collateral Agent and at the expense of such Assignor, confirming the
assignment for security, the form of such assignment for security to be
substantially the same as the form hereof or in such other form as may be
satisfactory to the Collateral Agent.
5.7. Remedies. If an Event of Default shall occur and be
continuing, the Collateral Agent may by written notice to the relevant Assignor,
take any or all of the following actions: (i) declare the entire right, title,
and interest of such Assignor in each of the Patents and Copyrights vested in
the Collateral Agent for the benefit of the Secured Creditors, in which event
such right, title, and interest shall immediately vest in the Collateral Agent
for the benefit of the Secured Creditors, in which case the Collateral Agent
shall be entitled to exercise the power of attorney referred to in Section 5.1
to execute, cause to be acknowledged and notarized and to record said absolute
assignment with the applicable
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agency; (ii) take and practice or sell the Patents, Copyrights and Trade Secret
Rights; and (iii) direct such Assignor to refrain, in which event such Assignor
shall refrain, from practicing the Patents and using the Copyrights and/or Trade
Secret Rights directly or indirectly, and such Assignor shall execute such other
and further documents as the Collateral Agent may request further to confirm
this and to transfer ownership of the Patents, Copyrights and Trade Secret
Rights to the Collateral Agent for the benefit of the Secured Creditors.
ARTICLE VI
PROVISIONS CONCERNING ALL COLLATERAL
6.1. Protection of Collateral Agent's Security. Each Assignor
will do nothing to impair the rights of the Collateral Agent in the Collateral.
Each Assignor will at all times keep its Inventory and Equipment insured in
favor of the Collateral Agent, at such Assignor's own expense to the extent and
in the manner provided in the Credit Agreement; all policies or certificates
with respect to such insurance (and any other insurance maintained by such
Assignor); (i) shall be endorsed to the Collateral Agent's satisfaction for the
benefit of the Collateral Agent (including, without limitation, by naming the
Collateral Agent as loss payee and naming each of the Banks, the Agent and the
Collateral Agent as additional insureds); (ii) shall state that such insurance
policies shall not be cancelled or revised without 30 days' prior written notice
thereof by the insurer to the Collateral Agent; and (iii) certified copies of
such policies or certificates shall be deposited with the Collateral Agent. If
any Assignor shall fail to insure its Inventory and Equipment in accordance with
the preceding sentence, or if any Assignor shall fail to so endorse and deposit
all policies or certificates with respect thereto, the Collateral Agent shall
have the right (but shall be under no obligation) to procure such insurance and
such Assignor agrees to promptly reimburse the Collateral Agent for all costs
and expenses of procuring such insurance. The Collateral Agent shall, at the
time such proceeds of such insurance are distributed to the Secured Creditors,
apply such proceeds in accordance with Section 7.4. Each Assignor assumes all
liability and responsibility in connection with the Collateral acquired by it
and the liability of such Assignor to pay the Obligations shall in no way be
affected or diminished by reason of the fact that such Collateral may be lost,
destroyed, stolen, damaged or for any reason whatsoever unavailable to such
Assignor.
6.2. Warehouse Receipts Non-negotiable. Each Assignor agrees
that if any warehouse receipt or receipt in the nature of a warehouse receipt is
issued with respect to any of its Inventory, such warehouse receipt or receipt
in the nature thereof shall not be
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"negotiable" (as such term is used in Section 7-104 of the Uniform Commercial
Code as in effect in any relevant jurisdiction or under other relevant law).
6.3. Further Actions. Each Assignor will, at its own expense,
make, execute, endorse, acknowledge, file and/or deliver to the Collateral Agent
from time to time such lists, descriptions and designations of its Collateral,
warehouse receipts, receipts in the nature of warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Collateral Agent
deems reasonably appropriate or advisable to perfect, preserve or protect its
security interest in the Collateral, including, without limitation, any
Collateral which previously constituted Excluded Collateral.
6.4. Financing Statements. Each Assignor agrees to execute and
deliver to the Collateral Agent such financing statements, in form acceptable to
the Collateral Agent, as the Collateral Agent may from time to time request or
as are necessary or desirable in the opinion of the Collateral Agent to
establish and maintain a valid, enforceable, first priority perfected security
interest in the Collateral as provided herein and the other rights and security
contemplated hereby all in accordance with the Uniform Commercial Code as
enacted in any and all relevant jurisdictions or any other relevant law. Each
Assignor will pay any applicable filing fees, recordation taxes and related
expenses relating to its Collateral. Each Assignor hereby authorizes the
Collateral Agent to file any such financing statements without the signature of
such Assignor where permitted by law.
ARTICLE VII
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
7.1. Remedies; Obtaining the Collateral Upon Default. Each
Assignor agrees that, if any Event of Default shall have occurred and be
continuing, then and in every such case, the Collateral Agent, in addition to
any rights now or hereafter existing under applicable law, shall have all rights
as a secured creditor under the Uniform Commercial Code in all relevant
jurisdictions and may also:
(i) personally, or by agents or attorneys, immediately take
possession of the Collateral or any part thereof, from such Assignor or
any other Person who
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then has possession of any part thereof with or without notice or
process of law, and for that purpose may enter upon such Assignor's
premises where any of the Collateral is located and remove the same and
use in connection with such removal any and all services, supplies,
aids and other facilities of such Assignor;
(ii) to the extent permitted by applicable law, instruct the
obligor or obligors on any agreement, instrument or other obligation
(including, without limitation, the Receivables and the Contracts)
constituting the Collateral to make any payment required by the terms
of such agreement, instrument or other obligation directly to the
Collateral Agent;
(iii) withdraw all monies, securities and instruments in the
Cash Collateral Account for application to the Obligations in
accordance with Section 7.4;
(iv) sell, assign or otherwise liquidate any or all of the
Collateral or any part thereof in accordance with Section 7.2, or
direct the relevant Assignor to sell, assign or otherwise liquidate any
or all of the Collateral or any part thereof, and, in each case, take
possession of the proceeds of any such sale or liquidation;
(v) take possession of the Collateral or any part thereof,
by directing the relevant Assignor in writing to deliver the same to
the Collateral Agent at any place or places designated by the
Collateral Agent, in which event such Assignor shall at its own
expense:
(x) forthwith cause the same to be moved to the place
or places so designated by the Collateral Agent and there
delivered to the Collateral Agent;
(y) store and keep any Collateral so delivered to the
Collateral Agent at such place or places pending further
action by the Collateral Agent as provided in Section
7.2; and
(z) while the Collateral shall be so stored and kept,
provide such guards and maintenance services as shall be
necessary to protect the same and to preserve and
maintain them in good condition; and
(vi) license or sublicense, whether on an exclusive or
nonexclusive basis, any Marks, Patents or Copyrights included in the
Collateral for such term and on
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such conditions and in such manner as the Collateral Agent shall in its
sole judgment determine;
it being understood that each Assignor's obligation so to deliver the Collateral
is of the essence of this Agreement and that, accordingly, upon application to a
court of equity having jurisdiction, the Collateral Agent shall be entitled to a
decree requiring specific performance by such Assignor of said obligation.
7.2. Remedies; Disposition of the Collateral. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 7.1 and any
other Collateral whether or not so repossessed by the Collateral Agent, may be
sold, assigned, leased or otherwise disposed of under one or more contracts or
as an entirety, and without the necessity of gathering at the place of sale of
the property to be sold, and in general in such manner, at such time or times,
at such place or places and on such terms as the Collateral Agent may, in
compliance with any mandatory requirements of applicable law, determine to be
commercially reasonable. Any of the Collateral may be sold, leased or otherwise
disposed of, in the condition in which the same existed when taken by the
Collateral Agent or after any overhaul or repair at the expense of the relevant
Assignor which the Collateral Agent shall determine to be commercially
reasonable. Any such disposition which shall be a private sale or other private
proceedings permitted by such requirements shall be made upon not less than 10
days' written notice to the relevant Assignor specifying the time at which such
disposition is to be made and the intended sale price or other consideration
therefor, and shall be subject, for the 10 days after the giving of such notice,
to the right of the relevant Assignor or any nominee of such Assignor to acquire
the Collateral involved at a price or for such other consideration at least
equal to the intended sale price or other consideration so specified. Any such
disposition which shall be a public sale permitted by such requirements shall be
made upon not less than 10 days' written notice to the relevant Assignor
specifying the time and place of such sale and, in the absence of applicable
requirements of law, shall be by public auction (which may, at the Collateral
Agent's option, be subject to reserve), after publication of notice of such
auction not less than 10 days prior thereto in two newspapers in general
circulation to be selected by the Collateral Agent. To the extent permitted by
any such requirement of law, the Collateral Agent may bid for and become the
purchaser of the Collateral or any item thereof, offered for sale in accordance
with this Section without accountability to the relevant Assignor. If, under
mandatory requirements of applicable law, the Collateral Agent shall be required
to make disposition of the Collateral within a period of time which does not
permit the giving of notice to the relevant Assignor as hereinabove specified,
the Collateral Agent need give such Assignor only such notice of disposition as
shall be reasonably practicable in view of such mandatory requirements of
applicable law. Each Assignor agrees to do or cause to be done all such other
acts and things as may be reasonably necessary to make such sale
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or sales of all or any portion of the Collateral of such Assignor valid and
binding and in compliance with any and all applicable laws, regulations, orders,
writs, injunctions, decrees or awards of any and all courts, arbitrations or
governmental instrumentalities, domestic or foreign, having jurisdiction over
any such sale or sales, all at such Assignor's expense.
7.3. Waiver of Claims. Except as otherwise provided in this
Agreement, EACH ASSIGNOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL AGENT'S
TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH SUCH ASSIGNOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and such Assignor hereby further waives, to the extent
permitted by law:
(i) all damages occasioned by such taking of possession
except any damages which are the direct result of the Collateral
Agent's gross negligence or willful misconduct;
(ii) all other requirements as to the time, place and terms
of sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(iii) all rights of redemption, appraisement, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Agreement or
the absolute sale of the Collateral or any portion thereof, and each
Assignor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the
benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other realization upon,
any Collateral shall operate to divest all right, title, interest, claim and
demand, either at law or in equity, of the relevant Assignor therein and
thereto, and shall be a perpetual bar both at law and in equity against such
Assignor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under such Assignor.
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7.4. Application of Proceeds. (a) All moneys collected by the
Collateral Agent upon any sale or other disposition of the Collateral (or, to
the extent the Pledge Agreement or Mortgages require proceeds of collateral
thereunder to be applied in accordance with the provisions of this Agreement,
the Pledgee or Mortgagee under such other Security Documents), together with all
other moneys received by the Collateral Agent hereunder, shall be applied as
follows:
(i) first, to the payment of all Obligations owing the
Collateral Agent of the type described in clauses (iii) and (iv) of the
definition of "Obligations";
(ii) second, to the extent proceeds remain after the
application pursuant to the preceding clause (i), an amount equal to
the outstanding Primary Obligations shall be paid to the Secured
Creditors as provided in Section 7.4(e), with each Secured Creditor
receiving an amount equal to its outstanding Primary Obligations or, if
the proceeds are insufficient to pay in full all such Primary
Obligations, its Pro Rata Share of the amount remaining to be
distributed;
(iii) third, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) and (ii), an amount
equal to the outstanding Secondary Obligations shall be paid to the
Secured Creditors as provided in Section 7.4(e), with each Secured
Creditor receiving an amount equal to its outstanding Secondary
Obligations or, if the proceeds are insufficient to pay in full all
such Secondary Obligations, its Pro Rata Share of the amount remaining
to be distributed; and
(iv) fourth, to the extent proceeds remain after the
application pursuant to the preceding clauses (i) through (iii),
inclusive, and following the termination of this Agreement pursuant to
Section 10.8(a) hereof, to the relevant Assignor or to whomever may be
lawfully entitled to receive such surplus.
(b) For purposes of this Agreement (x) "Pro Rata Share" shall
mean, when calculating a Secured Creditor's portion of any distribution or
amount, that amount (expressed as a percentage) equal to a fraction the
numerator of which is the then unpaid amount of such Secured Creditor's Primary
Obligations or Secondary Obligations, as the case may be, and the denominator of
which is the then outstanding amount of all Primary Obligations or Secondary
Obligations, as the case may be, (y) "Primary Obligations" shall mean (i) in the
case of the Credit Document Obligations, all principal of, and interest on, all
Loans under the Credit Agreement, all Unpaid Drawings theretofore made (together
with all interest accrued thereon), the aggregate Stated Amounts of all Letters
of Credit issued (or deemed issued) under the Credit Agreement, and all Fees and
(ii) in the case of the Other
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Obligations, all amounts due under the Interest Rate Protection Agreements or
Other Hedging Agreements (other than indemnities, fees (including, without
limitation, attorneys' fees) and similar obligations and liabilities) and (z)
"Secondary Obligations" shall mean all Obligations other than Primary
Obligations.
(c) When payments to Secured Creditors are based upon their
respective Pro Rata Shares, the amounts received by such Secured Creditors
hereunder shall be applied (for purposes of making determinations under this
Section 7.4 only) (i) first, to their Primary Obligations and (ii) second, to
their Secondary Obligations. If any payment to any Secured Creditor of its Pro
Rata Share of any distribution would result in overpayment to such Secured
Creditor, such excess amount shall instead be distributed in respect of the
unpaid Primary Obligations or Secondary Obligations, as the case may be, of the
other Secured Creditors, with each Secured Creditor whose Primary Obligations or
Secondary Obligations, as the case may be, have not been paid in full to receive
an amount equal to such excess amount multiplied by a fraction the numerator of
which is the unpaid Primary Obligations or Secondary Obligations, as the case
may be, of such Secured Creditor and the denominator of which is the unpaid
Primary Obligations or Secondary Obligations, as the case may be, of all Secured
Creditors entitled to such distribution.
(d) Each of the Secured Creditors agrees and acknowledges that
if the Bank Creditors are to receive a distribution on account of undrawn
amounts with respect to Letters of Credit issued (or deemed issued) under the
Credit Agreement (which shall only occur after all outstanding Loans and Unpaid
Drawings with respect to such Letters of Credit have been paid in full), such
amounts shall be paid to the Agent under the Credit Agreement and held by it,
for the equal and ratable benefit of the Bank Creditors, as cash security for
the repayment of Obligations owing to the Bank Creditors as such. If any amounts
are held as cash security pursuant to the immediately preceding sentence, then
upon the termination of all outstanding Letters of Credit, and after the
application of all such cash security to the repayment of all Obligations owing
to the Bank Creditors after giving effect to the termination of all such Letters
of Credit, if there remains any excess cash, such excess cash shall be returned
by the Agent to the Collateral Agent for distribution in accordance with Section
7.4(a) hereof.
(e) Except as set forth in Section 7.4(d), all payments
required to be made hereunder shall be made (x) if to the Bank Creditors, to the
Agent under the Credit Agreement for the account of the Bank Creditors, and (y)
if to the Other Creditors, to the trustee, paying agent or other similar
representative (each, a "Representative") for the Other Creditors or, in the
absence of such a Representative, directly to the Other Creditors.
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(f) For purposes of applying payments received in accordance
with this Section 7.4, the Collateral Agent shall be entitled to rely upon (i)
the Agent under the Credit Agreement and (ii) the Representative for the Other
Creditors or, in the absence of such a Representative, upon the Other Creditors
for a determination (which the Agent, each Representative for any Secured
Creditors and the Secured Creditors agree (or shall agree) to provide upon
request of the Collateral Agent) of the outstanding Primary Obligations and
Secondary Obligations owed to the Bank Creditors or the Other Creditors, as the
case may be. Unless it has actual knowledge (including by way of written notice
from a Bank Creditor or an Other Creditor) to the contrary, the Agent and each
Representative, in furnishing information pursuant to the preceding sentence,
and the Collateral Agent, in acting hereunder, shall be entitled to assume that
no Secondary Obligations are outstanding. Unless it has actual knowledge
(including by way of written notice from an Other Creditor) to the contrary, the
Collateral Agent, in acting hereunder, shall be entitled to assume that no
Interest Rate Protection Agreements or Other Hedging Agreements are in
existence.
(g) It is understood and agreed that each of the Assignors
shall remain liable to the extent of any deficiency between the amount of the
proceeds of the Collateral hereunder and the aggregate amount of the sums
referred to in clause (a) of this Section with respect to the relevant Assignor.
7.5. Remedies Cumulative. Each and every right, power and
remedy hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given under this Agreement, the
Interest Rate Protection Agreements or Other Hedging Agreements or the other
Credit Documents now or hereafter existing at law, in equity or by statute and
each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of the exercise of one shall not be deemed a waiver of the right to
exercise any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Default or Event of Default or an acquiescence
therein. No notice to or demand on any Assignor in any case shall entitle it to
any other or further notice or demand in similar or other circumstances or
constitute a waiver of any of the rights of the Collateral Agent to any other or
further action in any circumstances without notice or demand. In the event that
the Collateral Agent shall bring any suit to enforce any of its rights hereunder
and shall be entitled to judgment, then in such suit the Collateral Agent may
recover expenses, including attorneys' fees, and the amounts thereof shall be
included in such judgment.
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7.6. Discontinuance of Proceedings. In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Agreement by foreclosure, sale, entry or otherwise, and such
proceeding shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Collateral Agent, then and in every such
case the relevant Assignor, the Collateral Agent and each holder of any of the
Obligations shall be restored to their former positions and rights hereunder
with respect to the Collateral subject to the security interest created under
this Agreement, and all rights, remedies and powers of the Collateral Agent
shall continue as if no such proceeding had been instituted.
ARTICLE VIII
INDEMNITY
8.1. Indemnity. (a) Each Assignor jointly and severally agrees
to indemnify, reimburse and hold the Collateral Agent, each Secured Creditor and
their respective successors, permitted assigns, employees, agents and servants
(hereinafter in this Section 8.1 referred to individually as an "Indemnitee,"
and, collectively, as "Indemnities") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs, expenses or disbursements (including attorneys'
fees and expenses) (for the purposes of this Section 8.1 the foregoing are
collectively called "expenses") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnities in any way relating to or
arising out of this Agreement, any Interest Rate Protection Agreement or Other
Hedging Agreement, any other Credit Document or any other document executed in
connection herewith or therewith or in any other way connected with the
administration of the transactions contemplated hereby or thereby or the
enforcement of any of the terms of, or the preservation of any rights under any
thereof, or in any way relating to or arising out of the manufacture, ownership,
ordering, purchase, delivery, control, acceptance, lease, financing, possession,
operation, condition, sale, return or other disposition, or use of the
Collateral (including, without limitation, latent or other defects, whether or
not discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim; provided that no Indemnitee shall be indemnified
pursuant to this Section 8.1(a) for losses, damages or liabilities to the extent
caused by the gross negligence or willful misconduct of such Indemnitee. Each
Assignor agrees that upon written notice by any Indemnitee of the assertion of
such a liability, obligation, damage, injury, penalty, claim, demand, action,
suit
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or judgment, the relevant Assignor shall assume full responsibility for the
defense thereof. Each Indemnitee agrees to use its best efforts to promptly
notify the relevant Assignor of any such assertion of which such Indemnitee has
knowledge.
(b) Without limiting the application of Section 8.1(a), each
Assignor agrees, jointly and severally, to pay, or reimburse the Collateral
Agent for any and all fees, costs and expenses of whatever kind or nature
incurred in connection with the creation, preservation or protection of the
Collateral Agent's Liens on, and security interest in, the Collateral,
including, without limitation, all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or Liens upon or in respect of the Collateral, premiums
for insurance with respect to the Collateral and all other fees, costs and
expenses in connection with protecting, maintaining or preserving the Collateral
and the Collateral Agent's interest therein, whether through judicial
proceedings or otherwise, or in defending or prosecuting any actions, suits or
proceedings arising out of or relating to the Collateral.
(c) Without limiting the application of Section 8.1(a) or (b),
each Assignor agrees, jointly and severally, to pay, indemnify and hold each
Indemnitee harmless from and against any loss, costs, damages and expenses which
such Indemnitee may suffer, expend or incur in consequence of or growing out of
any misrepresentation by any Assignor in this Agreement, any Interest Rate
Protection Agreement or Other Hedging Agreement, any other Credit Document or in
any writing contemplated by or made or delivered pursuant to or in connection
with this Agreement, any Interest Rate Protection Agreement or Other Hedging
Agreement or any other Credit Document.
(d) If and to the extent that the obligations of any Assignor
under this Section 8.1 are unenforceable for any reason, such Assignor hereby
agrees to make the maximum contribution to the payment and satisfaction of
such obligations which is permissible under applicable law.
8.2. Indemnity Obligations Secured by Collateral; Survival.
Any amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of each Assignor contained in this Article VIII shall
continue in full force and effect notwithstanding the full payment of all the
Notes issued under the Credit Agreement, the termination of all Interest Rate
Protection Agreements or Other Hedging Agreements and Letters of Credit, and the
payment of all other Obligations and notwithstanding the discharge thereof.
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ARTICLE IX
DEFINITIONS
The following terms shall have the meanings herein specified.
Such definitions shall be equally applicable to the singular and plural forms of
the terms defined.
"Agent" shall have the meaning provided in the recitals to
this Agreement.
"Agreement" shall have the meaning provided in the preamble to
this Agreement.
"Assignor" shall have the meaning provided in the preamble to
this Agreement.
"Bank Creditors" shall have the meaning provided in the
recitals to this Agreement.
"Banks" shall have the meaning provided in the recitals to
this Agreement.
"Borrower" shall have the meaning provided in the recitals to
this Agreement.
"Cash Collateral Account" shall mean a non-interest bearing
cash collateral account maintained with, and in the sole dominion and control
of, the Collateral Agent for the benefit of the Secured Creditors.
"Chattel Paper" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Class" shall have the meaning provided in Section 10.2 of
this Agreement.
"Collateral" shall have the meaning provided in Section 1.1(a)
of this Agreement.
"Collateral Agent" shall have the meaning provided in the
preamble to this Agreement.
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"Contract Rights" shall mean all rights of any Assignor
(including without limitation all rights to payment) under each Contract
(including without limitation all such rights under the Paribas Indemnity).
"Contracts" shall mean all contracts between any Assignor and
one or more additional parties (including, without limitation, (x) any Interest
Rate Protection Agreements or Other Hedging Agreements and (y) the Paribas
Indemnity), but excluding those Contracts to the extent that the terms thereof
expressly prohibit the assignment of, or granting of a security interest in,
such Assignor's rights and obligations thereunder.
"Copyrights" shall mean any U.S. or foreign copyright owned by
any Assignor, including any registrations of any Copyrights, in the U.S.
Copyright Office or the equivalent thereof in any foreign country, as well as
any application for a U.S. or foreign copyright registration now or hereafter
made with the U.S. Copyright Office or the equivalent thereof in any foreign
jurisdiction by any Assignor.
"Credit Agreement" shall have the meaning provided in the
recitals to this Agreement.
"Credit Document Obligations" shall have the meaning provided
in the definition of "Obligations" in this Article IX.
"Default" shall mean any event which, with notice or lapse of
time, or both, would constitute an Event of Default.
"Documents" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Equipment" shall mean any "equipment," as such term is
defined in the Uniform Commercial Code as in effect on the date hereof in the
State of New York, now or hereafter owned by any Assignor and, in any event,
shall include, but shall not be limited to, all machinery, equipment,
furnishings, movable trade fixtures and vehicles now or hereafter owned by any
Assignor and any and all additions, substitutions and replacements of any of the
foregoing, wherever located, together with all attachments, components, parts,
equipment and accessories installed thereon or affixed thereto.
"Event of Default" shall mean any Event of Default under, and
as defined in, the Credit Agreement or any payment default under any Interest
Rate Protection Agreement
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<PAGE> 32
or Other Hedging Agreement and shall in any event, without limitation, include
any payment default on any of the Obligations after the expiration of any
applicable grace period.
"General Intangibles" shall have the meaning provided in the
Uniform Commercial Code as in effect on the date hereof in the State of New
York.
"Goods" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Indemnitee" shall have the meaning provided in Section 8.1 of
this Agreement.
"Instrument" shall have the meaning provided in the Uniform
Commercial Code as in effect on the date hereof in the State of New York.
"Interest Rate Protection Agreement or Other Hedging
Agreement" shall have the meaning provided in the recitals to this Agreement.
"Inventory" shall mean merchandise, inventory and goods, and
all additions, substitutions and replacements thereof, wherever located,
together with all goods, supplies, incidentals, packaging materials, labels,
materials and any other items used or usable in manufacturing, processing,
packaging or shipping same; in all stages of production -- from raw materials
through work-in-process to finished goods -- and all products and proceeds of
whatever sort and wherever located and any portion thereof which may be
returned, rejected, reclaimed or repossessed by the Collateral Agent from any
Assignor's customers, and shall specifically include all "inventory" as such
term is defined in the Uniform Commercial Code as in effect on the date hereof
in the State of New York, now or hereafter owned by any Assignor.
"Liens" shall mean any security interest, mortgage, pledge,
lien, claim, charge, encumbrance, title retention agreement, lessor's interest
in a financing lease or analogous instrument, in, of, or on any Assignor's
property.
"Marks" shall mean all right, title and interest in and to any
U.S. or foreign trademarks, service marks and trade names now held or hereafter
acquired by any Assignor, including any registration or application for
registration of any trademarks and service marks in the United States Patent and
Trademark Office, or the equivalent thereof in any State of the United States or
in any foreign country, and any trade dress including logos, designs,
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trade names, company names, business names, fictitious business names and other
business identifiers in connection with which any of these registered or
unregistered marks are used.
"Obligations" shall mean (i) the full and prompt payment when
due (whether at the stated maturity, by acceleration or otherwise) of all
obligations and liabilities (including, without limitation, indemnities, fees
and interest thereon) of each Assignor owing to the Bank Creditors, now existing
or hereafter incurred under, arising out of or in connection with any Credit
Document to which such Assignor is a party (including all such obligations and
indebtedness under the Subsidiaries Guaranty if such Assignor is a party) and
the due performance and compliance by each Assignor with the terms, conditions
and agreements of each such Credit Document (all such obligations or liabilities
under this clause (i), except to the extent consisting of obligations or
indebtedness with respect to Interest Rate Protection Agreements or Other
Hedging Agreements, being herein collectively called the "Credit Document
Obligations"); (ii) the full and prompt payment when due (whether at the stated
maturity, by acceleration or otherwise) of all obligations and liabilities
(including, without limitation, indemnities, fees and interest thereon) of each
Assignor owing to the Other Creditors, now existing or hereafter incurred under,
arising out of or in connection with any Interest Rate Protection Agreement or
Other Hedging Agreement, whether such Interest Rate Protection Agreement or
Other Hedging Agreement is now in existence or hereafter arising, including, in
the case of the Subsidiaries each Subsidiary Guarantor, all obligations under
the Subsidiaries Guaranty, in each case, in respect of Interest Rate Protection
Agreements or Other Hedging Agreements, and the due performance and compliance
by such Assignor with all of the terms, conditions and agreements contained in
any such Interest Rate Protection Agreement or Other Hedging Agreement (all such
obligations and indebtedness under this clause (ii) being herein collectively
called the "Other Obligations"); (iii) any and all sums advanced by the
Collateral Agent in order to preserve the Collateral or preserve its security
interest in the Collateral; (iv) in the event of any proceeding for the
collection or enforcement of any indebtedness, obligations, or liabilities of
each Assignor referred to in clauses (i), (ii) and (iii) after an Event of
Default shall have occurred and be continuing, the reasonable expenses of
retaking, holding, preparing for sale or lease, selling or otherwise disposing
of or realizing on the Collateral, or of any exercise by the Collateral Agent of
its rights hereunder, together with reasonable attorneys' fees and court costs;
and (v) all amounts paid by any Indemnitee as to which such Indemnitee has the
right to reimbursement under Section 8.1 of this Agreement. It is acknowledged
and agreed that the "Obligations" shall include extensions of credit of the
types described above, whether outstanding on the date of this Agreement or
extended from time to time after the date of this Agreement.
"Original Instruments" shall have the meaning contained in the
Paribas Indemnity.
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"Other Creditors" shall have the meaning provided in the
recitals to this Agreement.
"Other Obligations" shall have the meaning provided in the
definition of "Obligations" in this Article IX.
"Paribas Indemnity" shall mean the Lost Collateral Indemnity
Agreement, dated as of July 31, 1996, between Banque Paribas and the Borrower.
"Patents" shall mean any U.S. or foreign patent to which any
Assignor now or hereafter has title and any divisions or continuations thereof,
as well as any application for a U.S. or foreign patent now or hereafter made by
any Assignor.
"Pledged Securities" shall have the meaning provided in the
Pledge Agreement.
"Primary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Proceeds" shall have the meaning provided in the Uniform
Commercial Code as in effect in the State of New York on the date hereof or
under other relevant law and, in any event, shall include, but not be limited
to, (i) any and all proceeds of any insurance, indemnity, warranty or guaranty
payable to the Collateral Agent or any Assignor from time to time with respect
to any of the Collateral, (ii) any and all payments (in any form whatsoever)
made or due and payable to any Assignor from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any governmental authority (or any person acting under
color of governmental authority) and (iii) any and all other amounts from time
to time paid or payable under or in connection with any of the Collateral.
"Pro Rata Share" shall have the meaning provided in Section
7.4(b) of this Agreement.
"Receivables" shall mean any "account" as such term is defined
in the Uniform Commercial Code as in effect on the date hereof in the State of
New York, now or hereafter owned by any Assignor and, in any event, shall
include, but shall not be limited to, all of such Assignor's rights to payment
for, or exchange of, goods sold or leased or services performed or product
exchanged by such Assignor, whether now in existence or arising from time to
time hereafter, including, without limitation, rights evidenced by an account,
note,
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contract, barter arrangement, security agreement, chattel paper, or other
evidence of indebtedness or security, together with (a) all security pledged,
assigned, hypothecated or granted to or held by such Assignor to secure the
foregoing, (b) all of any Assignor's right, title and interest in and to any
goods or services, the sale or exchange of which gave rise thereto, (c) all
guarantees, endorsements and indemnifications on, or of, any of the foregoing,
(d) all powers of attorney for the execution of any evidence of indebtedness or
security or other writing in connection therewith, (e) all books, records,
ledger cards, and invoices relating thereto, (f) all evidences of the filing of
financing statements and other statements and the registration of other
instruments in connection therewith and amendments thereto, notices to other
creditors or secured parties, and certificates from filing or other registration
officers, (g) all credit information, reports and memoranda relating thereto and
(h) all other writings related in any way to the foregoing.
"Representative" shall have the meaning provided in Section
7.4(e).
"Requisite Creditors" shall have the meaning provided in
Section 10.2 of this Agreement.
"Secondary Obligations" shall have the meaning provided in
Section 7.4(b) of this Agreement.
"Secured Creditors" shall have the meaning provided in the
recitals to this Agreement.
"Termination Date" shall have the meaning provided in Section
10.8 of this Agreement.
"Trade Secret Rights" shall have the meaning provided in
Section 5.1 of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1. Notices. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made when delivered to
the party to which such notice, request,
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demand or other communication is required or permitted to be given or made under
this Agreement, addressed:
(a) if to any Assignor, at it address set forth opposite its
signature below;
(b) if to the Collateral Agent:
Bankers Trust Company
One Bankers Trust Plaza
New York, New York 10006
Attention: Patricia Hogan
Telephone No.: (212) 250-5175
Facsimile No.: (212) 250-7218
(c) if to any Bank Creditor (other than the Collateral Agent),
at such address as such Bank Creditor shall have specified in the
Credit Agreement; and
(d) if to any Other Creditor, at such address as such Other
Creditor shall have specified in writing to each Assignor and the
Collateral Agent;
or at such other address as shall have been furnished in writing by any Person
described above to the party required to give notice hereunder.
10.2. Waiver; Amendment. None of the terms and conditions of
this Agreement may be changed, waived, modified or varied in any manner
whatsoever unless in writing duly signed by each Assignor directly and adversely
affected thereby and the Collateral Agent (with the consent of (x) the Required
Banks (or all the Banks if required by Section 13.12 of the Credit Agreement) at
all times prior to the time at which all Credit Document Obligations have been
paid in full and all Commitments under the Credit Agreement have been terminated
or (y) the holders of at least a majority of the outstanding Other Obligations
at all times after the time on which all Credit Document Obligations have been
paid in full and all Commitments under the Credit Agreement have been
terminated; provided, that any change, waiver, modification or variance
affecting the rights and benefits of a single Class (as defined below) of
Secured Creditors (and not all Secured Creditors in a like or similar manner)
shall require the written consent of the Requisite Creditors (as defined below)
of such Class of Secured Creditors. For the purpose of this Agreement the term
"Class" shall mean each class of Secured Creditors, i.e., whether (x) the Bank
Creditors as holders of the Credit Document Obligations or (y) the Other
Creditors as the holders of the Other Obligations. For the purpose of this
Agreement, the term "Requisite Creditors" of any Class
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<PAGE> 37
shall mean each of (x) with respect to the Credit Document Obligations, the
Required Banks and (y) with respect to the Other Obligations, the holders of at
least a majority of all obligations outstanding from time to time under the
Interest Rate Protection Agreements or Other Hedging Agreements.
10.3. Obligations Absolute. The obligations of each Assignor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of such Assignor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of this Agreement, any other Credit Document or
any Interest Rate Protection Agreement or Other Hedging Agreement; or (c) any
renewal, extension, amendment or modification of or addition or supplement to or
deletion from any Credit Document or any Interest Rate Protection Agreement or
Other Hedging Agreement or any security for any of the Obligations; (d) any
waiver, consent, extension, indulgence or other action or inaction under or in
respect of any such agreement or instrument including, without limitation, this
Agreement; (e) any furnishing of any additional security to the Collateral Agent
or its assignee or any acceptance thereof or any release of any security by the
Collateral Agent or its assignee; or (f) any limitation on any party's liability
or obligations under any such instrument or agreement or any invalidity or
unenforceability, in whole or in part, of any such instrument or agreement or
any term thereof; whether or not any Assignor shall have notice or knowledge of
any of the foregoing. The rights and remedies of the Collateral Agent herein
provided are cumulative and not exclusive of any rights or remedies which the
Collateral Agent would otherwise have.
10.4. Successors and Assigns. This Agreement shall be binding
upon each Assignor and its successors and assigns and shall inure to the benefit
of the Collateral Agent and its successors and assigns; provided, that no
Assignor may transfer or assign any or all of its rights or obligations
hereunder without the prior written consent of the Collateral Agent. All
agreements, statements, representations and warranties made by each Assignor
herein or in any certificate or other instrument delivered by such Assignor or
on its behalf under this Agreement shall be considered to have been relied upon
by the Secured Creditors and shall survive the execution and delivery of this
Agreement, the other Credit Documents and the Interest Rate Protection
Agreements or Other Hedging Agreements regardless of any investigation made by
the Secured Creditors or on their behalf.
10.5. Headings Descriptive. The headings of the several
sections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.
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<PAGE> 38
10.6. Governing Law. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND
BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
10.7. Assignor's Duties. It is expressly agreed, anything
herein contained to the contrary notwithstanding, that each Assignor shall
remain liable to perform all of the obligations, if any, assumed by it with
respect to the Collateral and the Collateral Agent shall not have any
obligations or liabilities with respect to any Collateral by reason of or
arising out of this Agreement, nor shall the Collateral Agent be required or
obligated in any manner to perform or fulfill any of the obligations of each
Assignor under or with respect to any Collateral.
10.8. Termination; Release. (a) After the Termination Date (as
defined below), this Agreement shall terminate (provided that all indemnities
set forth herein including, without limitation, in Section 8.1 hereof shall
survive such termination) and the Collateral Agent, at the request and expense
of the respective Assignor, will promptly execute and deliver to such Assignor a
proper instrument or instruments (including Uniform Commercial Code termination
statements on form UCC-3) acknowledging the satisfaction and termination of this
Agreement, and will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
may be in the possession of the Collateral Agent and as has not theretofore been
sold or otherwise applied or released pursuant to this Agreement. As used in
this Agreement, "Termination Date" shall mean the date upon which the Total
Commitment and all Interest Rate Protection Agreements or Other Hedging
Agreements have been terminated, no Note is outstanding (and all Loans have been
paid in full), all Letters of Credit have been terminated and all other
Obligations then owing have been paid in full.
(b) In the event that any part of the Collateral is sold
(other than to another Assignor) (x) at any time prior to the time at which all
Credit Document Obligations have been paid in full and all Commitments under the
Credit Agreement have been terminated, in connection with a sale (other than to
another Assignor) permitted by Section 9.02 of the Credit Agreement or is
otherwise released at the direction of the Required Banks (or all the Banks if
required by Section 13.12 of the Credit Agreement) or (y) at any time
thereafter, to the extent permitted by the Interest Rate Protection Agreements
or Other Hedging Agreements, and in the case of clause (x) and (y), the proceeds
of such sale or sales or from such release are applied in accordance with the
terms of the Credit Agreement or such Interest Rate Protection Agreements or
Other Hedging Agreements, as the case may be, to the extent required to be so
applied, the Collateral Agent, at the request and expense of such
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<PAGE> 39
Assignor, will duly assign, transfer and deliver to such Assignor (without
recourse and without any representation or warranty) such of the Collateral as
is then being (or has been) so sold or released and as may be in the possession
of the Collateral Agent and has not theretofore been released pursuant to this
Agreement.
(c) At any time that the respective Assignor desires that
Collateral be released as provided in the foregoing Section 10.8(a) or (b), it
shall deliver to the Collateral Agent a certificate signed by an Authorized
Officer stating that the release of the respective Collateral is permitted
pursuant to Section 10.8(a) or (b). If requested by the Collateral Agent
(although the Collateral Agent shall have no obligation to make any such
request), the relevant Assignor shall furnish appropriate legal opinions (from
counsel, which may be in-house counsel, reasonably acceptable to the Collateral
Agent) to the effect set forth in the immediately preceding sentence. The
Collateral Agent shall have no liability whatsoever to any Secured Creditor as
the result of any release of Collateral by it as permitted by this Section 10.8.
10.9. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrower and the Collateral Agent.
10.10. The Collateral Agent. The Collateral Agent will hold in
accordance with this Agreement all items of the Collateral at any time received
under this Agreement. It is expressly understood and agreed that the obligations
of the Collateral Agent as holder of the Collateral and interests therein and
with respect to the disposition thereof, and other- wise under this Agreement,
are only those expressly set forth in this Agreement. The Collateral Agent shall
act hereunder on the terms and conditions set forth in Section 12 of the Credit
Agreement.
10.11. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.12. Limited Obligations. It is the desire and intent of
each Assignor and the Secured Creditors that this Agreement shall be enforced
against each Assignor to the fullest extent permissible under the laws and
public policies applied in each jurisdiction in which
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enforcement is sought. Notwithstanding anything to the contrary contained
herein, in furtherance of the foregoing, it is noted that the obligations of
each Subsidiary Guarantor constituting an Assignor have been limited as, and
only to the extent, provided in Section 28 of the Subsidiaries Guaranty.
10.13. Additional Assignors. It is understood and agreed that
any Subsidiary of the Borrower that is required to execute a counterpart of this
Agreement after the date hereof pursuant to the Credit Agreement shall
automatically become an Assignor hereunder by executing a counterpart hereof and
delivering the same to the Collateral Agent.
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* * *
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
Address
Tri-Parkway Corporate Park TRANSWORLD HOME
200 Schulz Drive HEALTHCARE, INC.,
Red Bank, New Jersey 07701 as a Pledgor
Attn.: Wayne A. Palladino
Telephone No.:(908) 530-1144
Facsimile No.:(908) 530-7389 By /s/ Wayne A. Palladino
-----------------------------
Title: Senior Vice President
Tri-Parkway Corporate Park DERMAQUEST, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
Facsimile No.: (908) 530-7389 ---------------------------
Title: Vice President
Tri-Parkway Corporate Park MK DIABETIC SUPPORT SERVICES, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
---------------------------
Title: Vice President
Tri-Parkway Corporate Park THE PROMPTCARE COMPANIES, INC.,
<PAGE> 42
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-------------------------
Title: Vice President
Tri-Parkway Corporate Park THE PROMPTCARE LUNG CENTER, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-------------------------
Title: Vice President
Tri-Parkway Corporate Park STERI-PHARM, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
Facsimile No.: (908) 530-7389 --------------------------
Title: Vice President
Tri-Parkway Corporate Park TRANSWORLD NURSES, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
--------------------------
Title: Vice President
<PAGE> 43
Facsimile No.: (908) 530-7389
Tri-Parkway Corporate Park RADAMERICA, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
--------------------------
Title: Vice President
Tri-Parkway Corporate Park RESPIFLOW, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
Facsimile No.: (908) 530-7389 --------------------------
Title: Vice President
BANKERS TRUST COMPANY,
as Pledgee
By /s/ Patricia Hogan
--------------------------
Title: Vice President
<PAGE> 1
SUBSIDIARIES GUARANTY
GUARANTY, dated as of July 31, 1996 (as amended, modified or
supplemented from time to time, this "Guaranty"), made by each of the
undersigned (each a "Guarantor" and, together with any other entity that becomes
a party hereto pursuant to Section 26 hereof, the "Guarantors"). Except as
otherwise defined herein, terms used herein and defined in the Credit Agreement
(as defined below) shall be used herein as therein defined.
W I T N E S S E T H :
WHEREAS, Transworld Home HealthCare, Inc. ("Borrower"), the
lenders from time to time party thereto (the "Banks"), and Bankers Trust
Company, as Agent (together with any successor agent, the "Agent"), have entered
into a Credit Agreement, dated as of July 31, 1996 (as amended, modified or
supplemented from time to time, the "Credit Agreement"), providing for the
making of Loans to the Borrower and the issuance of, and participation in,
Letters of Credit for the account of the Borrower, all as contemplated therein
(the Banks, each Letter of Credit Issuer, the Agent and the Collateral Agent are
herein called the "Bank Creditors");
WHEREAS, the Borrower may from time to time be party to one or
more (i) interest rate agreements, interest rate cap agreements, interest rate
collar agreements or other similar agreements or arrangements, (ii) foreign
exchange contracts, currency swap agreements or similar agreements or
arrangements designed to protect against the fluctuations in currency values
and/or (iii) other types of hedging agreements from time to time (each such
agreement or arrangement with an Other Creditor (as hereinafter defined), an
"Interest Rate Protection Agreement or Other Hedging Agreement"), with a Bank or
an affiliate of a Bank (each such Bank or affiliate, even if the respective Bank
subsequently ceases to be a Bank under the Credit Agreement for any reason,
together with such Bank's or affiliate's successors and assigns, collectively,
the "Other Creditors," and together with the Bank Creditors, are herein called
the "Creditors");
WHEREAS, each Guarantor is a Subsidiary of the Borrower;
WHEREAS, it is a condition to the making of Loans under the
Credit Agreement that each Guarantor shall have executed and delivered this
Guaranty; and
WHEREAS, each Guarantor will obtain benefits from the
incurrence of Loans by the Borrower under the Credit Agreement and the entering
into of Interest Rate Protection Agreements or Other Hedging Agreements and,
accordingly, desires to execute this Guaranty
<PAGE> 2
in order to satisfy the conditions described in the preceding paragraph and to
induce the Banks to make Loans to the Borrower and Other Creditors to enter into
Interest Rate Protection Agreements or Other Hedging Agreements with the
Borrower;
NOW, THEREFORE, in consideration of the foregoing and other
benefits accruing to each Guarantor, the receipt and sufficiency of which are
hereby acknowledged, each Guarantor hereby makes the following representations
and warranties to the Creditors and hereby covenants and agrees with each
Creditor as follows:
1. Each Guarantor, jointly and severally, irrevocably and
unconditionally guarantees: (i) to the Bank Creditors the full and prompt
payment when due (whether at the stated maturity, by acceleration or otherwise)
of (x) the principal of and interest on the Notes issued by, and the Loans made
to, the Borrower under the Credit Agreement and all reimbursement obligations
and Unpaid Drawings with respect to Letters of Credit and (y) all other
obligations (including obligations which, but for the automatic stay under
Section 362(a) of the Bankruptcy Code, would become due) and liabilities owing
by the Borrower to the Bank Creditors under the Credit Agreement (including,
without limitation, indemnities, Fees and interest thereon) and the other Credit
Documents to which the Borrower is a party, whether now existing or hereafter
incurred under, arising out of or in connection with the Credit Agreement or any
such other Credit Document and the due performance and compliance with the terms
of the Credit Documents by the Borrower (all such principal, interest,
liabilities and obligations under this clause (i), except to the extent
consisting of obligations or liabilities with respect to Interest Rate
Protection Agreements or Other Hedging Agreements, being herein collectively
called the "Credit Document Obligations"); and (ii) to each Other Creditor the
full and prompt payment when due (whether at the stated maturity, by
acceleration or otherwise) of all obligations (including obligations which, but
for the automatic stay under Section 362(a) of the Bankruptcy Code, would become
due) and liabilities owing by the Borrower under any Interest Rate Protection
Agreements or Other Hedging Agreements, whether now in existence or hereafter
arising, and the due performance and compliance by the Borrower with all terms,
conditions and agreements contained therein (all such obligations and
liabilities being herein collectively called the "Other Obligations", and
together with the Credit Document Obligations are herein collectively called the
"Guaranteed Obligations"). Each Guarantor understands, agrees and confirms that
the Creditors may enforce this Guaranty up to the full amount of the Guaranteed
Obligations against each Guarantor without proceeding against any other
Guarantor, the Borrower, against any security for the Guaranteed Obligations, or
under any other guaranty covering all or a portion of the Guaranteed
Obligations. All payments by each Guarantor under this Guaranty shall be made on
the same basis as payments by the Borrower under Sections 4.03 and 4.04 of the
Credit Agreement.
2. Additionally, each Guarantor, jointly and severally,
unconditionally and irrevocably, guarantees the payment of any and all
Guaranteed Obligations of the Borrower
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<PAGE> 3
to the Creditors whether or not due or payable by the Borrower upon the
occurrence in respect of the Borrower of any of the events specified in Section
10.05 of the Credit Agreement, and unconditionally and irrevocably, jointly and
severally, promises to pay such Guaranteed Obligations to the Creditors, or
order, on demand, in lawful money of the United States.
3. The liability of each Guarantor hereunder is exclusive and
independent of any security for or other guaranty of the Guaranteed Obligations
of the Borrower whether executed by such Guarantor, any other Guarantor, any
other guarantor or by any other party, and the liability of each Guarantor
hereunder shall not be affected or impaired by (a) any direction as to
application of payment by the Borrower or by any other party, (b) any other
continuing or other guaranty, undertaking or maximum liability of a guarantor or
of any other party as to the Guaranteed Obligations of the Borrower, (c) any
payment on or in reduction of any such other guaranty or undertaking, (d) any
dissolution, termination or increase, decrease or change in personnel by the
Borrower or (e) any payment made to any Creditor on the Guaranteed Obligations
which any Creditor repays the Borrower pursuant to court order in any
bankruptcy, reorganization, arrangement, moratorium or other debtor relief
proceeding, and each Guarantor waives any right to the deferral or modification
of its obligations hereunder by reason of any such proceeding. This is a
guaranty of payment and not of collection.
4. The obligations of each Guarantor hereunder are independent
of the obligations of any other Guarantor, any other guarantor or the Borrower,
and a separate action or actions may be brought and prosecuted against each
Guarantor whether or not action is brought against any other Guarantor, any
other guarantor or the Borrower and whether or not any other Guarantor, any
other guarantor of the Borrower or the Borrower be joined in any such action or
actions. Each Guarantor waives, to the fullest extent permitted by law, the
benefit of any statute of limitations affecting its liability hereunder or the
enforcement thereof. Any payment by the Borrower or other circumstance which
operates to toll any statute of limitations as to the Borrower shall operate to
toll the statute of limitations as to each Guarantor.
5. Each Guarantor hereby waives (to the fullest extent
permitted by applicable law) notice of acceptance of this Guaranty and notice of
any liability to which it may apply, and waives promptness, diligence,
presentment, demand of payment, protest, notice of dishonor or nonpayment of any
such liabilities, suit or taking of other action by the Agent or any other
Creditor against, and any other notice to, any party liable thereon (including
such Guarantor or any other guarantor or the Borrower).
6. Any Creditor may (except as shall be required by applicable
statute and cannot be waived) at any time and from time to time without the
consent of, or notice to, any Guarantor, without incurring responsibility to
such Guarantor, without impairing or releasing
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<PAGE> 4
the obligations of such Guarantor hereunder, upon or without any terms
or conditions and in whole or in part:
(a) change the manner, place or terms of payment of, and/or
change or extend the time of payment of, renew, increase, accelerate or
alter, any of the Guaranteed Obligations, any security therefor, or any
liability incurred directly or indirectly in respect thereof, and the
guaranty herein made shall apply to the Guaranteed Obligations as so
changed, extended, renewed or altered;
(b) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property by
whomsoever at any time pledged or mortgaged to secure, or howsoever
securing, the Guaranteed Obligations or any liabilities (including any
of those hereunder) incurred directly or indirectly in respect thereof
or hereof, and/or any offset thereagainst;
(c) exercise or refrain from exercising any rights against the
Borrower or others or otherwise act or refrain from acting;
(d) settle or compromise any of the Guaranteed Obligations,
any security therefor or any liability (including any of those
hereunder) incurred directly or indirectly in respect thereof or
hereof, and may subordinate the payment of all or any part thereof to
the payment of any liability (whether due or not) of the Borrower to
creditors of the Borrower;
(e) apply any sums by whomsoever paid or howsoever realized to
any liability or liabilities of the Borrower to the Creditors
regardless of what liabilities of the Borrower remain unpaid;
(f) consent to or waive any breach of, or any act, omission or
default under, any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of the instruments or
agreements referred to therein, or otherwise amend, modify or
supplement any of the Interest Rate Protection Agreements or Other
Hedging Agreements, the Credit Documents or any of such other
instruments or agreements; and/or
(g) act or fail to act in any manner referred to in this
Guaranty which may deprive such Guarantor of its right to subrogation
against the Borrower to recover full indemnity for any payments made
pursuant to this Guaranty.
7. No invalidity, irregularity or unenforceability of all or
any part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty, and this Guaranty shall be primary,
absolute and unconditional notwithstanding the occurrence of any event or the
existence of any other circumstances which might
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<PAGE> 5
constitute a legal or equitable discharge of a surety or guarantor except
payment in full of the Guaranteed Obligations.
8. This Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms hereof shall be conclusively
presumed to have been created in reliance hereon. No failure or delay on the
part of any Creditor in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein expressly specified are cumulative and not exclusive of any
rights or remedies which any Creditor would otherwise have. No notice to or
demand on any Guarantor in any case shall entitle such Guarantor to any other
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of any Creditor to any other or further action in any
circumstances without notice or demand. It is not necessary for any Creditor to
inquire into the capacity or powers of the Borrower or any of its Subsidiaries
or the officers, directors, partners or agents acting or purporting to act on
its behalf, and any indebtedness made or created in reliance upon the professed
exercise of such powers shall be guaranteed hereunder.
9. Any indebtedness of the Borrower now or hereafter held by
any Guarantor is hereby subordinated to the indebtedness of the Borrower to the
Creditors; and such indebtedness of the Borrower to any Guarantor, if the Agent,
after an Event of Default has occurred and is continuing, so requests, shall be
collected, enforced and received by such Guarantor as trustee for the Creditors
and be paid over to the Creditors on account of the indebtedness of the Borrower
to the Creditors, but without affecting or impairing in any manner the liability
of such Guarantor under the other provisions of this Guaranty. Prior to the
transfer by any Guarantor of any note or negotiable instrument evidencing any
indebtedness of the Borrower to such Guarantor, such Guarantor shall mark such
note or negotiable instrument with a legend that the same is subject to this
subordination. Without limiting the generality of the foregoing, each Guarantor
hereby agrees with the Creditors that it will not exercise any right of
subrogation which it may at any time otherwise have as a result of this Guaranty
(whether contractual, under Section 509 of the Bankruptcy Code or otherwise)
until all Guaranteed Obligations have been irrevocably paid in full in cash.
10. (a) Each Guarantor waives any right (except as shall be
required by applicable statute or law and cannot be waived) to require the
Creditors to: (i) proceed against the Borrower, any other Guarantor, any other
guarantor of the Borrower or any other party; (ii) proceed against or exhaust
any security held from the Borrower, any other Guarantor, any other guarantor of
the Borrower or any other party; or (iii) pursue any other remedy in the
Creditors' power whatsoever. Each Guarantor waives any (to the fullest extent
permitted by applicable law) defense based on or arising out of any defense of
the Borrower, any other Guarantor, any other
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<PAGE> 6
guarantor of the Borrower or any other party other than payment in full of the
Guaranteed Obligations, including, without limitation, any defense based on or
arising out of the disability of the Borrower, any other Guarantor, any other
guarantor of the Borrower or any other party, or the unenforceability of the
Guaranteed Obligations or any part thereof from any cause, or the cessation from
any cause of the liability of the Borrower other than payment in full of the
Guaranteed Obligations. The Creditors may, at their election, foreclose on any
security held by the Agent, the Collateral Agent or the other Creditors by one
or more judicial or nonjudicial sales, whether or not every aspect of any such
sale is commercially reasonable (to the extent such sale is permitted by
applicable law), or exercise any other right or remedy the Creditors may have
against the Borrower or any other party, or any security, without affecting or
impairing in any way the liability of any Guarantor hereunder except to the
extent the Guaranteed Obligations have been paid in full. Each Guarantor waives
any defense arising out of any such election by the Creditors, even though such
election operates to impair or extinguish any right of reimbursement or
subrogation or other right or remedy of such Guarantor against the Borrower or
any other party or any security.
(b) Each Guarantor waives all presentments, demands for
performance, protests and notices, including, without limitation, notices of
nonperformance, notices of protest, notices of dishonor, notices of acceptance
of this Guaranty, and notices of the existence, creation or incurring of new or
additional indebtedness. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrower's financial condition and assets, and of
all other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations and the nature, scope and extent of the risks which such Guarantor
assumes and incurs hereunder, and agrees that the Creditors shall have no duty
to advise any Guarantor of information known to them regarding such
circumstances or risks.
(c) Each Guarantor understands, is aware and hereby
acknowledges that to the extent the Guaranteed Obligations are secured by real
property located in the State of California, such Guarantor shall be liable for
the full amount of its liability hereunder notwithstanding foreclosure on such
real property by trustee sale or any other reason impairing such Guarantor's or
any Creditor's right to proceed against any Credit Party. Each Guarantor hereby
waives, to the fullest extent permitted by law, all rights and benefits under
Section 2809 of the California Civil Code purporting to reduce a guarantor's
obligation in proportion to the principal obligation. Each Guarantor hereby
waives all rights and benefits under Section 580a of the California Code of
Civil Procedure purporting to limit the amount of any deficiency judgment which
might be recoverable following the occurrence of a trustee's sale under a deed
of trust and all rights and benefits under Section 580b of the California Code
of Civil Procedure stating that no deficiency may be recovered on a real
property purchase money obligation. Each Guarantor further understands, is aware
and hereby acknowledges that if the Creditors elect to nonjudicially foreclose
on any real property security located in the State of California any right of
subrogation of such Guarantor against the Creditors may be impaired or
extinguished and that as a result of such impairment or extinguishment of
subrogation rights, such Guarantor may have a defense to a deficiency judgment
arising out of the operation of (i) Section 580d of the California Code of Civil
Procedure which states that no deficiency may be recovered on a note secured by
a deed of
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<PAGE> 7
trust on real property in case such real property is sold under the power of
sale contained in such deed of trust, and (ii) related principles of estoppel.
To the fullest extent permitted by law, each Guarantor waives all rights and
benefits and any defense arising out of the operation of Section 580d of the
California Code of Civil Procedure and related principles of estoppel, even
though such election operates to impair or extinguish any right of reimbursement
or subrogation or other right or remedy of such Guarantor against any Credit
Party or any other party or any security. In addition, each Guarantor hereby
waives, to the fullest extent permitted by applicable law, without limiting the
generality of the foregoing or any other provision hereof, all rights and
benefits which might otherwise be available to such Guarantor under Section 726
of the California Code of Civil Procedure and all rights and benefits which
might otherwise be available to such Guarantor under California Civil Code
Sections 2809, 2810, 2815, 2819, 2821, 2839, 2845, 2848, 2849, 2850, 2899 and
3433.
(d) Each Guarantor hereby further waives (to the fullest
extent permitted by applicable law): (1) all rights and defenses arising out of
an election of remedies by the Creditors, even though that election of remedies,
such as a nonjudicial foreclosure with respect to security for a Guaranteed
Obligation, has destroyed such Guarantor's rights of subrogation and
reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise; (2) such Guarantor's rights of
subrogation and reimbursement and any other rights and defenses available to
such Guarantor by reason of the California Civil Code Sections 2787 to 2855,
inclusive, including, without limitation, (i) any defenses such Guarantor may
have to the Guaranteed Obligations by reason of an election of remedies by the
Creditors and (ii) any rights or defenses such Guarantor may have by reason of
protection afforded to the principal borrower with respect to the obligation so
guaranteed pursuant to the antideficiency or other laws of the State of
California limiting or discharging the borrower's indebtedness, including,
without limitation, California Code of Civil Procedure Sections 580a, 580b, 580d
or 726.
11. Notwithstanding anything else to the contrary in this Guaranty, the
Creditors agree that this Guaranty may be enforced only by the action of the
Agent or the Collateral Agent, in each case acting upon the instructions of the
Required Banks (or, after the date on which all Credit Document Obligations have
been paid in full, the holders of at least a majority of the outstanding Other
Obligations) and that no other Creditor shall have any right individually to
seek to enforce or to enforce this Guaranty or to realize upon the security to
be granted by the Security Documents, it being understood and agreed that such
rights and remedies may be exercised by the Agent or the Collateral Agent or the
holders of at least a majority of the outstanding Other Obligations, as the case
may be, for the benefit of the Creditors upon the terms of this Guaranty and the
Security Documents. The Creditors further agree that this Guaranty may not be
enforced against any director, officer, employee, or stockholder of any
Guarantor (except to the extent such stockholder is also a Guarantor hereunder).
It is understood that the agreement in this paragraph 11 is among and solely for
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<PAGE> 8
the benefit of the Banks and that if the Required Banks so agree (without
requiring the consent of any Guarantor), the Guaranty may be directly enforced
by any Creditor.
12. In order to induce the Banks to make Loans and issue Letters of
Credit pursuant to the Credit Agreement, and in order to induce the Other
Creditors to execute, deliver and perform the Interest Rate Protection
Agreements or Other Hedging Agreements, each Guarantor represents, warrants and
covenants that:
(a) Such Guarantor (i) is a duly organized and validly
existing corporation and is in good standing under the laws of the
jurisdiction of its organization, and has the corporate power and
authority to own its property and assets and to transact the business
in which it is engaged and presently proposes to engage and (ii) is
duly qualified and is authorized to do business and is in good standing
in all jurisdictions where it is required to be so qualified and where
the failure to be so qualified could reasonably be expected to have a
Material Adverse Effect.
(b) Such Guarantor has the corporate power and authority to
execute, deliver and carry out the terms and provisions of this
Guaranty and each other Credit Document to which it is a party and has
taken all necessary corporate action to authorize the execution,
delivery and performance by it of each such Credit Document. Such
Guarantor has duly executed and delivered this Guaranty and each other
Credit Document to which it is a party and each such Credit Document
constitutes the legal, valid and binding obligation of such Guarantor
enforceable in accordance with its terms, except to the extent that the
enforceability hereof or thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by equitable principles
(regardless of whether enforcement is sought in equity or at law).
(c) Neither the execution, delivery or performance by such
Guarantor of this Guaranty or any other Credit Document to which it is
a party, nor compliance by it with the terms and provisions hereof or
thereof (i) will contravene any applicable provision of any law,
statute, rule or regulation, or any order, writ, injunction or decree
of any court or governmental instrumentality, (ii) will conflict or be
inconsistent with or result in any breach of, any of the terms,
covenants, conditions or provisions of, or constitute a default under,
or (other than pursuant to the Security Documents) result in the
creation or imposition of (or the obligation to create or impose) any
Lien upon any of the property or assets of such Guarantor or any of its
Subsidiaries pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, credit agreement or other material agreement or
other instrument to which such Guarantor or any of its Subsidiaries is
a party or by which it or any of its property or assets is bound or to
which it may be subject or (iii) will violate any provision of the
certificate of incorporation or by-laws of such Guarantor or any of its
Subsidiaries.
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<PAGE> 9
(d) No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with, or exemption
by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with,
(i) the execution, delivery and performance of this Guaranty or any
other Credit Document to which such Guarantor is a party, or (ii) the
legality, validity, binding effect or enforceability of this Guaranty
or any other Credit Document to which such Guarantor is a party other
than filings, registrations or recordings required to perfect the
security interests granted to the Collateral Agent pursuant to the
Security Agreement all of which have been made or will be made within
the time required therefor by the Security Agreement.
(e) There are no actions, suits or proceedings pending or to
the knowledge of such Guarantor, threatened (i) with respect to such
Guarantor that are likely to have a Material Adverse Effect or (ii)
that could reasonably be expected to have a material adverse effect on
the rights or remedies of the Creditors or on the ability of such
Guarantor to perform its respective obligations to the Creditors
hereunder and under the other Credit Documents to which it is a party.
13. Each Guarantor covenants and agrees that on and after the date
hereof and until the termination of the Total Revolving Loan Commitment and all
Interest Rate Protection Agreements or Other Hedging Agreements and when no Note
or Letter of Credit remains outstanding (other than Letters of Credit, together
with all Fees that have accrued and will accrue thereon through the stated
termination date of such Letters of Credit, which have been supported in a
manner satisfactory to the Letter of Credit Issuer in its sole and absolute
discretion) and all Guaranteed Obligations have been paid in full (other than
indemnities described in Section 13.13 of the Credit Agreement and analogous
provisions in the Security Documents which are not then due and payable), such
Guarantor shall take, or will refrain from taking, as the case may be, all
actions that are necessary to be taken or not taken so that no violation of any
provision, covenant or agreement contained in Section 8 or 9 of the Credit
Agreement, and so that no Default or Event of Default, is caused by the actions
of such Guarantor or any of its Subsidiaries.
14. The Guarantors hereby jointly and severally agree to pay all
reasonable out-of-pocket costs and expenses of each Creditor in connection with
the enforcement of this Guaranty and any amendment, waiver or consent relating
hereto (including, without limitation, the reasonable fees and disbursements of
counsel (including in-house counsel) employed by any of the Creditors).
15. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of the Creditors and their
successors and assigns.
16. Neither this Guaranty nor any provision hereof may be changed,
waived, discharged or terminated except with the written consent of each
Guarantor directly affected
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thereby and either (x) the Required Banks (or to the extent required by Section
13.12 of the Credit Agreement, with the written consent of each Bank) at all
times prior to the time on which all Credit Document Obligations have been paid
in full or (y) the holders of at least a majority of the outstanding Other
Obligations at all times after the time on which all Credit Document Obligations
have been paid in full; provided, that any change, waiver, modification or
variance affecting the rights and benefits of a single Class (as defined below)
of Creditors (and not all Creditors in a like or similar manner) shall require
the written consent of the Requisite Creditors (as defined below) of such Class
of Creditors (it being understood that the addition or release of any Guarantor
hereunder shall not constitute a change, waiver, discharge or termination
affecting any Guarantor other than the Guarantor so added or released). For the
purpose of this Guaranty the term "Class" shall mean each class of Creditors,
i.e., whether (x) the Bank Creditors as holders of the Credit Document
Obligations or (y) the Other Creditors as the holders of the Other Obligations.
For the purpose of this Guaranty, the term "Requisite Creditors" of any Class
shall mean each of (x) with respect to the Credit Document Obligations, the
Required Banks and (y) with respect to the Other Obligations, the holders of at
least a majority of all obligations outstanding from time to time under the
Interest Rate Protection Agreements or Other Hedging Agreements.
17. Each Guarantor acknowledges that an executed (or conformed)
copy of each of the Credit Documents and Interest Rate Protection Agreements or
Other Hedging Agreements existing as of the date hereof has been made available
to its principal executive officers and such officers are familiar with the
contents thereof and that an executed (or conformed) copy of any Credit Document
or Interest Rate Protection Agreement or Other Hedging Agreement created after
the date hereof will be made available to its principal executive officers and
such officers will be familiar with the contents thereof.
18. In addition to any rights now or hereafter granted under
applicable law (including, without limitation, Section 151 of the New York
Debtor and Creditor Law) and not by way of limitation of any such rights, upon
the occurrence and during the continuance of an Event of Default (such term to
mean and include any "Event of Default" as defined in the Credit Agreement or
any payment default under any Interest Rate Protection Agreement or Other
Hedging Agreement continuing after any applicable grace period), each Creditor
is hereby authorized at any time or from time to time, without notice to any
Guarantor or to any other Person, any such notice being expressly waived, to set
off and to appropriate and apply any and all deposits (general or special) and
any other indebtedness at any time held or owing by such Creditor to or for the
credit or the account of such Guarantor, against and on account of the
obligations and liabilities of such Guarantor to such Creditor under this
Guaranty, irrespective of whether or not such Creditor shall have made any
demand hereunder and although said obligations, liabilities, deposits or claims,
or any of them, shall be contingent or unmatured. Notwithstanding anything to
the contrary contained in this Section 18, no Creditor shall exercise any such
right of set-off without the prior consent of the Agent or the Required Banks so
long as the Guaranteed Obligations shall be secured by any Real Property located
in the State of California, it being understood and agreed, however, that this
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sentence is for the sole benefit of the Creditors and may be amended, modified
or waived in any respect by the Required Banks without the requirement of prior
notice to or consent by any Credit Party and does not constitute a waiver of any
rights against any Credit Party or against any Collateral.
19. All notices, requests, demands or other communications pursuant
hereto shall be deemed to have been duly given or made when delivered by hand or
overnight courier or by certified mail, return receipt requested, to the Person
to which such notice, request, demand or other communication is required or
permitted to be given or made under this Guaranty, addressed to such party at
(i) in the case of any Bank Creditor, as provided in the Credit Agreement, (ii)
in the case of any Guarantor, at its address set forth opposite its signature
below and (iii) in the case of any Other Creditor, at such address as such Other
Creditor shall have specified in writing to the Guarantor; or in any case at
such other address as any of the Persons listed above may hereafter notify the
others in writing.
20. If claim is ever made upon any Creditor for repayment or
recovery of any amount or amounts received in payment or on account of any of
the Guaranteed Obligations and any of the aforesaid payees repays all or part of
said amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over such payee or any of its property
or (ii) any settlement or compromise of any such claim effected by such payee
with any such claimant (including the Borrower), then and in such event each
Guarantor agrees that any such judgment, decree, order, settlement or compromise
shall be binding upon such Guarantor, notwithstanding any revocation hereof or
other instrument evidencing any liability of the Borrower, and such Guarantor
shall be and remain liable to the aforesaid payees hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by any such payee.
21. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
CREDITORS AND OF THE UNDERSIGNED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Any legal action or proceeding
with respect to this Guaranty or any other Credit Document to which such
Guarantor is a party may be brought in the courts of the State of New York or of
the United States of America for the Southern District of New York, and, by
execution and delivery of this Guaranty, each Guarantor hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. Each Guarantor hereby
further irrevocably waives any claim that any such courts lack jurisdiction over
such Guarantor, and agrees not to plead or claim, in any legal action or
proceeding with respect to this Guaranty or any other Credit Document to which
such Guarantor is a party brought in any of the aforesaid courts, that any such
court lacks jurisdiction over such Guarantor. Each Guarantor further irrevocably
consents to the service of process out of any of the aforementioned courts in
any such action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to each Guarantor at its address set forth
opposite its signature below, such service to become
-11-
<PAGE> 12
effective 30 days after such mailing. Each Guarantor hereby irrevocably waives
any objection to such service of process and further irrevocably waives and
agrees not to plead or claim in any action or proceeding commenced hereunder or
under any other Credit Document to which such Guarantor is a party that service
of process was in any way invalid or ineffective. Nothing herein shall affect
the right of any of the Creditors to serve process in any other manner permitted
by law or to commence legal proceedings or otherwise proceed against each
Guarantor in any other jurisdiction.
(b) Each Guarantor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Guaranty or any other credit document brought in the courts referred to in
clause (a) above and hereby further irrevocably waives and agrees not to plead
or claim in any such court that such action or proceeding brought in any such
court has been brought in an inconvenient forum.
22. In the event that all of the capital stock of one or more
Guarantors is sold or otherwise disposed of (but excluding for all purposes of
this Section 22 transfers of such capital stock to the Borrower or another
Subsidiary thereof) or liquidated in compliance with the requirements of Section
9.02 of the Credit Agreement (or such sale or other disposition or liquidation
has been approved in writing by the Required Banks (or all Banks if required by
Section 13.12 of the Credit Agreement)) and the proceeds of such sale,
disposition or liquidation are applied in accordance with the provisions of the
Credit Agreement, to the extent applicable, such Guarantor shall be released
from this Guaranty and this Guaranty shall, as to each such Guarantor or
Guarantors, terminate, and have no further force or effect (it being understood
and agreed that the sale of one or more Persons (but excluding for all purposes
of this Section 22 transfers of such capital stock to the Borrower or another
Subsidiary thereof) that own, directly or indirectly, all of the capital stock
or partnership interests of any Guarantor shall be deemed to be a sale of such
Guarantor for the purposes of this Section 22).
23. This Guaranty may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. A set of counterparts executed by all
the parties hereto shall be lodged with the Borrower and the Agent.
24. EACH GUARANTOR AND EACH OF THE CREDITORS HEREBY IRREVOCABLY
WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR RELATING TO THIS GUARANTY, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
-12-
<PAGE> 13
25. All payments made by any Guarantor hereunder will be made
without setoff, counterclaim or other defense.
26. It is understood and agreed that any Subsidiary of the Borrower
that is required to execute a counterpart of this Guaranty after the date hereof
pursuant to the requirements of the Credit Agreement shall automatically become
a Guarantor hereunder by executing a counterpart hereof and delivering the same
to the Agent.
27. At any time a payment in respect of the Guaranteed Obligations
is made under this Guaranty, the right of contribution of each Guarantor against
each other Guarantor shall be determined as provided in the immediately
following sentence, with the right of contribution of each Guarantor to be
revised and restated as of each date on which a payment (a "Relevant Payment")
is made on the Guaranteed Obligations under this Guaranty. At any time that a
Relevant Payment is made by a Guarantor that results in the aggregate payments
made by such Guarantor in respect of the Guaranteed Obligations to and including
the date of the Relevant Payment exceeding such Guarantor's Contribution
Percentage (as defined below) of the aggregate payments made by all Guarantors
in respect of the Guaranteed Obligations to and including the date of the
Relevant Payment (such excess, the "Aggregate Excess Amount"), each such
Guarantor shall have a right of contribution against each other Guarantor who
has made payments in respect of the Guaranteed Obligations to and including the
date of the Relevant Payment in an aggregate amount less than such other
Guarantor's Contribution Percentage of the aggregate payments made to and
including the date of the Relevant Payment by all Guarantors in respect of the
Guaranteed Obligations (the aggregate amount of such deficit, the "Aggregate
Deficit Amount") in an amount equal to (x) a fraction the numerator of which is
the Aggregate Excess Amount of such Guarantor and the denominator of which is
the Aggregate Excess Amount of all Guarantors multiplied by (y) the Aggregate
Deficit Amount of such other Guarantor. A Guarantor's right of contribution
pursuant to the preceding sentences shall arise at the time of each computation,
subject to adjustment to the time of any subsequent computation; provided, that
no Guarantor may take any action to enforce such right until the Guaranteed
Obligations have been paid in full and the Total Commitment has been terminated,
it being expressly recognized and agreed by all parties hereto that any
Guarantor's right of contribution arising pursuant to this Contribution
Agreement against any other Guarantor shall be expressly junior and subordinate
to such other Guarantor's obligations and liabilities in respect of the
Guaranteed Obligations and any other obligations owing under this Guaranty. As
used in this Section 27: (i) each Guarantor's "Contribution Percentage" shall
mean the percentage obtained by dividing (x) the Adjusted Net Worth (as defined
below) of such Guarantor by (y) the aggregate Adjusted Net Worth of all
Guarantors; (ii) the "Adjusted Net Worth" of each Guarantor shall mean the
greater of (x) the Net Worth (as defined below) of such Guarantor and (y) zero;
and (iii) the "Net Worth" of each Guarantor shall mean the amount by which the
fair salable value of such Guarantor's assets on the date of any Relevant
Payment exceeds its existing debts and other liabilities (including contingent
liabilities, but without giving effect to any Guaranteed Obligations arising
under this Guaranty) on such date. All parties hereto recognize and agree
-13-
<PAGE> 14
that, except for any right of contribution arising pursuant to this Section 27,
each Guarantor who makes any payment in respect of the Guaranteed Obligations
shall have no right of contribution or subrogation against any other Guarantor
in respect of such payment. Each of the Guarantors recognizes and acknowledges
that the rights to contribution arising hereunder shall constitute an asset in
favor of the party entitled to such contribution. In this connection, each
Guarantor has the right to waive its contribution right against any Guarantor to
the extent that after giving effect to such waiver such Guarantor would remain
solvent, in the determination of the Required Banks.
28. Each Guarantor hereby confirms that it is its intention that
this Guaranty not constitute a fraudulent transfer or conveyance for purposes of
any bankruptcy, insolvency or similar law, the Uniform Fraudulent Conveyance Act
or any similar Federal, state of foreign law. To effectuate the foregoing
intention, each Guarantor hereby irrevocably agrees that the Guaranteed
Obligations shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other (contingent or otherwise) liabilities of
such Guarantor that are relevant under such laws, result in the Guaranteed
Obligations of such Guarantor in respect of such maximum amount not constituting
a fraudulent transfer or conveyance.
* * *
-14-
<PAGE> 15
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to
be executed and delivered as of the date first above written.
Address
Tri-Parkway Corporate Park DERMAQUEST, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino By /s/ Wayne A. Palladino
Telephone No.: (908) 530-1144 ---------------------------
Facsimile No.: (908) 530-7389 Title: Senior Vice President
Tri-Parkway Corporate Park MK DIABETIC SUPPORT
200 Schulz Drive as a Pledgor
SERVICES, INC.,
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
Telephone No.: (908) 530-1144 ---------------------------
Facsimile No.: (908) 530-7389 Title: Vice President
Tri-Parkway Corporate Park THE PROMPTCARE COMPANIES,
200 Schulz Drive INC., as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
Telephone No.: (908) 530-1144 ---------------------------
Facsimile No.: (908) 530-7389 Title: Vice President
Tri-Parkway Corporate Park THE PROMPTCARE LUNG CENTER,
200 Schulz Drive INC.,
<PAGE> 16
Red Bank, New Jersey 07701 as a Pledgor
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-----------------------------
Title: Vice President
Tri-Parkway Corporate Park STERI-PHARM, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
Facsimile No.: (908) 530-7389 -----------------------------
Title: Vice President
Tri-Parkway Corporate Park TRANSWORLD NURSES, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
Facsimile No.: (908) 530-7389 -----------------------------
Title: Vice President
Tri-Parkway Corporate Park RESPIFLOW, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144 By /s/ Wayne A. Palladino
Facsimile No.: (908) 530-7389 -----------------------------
Title: Vice President
Tri-Parkway Corporate Park RADAMERICA, INC.,
200 Schulz Drive as a Pledgor
Red Bank, New Jersey 07701
<PAGE> 17
Attn.: Wayne A. Palladino
Telephone No.: (908) 530-1144
Facsimile No.: (908) 530-7389 By /s/ Wayne A. Palladino
-------------------------------
Title: Vice President
Accepted and Agreed to:
Bankers Trust Company,
as Agent for the Banks
By /s/ Patricia Hogan
-------------------------------
Title: Vice President
<PAGE> 1
SUBSIDIARY ASSUMPTION AGREEMENT
SUBSIDIARY ASSUMPTION AGREEMENT (this "Agreement"), dated as
of November 13, 1996, made by Transworld Acquisition Corp., a Delaware
corporation, and IMH Acquisition Corp., a Delaware corporation (each a "New
Subsidiary" and collectively the "New Subsidiaries"). Unless otherwise defined
herein, capitalized terms used herein and defined in the Credit Agreement
referred to below are used herein as so defined.
W I T N E S S E T H:
WHEREAS, Transworld Home Health Care, Inc. (the "Borrower"),
the lenders from time to time party to the Credit Agreement referred to below
(the "Banks"), and Bankers Trust Company, as Agent (the "Agent") are parties to
a Credit Agreement, dated as of July 31, 1996 (as amended, modified or
supplemented to the date hereof, the "Credit Agreement");
WHEREAS, in connection with the Credit Agreement, various
Subsidiaries of the Borrower have entered into a Subsidiaries Guaranty, dated as
of July 31, 1996 (as in effect on the date hereof, the "Subsidiaries Guaranty");
WHEREAS, in connection with the Credit Agreement, the Borrower
and various of its Subsidiaries have entered into a Pledge Agreement, dated as
of July 31, 1996 (as in effect on the date hereof, the "Pledge Agreement");
WHEREAS, in connection with the Credit Agreement, the Borrower
and various of its Subsidiaries have entered into a Security Agreement, dated as
of July 31, 1996 (as in effect on the date hereof, the "Security Agreement" and,
together with the Subsidiaries Guaranty and the Pledge Agreement, the
"Documents"); and
WHEREAS, each New Subsidiary desires to execute and deliver
this Agreement in order to become a party to each of the Documents;
<PAGE> 2
NOW, THEREFORE, IT IS AGREED:
1. Subsidiaries Guaranty. By executing and delivering this
Agreement, each New Subsidiary hereby becomes a party to the Subsidiaries
Guaranty as a "Guarantor" thereunder, and hereby expressly and jointly and
severally assumes all obligations and liabilities of a "Guarantor" thereunder,
subject to the limitations set forth therein. Each New Subsidiary hereby makes
each of the representations and warranties contained in the Subsidiaries
Guaranty on the date hereof, after giving effect to this Agreement.
2. Pledge Agreement. By executing and delivering this
Agreement, each New Subsidiary hereby becomes a party to the Pledge Agreement as
a "Pledgor" thereunder, and hereby expressly assumes all obligations and
liabilities of a "Pledgor" thereunder. Annexes A, B, C and D, of the Pledge
Agreement are each hereby amended by supplementing such Annex with the
information contained in Annexes A, B, C and D, attached to Annex I of this
Agreement. Each New Subsidiary hereby makes each of the representations and
warranties contained in the Pledge Agreement on the date hereof, after giving
effect to this Agreement.
3. Security Agreement. By executing and delivering this
Agreement, each New Subsidiary hereby becomes a party to the Security Agreement
as an "Assignor" thereunder, and hereby expressly assumes all obligations and
liabilities of an "Assignor" thereunder. Annexes A, B, C, D, E and F to the
Security Agreement are each hereby amended by supplementing such Annexes with
the information contained on Annexes A, B, C, D, E and F attached to Annex II of
this Agreement. Each New Subsidiary hereby makes each of the representations and
warranties contained in the Security Agreement on the date hereof, after giving
effect to this Agreement.
4. Pledged Securities; Financing Statements. By executing and
delivering this Agreement, each New Subsidiary hereby agrees to:
(i) deposit as security with the Pledgee (as defined in the
Pledge Agreement) the Securities (as defined in the Pledge Agreement)
owned by the New Subsidiary on the date hereof, and deliver to the
Pledgee certificates or instruments therefor, duly endorsed in blank by
such New Subsidiary in the case of Notes (as defined in the Pledge
Agreement) and accompanied by undated stock powers duly executed in
blank by the New Subsidiary in the case of Stock (as defined in the
Pledge Agreement), or such other instruments of transfer as are
acceptable to the Pledgee; and
(ii) execute and deliver to the Collateral Agent (as defined in
the Security Agreement) such financing statements, in form acceptable
to the Collateral Agent, as the Collateral Agent may request or as are
necessary or desirable in the opinion
-2-
<PAGE> 3
of the Collateral Agent to establish and maintain a valid, enforceable,
first priority perfected security interest in the Collateral (as
defined in the Security Agreement) owned by such New Subsidiary.
5. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
6. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
* * *
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be duly executed and delivered as of the date first above written.
Address:
TRANSWORLD ACQUISITION CORP.
By /s/ Wayne A. Palladino
------------------------------
Title: Vice President
IMH ACQUISITION CORP.
By /s/ Wayne A. Palladino
-----------------------------
Title: Chief Financial Officer
Senior Vice President
ACKNOWLEDGED AND ACCEPTED:
BANKERS TRUST COMPANY,
as Agent and as Collateral Agent
By /s/ Patricia Hogan
--------------------------
Title: Vice President
-3-
<PAGE> 1
LEASE
THIS LEASE, is made, executed and delivered as of this 14 day
of February, 1996, between FARMACIA SANTURCE, of Puerto Rico, (the "Landlord")
and TRANSWORLD HEALTHCARE PUERTO RICO, INC., of Jacksonville, Florida (the
"Tenant").
In consideration of the mutual covenants in this Lease, the parties
agree as follows:
1. The Leased Premises.
The Landlord leases to the Tenant, and the Tenant rents from the
Landlord upon the terms and conditions contained in this Lease, the land and
building and a street address of Hipodromo Esq. San Rafael #1400 Santurce, PR
00909, owned by Landlord and more specifically described on Exhibit A attached
hereto (the "Leased Premises"). Tenant has inspected the Leased Premises and
accepts the same in the present condition, subject to completion of repairs as
set forth in paragraph 4(c). Except as otherwise set forth herein, Landlord
makes no representations of warranties, implied or otherwise, with respect to
the condition of the Leased Premises.
2. Term.
This Lease has a Term of one (1) year beginning at 12:01 a.m., February
1, 1996 (the "Commencement Date"), and ending at midnight, January 31, 1997,
unless this Lease is sooner terminated under the provisions of this Lease. The
Landlord shall give the Tenant possession of the leased Premises on the first
day of the Term. Tenant shall have the option to renew the Lease for an
additional term of one (1) year upon the same terms and conditions, with not
less than thirty (30) days prior written notice of intention to renew. Tenant
may terminate this Lease at any time upon ninety (90) days notice, which notice
shall be effective not less than six (6) months from the commencement day of
the Lease.
3. Rent.
The Tenant shall pay rent in the amount of Fifteen Thousand and 00/100
Dollars ($15,000.00) per year, payable in equal monthly payments of One
Thousand Two Hundred Fifty and 00/100 Dollars ($1,250.00), in advance, on
the first day of the month beginning on the commencement date and continuing on
the same day of each month thereafter. Unless notified in writing by the
Landlord, the Tenant shall make its payments to Landlord by check made payable
to "CEFAB CORP." Landlord shall pay applicable sales or use tax on the rent
which Landlord is required to collect from Tenant.
4. Maintenance and Repairs.
(a) Throughout the term of this Lease, Landlord agrees at its
own cost and expense to make all repairs and replacements as may be required to
keep the Leased Premises (including, without limitation: the roof, walls,
floors, ceilings, pipes, electrical wiring and systems, gas, sewer and water
lines, plumbing fixtures and equipment, heating and air conditioning equipment,
windows, doors, and plate glass, paint, and all alterations, additions and
improvements) in good repair and condition, unless caused by the negligence of
Tenant, in which case Tenant shall repair such damage. In case of any material
damage to, or destruction of, the Leased Premises, or any part thereof, the
Tenant will promptly give written notice thereof to the Landlord, generally
describing the nature and extent of such damage or destruction.
(b) In the event Landlord fails to maintain the Leased
Premises as required herein or Landlord fails to complete any repairs or
replacements within ten (10) days after written notice from Tenant of need for
such repairs or replacements (or if the work cannot be completed within ten
(10) days, Landlord fails to commence work within said ten (10) days period and
diligently proceed thereafter to complete such repairs or replacements) then
Tenant shall have the right (but no obligation) in addition to any and all
other remedies it may have in law or in equity, to make such repairs or
replacements or have a contractor make such repairs or replacements, on behalf
of Landlord, and charge Landlord for the cost thereof as a deduction from rent.
(c) Landlord shall immediately, at Landlord's expense,
complete the following repairs: (i) Walls patched and painted; (ii) Plumbing:
Clean and in good working order, toilet seats replaced; (iii) Ceilings: Tiles
fit in (complete ceiling); (iv) Light Bulbs: Replaced, fixtures cleaned; (v)
Windows: Washed inside and out; (vi) Bars on all external glass; (vii) Floors
scraped/cleaned and waxed where appropriate; (viii) Exterior walls painted in
colors selected by Tenant; (ix) Locks on exterior/interior doors, gates/doors
- -- Tenant to receive four (4) sets of keys, (x) Common ways need to be
accessible consistent with Tenant's office hours and clear for ingress and
egress.
5. Alterations.
Tenant shall not make additions, alterations, changes or improvements
in or to the Leased Premises or any part thereof without the prior written
consent of Landlord. In the event that Landlord consents to such additions,
alterations, changes or improvements then, all additions, alterations, changes
or improvements shall be constructed at Tenant's sole expense and shall, upon
completion thereof, become the property of Landlord; provided, however, Landlord
may at its option, require Tenant, at Tenant's sole cost and expense, to remove
any such additions, alterations, changes or improvements at the expiration
or sooner termination of this Lease, and to repair any damages to the Leased
premises caused by such removal. Tenant hereby agrees to indemnify Landlord
against, and shall keep
<PAGE> 2
the Leased Premises free from, all mechanic's liens or other such liens arising
from any work performed, material furnished, or obligations incurred by Tenant
in connection with the Leased Premises, and agrees to obtain discharge of any
lien which attaches as a result of such work immediately after such lien
attaches or payment for the labor or materials is due. Notice is hereby given
to all Tenant's contractors, subcontractors, materialmen or suppliers that
Landlord is not liable for any labor or materials furnished to Tenant on credit
and no mechanic's or other lien shall attach to or affect Landlord's interest
in the Project or the Leased Premises as a result thereof.
6. Inspection.
The Landlord shall have the right to enter and inspect the Leased
Premises during reasonable business hours, provided that in doing so Landlord
shall not interfere with the conduct of the Tenant's business.
7. Utilities and Taxes.
(a) The Tenant will pay for all electricity, water, sewer and other
utilities used by it on the Leased Premises. The Landlord will pay all real
estate taxes and general and special assessments levied or assessed upon real
property or improvements on the Leased Premises prior to the time any tax
certificates are issued with respect to nonpayment. All amounts due Landlord
for charges under this Lease, other than rent due pursuant to paragraph 3, are
denominated as additional rent and shall be paid to Landlord within ten (10)
days of rendition of a bill from Landlord to Tenant.
(b) Landlord shall not be liable in the event of any interruption in
the supply of any utilities. Tenant agrees that it will not install any
equipment which will exceed or overload the capacity of any utility facilities
and that if any equipment installed by Tenant shall require additional utility
facilities, the same shall be installed at Tenant's expense.
8. Insurance.
(a) Tenant agrees at its own cost and expense to maintain public
liability insurance on an occurrence basis with minimum limits of liability
sufficient to cover liabilities reasonably anticipated to occur in connection
with the use of the Leased Premises by the Tenant, but in no event with limits
of not less than $100,000.00 per person and $500,000.00 per accident. Landlord
shall provide all insurance of property damage liability. Insurance on the
personal property of the Tenant located in the Leased Premises shall be
provided by Tenant. The public liability insurance procured by Tenant as
required herein shall be issued in the name of Landlord and Tenant and shall
contain such mortgage endorsements as may be requested by any mortgagee of
Landlord. The insurance carried by Tenant on its personal property shall insure
only Tenant. All policies required to name Landlord shall be issued by
companies licensed to do business in the state of Puerto Rico and shall contain
endorsements that such insurance may not be cancelled or amended without ten
(10) days written notice by registered mail to Landlord by the insurance
company. In the event Tenant fails to pay the premium necessary to keep in
force the insurance required herein, Landlord may, but shall not be required
to, pay such sums as may be required to keep in force the insurance required
herein and all sums advanced by Landlord may be charged to Tenant as additional
rent, which shall be due and payable on demand.
(b) The Tenant shall have the right to meet its insuring obligations
through the use of blanket policies and insurance certificates in lieu of
having separate policies issued. Insurance coverage under blanket policies
shall not be less than the amounts required hereunder.
(c) Neither party shall be liable to the other for loss or damage,
caused by personal injury, fire or any other peril insured against under
standard extended coverage insurance even though the loss of or damage is
caused by the party's negligence to the extent of such insurance coverage. Each
insurance policy carried by Lessor and Lessee in accordance with this paragraph
shall contain a provision by which the insurance company shall waive all right
or recovery by subrogation against the other party for loss or damage to the
insured property.
9. Tenant's Right to Remove Its Own Property.
Notwithstanding anything in this Lease to the contrary, trade fixtures,
personal property and equipment which are installed or placed upon the Leased
Premises by the Tenant or at its expense shall remain the property of the
Tenant, and the Tenant shall have the right to remove them from the Leased
Premises at any time. The Tenant shall be responsible for repairing and
restoring all building surfaces damaged and any other portion of the Leased
Premises damaged by the Tenant's removal of any of its trade fixtures and
equipment.
10. Restriction on Assignment or Subletting.
Except as set forth below, Tenant shall not assign this Lease, in whole
or in part, or sublet all or any part of the Leased Premises without the prior
written consent of Landlord, which consent may not be unreasonably withheld.
This prohibition against assignment or subletting shall be construed to include
a prohibition against any assignment or subletting by operation of law. If this
Lease be assigned or if the Leased Premises or any part thereof be occupied by
anybody other than Tenant in a manner not permitted in this Lease, Landlord may
collect rent from the assignee, or occupant and apply the net amount collected
to the rent herein reserved. Notwithstanding any assignment or sublease, Tenant
shall remain fully liable and shall not be released from performing any of the
terms of this Lease.
-2-
<PAGE> 3
11. Landlord's Title and Quiet Enjoyment.
The Landlord warrants that except as described herein the Landlord has
good and merchantable title to the Leased Premises and has the right and
authority to enter into this Lease. So long as the Tenant is not in default,
the Landlord covenants that Tenant shall peaceably and quietly enjoy the leased
Premises, subject to the terms of this Lease and any existing covenants,
conditions, easements, restrictions and reservations appearing in the public
records as of the date of this Lease.
12. Fire or Casualty.
(a) Subject to the provisions of subparagraph (b), if the Leased
Premises shall be partially damaged by any casualty covered by the fire and
extended coverage insurance required to be carried by Landlord, Landlord shall
promptly repair the same to their condition at the time of the occurrence of
the damage and the rent (subject to the provisions of subparagraph (c)) shall
be abated proportionately as to the portion of the Leased Premises rendered
untenantable, unless the damage shall be due to the negligence of Tenant or its
agents or employees, in which event, there will be no abatement.
(b) If the Leased Premises (i) are rendered wholly untenantable; or (ii)
should be damaged as a result of a risk which is not covered by insurance; or
(iii) should be damaged to the extent of fifty percent (50%) or more of the
then monetary value thereof; then Landlord shall have the option to terminate
this Lease by giving notice of termination to the tenant within thirty (30)
days from the date of the damage or the casualty. In the event of termination,
all obligations under this Lease shall be of no further force and effect and
rent shall abate as of the date of the notice of termination. If the Lease is
terminated, the Landlord shall be entitled to that portion of the proceeds
received under the casualty policy insuring the Leased Premises and maintained
by the Tenant in accordance with paragraph 8 above as are attributable to the
building or the Leased Premises, less Tenant's trade fixtures. If Landlord does
not elect to terminate this Lease and if the insurance proceeds are not applied
by any mortgagee against the indebtedness secured by its mortgage, then the
proceeds received under the casualty policy insuring the Leased Premises shall
be used to restore the Leased Premises to the condition existing prior to the
damage and any excess proceeds shall become the property of Landlord.
(c) Any abatement of rent provided for above shall end when the Leased
Premises have been substantially restored.
(d) Unless this Lease is terminated, Tenant shall repair and refixture
the interior of the Leased Premises in a manner and to at least a condition
equal to that existing prior to its destruction or casualty.
(e) If the Leased Premises shall be damaged and any restoration work is
not substantially completed by Tenant within two (2) months of the date of the
damage (which time period shall be extended for a period equal to the time
which the Tenant is not able to continue with the restoration work due to acts
of God and other causes beyond the control of Tenant, but in no event longer
than two (2) months), then Landlord may (but shall not be obligated to)
terminate this Lease, in which event Landlord shall be entitled to any
insurance proceeds which have not been applied to the cost of restoration and
which are not attributable to Tenant's trade fixtures.
(f) No termination of the Lease by either Landlord or Tenant pursuant
to the provisions of this paragraph 12 shall relieve Tenant of any liability
for any tortious conduct or any breach of the provisions of this Lease
occurring prior to the termination.
13. Condemnation or Taking.
If any part of the Leased Premises is taken by eminent domain or
condemnation, Landlord may, at its sole option, terminate the Lease by giving
written notice to Tenant within forty-five (45) days after the taking, or if by
reason of any such taking, Tenant's operation on the Leased Premises is
materially impaired, Tenant shall have the option to terminate this Lease
Agreement, by giving written notice to Landlord within forty-five (45) days
after the taking. After such taking and as of such date, the rent will be
adjusted in proportion to the impairment of the use that Tenant can reasonably
make of the balance of the Leased Premises. If the Leased Premises are damaged
or if access to the Leased Premises is impaired by reason of such taking and
neither Landlord nor Tenant elects to terminate this Lease Agreement, Landlord
will promptly rebuild or repair the damage to the extent possible within the
limitations of the available condemnation awards. All condemnation awards
belong to Landlord, except that specifically awarded to Tenant for its separate
property and fixtures.
14. Surrender of the Lease.
At the expiration of the Term or after the termination of this Lease,
the Tenant shall peaceably and quietly surrender the Leased Premises to the
Landlord in good order and repair except for ordinary wear and tear and damage
caused by fire or other casualty unless the same is restored in accordance with
paragraph 12 hereof.
15. Mechanic's Lien.
Tenant shall have no authority to subject any interest of Landlord in
the Leased Premises to any mechanic's or other lien. Should any mechanic's or
other liens be filed against the Leased Premises or any interest of Landlord
therein by reason of Tenant's acts or omissions, or because of a claim against
Tenant, Tenant shall promptly notify
-3-
<PAGE> 4
Landlord of the existence of such lien, and shall cause the same to be
cancelled and discharged of record by bond or otherwise within ten (10) days
after notice by Landlord.
16. Default.
(a) Events of Default. The happening of any one or more of the
following listed events shall constitute a default of this Lease Agreement on
the part of tenant:
(1) The failure of Tenant to pay any rent payable under this Lease
Agreement within ten (10) days of written notice;
(2) The failure of Tenant to fully and properly perform any act
required of it in the performance of this Lease, or otherwise to comply
with any term or provision hereof when the same is not cured within ten
(10) days of the mailing of notice of such default;
(3) The filing by or on behalf of Tenant of any petition or pleading
to declare Tenant a bankrupt or the adjudication in bankruptcy of Tenant
under any bankruptcy law or act;
(4) The appointment by any court or under any law of a receiver,
trustee, or other custodian of the property, assets, or business of Tenant;
(5) The assignment by Tenant of all or any part of its property or
assets for the benefit of its creditors;
(6) The levy, execution, attachment or other taking of property,
assets or of the leasehold interest of Tenant by process of law or
otherwise in satisfaction of any judgment, debt or claim or the
abandonment of the Leased Premises by the Tenant; or
(7) The abandonment of the Leased Premises by the Tenant; or
(8) The discontinuance of occupancy or use of the Leased Premises by
the Tenant.
(b) Remedies in Default. In the event of any such default or breach
by Tenant, Landlord may at any time thereafter, in his sole discretion, with or
without notice or demand and without limiting Landlord in the exercise of a
right or remedy which Landlord may have by reason of such default or breach:
(1) Terminate Tenant's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default including, but not
limited to, the cost of recovering possession of the Premises; expenses
of reletting; reasonable attorney's fees; and accelerate all unpaid
rent and other charges and Adjustments called for herein for the
balance of the term of the Lease. Unpaid installments of rent or other
sums shall bear interest from the date due at the maximum legal rate; or
(2) Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of
Landlord's rights and remedies under this Lease, including the right to
recover the rent and any other charges and Adjustments as may become due
hereunder; or
(3) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the State in which the Premises
are located.
17. Notice.
All rent shall be payable, and notices required or permitted by the terms
of this Lease shall be given to each party at the address of that party as
recited above, or at such other address as may be specified by notice in
writing to the other party. Any notice hand delivered, by overnight courier, or
properly mailed by certified mail, postage and fee prepaid, shall be deemed
delivered when so properly mailed, whether received or not, except that notice
of change of address shall not be effective until actually received.
18. Brokerage.
Each of the parties hereto represents and warrants that there are no
claims for brokerage commissions or finder's fees in connection with the
execution of this Lease, and each of the parties agree to indemnify the other
against, and hold it harmless from, all liabilities arising from any such claim,
including, without limitation, the attorney's fees and court costs in
connection therewith.
-4-
<PAGE> 5
19. Use of Leased Premises.
The Leased Premises may be used by the Tenant and its permitted
assignee, successor and subtenant solely for the following purposes: General
office, storage and distribution. All such activities shall be conducted in a
professional manner, and shall not unreasonably disturb Landlord or any other
Tenant of Landlord, or otherwise be a nuisance.
20. Miscellaneous.
If any provision of this Lease shall be held to be invalid, illegal, or
unenforceable, the validity of the other terms of this Lease shall in no way be
affected thereby. This Lease may be changed, waived, discharged, or terminated
only by an instrument in writing signed by the party against whom the
enforcement of such change, waiver, discharge or termination is sought. This
Lease shall be binding on, inure to the benefit of, and be enforceable by the
respective successors and assigns of the parties hereto. The waiver by Landlord
or Tenant of any breach of any term, covenant or condition herein shall not be
deemed to be a waiver of any subsequent breach of such term, covenant or
condition. The paragraph headings in this Lease are for purposes of reference
only and shall not limit or define the meaning of the provisions contained in
this Lease. This Lease may be executed in any number of counterparts, each of
which is an original but all of which shall constitute one and the same
instrument. This Lease shall be construed and enforced in accordance with the
laws of the State of Florida. This Lease sets forth the entire agreement of the
parties with respect to the rights and obligations of the parties.
21. Indemnity.
Tenant shall indemnify, defend and save Landlord harmless from any and
all suits, actions, damages, liability, loss and expense (including, but not
limited to attorneys fees in settlement at trial and on appeal) in connection
with loss of life, personal injury or property damage arising from or out of
any occurrence in, upon, at or from the Leased Premises or the adjoining
streets and sidewalks, or the occupancy or use by Tenant of the Leased Premises
or the adjoining streets and sidewalks, or occasioned wholly or in part by any
act or omission of Tenant, its agents, contractors, employees, invitees, or
licensees.
22. Compliance with Laws.
Tenant shall, at its own cost and expense, comply with all present and
future governmental laws, ordinances, orders and regulations affecting the
Leased Premises and the conduct of Tenant's business thereon, and all rules,
requirements and regulations of the Board of Fire Underwriters, insurance
companies insuring the Leased Premises, and other organizations establishing
insurance rates.
23. Subordination.
Tenant agrees that this Lease and Tenant's rights hereunder are subject
and subordinate to the mortgage now encumbering the Leased Premises, and to all
renewals, future advances, modifications, replacements, consolidations and
extensions thereof.
24. Holding Over.
If the Tenant remains in possession of the Leased Premises after the
expiration of the term of this Lease with either the express or implied consent
of the Landlord, Tenant's possession shall be a month-to-month tenancy under
the same terms and conditions contained in this Lease. Such tenancy may be
terminated by either party by giving thirty days' written notice to the other
party.
IN WITNESS WHEREOF, the Landlord and the Tenant have executed these
presents as of the day and year first above written.
Signed, sealed and delivered
in the presence of:
- ------------------------------------ ---------------------------------
FARMACIA SANTURCE
- ------------------------------------ "LANDLORD"
/s/ Kenneth R. Givens TRANSWORLD HEALTHCARE
- ------------------------------------ PUERTO RICO, INC.
/s/ Elda E. Vega
- ------------------------------------ By: /s/ Warren K. Trowbridge
-----------------------------
Its: Vice President
----------------------
"TENANT"
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<PAGE> 1
LEASE AGREEMENT
BETWEEN
REALTY SITES, LANDLORD
AND
TRANSWORLD HOME HEALTHCARE, INC.
TENANT
PREMISES: 75 TERMINAL AVENUE
CLARK, NEW JERSEY
DATED: AUGUST 6, 1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I DEMISED PREMISES .................................. 1
ARTICLE II TERM .............................................. 2
ARTICLE III RENT .............................................. 4
ARTICLE IV USE AND OPERATION OF PREMISES ..................... 4
ARTICLE V ASSIGNMENT AND SUBLETTING ......................... 5
ARTICLE VI PAYMENT OF TAXES AND UTILITIES .................... 6
ARTICLE VII MECHANICS' LIENS .................................. 7
ARTICLE VIII GOVERNING LAW, CUMULATIVE REMEDIES ................ 8
ARTICLE IX INDEMNIFICATION OF LANDLORD AND TENANT.. .......... 8
ARTICLE X REPAIR, REPLACEMENT, MAINTENANCE .................. 9
ARTICLE XI FIRE OR OTHER CASUALTY LOSS ....................... 13
ARTICLE XII INSURANCE ......................................... 14
ARTICLE XIII DEFAULT ........................................... 16
ARTICLE XIV SUBORDINATION ..................................... 18
ARTICLE XV CONDEMNATION ...................................... 19
ARTICLE XVI HOLDING OVER ...................................... 20
ARTICLE XVII EXCULPATORY CLAUSE ................................ 21
ARTICLE XVIII DELAYS IN PERFORMANCE ............................. 21
ARTICLE XIX QUIET ENJOYMENT ................................... 22
ARTICLE XX BROKER ............................................ 22
ARTICLE XXI SIGNS ............................................. 22
ARTICLE XXII IRSA .............................................. 22
ARTICLE XXIII NON-PERFORMANCE BY LANDLORD ....................... 24
ARTICLE XXIV NOTICE ............................................ 25
ARTICLE XXV SECURITY DEPOSIT .................................. 25
ARTICLE XXVI ARBITRATION ....................................... 26
ARTICLE XXVII MISCELLANEOUS ..................................... 27
</TABLE>
i
<PAGE> 3
TABLE OF SCHEDULES
<TABLE>
<S> <C>
SCHEDULE A DESCRIPTION
SCHEDULE B WORK TO BE COMPLETED FOR CERTIFICATE OF CONTINUED
OCCUPANCY
SCHEDULE C WORK TO BE PERFORMED BY LANDLORD
SCHEDULE D CERTIFICATE OF CONTINUED OCCUPANCY
SCHEDULE E(1) LETTER OF NON-APPLICABILITY FROM THE DEPARTMENT OF
ENVIRONMENTAL PROTECTION DATED JANUARY 19, 1995,
ISSUED TO PREVIOUS TENANT
SCHEDULE E(2) LETTER OF NON-APPLICABILITY FROM THE DEPARTMENT OF
ENVIRONMENTAL PROTECTION DATED JUNE 4, 1996 ISSUED TO
PREVIOUS TENANT
SCHEDULE F(1) MORTGAGE TO UNITED COUNTIES TRUST COMPANY
SCHEDULE F(2) NOTE TO UNITED COUNTIES TRUST COMPANY
SCHEDULE F(3) EXTENSION AND MODIFICATION AGREEMENT
SCHEDULE G EASEMENT AGREEMENT
SCHEDULE H SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT
AGREEMENT
</TABLE>
ii
<PAGE> 4
06/03/96 06/27/96
06/04/96 06/28/96
06/25/96 08/05/96
LEASE AGREEMENT
THIS AGREEMENT made this day of August, 1996, between REALTY SITES, a
New Jersey partnership, having an office at 1154 Westfield Avenue, Clark, New
Jersey, 07066, hereinafter referred to as the Landlord, and TRANSWORLD HOME
HEALTHCARE, INC., a corporation of New Jersey, having an office at 51 Terminal
Avenue, Clark, New Jersey, 07066, hereinafter referred to as the Tenant;
WHEREAS, the Tenant wishes to lease property owned by the Landlord at 75
Terminal Avenue, Clark, New Jersey; and NOW, THEREFORE, for ONE ($1.00) DOLLAR
and other good and valuable consideration, the parties hereby agree as follows:
ARTICLE I
DEMISED PREMISES
1.01. Upon the terms and conditions hereinafter set forth, and in
consideration of the payment of the rents and prompt performance by the Tenant
of the covenants and agreements, to be kept and performed by the Tenant, the
Landlord does hereby lease, let and demise to the Tenant and the Tenant hereby
leases from the Landlord the following described premises, situate, lying and
being in the Township of Clark, County of Union, State of New Jersey, more
particularly described on Schedule "A" attached hereto together with
non-exclusive rights over the easement area described in the Easement Agreement,
a copy of which is annexed hereto as Schedule "G"; and Landlord represents and
warrants that the Easement Agreement has been signed and shall be simultaneously
recorded herewith, which easement Landlord represents is in full force and
effect.
1
<PAGE> 5
ARTICLE II
TERM
2.01. The lease shall commence on August 1, 1996, and end on July 31,
2003.
A. For the seven (7) year term (hereinafter called "Term"), the
following terms and conditions shall apply:
(1) The term of the lease shall be for a period seven (7)
years.
(2) The rent for the term shall be the rental set forth in
Paragraph 3.01.
(3) All terms and conditions of this lease shall be in full
force and effect during the Term.
B. The lease payments shall commence on August 1, 1996,
notwithstanding that the Landlord has not substantially completed the necessary
repairs to the building as required by Schedules B and C, providing that in the
event that the Landlord has not completed the work required by Schedules B and C
by September 15, 1996, the Tenant shall have the right to terminate the contract
upon ten (10) days written notice to the Landlord or else notify the Landlord
that the Tenant will complete the work itself and deduct cost of completion from
the rent, and in the event that the Landlord has not completed the unfinished
work within the ten (10) day period, then the Tenant shall have an additional
five (5) days to determine whether it wishes to terminate the lease or complete
the work and in the event it elects to terminate, the Tenant shall immediately
vacate the building and premises provided that the cause of any delay in
completing Landlord's work is not caused by any actions of the Tenant, its
contractors, agents, employees or any person operating under the direction of
the Tenant. In the event of termination, the Landlord shall return to the Tenant
all rental payments made by the Tenant to the Landlord. Tenant shall not have
the right to terminate in the event the unfinished work is work for which the
Tenant has received credit from the Landlord as permitted in Schedule B.
2
<PAGE> 6
C. Prior to the commencement date, Tenant shall be permitted, upon
execution of this lease, to perform any work to the demised premises that it
deems necessary for occupancy including, but not limited to, the work performed
in Schedule C for which it receives a credit from the Landlord. The Tenant's
work shall be performed in a manner which shall cause a minimum of interference
with the performance by the Landlord of the Landlord's work.
2.02. Provided that the Tenant is not in default of any of the terms of
the lease, the Tenant shall have the option to renew the lease for two
additional five (5) year terms upon the same terms and conditions set forth in
this lease, except for the following:
A. FIRST OPTION PERIOD.
(1) For the first five year term, the Tenant shall notify
the Landlord, in writing, one (1) year before the expiration of the term of the
main lease that it intends to exercise the option to renew. Failure to notify
the Landlord, in writing, by the aforementioned date shall terminate the right
of the Tenant to exercise the option.
(2) The yearly rent for the First Option Period shall be the
annual rent required to be paid by the Tenant in the last year of the initial
term of the lease, increased by an amount equal to the percentage increase that
the Consumer Price Index for Urban Wage and Clerical Workers (CPI-W) for June,
1996, bears to the CPI-W for the month of June, 2003.
B. SECOND OPTION PERIOD.
(1) For the Second Option Period, the Tenant shall notify
the Landlord, in writing, one (1) year before the expiration of the First Option
Period that it intends to exercise the option to renew. Failure to notify the
Landlord, in writing, by the aforementioned date shall terminate the right of
the Tenant to exercise the option to renew.
(2) The yearly rent for the Second Option Period shall be
the yearly rent required to be paid in the last
3
<PAGE> 7
year of the First Option Period, increased by an amount equal to the percentage
increase that the Consumer Price Index for Urban Wage and Clerical Workers
(CPI-W) for June, 2003, bears to the CPI-W for the month of June, 2008.
ARTICLE III
RENT
3.01. The annual rent for the Term shall be $84,458.55, payable in monthly
installments of $7,038.21.
3.02. All rentals shall be paid monthly on the first day of each month, in
advance. In the event the lease commences on a day other than the first of the
month, then the Tenant shall pay the monthly rent pro-rated for the period
that the Tenant occupies the premises. In the event the lease ends on a day
other than the last day of the month, then the Tenant shall pay the monthly rent
pro-rated for the period that the Tenant occupies the premises.
3.03. All rental payments shall be payable to the Landlord at 1154
Westfield Avenue, P.O. Box 875, Clark, New Jersey, 07066, or at such place as
may be designated by the Landlord.
3.04. In the event that any rental payment called for under the terms of
this lease, including Tenant's obligation for taxes, assessments and insurance,
shall be received by Landlord more than fifteen (15) days late, then the Tenant
shall pay a late fee of four (4%) percent of the payment.
ARTICLE IV
USE AND OPERATION OF BUSINESS
4.01. The Tenant may use and occupy the premises for any legal purpose,
including executive offices, nursing offices, a nurse training center, marketing
and warehouse activities in connection with the Tenant's health care business.
4.02. Landlord represents that (1) it owns the demised premises, which
premises is described in the title policy issued by New Jersey
4
<PAGE> 8
Realty Title Insurance Company, policy number UB 1234, and (2) that the premises
currently complies with the legal requirements of the Township of Clark for
office and warehouse use and in this respect, the Landlord shall deliver to the
Tenant a Certificate of Continued Occupancy issued by the Building inspector of
the Township of Clark after the performance by the Landlord of any work that may
be required to obtain the Certificate of Continuing Occupancy as set forth on
Schedule B.
4.03. Tenant, at its sole expense, shall comply with all laws, orders and
regulations of federal, state, and municipal authorities, and with any lawful
direction of any public officer, which shall impose any duty upon the Tenant
with respect to the premises, provided that Tenant shall not be obligated to
make any structural repairs unless required as a result of Tenant's particular
use of the premises. The Tenant, at its sole expense, shall obtain all required
licenses or permits for the conduct of its business within the terms of the
lease, or for the making of repairs, alterations, improvements, or additions,
except for the alterations and improvements set forth on Schedule B and C for
which the Landlord shall be responsible for obtaining required licenses or
permits, and the Landlord, where necessary, will join with the Tenant in
applying for all such permits or licenses and shall execute all documents
reasonably required for said purpose. This section shall not be construed to
effect or shift the liability that each party to this lease agreement may have
to other parties.
ARTICLE V
ASSIGNMENT AND SUBLETTING
5.01. Tenant may not sublet or assign all or part of the demised premises
without the written consent of the Landlord, which consent shall not be
unreasonably withheld. Said provision shall not be deemed to prohibit the Tenant
from selling its business to another company providing that (1) the new company
shall execute an agreement agreeing to be bound by the terms of the lease from
and after the date of such agreement; (2) the new company shall have a net worth
of at least $3,000,000 giving effect to the acquisition of Tenant's business,
but
5
<PAGE> 9
exclusive of any other good will; and (3) the Tenant shall not be in default of
its lease at the time of the sale.
ARTICLE VI
PAYMENT OF TAXES AND UTILITIES
6.01. The Landlord represents that the following utilities and services
are available to the building: gas, water, electricity, refrigeration and hot
water and that all of the same are separately metered or separately billed by
the appropriate utility to the Tenant. The Tenant shall be responsible for the
cost and expense of the use of these utilities and services from and after the
date that Landlord's work has been completed as certified by Landlord by notice
as set forth above. The Landlord shall not be obligated to provide any services
or these utilities to the premises other than is presently existing unless
otherwise set forth in this Lease.
6.02. From and after the commencement of this lease, the Tenant shall pay,
before any fine, penalty, interest or cost may be added or become due or be
imposed for nonpayment thereof, all taxes, assessments, water and sewer rents,
rates and charges, transit taxes, charges for public utilities, excises, levies,
licenses and permit fees and other governmental charges, general and special,
ordinary and extraordinary, unforeseen and foreseen, of any kind and nature,
whatsoever except for income taxes and estate taxes levied on Lessor, which at
any time during the term of this lease may be assessed, levied, confirmed,
imposed upon, or become due and payable out of or in respect of, or become a
lien on, the demised premises, or any improvements thereon, or any part thereof
or any appurtenance thereto, or otherwise arising out of the rent and income
received by the Tenant from subtenants, any use or occupation of the demised
premises, and such franchises as may be appurtenant to the use of the demised
premises, or any document (to which the Tenant is a party) creating or
transferring an interest or estate in the demised premises. Notwithstanding any
other provision hereof, if any assessments, taxes or other charges to be paid by
the Tenant pursuant to the terms hereof can be paid in installments when due,
said assessments, taxes or
6
<PAGE> 10
charges shall be paid in installments and Tenant shall only be required to pay
those installments due during the term hereof. However, the Tenant shall have
the following rights with regard to the said taxes:
A. The Tenant shall have the right to contest real estate and
other taxes and charges in good faith, provided that the Tenant takes such acts
as may be reasonably required to prevent the imposition of a lien against the
demised premises and Tenant shall pay any fees incurred in contesting the taxes.
In the event that Tenant, through its own efforts, receives of a tax refund, the
Tenant shall be entitled to retain the full benefit of such refund to the extent
it represents a refund of the taxes paid by the Tenant.
B. The Landlord shall be required to cooperate in the
prosecution of any such appeal and agrees to execute such documents as the
Lessee may reasonably require in connection therewith.
6.03. For the purposes of this paragraph and the default clause of Article
XIII, the obligation of the Tenant to pay for the obligations set forth in
paragraph 6.02 shall be considered as additional rent.
ARTICLE VII
MECHANICS' LIENS
7.01. The Tenant shall not have the power to subject the interest of the
Landlord in the premises to any mechanics' or materialmen's liens or lien of any
kind. If such lien be claimed or filed as a result of work performed by or at
the request of Tenant (except for work Landlord is required to do under this
lease, it shall be the duty of the Tenant, within thirty (30) days after the
Tenant shall have been given written notice of such claim having been filed to
cause the premises to be released from such claim; and the Tenant covenants and
agrees, within such period of thirty (30) days, so as to cause the premises and
the Landlord's interest therein to be released from the legal effect of such
claim.
7.02. Landlord represents that at the time of commencement of the lease
that there will be no mechanics' or materialmen's lien claim
7
<PAGE> 11
filed against the premises and in the event there is, the Landlord shall be
responsible for discharging the same.
ARTICLE VIII
GOVERNING LAW, CUMULATIVE REMEDIES
8.01. All of the rights and remedies of the respective parties shall be
governed by the provisions of this instrument and by the laws of the State of
New Jersey, as such laws relate to the respective rights and duties of landlords
and tenants.
8.02. All rights and remedies accruing to the parties shall be cumulative;
that is, any nondefaulting party hereto may pursue such rights as the law and
this lease affords to him in whatever order said party desires and the law
permits without being compelled to resort to any one remedy in advance of any
other.
ARTICLE IX
INDEMNIFICATION OF LANDLORD AND TENANT
9.01. During the entire term of the lease, the Tenant will indemnify and
save harmless the Landlord against any and all claims, debts, demands, or
obligations which may be made against such other party or against the Landlord
or Landlord's title in the premises, arising out of, or in connection with, any
alleged act or omission of the Tenant or any person claiming under, by, or
through the Tenant; and if it becomes necessary for the Landlord to defend any
action seeking to impose any liability, the Tenant will pay the Landlord all
costs of court and attorneys' fees incurred by Landlord in effecting such
defense in addition to any other such sums which the Landlord may be called upon
to pay by reason of the entry of a judgment against the Landlord in the
litigation in which such claim is asserted. Tenant shall have the right to
defend Landlord at its own cost and expense in any court action pursuant to this
paragraph.
9.02. During the entire term of the lease, the Landlord will indemnify and
save harmless the Tenant against any and all claims, debts, demands, or
obligations which may be made against such other
8
<PAGE> 12
party or against the Tenant or Tenant's title in the premises, arising out of,
or in connection with, any alleged act or omission of the Landlord or any person
claiming under, by or through the Landlord; and if it becomes necessary for the
Tenant-to defend any action seeking to impose any liability, Landlord will pay
the Tenant all costs of court and attorneys' fees incurred by Tenant in
effecting such defense in addition to any other such sums which the Tenant may
be called upon to pay by reason of the entry of a judgment against the Tenant in
the litigation in which such claim is asserted. Landlord shall have the right to
defend Tenant at its own cost and expense in any court action pursuant to this
paragraph.
ARTICLE X
REPAIR, REPLACEMENT, MAINTENANCE
10.01. The Landlord represents and agrees that at the commencement of the
lease, the following representations shall be in full force and effect:
A. Subject to any further requirements set forth in Schedules B
and C, that the roof and structure shall be in good condition and that the
plumbing, heating, ventilation, air conditioning and electrical systems shall be
in good working order and repair and Landlord represents and warrants to Tenant
that to Landlord's knowledge, there are no other material defects in the
premises.
B. Subject to any further requirements set forth in Schedules B
and C, that the Landlord will give a one year warranty on the HVAC and the
electrical work if not caused by the acts of the Tenant, its employees or
agents. In addition, Landlord will warrant the workmanship and materials for a
period of one (1) year from the date of commencement of the lease, normal wear
and tear and any damage caused by acts of Tenant, its employees or agents
excepted, the work performed by the Landlord as set forth on Schedule C. In
addition, Landlord will be responsible for all repairs to the HVAC system for
the first year and fifty (50%) of the repairs to the HVAC system for the second
year of the lease.
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C. Landlord represents that the Building Inspector has issued a
Certificate of Continued Occupancy dated June 26, 1996, a copy of which is
attached as Schedule D. Landlord represents that to the best of its knowledge
and belief, it knows of no environmental violation or hazardous materials on the
demised premises and that its knowledge is derived solely from the letters of
non-applicability obtained by the previous tenant on the property from the
Department of Environmental Protection dated January 19, 1995, and updated on
June 4, 1996, copies of which are attached as Schedules E (1) and (2).
D. Landlord shall perform all of the work set forth on Schedules B
and C in a good and workmanlike manner and in accordance with all applicable
laws, rules and regulations, prior to the commencement date of the lease. With
the exception of the work to be performed by the Landlord on Schedules B and C,
and subject to the Landlord's representations and warranties set forth in
subparagraphs A and B above, the Tenant has examined the premises and accepts it
in it present condition and without any representations on the part of the
Landlord or its agents, as to the present or future condition of the demised
premises. In the event Landlord does not complete the work called for in this
paragraph prior to the commencement date, but Tenant, nevertheless, decides to
occupy the building, Landlord shall complete the work called for in this
paragraph within sixty (60) days of the date of occupation of the premises by
Tenant.
10.02. Subject to the second paragraph of this subparagraph 10.02, the
Tenant shall, at all time during the lease term (after Landlord's work has been
completed), at its sole cost and expense, maintain in good repair and in good
and safe condition, all buildings and improvements on the leased property, and
their equipment and appurtenances, both inside and outside, however the
necessity or desirability for repairs may occur, and whether or not necessitated
by wear and tear, obsolescence, or defects (latent or otherwise), ordinary wear
and tear excepted and unless same are by virtue of a breach of Landlord's
representations and warranties hereunder or default by Landlord under this lease
or were caused by the negligence or willful acts of Landlord, its agents,
contractors or employees. The Tenant shall also, at its own expense, maintain in
repair and in good and safe
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condition, and free from dirt, snow, ice, rubbish, and other obstructions or
encumbrances, the sidewalks, parking areas, railings, gutters and curbs in front
of and adjacent to the leased property.
The Tenant shall not be responsible for any structural repairs
or replacements to the building or any repair or replacement of the roof, which
shall be the responsibility of the Landlord unless the damage necessitating the
replacement or repair of the roof or structural items results from any wrongful
activities of the Tenant, its agents, employees or contractors. In this regard,
the Tenant shall not place any equipment on the roof or make any attachments to
the roof without the written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed, and shall not make any repairs or improvements
to the structural items of the demised premises without the written consent of
the Landlord, which consent shall not be unreasonably withheld or delayed. In
addition, the Tenant shall not make any alterations, additions or improvements
to said demised premises for any improvement or alterations in excess of $5,000
without the written consent of the Landlord, which consent shall not be
unreasonably withheld or delayed, except for furniture and both movable and non-
movable trade fixtures installed at the expense of the Tenant.
10.03. For the purposes of this Article X, in determining whether or not
an item that needs to be replaced or repair during the term of this lease is
structural or not, the following criteria shall be followed:
A. An initial determination shall be made by the parties to
determine whether the life of the proposed item that needs to be replaced or
repaired will have a life expectancy, with consideration given to normal wear
and tear, exceeds the term of the lease with options.
B. If the determination is made that the life expectancy is less
than the term of the lease with options, then the Tenant shall have the
responsibility for undertaking the replacement or repair.
C. If the determination is made that the life expectancy exceeds
the term of the lease, then the Landlord shall be responsible for that pro-rated
portion of the cost that exceeds the term of the
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lease and the Tenant shall be responsible for the pro-rated portion of the cost
during the term of the lease.
D. Any determination that is made shall be based on the
expectation that the Tenant shall exercise the two five (5) year options to
renew. In the event that the Tenant does not exercise one or both options, then
the determination as to the responsibility for the cost shall be adjusted to
reflect this situation.
E. In determining whether an item should be repaired or replaced
and the life expectancy of the same, the following criteria shall be used:
(1) Standard construction manuals shall be emloyed.
(2) If the repair or replacement is solely for the use of
the tenant and cannot reasonably used by the Landlord after the termination of
the lease or will be removed by the Tenant at the end of the lease, then the
cost for the same shall be the responsibility of the Tenant.
F. In determining whether the Landlord or Tenant shall
perform the work, the following criteria shall apply:
(1) If the remaining term of the lease, plus options, is
less than one-half of the life expectancy of the item, then the Landlord shall
be responsible for undertaking the repair or replacement and if the remaining
term, plus options, is more than 50% of the life expectancy of the item, the
Tenant shall be responsible for undertaking the repair.
(2) Neither party shall be required to proceed with any
repair or replacement until the other party has deposited its share of its
anticipated cost in escrow in a joint account in both names.
10.04. The Tenant shall quit and surrender the demised premises at the end
of the demised term in as good condition as the reasonable use by the Tenant
will permit, damage by fire or other casualty, act of any governmental
authority, alterations, changes and improvements made thereto and subject to the
provisions of this lease, and ordinary wear and tear excepted. At the
termination of the lease, the Tenant shall remove all non-realty fixtures and
equipment, and both movable and nonmovable trade fixtures installed by Tenant
without damage to the building. However, Tenant shall not be required to remove
the same at
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the expiration of the terms of the lease. Tenant shall, prior to the termination
of the lease, repair in a good and workmanlike manner any and all damage caused
by the aforesaid removal. In the event the Tenant fails to remove the same,
Landlord shall have the option of retaining any or all of the alterations,
additions and improvements, furniture and movable and non-movable trade fixtures
or of removing any or all of the same at the cost and expense of the Tenant.
ARTICLE XI
FIRE OR OTHER CASUALTY LOSS
11.01. In the event of damage to or destruction of the leased property by
fire or other casualty, the Landlord shall promptly restore the leased property,
except as set forth in paragraph 11.02. Landlord shall only be required to use
insurance proceeds received pursuant to the provisions of this lease. Landlord
shall not be required to restore until such time as it receives the insurance
proceeds. , If the Landlord chooses not to proceed until receipt of the
insurance proceeds, and the insurance proceeds are not received within 45 days
of the date of the fire or casualty loss, then and in that event the Tenant
shall have the right to terminate the lease upon fourteen (14) days written
notice to the Landlord and unless the Landlord agrees to immediately undertake
the rebuilding of the premises within the fourteen (14) day period, then and in
that event the lease shall terminate.
11.02. If at any time within two (2) years prior to the end of the lease
term, the leased property is completely destroyed or so damaged by fire or other
casualty covered by insurance as to render it substantially unfit for use as
intended, the Landlord or the Tenant may terminate this lease on notice of at
least ten (10) days and no more than thirty (30) days. Such notice shall be
given within sixty (60) days after the date of such damage or destruction.
11.03. Any disbursement of insurance proceeds by a holder of a mortgage
shall be deemed to have been made by the Landlord. If any holder of a mortgage
shall refuse to disburse any portion of insurance proceeds to which the Tenant
is entitled, for any mortgage presently on
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the premises at the date of execution of this lease, then such funds as may be
required by the mortgagee to be paid to the mortgagee shall be paid by the
Landlord. In the event any mortgage is placed on the premises by Landlord after
the execution of the lease, the Landlord shall insure that the mortgagee agrees
to allow any such funds to be used for the rebuilding of the premises or the
Lessor shall provide an equivalent sum from some other source.
11.04. Except as provided in subparagraph 11.02, if the leased property or
any part thereof that substantially interferes with Tenant's operation shall be
destroyed or damaged, this lease shall remain in full force and effect,
provided, however Tenant's obligation to pay the base rent and additional rent
shall abate unless it is determined that the damage or destruction has been
caused by the negligence of the Tenant, its agents, employees or any party
acting under the authority of the Tenant; and provided further that Tenant has
maintained the rental value insurance described in Paragraph 12.01(d) and the
proceeds from said policy are paid to Landlord.
ARTICLE XII
INSURANCE
12.01. The Tenant shall keep the demised property insured throughout the
term of this lease against the following, provided that said coverage is
currently in force and effect and continues to be available, and provided
further that in no event shall the insurance be less than the amount required
under paragraph 12.02:
(a) BUILDING INSURANCE. Loss or damage by all risks shall be
equal to the full replacement cost of the building (less footings/foundations).
(b) SPRINKLER SYSTEM. Loss or damage from leakage of sprinkler
systems now or hereafter installed in the building on the leased property in an
amount not less than 100% of the then full insurable value.
(c) BOILER. Loss or damage by explosion of steam boilers,
pressure vessels, or similar apparatus, now or hereafter installed in
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the building on the leased property, in such limits as are provided in
subparagraph (a) of this section.
(d) RENTAL VALUE. Loss of rental, under a rental value insurance
policy covering risk of loss due to the occurrence of any of the hazards
described in the preceding subparagraphs in an amount sufficient to prevent the
Landlord from becoming a coinsurer, but in any event, in an amount not less than
80% of the then full annual rental income fixed by this lease, including all
annual rental agreed to be paid by the Tenant hereunder.
(e) LIABILITY. Claims for personal injury or property damage,
under a policy of general public liability insurance, with such limits as may
reasonably be requested by the Landlord from time to time, but not less than
$5,000,000 combined single limit per occurrence.
(f) MORTGAGE REQUIREMENTS. Against such other hazards and in such
amounts as the holder of any mortgage to which this lease is subordinate may
require from time to time if such additional coverage is usually required.
12.02. FULL INSURABLE VALUE. The term "Full Insurable Value" shall mean the
actual replacement cost of the building on the demised premises, less
footings/foundations. The "full insurable value" shall be updated for each
calendar year without a full appraisal, based on the physical changes of the
building since the prior year, along with any change in the cost of living that
will reflect an increase or decrease in the construction cost. In addition, the
Landlord may obtain a full appraisal from an appraiser selected and paid for by
the Landlord and reasonably satisfactory to Tenant, in order to determine any
changes in the "Full Insurable Value", which findings shall be binding upon the
parties.
12.03. POLICIES. All insurance provided for in this lease shall be
effected under enforceable policies issued by insurers of recognized
responsibility licensed to be business in this state and found acceptable by the
Landlord. At least 15 days prior to the expiration date of any policy, the
original renewal policy or certificate for such insurance shall be delivered by
the Tenant to the Landlord. Within 15 days after the premium on any policy shall
become due and payable, the
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Landlord, upon request, shall be furnished with satisfactory evidence of its
payment. If the Tenant fails to pay the insurance premium within 15 days, then
the Landlord shall have the option of paying said amount due and the Tenant
shall reimburse Landlord within 10 days of the Landlord's payment. Any payment
made by the Landlord shall be considered as additional rent.
12.04. BLANKET POLICIES. If the Tenant provides any insurance required by
this lease in the form of a blanket policy, the Tenant shall furnish
satisfactory proof that such a blanket policy complies in all respects with the
provisions of this lease, and that the coverage thereunder is at least equal to
the coverage which would be provided under a separate policy covering only the
leased property. If Tenant, under any policy or insurance required by this
lease, has a deductible or self-insured retention, Tenant is responsible to pay
same.
ARTICLE XIII
DEFAULT
13.01. The Landlord may give the Tenant five (5) days notice of intention
to terminate the lease in any of the following circumstances:
(a) BREACH. If the Tenant shall be in default in the performance
of any covenant of this lease, including the payment of basic rent or additional
rent, and if such default is not cured within fifteen (15) business days for a
non-monetary breach or fifteen (15) consecutive days for a monetary breach after
written notice thereof given by the Landlord; or if such default shall be of
such nature that it cannot be cured completely within such fifteen (15) day
period, if the Tenant shall not have promptly commenced within such fifteen (15)
day period or shall not thereafter proceed with reasonable diligence and in good
faith to remedy such default, provided nothing herein shall be deemed to extend
the time to cure the failure to pay basic rent or additional more than fifteen
(15) days after legal notice.
(b) INSOLVENCY. If the Tenant shall be unable to meet its
obligations as they become due, or shall be adjudicated a bankrupt, make a
general assignment for the benefit of creditors, or take the benefit of the
insolvency act, or if a permanent receiver or trustee in
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bankruptcy shall be appointed for the Tenant's property and such appointment is
not vacated within ninety (90) days. For these purposes the "Tenant" shall mean
the Tenant then in possession of the leased property.
(c) ABANDONMENT. If the leased property is abandoned.
(d) ASSIGNMENT. If this lease shall be assigned or sublet other
than in accordance with the terms of the lease and such default is not cured
within fifteen (15) days after notice.
13.02. If the lease shall be terminated by Landlord pursuant to
subparagraph 13.01, then at the expiration of such period specified therein, the
Landlord, at its option, send a termination notice to Tenant and upon giving of
such notice, this lease shall terminate as completely as if that were the date
fixed for the expiration of the term of this lease, and the Tenant shall then
surrender the leased property to the Landlord. If this lease shall so terminate,
it shall be lawful for the Landlord, at its option, without formal demand or
notice of any kind, to re-enter the leased property by an unlawful detainer
action or by any other means, including force, and to remove the Tenant
therefrom without being liable for any damages therefor. Upon the termination of
this lease, the Landlord shall have the right, at its election, to terminate any
sublease then in effect, without the consent of the sublessee concerned.
13.03. The Tenant shall remain liable for all its obligations under this
lease, despite the Landlord's re-entry, and the Landlord may re-rent or use the
leased property as agent for the Tenant, if the Landlord so elects. The Tenant
waives any legal requirement for notice of intention to re-enter and any right
of redemption.
13.04. Notwithstanding the provisions of paragraph 13.01, nothing herein
contained shall prohibit the Landlord from instituting any action without
terminating the lease for nonpayment of any basic rent or additional rent, for
compliance with any of the terms and conditions of the lease, for any damages
resulting from Tenant's breach of the terms and conditions of this lease and any
other action permitted under the laws of the State of New Jersey, other than the
termination of the lease.
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13.05. If the lease shall terminate as provided in this Article the
Landlord shall have the right, at its election at any time, to recover from the
Tenant the amount by which the rent and charges equivalent to rent reserved
herein for the balance of the term shall exceed the reasonable rental value of
the leased property for the same period.
13.06. The Tenant agrees to pay all reasonable attorneys' fees and other
expenses incurred by the Landlord in enforcing any of the obligations under the
lease, should the Tenant be in default.
13.07. Time is of the essence of this lease with respect to the
performance by the Landlord or Tenant of their respective obligations hereunder.
ARTICLE XIV
SUBORDINATION
14.01. This lease and all rights of the Tenant hereunder shall be subject
and subordinate to the lien of any and all mortgages, or consolidated mortgage
or mortgages, which hereafter affect the property, or any part thereof, and to
all renewals, modifications, consolidations, replacements and extensions
thereof, provided that the any new mortgagee shall execute a Subordination,
Non-Disturbance and Attornment Agreement as set forth on Schedule H. So long as
the Tenant is not in uncured default in the payment of rent or additional rent
or in performance of any of the terms of the lease, the Tenant's possession of
the leased property and the Tenant's rights and privileges under the lease or
any renewal thereof shall not be diminished or interfered with by the Mortgagee.
Although no instrument or act on the part of the Tenant shall be necessary to
effectuate such subordination, the Tenant will, nevertheless, execute and
deliver such further instruments subordinating this lease to the lien of all
such mortgages as may be desired by the mortgagee. Landlord represents that at
the time of execution of this lease no mortgage encumbers the property.
14.02. Landlord represents that the property is presently encumbered by a
mortgage held by United Counties Trust Company
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dated October 29, 1985, and modified by a Modification and Extension of Mortgage
dated April 16, 1993, which note, mortgage and modification are attached as
Schedules F (1), (2) and (3) and Landlord represents that the note and mortgage
is not in default and there is presently a principal balance due of $264,726.92.
In the event that the Landlord defaults in the payment of the note and mortgage
and as a result the mortgagee demands the payment of the entire amount of
principal and unpaid interest, then the Landlord shall notify the Tenant of said
demand and the Tenant shall have the right to either pay the amount necessary to
reinstate the mortgage or pay off the entire balance due on the note and
mortgage, in which event the Tenant shall have the right to deduct any amount
paid by the Tenant, along with the fees and costs incurred by the Tenant and
interest on any amounts paid by the Tenant based on the prime rate of the United
Counties Trust Company from any rental payments due and owing by Tenant to
Landlord until such time as the Tenant recovers all of the money to which the
Tenant is entitled under the provisions of this paragraph.
ARTICLE XV
CONDEMNATION
15.01. If the demised premises or any substantial part thereof, as to make
the premises unsuitable for the purposes to which the Tenant has used the
premises, shall be taken by public or quasi-public authority by inverse
condemnation or under any power of eminent domain or condemnation, this lease,
at the option of the Tenant, shall forthwith terminate and the Tenant shall have
no claim or interest in or to any award or damage for such taking other than for
improvements Tenant has made and paid for, and Tenant's special damages such as
moving expenses, loss of profits and the like, provided that same do not detract
from Landlord's award. If any part of the premises shall be taken or
appropriated by inverse condemnation or under any power of eminent domain or
condemnation, or conveyed in lieu thereof, so that Tenant's use of the premises
is materially affected, Tenant shall have the right to terminate this Lease,
provided that Tenant submits to Landlord proof that the Tenant's use of the
premises is or will be
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materially affected within fourteen (14) days of the date of the later of notice
by Landlord to Tenant and the occurrence of the taking and if Landlord disputes
the Tenant's justification for the termination within seven (7) days of the date
of receipt of Tenant's notice, then this matter shall be immediately submitted
to arbitration before three (3) arbitrators designated by the American
Arbitration Association in accordance with the rules of such association, and
the decision of the arbitrators shall be binding. The expense of the arbitration
proceedings conducted under this paragraph shall be borne equally between the
parties and all arbitration proceedings shall be conducted in the County of
Union. In the event of the taking of any part of the building on the demised
premises and this lease not be cancelled as a result of such taking, Landlord
agrees to repair and restore the building promptly and with due diligence and
the rent shall be diminished by an amount representing the part of said rent
properly applicable to the portion or portions of the building and premises
which may be so taken.
ARTICLE XVI
HOLDING OVER
16.01. In the event that the Tenant shall remain in the demised premises
after the expiration of the term of this lease, or of any renewal term, without
having executed a new written lease with the Landlord, such holding over shall
not constitute a renewal or extension of this lease. The Landlord may, at its
option, elect to treat the Tenant as one who has not removed at the end of its
term, and thereupon be entitled to all the remedies against the Tenant, provided
by law in that situation, or the Landlord may elect, at its option, to construe
such holding over as a tenancy from month to month, subject to all the terms and
conditions of this lease, except as to duration thereof, and in that event the
Tenant shall pay monthly rent in advance at the rate not to exceed 150% of the
fixed rent.
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ARTICLE XVII
EXCULPATORY CLAUSE
17.01. Except where same would be a violation of an obligation of Landlord
under this lease or a breach of representation or warranty by Landlord under
this lease, the Landlord shall not be responsible for the loss or damage to
property, or injury to persons occurring in or about the demised premises, by
reason of any existing or future condition, defect, matter or thing in said
demised premises, (or for the property of which the demised premises are a
part), or for the acts omissions or negligence of other persons or tenants in
and about the demised premises, provided, however, that Landlord will be
responsible for acts and negligence of Landlord, its employees, contractors and
agents.
ARTICLE XVIII
DELAYS IN PERFORMANCE
18.01. Except as provided in subparagraph 11.04, Article XV and elsewhere
in the lease where a right of setoff is specifically permitted, no abatement,
diminution, or reduction of rent, charges or other compensation shall be claimed
by or allowed to the Tenant, or any persons claiming under it, under any
circumstances, whether for inconvenience, discomfort, interruption of business,
or otherwise, arising from the making of alterations, changes, additions,
improvements, or repairs to any buildings now on or which may hereafter be
erected on the leased premises, by virtue or because of any present or future
governmental laws, ordinances, requirements, orders, directions, rules or
regulations or by virtue or arising from, and during, the restoration of the
leased premises after destruction or damage thereof by fire or other cause or
the taking or condemnation of a portion only of the leased premises or arising
from any other cause or reason.
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QUIET ENJOYMENT
19.01. The Tenant, provided the Tenant is not in default beyond grace and
notice periods in the payment of the rent and the performance of all the terms
of this lease, shall at all times during the lease term and during any extension
or renewal term peaceably and quietly enjoy the leased property without any
disturbance from the Landlord or from any other person claiming through the
Landlord.
ARTICLE XX
BROKER
20.01. Both parties represent to the other party that neither party has
employed a real estate broker in connection with the negotiations of this lease
or the execution of this lease and each party shall hold the other party
harmless in the event that any claim is made against any party by any real
estate broker, such indemnity to include reasonable counsel fees and to survive
the expiration or other termination of this lease.
ARTICLE XXI
SIGNS
21.01. No sign, advertisement or notice shall be affixed to or placed upon
any part of the demised premises by the Tenant, except in such manner and of
such size, design and color as shall be approved in advance in writing by the
Landlord, and the Landlord agrees that it will not unreasonably withhold its
approval, providing, however, that the Tenant complies with all of the local,
county and state rules, regulations and ordinances regarding such signs.
ARTICLE XXII
ISRA
22.01. The Landlord represents that it has received from the previous
tenant a letter of nonapplicability from the New Jersey
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Department of Environmental Protection ("DEP") dated January 19, 1995, and
updated by letter dated June 4, 1996, attached as Schedules E (1) and (2).
Notwithstanding the provisions of 10.01(C), Landlord further agrees to
indemnify, defend and hold harmless the Tenant, it successors and assigns from
and against any claims, liabilities, damages and expenses, regulatory violations
and sanctions relating to or arising out of any environmental compliance
liability relating to any use or possession of-the premises which occurred prior
to occupancy of the premises by the Tenant which indemnification shall include
reasonable attorney fees and remediation costs incurred by Tenant in the event
that Landlord fails to remediate within a reasonable time after notification by
the Tenant. Tenant shall have the right of offset on rent in the event that
Landlord fails to pay within ninety (90) days. This indemnification shall
survive the expiration and termination of the lease.
22.02. To the extent applicable to and/or resulting from Tenant's
operations at the premises, and subject to the provisions of this Article below,
Tenant shall, at Tenant's own cost and expense, comply with the Industrial Site
Recovery Act ("ISRA") N.J.S.A. 13:1K-6 et seq. (the "Act") and all regulations
promulgated pursuant to the Act, and with the provisions of the Spill
Compensation Control Act, N.J.S.A. 58:10-23.11, or any other environmental law
that may affect the demised premises. Tenant shall, at Tenant's own cost and
expense, provide all information within Tenant's control requested by the
Landlord or the Bureau of Industrial Site Evaluation for the preparation of
submissions, declarations, reports and plans pursuant to the Act. Tenant, at the
termination of the lease shall supply to the Landlord a negative declaration,
nonapplicability letter or such other approvals that may be required by the DEP,
but covering only such facts as may have first arisen or occurred during
Tenant's occupancy of the premises. If the DEP shall determine that a clean-up
plan be prepared and that a clean-up be undertaken because of any spills or
discharges of hazardous substances or wastes at the premises which occur during
the term of the Lease, which spills or discharges are caused by the Tenant or
its agents, employees, guests, licensees, invitees or subtenants, then Tenant
shall, at Tenant's own expense,
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prepare and submit the required plans and carry out the approved plans. Tenant
shall indemnify, defend and save harmless Landlord from all fines, suits,
procedures, claims and actions of any kind arising out of or in any way
connected with any spills or discharges of hazardous substances or wastes at the
premises which occur during the term of this Lease, and are caused by the Tenant
or its agents, employees, guests, licensees, invitees or subtenants. Tenant's
obligations and liability under this paragraph shall survive the term of this
Lease, and shall continue so long as Landlord remains responsible for any spills
or discharges of hazardous substances or wastes at the premises which occur
during the term of this Lease.
ARTICLE XXIII
NON-PERFORMANCE BY LANDLORD
23.01. If the Landlord shall fail or refuse to comply with and perform any
condition or covenant of the Lease and should such failure continue for more
than twenty-one (21) days after receipt of notice by the Landlord or a shorter
period of time in case of emergency, the Tenant may comply with and perform any
such condition or covenant without prejudice to its claim against the Landlord.
Notwithstanding the foregoing, the Landlord shall not be deemed in default if
the Landlord commences diligently to pursue performance of any condition or
covenant within the twenty-one (21) day period following notice which cannot be
completed within the said twenty-one (21) day period. Tenant shall have the
right to deduct the reasonable costs incurred in complying from any rental
payments that might be due to Landlord by Tenant, except if the cost was
incurred without notice to Landlord in which event Tenant shall not be permitted
to deduct from the rental payments unless approved by the Landlord.
ARTICLE XXIV
NOTICE
24.01. Any notices required or permitted to be given hereunder
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shall be in writing and shall either be personally delivered (including
by courier), mailed by certified or registered, postage prepaid, return receipt
requested, or by facsimile transmission (with subsequent written confirmation),
addressed as follows:
FOR LANDLORD: REALTY SITES
1154 Westfield Avenue, P.O. Box 875
Clark, New Jersey 07066
COPY TO: Paul R. Williams, Jr. Esq.
501 Lenox Avenue, P.O. Box 578
Westfield, New Jersey 07091
FOR TENANT: TRANSWORLD HEALTHCARE, INC.
51 Terminal Avenue
Clark, New Jersey 07066
COPY TO: LESLIE LEVINSON, ESQ.
BAER, MARKS & UPHAM, L.L.P.
805 Third Avenue
New York, New York 10022
Any notice, if mailed, shall be deemed to have been given upon
the date of the delivery indicated on the certification or registry receipt; any
notice by personal delivery or facsimile transmission shall be deemed to have
been given when actually received by the party to whom the notice is directed.
Any party may designate a new address by notice given in the manner prescribed
herein. Counsel may give notice for its client if otherwise given in accordance
with the provisions of this Article XXIV.
ARTICLE XXV
SECURITY DEPOSIT
25.01. The Tenant will deposit with the Landlord the sum of TEN THOUSAND
SIX HUNDRED TWENTY ($10,620.00) DOLLARS as security for the performance by the
Tenant of the terms of this lease, upon execution of this lease. The Landlord
may use, apply, or retain the whole or any part of the security to the extent
required for the payment of any rent, additional rent, or other
25
<PAGE> 29
sum or debt as to which the Tenant is in default beyond grace and notice periods
or for any sum which the Landlord may expend or incur by reason of the Tenant's
default beyond grace and notice periods in any of the terms of this lease,
including, but not limited to, any damages or deficiency in the reletting of the
leased property, whether such damages or deficiency accrued before or after
summary proceedings or other re-entry by the Landlord. In the event that the
Tenant shall comply with all of the terms of this lease, the security shall be
returned to the Tenant within fourteen (14) days after the date fixed as the end
of the lease and after delivery of possession of the leased property to the
Landlord. In the event of a sale of the premises of which the leased property
forms a part, the Landlord shall have the right to transfer the security to the
purchaser and the Landlord shall thereupon be released from all liability for
the return of such security. The Tenant shall look solely to the new landlord
for the return of such security so transferred. The Tenant shall not assign or
encumber the money deposited as security, and neither the Landlord nor its
successors or assigns shall be bound by any such assignment or encumbrance.
Landlord shall not be required to retain said security deposit in an escrow
account.
ARTICLE XXVI
ARBITRATION
26.01. A. In the event that a disagreement or dispute between the Landlord
and Tenant in connection with this lease, exclusive of any obligation on the
part of the Tenant to pay the rent and and other money obligations on the part
of the Tenant to be performed, the same shall be submitted to the American
Arbitration Association for arbitration at its nearest New Jersey office for
arbitration by three (3) arbitrators in accordance with the procedural rules
then obtaining of such Association or any successor or other relief as they may
deem necessary. The decision of the arbitrators shall be final, conclusive and
binding upon the parties, and a judgment may be obtained thereon
26
<PAGE> 30
in any court having jurisdiction. Landlord and Tenant shall each pay one-half of
the costs and expense of such arbitration, and each shall separately pay for its
own attorney's fees and expenses.
ARTICLE XXVII
MISCELLANEOUS
27.01. The failure of either party to insist on strict performance of any
term, covenant, or condition hereof, or to exercise any option herein contained,
shall not be construed as a waiver of such term, covenant, condition or option
in any other instance.
27.02. This lease cannot be changed or terminated orally, but only by an
instrument in writing signed by both parties.
27.03. Neither party has made any representations or promises except as
contained in this lease.
27.04. The captions and index in this lease are included for convenience
only and shall not be taken into consideration in any construction or
interpretation of this lease or any of its provisions.
27.05. The provisions of this lease shall apply to, bind and inure to the
benefit of Landlord and Tenant, and their respective successors, legal
representatives and assigns.
27.06. It is the intention of the parties that the lease is a net/net/net
lease, except as provided herein, with all costs, expenses and obligations of
every kind and nature whatsoever relating to the demised premises or any
improvements thereon which may have arisen, may arise or become due during the
term of this lease, being paid by the Tenant, and in the event that any
interpretation is required concerning any of the terms and conditions of this
lease, then this principle shall govern any dispute between the Landlord and
Tenant where applicable.
27.07. Attached as Schedule G is a joint ingress and egress agreement for
the common driveway used by the tenants of the demised premises and the
adjoining premises. Tenant agrees to abide by the terms of the agreement, but
Landlord shall be responsible for any maintainence and/or repairs that may be
required under the terms of the agreement.
27
<PAGE> 31
27.08. Landlord shall deliver to Tenant by July 1st proof that the existing
tenancy with KELCO for the demised premises has been terminated.
27.09. Capital Costs at End of Lease. If Tenant shall make any repair or
replacement required of Tenant hereunder (by virtue or compliance with laws or
otherwise) during the five (5) year period immediately preceding the expiration
or earlier termination of this lease, and such repair or replacement is capital
in nature, then the cost of any such replacement and/or capital improvement
shall be deemed amortized over a period equal to the useful life of such repair
or replacement, commencing upon the date of installation completion thereof, as
the case may be, and Landlord shall promptly reimburse Tenant for the
unamortized cost thereof as of the date of expiration or earlier termination of
this lease, it being understood and agreed that Landlord's payment obligation
hereunder shall survive the expiration or termination of this lease.
Notwithstanding the foregoing, the obligations of this paragraph 27.09 will not
apply to compliance with law necessitated by virtue of Tenant's particular
manner of use, or repairs caused by Tenant's wrongful acts or negligence.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
signed by its proper corporate officers and its corporate seals affixed, this
6 day of August, 1996.
REALTY SITES
WITNESS:
/s/ Robert J. Villa
----------------------------------------
ROBERT J. VILLA, PARTNER
/S/ Paul R. Williams, Jr.
- ----------------------------------
/s/ Quentin J. Villa
----------------------------------------
QUENTIN J. VILLA, PARTNER
ATTEST: TRANSWORLD HOME HEALTHCARE, INC.
BY: /s/ Vincent J. Caruso
-------------------------------------
- ----------------------------------
28
<PAGE> 32
STATE OF NEW JERSEY, COUNTY OF UNION, SS:
I HEREBY CERTIFY that on August 6, 1996, before me, the subscriber,
personally appeared ROBERT J. VILLA and QUENTIN J. VILLA, partners authorized to
execute documents of REALTY SITES, a New Jersey partnership, who, I am
satisfied, are the persons named in and who executed the within Instrument, and
thereupon they acknowledged that they signed, sealed and delivered the same as
their act and deed, for the uses and purposes therein expressed, and the act and
deed of the said partnership.
/S/ Paul R. Williams, Jr.
----------------------------------------
Paul R. Williams, Jr.
STATE OF NEW JERSEY, COUNTY OF UNION, SS:
I HEREBY CERTIFY that August ___________, 1996 ,______________ personally came
before me and acknowledged under oath, to my satisfaction, that (a) this person
is the of TRANSWORLD HOME HEALTH CARE, INC., the corporation named in
the within instrument; (b) this person is the attesting witness to the signing
of this document by the proper corporate officer who is , the President
of the corporation; (c) this document was signed and delivered by the
corporation as its voluntary act duly authorized by a proper resolution of its
Board of Directors; (d) this person knows the proper seal of the corporation
which was affixed to this document; and (e) this person signed this proof to
attest to the truth of these facts.
Signed and sworn to before me
this day of August, 1996.
----------------------------------------
- ----------------------------------
29
<PAGE> 1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of this 8th
day of January, 1997 by and between Transworld Home HealthCare, Inc., a New York
corporation (the "Company"), and Hyperion Partners II L.P., a Delaware limited
partnership ("HPII" or the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
1.1 Sale and Issuance of Shares. Subject to the terms and
conditions of this Agreement, at the Closing (as hereinafter defined),
the Investor agrees to purchase and the Company agrees to sell and
issue to the Investor 898,877 shares (the "Shares") of common stock,
par value $.01 per share, of the Company (the "Common Stock") at a
price of $11.125 per Share, for an aggregate purchase price of
$10,000,000.
1.2 Closing. The purchase and sale of the Shares shall take
place at the offices of Proskauer Rose Goetz & Mendelsohn LLP, 1585
Broadway, New York, New York 10036, within 15 days following the
satisfaction of the conditions set forth in Sections 4 and 5, or at
such other time and place as the Company and the Investor mutually
agree upon orally or in writing (which time and place are designated as
the "Closing"). At the Closing, in addition to satisfying the other
conditions set forth herein, the Company shall deliver to the Investor
one or more certificates representing the Shares, against delivery to
the Company by the Investor of a wire transfer in the amount of
$10,000,000.
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to, and agrees with, the Investor that:
2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing
under the laws of the State of New York. The Company has all requisite
power and authority to own, lease, license and use its properties and
assets and to carry on its business as now conducted and as proposed to
be conducted. The Company has all requisite power and authority to
enter into and perform this Agreement and the transactions contemplated
hereby.
2.2 Authorization. All corporate action on the part of the
Company and its officers, directors and shareholders necessary for the
authorization, execution and delivery of
<PAGE> 2
this Agreement, the performance of all obligations of the Company
hereunder and the authorization, sale, issuance and delivery of the
Shares has been taken. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its
terms, except (i) as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights
generally, and (ii) as enforceability may be limited by laws relating
to the availability of specific performance, injunctive relief or other
equitable remedies.
2.3 Valid Issuance of Shares.
(a) The Shares, when issued, sold and delivered in accordance
with the terms hereof and for the consideration expressed herein, (i)
will be duly and validly issued and fully paid and nonassessable, (ii)
will be free of any pledges, liens, security interests, claims or other
encumbrances of any kind, (iii) will be issued in compliance with all
applicable federal and state securities laws, and (iv) will not be
issued in violation of any preemptive rights of shareholders. The
Shares have been duly and validly reserved for issuance.
(b) The outstanding shares of Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were
issued in compliance with all applicable federal and state securities
laws.
2.4 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state or local governmental
authority on the part of the Company or any of its subsidiaries is
required in connection with the consummation of the transactions
contemplated by this Agreement except for (i) filings with respect to
compliance with the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended; (ii) filing with the Securities and Exchange
Commission on Form 10-C; and (iii) such filings as have been made.
2.5 Compliance with Other Instruments. The execution, delivery
and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in a violation of, or
be in conflict with, or constitute, with or without the passage of time
or the giving of notice or both, a default under, any provision of the
Company's certificate of incorporation, as amended, or bylaws, as
amended, or any judgment, order, writ or decree, or any contract,
agreement or instrument, or require any consent, waiver or approval
thereunder, or give rise to a right to terminate or accelerate the
performance required
2
<PAGE> 3
thereby, or constitute an event which results in the creation of any
lien, charge or encumbrance upon any asset of the Company. The
execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, will not
constitute a "change of control" under any agreement or contract or
give rise to any right to receive severance or similar payments.
2.6 Registration Rights Agreement. The Shares are "Registrable
Securities" as that term is used in the Registration Rights Agreement
dated as of May 29, 1996 between the Company and the Investor (the
"Registration Rights Agreement"), and are entitled to all of the
benefits of the Registration Rights Agreement.
3. Representations and Warranties of the Investor. The Investor hereby
represents and warrants to the Company that:
3.1 Authorization. The Investor has all requisite power and
authority to enter into this Agreement. This Agreement has been duly
executed and delivered and constitutes the Investor's valid and legally
binding obligation, enforceable in accordance with its terms, except
(i) as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and
(ii) as enforceability may be limited by laws relating to the
availability of specific performance, injunctive relief or other
equitable remedies.
3.2 Purchase Entirely for Own Account. The Shares to be
purchased by the Investor will be acquired for investment for its own
account, and, except as contemplated by the Registration Rights
Agreement or otherwise in accordance with applicable securities laws,
not with a view to the resale or distribution of any part thereof and
without the present intention of selling, granting any participation
in, or otherwise distributing the same.
3.3 Investment Experience. The Investor can bear the economic
risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares.
3.4 Restricted Securities. The Investor understands that the
Shares it is purchasing are characterized as "restricted securities"
under the federal securities laws inasmuch as they are being acquired
from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be
resold without registration under the Act, only in certain limited
circumstances. In this connection, the Investor
3
<PAGE> 4
represents that it is familiar with Rule 144 of the Securities and
Exchange Commission, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.5 Legends. The Investor understands that the certificates
evidencing the Shares will bear the following legend:
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR
ANY STATE SECURITIES LAWS AND NEITHER SUCH SHARES NOR ANY
INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH
LAWS AND THE RULES AND REGULATIONS THEREUNDER."
The Shares shall not be required to bear such legend if an
opinion of counsel reasonably satisfactory to the Company is delivered
to the Company to the effect that neither the legend nor the
restrictions on transfer contained in this Agreement are required to
insure compliance with the Act. Whenever, pursuant to the preceding
sentence, any certificate for any of the Shares is no longer required
to bear the foregoing legend, the Company may, and if requested by the
holder thereof, shall, issue to the holder, at the Company's expense, a
new certificate not bearing the foregoing legend.
4. Conditions to the Investor's Obligations at Closing. The obligations
of the Investor under this Agreement are subject to the fulfillment on or before
the Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true in all
material respects on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of
the Closing.
4.2 Performance. The Company shall have performed and complied
with all agreements, covenants, obligations and conditions contained in
this Agreement in all material respects that are required to be
performed or complied with by it on or before the Closing.
4.3 No Material Adverse Change. There shall have been no
material adverse change in the business, affairs, prospects,
operations, properties, assets or condition (financial or otherwise) of
the Company and its subsidiaries taken as a whole.
4
<PAGE> 5
4.4 Compliance Certificate. The President or Chief Executive
Officer of the Company shall deliver to the Investor at the Closing a
certificate certifying that the conditions specified in Sections 4.1,
4.2, 4.3, 4.5, 4.6 and 4.11 have been fulfilled.
4.5 Qualifications; Litigation. All authorizations, approvals
or permits, if any, of any governmental authority or regulatory body
that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement shall be duly obtained and
effective as of the Closing. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or
otherwise challenge, this Agreement or the consummation of the
transactions contemplated by this Agreement, or seeking to obtain
substantial damages with respect thereto.
4.6 Consents and Coordination. All consents and waivers that
are required in connection with the Closing under this Agreement, and
the consummation of the transactions contemplated hereby, shall be duly
obtained and effective as of the Closing.
4.7 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the
Closing and all documents incident thereto shall be satisfactory in
form and substance to the Investor, and the Investor shall have
received all such counterpart original and certified or other copies of
such documents as it may reasonably request.
4.8 Opinion of Company Counsel. Baer, Marks & Upham LLP,
counsel for the Company, shall have delivered an opinion which is
addressed to the Investor, dated as of the Closing and substantially in
the form delivered pursuant to the Unit Purchase Agreement dated as of
November 20, 1995 between the Company and the Investor (the "Unit
Purchase Agreement").
4.9 Banks Waiver and Consent. The Company shall have received,
in form and substance satisfactory to the Investor, (i) the waiver of
the lenders (the "Banks") party to the Credit Agreement dated as of
July 31, 1996, as amended (the "Credit Agreement") among the Company,
the Banks and Bankers Trust Company, as Agent, of any right the Banks
may have to the proceeds of the transactions contemplated hereby to
prepay outstanding indebtedness of the Company under the Credit
Agreement, (ii) the consent of the Banks to the issuance and sale of
the Shares and waiver of any events of default caused in connection
therewith, (iii) the consent of the Banks to the Stock Purchase
Agreement (the "Stock Purchase Agreement") dated as of November 13,
1996, as amended, between the Company and
5
<PAGE> 6
Health Management, Inc. ("HMI") and the consummation of the
transactions contemplated thereby, (iv) the consent of the Banks to the
Agreement and Plan of Merger (the "Merger Agreement") among the
Company, IMH Acquisition Corp. and HMI dated as of November 13, 1996,
and the consummation of the merger (the "Merger") and other
transactions contemplated thereby and (v) such other consents and
waivers of the Banks as may be required in connection with the
transactions hereunder and under the Stock Purchase Agreement and
Merger Agreement.
4.10 Hart-Scott-Rodino. All applicable waiting periods in
respect of the transactions contemplated by this Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall
have expired at or prior to the Closing.
4.11 Investment in and Merger with Health Management, Inc. The
transactions contemplated by the Stock Purchase Agreement and the
Merger Agreement (including, without limitation, the Merger) shall have
been consummated.
5. Conditions to the Company's Obligations at the Closings. The
obligations of the Company to the Investor under Section 1 of this Agreement are
subject to the fulfillment on or before the Closing of the following conditions,
any of which may be waived by the Company:
5.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 shall be true in all
material respects on and as of the Closing with the same effect as
though such representations and warranties had been made on and as of
the date of the Closing.
5.2 Payment of Purchase Price. The Investor shall have
delivered the purchase price specified in Section 1.2.
5.3 Performance. The Investor shall have performed and
complied with all agreements, covenants, obligations and conditions
contained in this Agreement in all material respects that are required
to be performed or complied with by it on or before the Closing.
5.4 Qualifications; Litigation. All authorizations, approvals
or permits, if any, of any governmental authority or regulatory body
that are required in connection with the lawful issuance and sale of
the Shares pursuant to this Agreement shall be duly obtained and
effective as of the Closing. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or
otherwise challenge, this Agreement or the consummation of
6
<PAGE> 7
the transactions contemplated by this Agreement, or seeking to obtain
substantial damages with respect thereto.
5.5 Banks Waiver and Consent. The Company shall have received,
in form and substance satisfactory to the Company, (i) the waiver of
the Banks of any right they may have to the proceeds of the
transactions contemplated hereby to prepay outstanding indebtedness of
the Company under the Credit Agreement, (ii) the consent of the Banks
to the issuance and sale of the Shares and waiver of any events of
default caused in connection therewith, (iii) the consent of the Banks
to the Stock Purchase Agreement and the consummation of the
transactions contemplated thereby, (iv) the consent of the Banks to the
Merger Agreement and the consummation of the Merger and other
transactions contemplated thereby and (v) such other consents and
waivers of the Banks as may be required in connection with the
transactions hereunder and under the Stock Purchase Agreement and
Merger Agreement.
5.6 Hart-Scott-Rodino. All applicable waiting periods in
respect of the transactions contemplated by this Agreement under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall
have expired at or prior to the Closing.
5.7 Consents and Coordination. All consents and waivers that
are required in connection with the Closing under this Agreement, and
the consummation of the transactions contemplated hereby, shall be duly
obtained and effective as of the Closing.
5.8 Investment in and Merger with Health Management, Inc. The
transactions contemplated by the Stock Purchase Agreement and the
Merger Agreement (including, without limitation, the Merger) shall have
been consummated.
6. Covenants of the Company. The Company covenants and agrees
with the Investor as follows:
6.1 Advice of Changes. The Company will promptly advise the
Investor in writing of (i) any event occurring subsequent to the date
of this Agreement which would render any representation or warranty of
the Company contained in this Agreement, if made on or as of the date
of such event or the date of the Closing, untrue or inaccurate in any
material respect and (ii) any material adverse change in the business
of the Company and its subsidiaries taken as a whole.
6.2 Information. The Company covenants and agrees that the
Company shall deliver to the Investor the information specified in
Section 6.9 of the Unit Purchase
7
<PAGE> 8
Agreement, unless the Investor at any time specifically requests that
such information not be delivered to it.
6.3 Observer and Director Rights. The Company covenants and
agrees that it will afford to the Investor the observer, director and
other rights specified in Sections 6.11 and 8.1(a) of the Unit Purchase
Agreement.
6.4 Listing Application. The Company shall prepare and file
with the NASD an Additional Listing Application, in the form and within
the time period prescribed by the NASD, with respect to the listing of
the Shares.
7. Indemnification. The Company agrees to indemnify the Investor and
its general partner, and each officer, director, employee, partner, agent and
affiliate of the Investor and its general partner (the "Indemnified Parties")
for, and hold each Indemnified Party harmless from and against: (i) any and all
damages, losses, claims and other liabilities of any and every kind, including,
without limitation, judgments and costs of settlement, and (ii) any and all
out-of-pocket costs and expenses of any and every kind, including, without
limitation, reasonable fees and disbursements of one counsel for such
Indemnified Parties (selected by the Investor) (all of which expenses
periodically shall be reimbursed as incurred), in each case, arising out of or
suffered or incurred in connection with (A) any investigative, administrative or
judicial proceeding or claim brought or threatened relating to or arising out of
the Investor's purchase of the Shares, or this Agreement, the Registration
Rights Agreement, the Stock Purchase Agreement, the Merger Agreement or the
transactions contemplated hereby and thereby, or (B) any material inaccuracy or
alleged inaccuracy in any representation or warranty of the Company made or
incorporated by reference in this Agreement or any material breach or alleged
breach by the Company of any covenant or agreement made or incorporated by
reference in this Agreement or the Registration Rights Agreement.
8. Termination.
8.1 Termination Prior to Closing. This Agreement may be
terminated at any time prior to the Closing:
(a) by the mutual consent of the Investor and the Company;
(b) by the giving of notice by the Investor or the Company at
any time after June 30, 1997 (or such later date as shall have been
agreed to in writing by the parties hereto), if at the time notice of
such termination is given the Closing shall not have been consummated;
8
<PAGE> 9
(c) by the giving of notice by the Investor or the Company at
any time after the Stock Purchase Agreement or the Merger Agreement is
terminated; or
(d) by the Investor, if there has been a material
misrepresentation or material breach on the part of the Company in any
of the representations, warranties, covenants or agreements of the
Company set forth herein, or if there has been any material failure on
the part of the Company to comply with its obligations hereunder, or by
the Company if there has been a material misrepresentation or material
breach on the part of the Investor in any of the representations,
warranties, covenants or agreements of the Investor set forth herein,
or if there has been any material failure on the part of the Investor
to comply with its obligations hereunder.
8.2 Liability Upon Termination.
(a) In the event of termination of this Agreement pursuant to
Sections 8.1(a), 8.1(b) or 8.1(c), no party hereto shall have any
liability or further obligation to any other party hereto except as
provided in Sections 7, 9.7 and 9.8.
(b) In the event of termination pursuant to Section 8.1(d),
(i) if the Investor is the non-breaching party, the Investor shall be
entitled to reimbursement of expenses as set in Section 9.8 and (ii)
the non-breaching party shall have the right to pursue all rights and
remedies available to it hereunder or otherwise provided at law or
equity, including without limitation, the right to seek specific
performance and money damages.
9. Miscellaneous.
9.1 Survival of Warranties. The warranties, representations,
covenants and agreements of the Company and the Investor contained in
or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing. Neither any investigation
by or on behalf of the Investor nor the receipt by the Investor of any
data or information from the Company, shall in any way affect the right
of the Investor to rely on the representations, warranties, covenants
and agreements of the Company or the right of the Investor to terminate
this Agreement as provided in Section 8.
9.2 Successors and Assigns. The Investor and each assignee of
the Investor may, without the consent of the Company, assign its rights
under this Agreement, in whole or in part, in connection with any sale
or transfer to an affiliate or a partner, and the terms and conditions
of this
9
<PAGE> 10
Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. Nothing in this
Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided in this
Agreement.
9.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of New York as applied to
agreements among New York residents entered into and to be performed
entirely within New York.
9.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
9.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
9.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon receipt by the party to be notified or
five days after deposit with the United States Post Office, by
registered or certified mail, postage prepaid and addressed to the
party to be notified (i) if to the Company, at the following address:
75 Terminal Avenue
Clark, New Jersey 07066
Attn: Vincent J. Caruso
with a copy to:
Baer Marks & Upham LLP
805 Third Avenue
New York, New York 10022
Attn: Leslie J. Levinson
(ii) if to HPII, at the following address:
50 Charles Lindbergh Blvd.
Suite 500
Uniondale, New York 11553-3600
Attn: Scott A. Shay
10
<PAGE> 11
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attn: Bruce Lieb
or at such other address as any of the parties may designate by 10
days' advance written notice to the other parties.
9.7 No Finder's Fee. Each party represents that it is not, and
will not be, obligated for any finder's fee or commission in connection
with this transaction.
The Investor agrees to indemnify and hold harmless the Company
from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Investor or any of its
officers, employees or representatives is responsible.
The Company agrees to indemnify and hold harmless the Investor
from any liability for any commission or compensation in the nature of
a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of their
respective officers, employees or representatives is responsible.
9.8 Expenses. The Company agrees to pay all out-of-pocket fees
and reasonable expenses incurred by HPII in connection with this
Agreement and the transactions contemplated hereby (whether or not the
transactions contemplated hereby are consummated) including, without
limitation, (i) the reasonable fees and expenses of counsel for HPII
incurred in connection with this Agreement and the transactions
contemplated hereby (including the reasonable fees and expenses of
Proskauer Rose Goetz & Mendelsohn LLP, and including, without
limitation, any legal fees and expenses relating to any future waiver,
consent or amendment, whether or not any such future action is given or
consummated) and (ii) all filing fees relating to filings under the
Hart-Scott-Rodino Antitrust Improvements Act of 1974, as amended.
9.9 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of HPII and the
Company.
9.10 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law,
11
<PAGE> 12
such provision shall be excluded from this Agreement and the balance of
this Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
9.11 Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof.
9.12 Equitable Adjustments. Prior to the consummation of the
Closing, all number of Shares referred to herein shall be equitably
adjusted to account for stock splits, stock dividends, mergers and
similar corporate events.
[END OF TEXT]
12
<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this agreement
as of the date first above written.
"COMPANY"
TRANSWORLD HOME HEALTHCARE, INC.
By: /s/ Vincent J. Caruso
-------------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
and Chief Administrative
Officer
"THE INVESTOR OR HPII"
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
13
<PAGE> 1
TRANSWORLD HOME HEALTHCARE, INC.
75 TERMINAL AVENUE
CLARK, NJ 07066
January 13, 1997
Mr. Timothy M. Aitken
231 Via Lido Soud
Newport Beach, CA 92663
Dear Mr. Aitken:
We write to set forth our agreement with respect to your
employment as Chairman and Chief Executive Officer of Transworld Home
HealthCare, Inc., a New York corporation (the "Company").
1. Services. The Company hereby agrees to employ you, and you
hereby agree to be employed by the Company, on the terms and conditions
hereinafter set forth. You will serve as Chairman and Chief Executive Officer of
the Company, and will render such services and perform such duties for the
Company and its direct and indirect subsidiaries (collectively, with the
Company, the "Company Group") as customarily are performed by chief executive
officers, including, without limitation, those services and duties consistent
with your position as the Board of Directors may from time to time assign to
you. You agree to serve as a member of the Board of Directors of the Company.
You will, in addition, hold such offices, directorships and other positions with
the Company Group, as are consistent with your status as Chairman and Chief
Executive Officer, to which you may from time to time be elected or appointed.
Your authority shall be subject at all times to the direction and control of the
Board of Directors of the Company and to the Board's discretion to determine the
policies of the Company Group. You agree to serve the Company Group faithfully,
diligently and to the best of your ability, and you shall devote your full
working time, attention, energy and skills exclusively to the business and
affairs of the Company Group and to the promotion and advancement of its
interests, except that you may devote up to ten percent (10%) of your business
time to other matters that are not competitive with the Company's business,
including your non-executive position at Omnicare PLC. You agree that you will
not participate in any activity detrimental to the best interests of the Company
Group, and that you will not adversely interfere in any way with the Company
Group's pursuit of its business interests.
<PAGE> 2
Mr. Timothy M. Aitken
January 13, 1997
Page 2
2. Compensation. As full compensation for all of your services
(including services as a director of the Company and as an officer and director
of members of the Company Group, if you are so appointed or elected), you shall
receive the following:
(a) During your employment hereunder you shall receive a
base salary at the rate of Two Hundred Fifty Thousand Dollars ($250,000) per
annum through the first anniversary of the date hereof and, if the term of this
Agreement is renewed as provided below, at the rate of Three Hundred Thousand
Dollars ($300,000) per annum during any renewal term, in each case payable in
accordance with the Company's normal payroll practices.
(b) In addition to your base salary, in the sole discretion
of the Board of Directors of the Company, you may receive annual bonuses in such
amount as may be determined by the Board of Directors.
(c) The Company shall grant to you ten-year non- qualified
stock options to purchase up to five hundred thousand (500,000) shares of the
Company's common stock at a purchase price per share equal to the closing price
of the common stock on the last business day preceding the date of this
Agreement. One fifth (1/5) of such options shall be exercisable immediately as
of the date hereof, four-fifteenths (4/15) of such options shall become
exercisable on the first anniversary of the date hereof, four-fifteenths (4/15)
of such options shall become exercisable on the second anniversary of the date
hereof and four-fifteenths (4/15) of such options shall become exercisable on
the third anniversary of the date hereof, provided in each case that you are
employed by the Company on the respective anniversary date. All options shall
immediately become exercisable upon a "Change in Control of the Company" (as
defined in paragraph 9(c) below). Any options that have not become exercisable
as of the date of the termination of your employment with the Company shall
expire as of that date, provided that if during the term of this Agreement your
employment is terminated by the Company without "cause" (as defined below) or if
during the term of this Agreement you terminate your employment for "good
reason" (as defined below), then the annual installment of the options that is
scheduled to become exercisable on the last day of the then current term of this
Agreement shall immediately become exercisable. You (or your legal
representative or estate, as applicable) may exercise options that have become
exercisable on or before the date of the termination of your employment with the
<PAGE> 3
Mr. Timothy M. Aitken
January 13, 1997
Page 3
Company as follows: one quarter (1/4) of such options may be exercised at any
time within three months after termination of your employment (such options
shall expire at the end of such three-month period); one quarter (1/4) of such
options may be exercised at any time within six months after termination of your
employment (such options shall expire at the end of such six-month period); one
quarter (1/4) of such options may be exercised at any time within nine months
after termination of your employment (such options shall expire at the end of
such nine-month period); and one quarter (1/4) of such options may be exercised
at any time within one year after termination of your employment (such options
shall expire at the end of such one-year period); provided, however, that if
your employment is terminated by the Company for cause prior to the first
anniversary of the date hereof or if you voluntarily terminate your employment
other than for good reason prior to the first anniversary of the date hereof,
all of your options shall expire as of the date of the termination of your
employment.
All payments required to be made by the Company to you under
this Agreement shall be subject to withholding, social security, payroll and
other applicable taxes and deductions.
3. Term. (a) Your employment hereunder shall commence on the
date hereof and shall end on the earliest of the following dates: (i) the first
anniversary of the date hereof or, if the term of this Agreement is renewed as
provided below, the last day of the last renewal term, (ii) the date of your
death, (iii) if, in the reasonable opinion of the Company's Board of Directors,
as a result of physical or mental disability, you have failed, or have become
unable, to perform any material duties to the Company for a period of more than
three (3) consecutive months, or a period of more than 180 days in the aggregate
in any eighteen-month period, the date on which the Company shall elect to
terminate your employment by reason of such disability, (iv) the date on which
the Company shall elect to terminate your employment for "cause" (as defined
below), (v) the date on which you shall elect to terminate your employment for
"good reason" (as defined below) and (vi) the date on which you or the Company
shall elect to terminate your employment following a Change in Control of the
Company pursuant to paragraph 9 below. The term of your employment hereunder
automatically shall renew for successive one-year terms unless you or the
Company gives written notice of non-renewal to the other at least ninety (90)
days prior to the end of the then current term.
<PAGE> 4
Mr. Timothy M. Aitken
January 13, 1997
Page 4
(b) For purposes of this Agreement "cause" means any one or
more of the following: (i) you are convicted of or plead guilty or nolo
contendere to a felony or other crime; (ii) willful and continued misconduct by
you relating to the Company, including, without limitation, your willful and
continued failure to perform stated duties; (iii) the willful engaging by you in
gross misconduct materially and demonstrably injurious to the Company; or (iv)
any willful and material breach by you of the terms of this Agreement.
Notwithstanding anything to the contrary in this Agreement, in the event your
employment is terminated for cause, or in the event you voluntarily leave the
employ of the Company other than for good reason, in each case prior to the
first anniversary of the date hereof, you shall forfeit all rights to any
compensation or benefits hereunder for any period after such termination,
whether or not such rights have previously vested. For purposes of this
paragraph 3(b), no act or failure to act by you shall be considered "willful"
unless done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of the
Company. For purposes of this Agreement, you shall not be deemed to have been
terminated for cause unless and until there shall have been delivered to you a
copy of a resolution, duly adopted by the affirmative vote of not less than a
majority of the entire membership of the Board of Directors of the Company
(excluding you) at a meeting called and held for this purpose after reasonable
written notice to you and an opportunity for you, together with your counsel, to
be heard by the Board, finding that, in the good faith opinion of the Board, you
are guilty of conduct of the type described in this paragraph 3(b) defining
"cause", and specifying the particulars thereof.
(c) For purposes of this Agreement, "good reason" shall mean
(i) your failure to serve as a member of the Board of Directors of the Company
for any reason other than a voluntary resignation by you or your removal for
cause, (ii) the failure of the Company to nominate you for election as a
director of the Company at any election of directors unless you decline to stand
for election, (iii) the failure by the Company to obtain from any successor or
assign of all or substantially all of the business of the Company, before the
succession or assignment takes place, an agreement to assume and perform this
Agreement, (iv) any purported termination of your employment for cause which is
not effected pursuant to a notice described in paragraph 3(b) above, (v) without
your written consent, the assignment to you of any substantial duties
inconsistent with your status as Chairman and Chief Executive Officer of the
Company or a substantial alteration in the nature or status of your
responsibilities, or
<PAGE> 5
Mr. Timothy M. Aitken
January 13, 1997
Page 5
an adverse and substantial alteration in your reporting responsibilities, titles
or offices, or any removal of you or failure to re-elect you to any of such
positions, except in connection with the termination of your employment or (vi)
any material breach by the Company of this Agreement.
(d) If during the term of this Agreement your employment
hereunder is terminated by the Company without cause or by you with good reason,
then the Company shall continue to pay your base salary through the end of the
then current term of this Agreement.
4. Certain Benefits. During your employment hereunder, subject
to you meeting applicable eligibility requirements, the Company shall provide
you with such life, disability, health insurance and other benefits as are
generally made available to senior executive employees of the Company. You shall
be entitled to receive six weeks of paid vacation during each year of the term
of your employment hereunder.
5. Reimbursement of Expenses. During your employment
hereunder, the Company will reimburse you for your reasonable, ordinary and
necessary travel and other business expenses incident to your rendering of
services hereunder, in conformity with the Company's regular policies from time
to time in effect regarding reimbursement of expenses. Payments to you for such
expenses will be made upon presentation of expense statements in such detail as
the Company may from time to time reasonably require.
6. Confidentiality. You acknowledge that, in the course of
your employment, you will be occupying a position of trust and confidence with
the Company Group. You further acknowledge that you will have access to valuable
trade secrets and confidential information of the Company Group solely as a
result of your position with the Company. You agree that you will not make use
of or disclose, directly or indirectly, any trade secrets or confidential
information of the Company Group, except that you may disclose such information
(i) to the extent necessary to perform your obligations under this Agreement and
in furtherance of the best interests of the Company Group, (ii) to the extent
required by applicable law or (iii) if expressly consented to by the Company.
The provisions of this paragraph 6 shall survive the expiration or termination,
for any reason, of this Agreement.
<PAGE> 6
Mr. Timothy M. Aitken
January 13, 1997
Page 6
7. Representations. You hereby represent and warrant to the
Company that you have full legal authority to enter into this Agreement and to
perform your obligations hereunder, that you have no obligation to any other
person or entity that would affect or conflict with any of your obligations
hereunder, and that the complete performance of your obligations hereunder will
not violate, result in a breach of, or constitute a default under, any law,
regulation, order or decree of any governmental or judicial body or any contract
by which you are bound.
8. Indemnification. The Company agrees that it will indemnify
you as provided in, and by execution and delivery to you of, an agreement in the
form attached hereto as Exhibit A, which is the form of indemnification
agreement customarily entered into by the Company with its officers and
directors.
9. Severance Compensation. (a) You and the Company each shall
be entitled to terminate your employment hereunder at any time within six months
following a "Change in Control of the Company" (as defined below).
(b) If, within six months following a Change in Control of
the Company you or the Company terminates your employment hereunder for any
reason (other than your death or disability or the termination of your
employment for "cause"), then the Company shall pay to you, as severance pay, in
cash, within sixty (60) days following the termination of your employment, an
amount equal to 2.9 times your average annual base salary hereunder during the
five calendar years preceding the Change in Control of the Company (or during
such lesser period during which you were employed by the Company) (the
"Severance Payment"); provided, however, that in the event that any payment or
benefit received or to be received by you (together with the Severance Payment,
the "Total Payments") in connection with a Change in Control of the Company or
the termination of your employment (whether payable pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control of the Company or any person
affiliated with the Company or such person) would not be deductible (in whole or
part) as a result of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") or would be subject to the excise tax imposed by Section
4999 of the Code, the Severance Payment shall be reduced until no portion of the
Total Payments is not deductible as a result of Section 280G of the Code and no
portion of the Total Payments is subject to the excise tax imposed by Section
4999 of the Code, or the Severance Payment has been reduced to zero.
<PAGE> 7
Mr. Timothy M. Aitken
January 13, 1997
Page 7
(c) "Change in Control of the Company" means the occurrence
of any of the following while you are employed by the Company under this
Agreement: (i) any "person" (as that term is used in Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) other
than Hyperion Partners II L.P., its affiliates and partners shall become the
"beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act) of
more than 30% of the outstanding capital stock of the Company entitled to vote
for the election of directors ("Voting Shares"); (ii) there shall be consummated
a merger or consolidation of the Company with one or more other corporations as
a result of which the holders of the outstanding Voting Shares of the Company
immediately before the merger or consolidation hold less than 51% of the Voting
Shares of the surviving or resulting corporation; (iii) there shall be
consummated the sale of all or substantially all of the assets of the Company
and its subsidiaries taken as a whole; or (iv) during any period of two
consecutive years, individuals who at the beginning of such period constitute
the entire Board of Directors of the Company cease for any reason to constitute
at least a majority thereof, unless the election, or the nomination for election
by the Company's stockholders, of each new director was approved by a vote of at
least a majority of the directors then still in office who were directors at the
beginning of the period.
10. Notices. Any notice or other communication required or
permitted to be given hereunder shall be deemed to have been duly given when
personally delivered or when sent by certified mail, return receipt requested,
postage prepaid, as follows:
If to the Company:
Transworld Home HealthCare, Inc.
75 Terminal Avenue
Clark, NJ 07066
Attention: Chief Administrative Officer
With a copy to:
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attention: Leslie J. Levinson, Esq.
If to you, at your address as set forth above.
<PAGE> 8
Mr. Timothy M. Aitken
January 13, 1997
Page 8
Either party may change its or his address for the purpose of this paragraph by
written notice similarly given.
11. Severability. 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 provision of this Agreement.
12. Miscellaneous. This Agreement sets forth the parties'
final and entire agreement, and supersedes any and all prior understandings,
with respect to its subject matter. The headings in this Agreement are for
convenience of reference only and shall not affect the interpretation of this
Agreement. This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, and upon you, your heirs, administrators
and legal representatives, but no right or obligation hereunder may be assigned
or delegated. No failure or delay by either party in exercising any right,
option, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof, or the exercise of any other right, option, power or
privilege. This Agreement can only be changed, waived or terminated only by a
writing signed by both you and the Company and shall be governed by the internal
laws of the State of New York (without reference to its rules as to conflicts of
laws). This Agreement may be executed in counterparts, each of which shall be
deemed an original, but both of which taken together shall constitute one and
the same document.
13. Dispute Resolution. Any dispute, controversy or claim
arising out of or relating to this Agreement or the breach or alleged breach of
this Agreement, whether arising during the term of this Agreement or at or after
its termination shall be settled by arbitration in New York City, New York in
accordance with the commercial arbitration rules, then obtaining, of the
American Arbitration Association (the "AAA Rules"). The arbitration shall be
conducted before a panel of three arbitrators, as provided in the AAA Rules.
Except with respect to confidentiality provisions, the arbitrators may not award
non-monetary or equitable relief of any sort. They shall have no power to award
(i) damages inconsistent with this Agreement or (ii) punitive damages or any
other damages not measured by the prevailing party's actual damages, and the
parties expressly waive their right to obtain such damages in arbitration or in
any other
<PAGE> 9
Mr. Timothy M. Aitken
January 13, 1997
Page 9
forum. In no event, even if any other portion of these provisions is held to be
invalid or unenforceable, shall the arbitrators have power to make an award or
impose a remedy that could not be made or imposed by a court deciding the matter
in the same jurisdiction. All aspects of the arbitration shall be treated as
confidential. Neither the parties nor the arbitrators may disclose the
existence, content or results of the arbitration, except as necessary to comply
with legal or regulatory requirements. The result in the arbitration will be
binding on the parties, and judgment on the arbitrators' award may be entered in
any court having jurisdiction.
If the foregoing correctly sets forth your understanding of
our agreement, please so indicate by signing and returning to us a copy of this
letter.
TRANSWORLD HOME HEALTHCARE, INC.
By: /s/ Robert Fine
------------------------------
Name:
Title: CEO/President
ACCEPTED AND AGREED TO:
/s/ Timothy M. Aitken
- ------------------------------
Timothy M. Aitken
Dated: January 13, 1997
<PAGE> 1
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF
SUBSIDIARIES ORGANIZATION
DermaQuest, Inc. Pennsylvania
MK Diabetic Support Services, Inc. Florida
Radamerica, Inc. Maryland
RespiFlow, Inc. Florida
Steri-Pharm, Inc. New York
The PromptCare Companies, Inc. New Jersey
The PromptCare Lung Center, Inc. Delaware
Transworld Home HealthCare - Nursing Division, Inc. Delaware
Transworld Healthcare Puerto Rico, Inc. Florida
Health Management, Inc. (49% owned through IMH Delaware
Acquisition Corp., a wholly owned subsidiary of the Company)
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statements of
Transworld Home HealthCare, Inc. on Form S-3 (File No. 33-93774) and Form S-8
(File No. 33-50876) of our report dated December 20, 1996, except as to the
information presented in the last five paragraphs in Note 12, for which the
date is January 14, 1997 on our audits of the consolidated financial statements
and financial statement schedule as of October 31, 1996 and 1995, and for each
of the three years in the period ended October 31, 1996, which report is
included in the 1996 Annual Report on Form 10-K. Our report on such audits
contains an explanatory paragraph related to the adoption of the provisions of
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes," in fiscal 1994.
New York, New York
January 27, 1997
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