<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended April 30, 1997
Commission File Number 1-11570
-------------------------------------------------------------
Transworld 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.)
75 Terminal Avenue, Clark, New Jersey 07066
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 340-1144
Transworld Home HealthCare, Inc. .
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO____
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 11, 1997
Common Stock 15,120,660 Shares
<PAGE> 2
Transworld HealthCare, Inc.
Second Quarter Report On Form 10-Q
Table of Contents
Part I. Page
Item 1. Financial Statements (Unaudited)........................... 3
Condensed Consolidated Balance Sheets
April 30, 1997 and October 31, 1996............... 4
Condensed Consolidated Statements of Operations
For the Three and Six Months Ended April 30, 1997
and 1996.......................................... 5
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended April 30, 1997
and 1996.......................................... 6
Notes to Condensed Consolidated Financial
Statements........................................ 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................... 16
Part II.
Item 2. Changes in Securities....................................... 29
Item 5. Other Information........................................... 29
Item 6. Exhibits and Reports on Form 8-K............................ 29
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. This Quarterly Report contains certain forward
looking 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 Quarterly Report relating to
matters that are not historical facts are forward looking 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.
Page 2
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Part I
Item 1. Financial Statements (Unaudited)
The financial statements of Transworld HealthCare, Inc. (the
"Company") begin on page 4.
Page 3
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TRANSWORLD HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, OCTOBER 31,
1997 1996
-------------- -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and temporary investments $ 37,263 $ 4,598
Accounts receivable, less allowance for doubtful
accounts of $7,341 and $5,471 32,599 24,414
Inventories 1,985 1,829
Prepaid income taxes 62 600
Prepaid expenses and other current assets 7,337 5,106
------------ ----------
Total current assets 79,246 36,547
Property & equipment, net 4,084 3,934
Advances to and investment in Health Management, Inc. 31,508
Intangible assets, net of accumulated amortization of
$4,223 and $3,385 43,658 44,496
Other assets 7,001 5,750
------------ ----------
Total assets $ 165,497 $ 90,727
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current
liabilities $ 10,045 $ 8,544
Acquisitions payable 96 1,802
------------ ----------
Total current liabilities 10,141 10,346
Long-term debt, including obligations under capital leases 35,494 12,505
Deferred income taxes and other 651 651
------------ ----------
Total liabilities 46,286 23,502
------------ ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; authorized
2,000 shares, issued and outstanding - none
Common stock, $.01 par value; authorized
30,000 shares, issued and outstanding
15,104 and 9,940 shares 151 99
Additional paid-in capital 112,799 62,221
Retained earnings 6,261 4,905
------------ ----------
Total stockholders' equity 119,211 67,225
------------ ----------
Total liabilities and stockholders' equity $ 165,497 $ 90,727
============ ==========
</TABLE>
See notes to condensed consolidated financial statements.
Page 4
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TRANSWORLD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED APRIL 30, ENDED APRIL 30,
-------------------- --------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Net respiratory, medical equipment and supplies sales $ 13,226 $ 10,373 $ 25,454 $ 22,807
Net patient services 4,651 4,654 9,416 9,468
Net infusion services 2,792 2,495 6,096 4,891
-------- -------- -------- --------
Total revenues 20,669 17,522 40,966 37,166
-------- -------- -------- --------
Cost of revenues:
Respiratory, medical equipment and supplies sales 5,932 4,034 10,945 8,998
Patient services 2,312 2,443 4,783 4,947
Infusion services 2,006 1,423 4,011 2,899
-------- -------- -------- --------
Total cost of revenues 10,250 7,900 19,739 16,844
-------- -------- -------- --------
Gross profit 10,419 9,622 21,227 20,322
Selling, general and administrative expenses 8,518 7,992 17,004 16,143
-------- -------- -------- --------
Operating income 1,901 1,630 4,223 4,179
Interest income (426) (9) (1,108) (26)
Interest expense 1,115 1,433 2,113 2,584
Equity in losses of Health Management, Inc., net 296 -- 296 --
-------- -------- -------- --------
Income before income taxes 916 206 2,922 1,621
Provision for income taxes 683 87 1,566 681
-------- -------- -------- --------
Net income $ 233 $ 119 $ 1,356 $ 940
======== ======== ======== ========
Net income per share of common stock $ .02 $ .02 $ .12 $ .15
======== ======== ======== ========
Weighted average number of common shares outstanding 11,583 6,776 11,360 6,762
======== ======== ======== ========
</TABLE>
See notes to condensed consolidated financial statements.
Page 5
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TRANSWORLD HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
APRIL 30,
------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,356 $ 940
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 1,795 1,848
Provision for doubtful accounts 3,129 3,082
Equity in losses of Health Management, Inc. 637
Payments for debt issuance costs (500) (349)
Changes in assets and liabilities:
Increase in accounts receivable (11,315) (5,782)
(Increase) decrease in inventories (156 147
Increase in prepaid expenses and other assets (2,717) (833)
Increase (decrease) in accounts payable and other liabilities 1,261 (1,993)
-------- --------
Net cash used in operating activities (6,510) (2,940)
-------- --------
Cash flows from investing activities:
Notes receivable issued (70)
Capital expenditures (683) (385)
Advances to and investment in Health Management, Inc. (34,177)
Payments received from Health Management, Inc. 2,032
Payment on acquisition payable (1,706) (10,025)
-------- --------
Net cash used in investing activities (34,604) (10,410)
-------- --------
Cash flows from financing activities:
Proceeds from notes payable 10,000
Payments on notes payable (11)
Proceeds from short-term debt 1,000
Payments on short-term debt (1,000)
Borrowing under revolving loan 33,847 5,265
Payments on revolving loan (10,883)
Proceeds from long-term debt 47 18
Payments on long-term debt (29) (2,269)
Proceeds from stock issuance 50,650
Payments for stock issuance costs (135)
Stock options and warrants exercised, including tax benefit 293 198
-------- --------
Net cash provided by financing activities 73,779 13,212
-------- --------
Increase (decrease) in cash 32,665 (138)
Cash and temporary investments, beginning of period 4,598 915
-------- --------
Cash and temporary investments, end of period $ 37,263 $ 777
======== ========
Supplemental cash flow information:
Cash paid for interest $ 1,308 $ 1,625
======== ========
Cash paid for income taxes $ 1,028 $ 1,666
======== ========
Supplemental disclosure of non-cash investing and financing activities:
Common stock issued for payment on acquisition payable $ 3,831
========
</TABLE>
See notes to condensed consolidated financial statements.
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
(Unaudited)
Note 1: Basis of Presentation
Transworld 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.
The Condensed Consolidated Financial Statements included herein are
unaudited and include all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations of the interim
period pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. These condensed financial statements
should be read in conjunction with the Company's Form 10-K for the year ended
October 31, 1996. Although the Company's operations are not highly seasonal, the
results of operations for the three and six months ended April 30, 1997 and 1996
are not necessarily indicative of the operating results for the full year. Prior
year's financial statements have been reclassified to conform with the current
year's presentation.
Note 2: 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 certain acquisition agreements and
dilutive stock options and warrants using the treasury stock method. Fully
diluted earnings per share has not been presented as the dilutive effect is not
material.
Page 7
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 2: Earnings Per Share (cont.)
The earnings per share calculations for the three and six months ended
April 30, 1997 and 1996 were computed as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 233 $ 119 $ 1,356 $ 940
Add: Interest on long-term debt, net of tax effect,
after application of -- 34 -- 51
treasury stock method ------- ------- ------- -------
Net income, as adjusted $ 233 $ 153 $ 1,356 $ 991
======= ======= ======= =======
Weighted average number of shares outstanding during
applicable periods 10,560 5,473 10,273 5,272
Weighted average number of shares contingently
issuable per acquisition agreements 269 257 269 441
Incremental shares, after application of treasury
stock method, of stock options and warrants 754 1,046 818 1,049
------- ------- ------- -------
Shares used in calculation of net income per common share 11,583 6,776 11,360 6,762
======= ======= ======= =======
Net income per common share $ 0.02 $ 0.02 $ 0.12 $ 0.15
======= ======= ======= =======
</TABLE>
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." SFAS No. 128 simplifies the computation of earnings per share ("EPS")
and replaces primary EPS with basic EPS and fully diluted EPS with diluted EPS.
SFAS No. 128 is effective for annual and interim financial statements issued
after December 15, 1997 and earlier application is not permitted. SFAS No. 128
requires the restatement of EPS data for all prior periods. The Company has not
yet determined the impact that this statement will have on its EPS amounts when
adopted.
Note 3: Business Combinations
RADAMERICA
On August 5, 1994, the Company acquired all of the issued and outstanding
capital stock of Radamerica, Inc., for $8,000 in cash and 250 shares of the
Company's common stock valued at $5,000 based on a $20 per share market price
guarantee. The measurement date for such guarantee will be August 5, 1997, at
which point any deficiency between the market value of the Company's common
stock, as defined in the purchase agreement, and the $20 per share guarantee may
be paid to the selling shareholders either in common stock of the Company, in
cash or a combination of stock and cash. Such payment, if any, is due within 30
Page 8
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations (cont.)
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 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.
PENDING ACQUISITIONS
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, amended on April 24, 1997 to $9,500, consisting of $8,750 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 (as
defined and described in Note 4), 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. The Company
cannot predict when or whether all of the requisite consents and approvals will
be obtained or whether the transaction
Page 9
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations (cont.)
will ultimately be consummated. For the years ended December 31, 1996, 1995 and
1994, the VIP Companies generated approximately $29,000, $35,000 and $33,000,
respectively, in revenues and, for the same periods, pro forma net income (loss)
(after consideration of pro forma provision for income taxes) of $349, ($978)
and $850, respectively. The 1995 net loss includes a special one-time bonus of
$3,000 (pretax) to one of the VIP Companies' officers.
HMI
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 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.
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. HMI is currently
in default under the HMI Credit Agreement and the Company has agreed to forbear
from exercising any remedies until July 15, 1997. Borrowings under the HMI
Credit Agreement bear interest at a rate (9.75% at April 30, 1997) which floats
with the Company's senior lending rate.
In mid January 1997, the Stock Purchase Agreement was completed, pursuant
to which the Company acquired 8,964 newly issued shares of HMI 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
shares representing up to an additional 2% of HMI's then outstanding common
stock for $1 per share, which expires on January 14, 1998.
The acquisition of 49% of the outstanding shares of HMI common stock is
being accounted for by the Company under the equity method of accounting
(effective as of January 31, 1997) 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.
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations (cont.)
For the year ended April 30, 1996 and the nine months ended January 31,
1997 (unaudited), HMI reported net sales of $158,860 and $120,030, respectively
and net losses of $10,927 and $31,348, respectively. Included in the net loss
for the year ended April 30, 1996 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).
Included in the net loss for the nine months ended January 31, 1997 are charges
of $21,588, related to (i) an additional provision reflecting a change in the
estimation of the allowance for doubtful accounts ($10,000); (ii) costs
associated with overpayments from New York State Medicaid ($1,400); (iii) costs
and other expenses related to the closing or sale of three retail pharmacies,
including a goodwill write-off ($2,813); (iv) estimated costs related to the
settlement of a stockholder class action litigation ($7,200); and (v) estimated
costs related to the settlement of a derivative lawsuit ($175).
The table below contains summarized financial information of HMI as of
April 30, 1997 for balance sheet data and for the fourth quarter ended April 30,
1997 for statement of operations data based on unaudited financial information
provided by HMI.
<TABLE>
<CAPTION>
Condensed Balance Sheet Data April 30, 1997
- ---------------------------- --------------
<S> <C>
Current assets $38,916
Noncurrent assets 33,435
Current liabilities 58,861
Noncurrent liabilities 684
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
Condensed Statement of Operations Data April 30, 1997
- -------------------------------------- ------------------
<S> <C>
Net revenues $ 38,389
Gross profit 7,317
Operating loss (3,377)
Net loss (1,299)
The Company's share (net of
elimination of intercompany interest expense of $341) (296)
</TABLE>
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 3: Business Combinations (cont.)
The $9,714 investment in HMI as of January 31, 1997 represents 49% of
HMI's equity in net tangible assets and after fair value adjustments $15,835
was preliminarily being allocated to goodwill, which is being amortized on a
straight-line basis over thirty years. The final allocation of purchase price
and the resulting amortization expense may differ from the preliminary
estimates due to the final allocation being based on final appraised values of
assets and liabilities.
The Company plans to undertake a detailed review of productivity enhancing
opportunities, as well as the carrying value of various assets, at certain
operations and subsidiaries of HMI. Accordingly, goodwill associated with the
acquisition of HMI will be reviewed for potential impairment, if any. The
Company anticipates that this review may result in restructuring and other
charges in the latter part of 1997. Based on the preliminary status of this
review, it is not currently practicable to estimate the amount of charges, if
any, that may result from these reviews.
The Merger Agreement, as amended on March 26, 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 $ .30 per share. Consummation of
the Merger Agreement is subject to various closing conditions, including final
settlement of certain shareholder litigation, approval of the Company's lenders
under the Credit Facility, receipt of certain regulatory approvals and approval
by HMI's shareholders. If the Merger Agreement is not consummated, it is likely
that HMI would seek protection under the Federal Bankruptcy laws.
The aggregate cost of the acquisition, based on the amended Merger
Agreement, will be approximately $52,000, including the exchange of trade
payables of $12,187 for the issuance of the AP Shares (as defined below). The
Company has invested approximately $31,508 in the HMI transaction as of April
30, 1997 including $3,200 advanced for partial settlement of certain shareholder
litigation and advances of $21,263 representing the acquisition of HMI's senior
secured indebtedness. The Company expects that any remaining cost of the
acquisition will be provided through either working capital or borrowings under
the Credit Facility. The Company anticipates completing this acquisition by the
end of the Company's third fiscal quarter of 1997.
Page 12
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 4: Debt
On January 13, 1997, the Company amended its $100,000 senior secured
revolving credit facility (the "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 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 April 17, 1997, the Company amended the Credit Facility in order to
accommodate the sale of the Additional Shares and the AP Shares (each as defined
in Note 5), the March 26, 1997 amendment to the Merger Agreement (Note 3), the
advance made on behalf of HMI of $3,200 for partial settlement of certain
shareholder litigation (Note 3) and the ability to make an additional payment of
$1,350 after the closing of the Merger Agreement, the ability to make advances
and loans to HMI for general corporate and working capital purposes up to
$2,000, the ability to purchase 1,765 shares of Omnicare plc ("Omnicare") from
Hyperion Partners II L.P. ("HPII") (Note 7) and the ability to change its
corporate name to Transworld HealthCare, Inc. (Note 7).
Note 5: Stockholders' Equity
On April 21, 1997, HPII purchased an additional 899 shares of the
Company's common stock at $11.125 per share and Hyperion TW Fund L.P. purchased
4,117 shares of the Company's common stock at $9.875 per share for an aggregate
purchase price of $50,650 (collectively, the "Additional Shares").
On March 26, 1997, HPII agreed to invest an additional $12,187 of
equity capital, representing a purchase of 1,234 shares (the "AP Shares") at
$9.875 per share, the consideration for which will be comprised of the transfer
to the Company of HPII's receivables from HMI, representing certain trade
payables of HMI, previously acquired by HPII. Completion of this transaction is
subject to customary closing conditions including, but not limited to,
shareholder approval.
Page 13
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 6: Commitments and Contingencies
On November 2, 1994, an action was filed in the Supreme Court of the
State of New York, County of Westchester against the Company, alleging that one
of its drivers negligently caused the death of the plaintiff's husband while
operating his motor vehicle during a delivery for the Company. The plaintiffs
were seeking $12,580 in damages. The case was settled on April 16, 1997 for
$760, of which the Company's portion amounted to $710, and was paid on May 6,
1997 by the Company's insurance company. As of April 30, 1997, the Company's
balance sheet includes a $710 receivable from the insurance company, which is
included in prepaid and other current assets, and a corresponding settlement
payable which is included in accounts payable, accrued expenses and other
current liabilities. Since this settlement was within the policy limits of the
Company's insurance policies it will not have any effect on the Company's
consolidated financial position, results of operations or cash flows.
Note 7: Subsequent Events
Effective May 6, 1997 Transworld Home HealthCare, Inc. changed its name
to Transworld HealthCare, Inc.
OMNICARE
On May 28, 1997 Transworld HealthCare (UK) Limited ("Transworld UK"), a
wholly owned subsidiary of the Company and Omnicare reached agreement on the
terms of a recommended cash offer to acquire all the issued and to be issued
shares of Omnicare. The aggregate cost of the acquisition will be approximately
$32,000.
Omnicare provides respiratory equipment and services to patients at home
in the United Kingdom under the terms of contracts and licenses with various
United Kingdom National Health Service agencies. The Company also dispenses and
supplies a range of medical and surgical products, principally ostomy products,
to patients at home, as well as providing those patients with advisory and other
services through its network of regional care centers.
Transworld UK has received commitments from shareholders to sell 35.9%
of the outstanding shares of Omnicare. Transworld also acquired 1,765 Omnicare
shares from HPII on May 28, 1997 for $2,857. As a result, Transworld UK
(including commitments from shareholders) would own an aggregate of 6,015
shares, representing 50.8% of Omnicare's outstanding shares.
Page 14
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TRANSWORLD HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
(In thousands, except per share data)
(Unaudited)
Note 7: Subsequent Events (cont.)
Completion of the transaction is subject to various conditions as set
forth in the definitive United Kingdom offering materials. On May 30, 1997 the
Credit Agreement was amended to accommodate the offer to acquire Omnicare. The
Company expects to fund the acquisition with working capital. The Company
anticipates completing this transaction in July 1997.
Timothy M. Aitken, the Company's Chairman and Chief Executive Officer is a
director of both the Company and Omnicare, and accordingly has not participated
in either the Company's or Omnicare's board deliberations concerning the offer.
Page 15
<PAGE> 16
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
THREE MONTHS ENDED APRIL 30, 1997 VS. THREE MONTHS ENDED APRIL 30, 1996
Revenues. Total revenues increased by $3,147,000 or 18.0% to $20,669,000
for the three months ended April 30, 1997 from $17,522,000 for the three months
ended April 30, 1996. This increase was primarily attributable to an increase in
the number of patients serviced in the Company's specialty mail-order pharmacy
and medical supplies operations ($2,725,000) and the inclusion of U.S. HomeCare
Infusion Therapy Services Corporation of New Jersey ("USNJ") ($944,000).
Cost of Revenues. Cost of revenues increased by $2,350,000 or 29.7% to
$10,250,000 for the three months ended April 30, 1997 from $7,900,000 for the
three months ended April 30, 1996. As a percentage of total revenues, cost of
revenues increased to 49.6% from 45.1% for the three months ended April 30, 1997
and 1996, respectively. Cost of revenues as a percentage of sales increased for
respiratory, medical equipment and supplies sales (44.9% for the three months
ended April 30, 1997 versus 38.9% for the corresponding 1996 period), decreased
for patient services (49.7% for the three months ended April 30, 1997 versus
52.5% for the corresponding 1996 period) and increased for infusion services
(71.8% for the three months ended April 30, 1997 versus 57.0% for the
corresponding 1996 period). The increases in the respiratory, medical
equipment and supplies sales and the infusion services costs are primarily
attributable to an increase in the mix of higher cost product lines and
therapies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $526,000 or 6.6% to $8,518,000 for the
three months ended April 30, 1997 from $7,992,000 for the comparable 1996
period. This increase was principally due to an increase in selling, general and
administrative expenses at the Company's specialty mail-order pharmacy and
medical supplies operations ($724,000) which increased principally as a result
of the building of infrastructure (such as payroll and payroll related expenses
and office expenses) and the Company's infusion therapy operations primarily due
to the inclusion of USNJ for the three months ended April 30, 1997 ($72,000).
Interest Income. Interest income increased by $417,000 to $426,000 for the
three months ended April 30, 1997 from $9,000 for the comparable 1996 period.
This increase was primarily attributable to interest income earned, after the
elimination of intercompany interest (49%), under the HMI Credit Agreement (as
defined herein) ($354,000) in the second quarter of 1997.
Page 16
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Results of Operations (cont.)
Interest Expense. Interest expense decreased by $318,000 to $1,115,000 for
the three months ended April 30, 1997 from $1,433,000 for the comparable 1996
period. This decrease in interest expense was primarily due to interest expense
($500,000) in the second quarter of 1996 on a $10,000,000 subordinated loan
which was repaid on July 31, 1996.
Equity in Losses of Health Management, Inc. ("HMI"). Equity in losses of
HMI was $296,000 for the three months ended April 30, 1997 versus $0 for the
comparable 1996 period. This represents 49% of HMI's losses for the three months
ended April 30, 1997, after the elimination of intercompany interest expense
($341,000). The 49% interest in HMI was acquired in mid January 1997 and
included in the results of operations effective February 1, 1997.
Provision for Income Taxes. Provision for income taxes as a percentage of
income before income taxes was 74.6% for the three months ended April 30, 1997
and 42.2% for the three months ended April 30, 1996. The increase in the
effective tax rate from the 1996 period to the 1997 period was principally
attributable to equity in losses of HMI (30.6%) and to a much lesser extent to
higher levels of non-deductible expenses, primarily goodwill amortization.
Net Income. As a result of the foregoing, net income increased by
$114,000 to $233,000 for the three months ended April 30, 1997 from net income
of $119,000 for the three months ended April 30, 1996. Excluding the Company's
share of HMI's losses for the three months ended April 30, 1997, amounting to
$637,000 (excluding a $341,000 reduction in interest income), the Company's
net income would have been $870,000.
SIX MONTHS ENDED APRIL 30, 1997 VS. SIX MONTHS ENDED APRIL 30, 1996
Revenues. Total revenues increased by $3,800,000 or 10.2% to $40,966,000
for the six months ended April 30, 1997 from $37,166,000 for the six months
ended April 30, 1996. This increase was primarily attributable to an increase of
$2,647,000 or 11.6% in net respiratory, medical equipment and supplies sales
resulting from an increase in the number of patients serviced in the Company's
specialty mail-order pharmacy and medical supplies operations. Net infusion
service revenues also increased by $1,205,000 or 24.6% due primarily to the
inclusion of USNJ for the six months ended April 30, 1997.
Cost of Revenues. Cost of revenues increased by $2,895,000 or 17.2% to
$19,739,000 for the six months ended April 30, 1997 from $16,844,000 for the six
months ended April 30, 1996. As a percentage of total revenues, cost of revenues
increased to 48.2% from 45.3% for the six months ended April 30, 1997 and 1996,
respectively. Cost of revenues as a percentage of sales increased for
respiratory, medical equipment and supplies sales (43.0% for the six months
ended April 30, 1997 versus 39.5% for the corresponding 1996 period), decreased
for
Page 17
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Results of Operations (cont.)
patient services (50.8% for the six months ended April 30, 1997 versus 52.2% for
the corresponding 1996 period) and increased for infusion services (65.8% for
the six months ended April 30, 1997 versus 59.3% for the corresponding 1996
period). The increases in the respiratory, medical equipment and supplies
sales and the infusion services costs are primarily attributable to an increase
in the mix of higher cost product lines and therapies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased by $861,000 or 5.3% to $17,004,000 for the six
months ended April 30, 1997 from $16,143,000 for the comparable 1996 period.
This increase was primarily attributable to an increase in the Company's
specialty mail-order pharmacy and medical supplies operations ($880,000) which
increased principally as a result of the building of infrastructure (such as
payroll and payroll related expenses and office expense) and the Company's
infusion therapy operations primarily due to the inclusion of USNJ for the six
months ended April 30, 1997 ($262,000).
Interest Income. Interest income increased by $1,082,000 to 1,108,000 for
the six months ended April 30, 1997 from $26,000 for the comparable 1996 period.
This increase was primarily attributable to interest income earned, after the
elimination of intercompany interest (49%) for the three months ended April 30,
1997, under the HMI Credit Agreement (as defined herein) ($1,022,000) for the
six months of 1997.
Interest Expense. Interest expense, decreased by $471,000 to $2,113,000
for the six months ended April 30, 1997 from $2,584,000 for the comparable 1996
period. This decrease was primarily attributable to interest expense ($622,000)
in the six months ended April 30, 1996 on a $10,000,000 subordinated loan which
was repaid on July 31, 1996.
Equity in Losses of HMI. Equity in losses of HMI was $296,000 for the six
months ended April 30, 1997 verses $0 for the comparable 1996 period. This
represents 49% of HMI's losses for the three months ended April 30, 1997, after
the elimination of intercompany interest expense ($341,000). The 49% interest in
HMI was acquired in mid January 1997 and included in the results of operations
effective February 1, 1997.
Provision for Income Taxes. Provision for income taxes as a percentage of
income before income taxes was 53.6% for the six months ended April 30, 1997 and
42.0% for the six months ended April 30, 1996. The increase in the effective tax
rate from the 1996 period to the 1997 period was principally attributable to
equity in losses of HMI (9.6%) and to a much lesser extent to higher levels of
non-deductible expenses, primarily goodwill amortization.
Page 18
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Results of Operations (cont.)
Net Income. As a result of the foregoing, net income increased by
$416,000 or 44.3% to $1,356,000 for the six months ended April 30, 1997 from
net income of $940,000 for the six months ended April 30, 1996. Excluding the
Company's share of HMI's losses for the three months ended April 30, 1997,
amounting to $637,000 (excluding a $341,000 reduction in interest income), the
Company's net income would have been $1,993,000.
Page 19
<PAGE> 20
Liquidity and Capital Resources
During the six months ended April 30, 1997, the Company's negative cash
flow from operations was $6,510,000 primarily as a result of an increase in
accounts receivable of $8,186,000 (net of increases in allowance for doubtful
accounts) (see Accounts Receivable below). The Company utilized $34,604,000 in
investing activities, including $1,706,000 for payments on acquisitions payable
(primarily for USNJ), $683,000 for capital expenditures, $70,000 for notes
receivable, $21,263,000, for the acquisition of the senior secured indebtedness
of HMI, $8,964,000 for the acquisition of 8,964,000 shares of HMI common stock,
$750,000 for costs associated with the acquisition of HMI's shares, $3,200,000
for advances made on behalf of HMI for a partial settlement of certain
shareholder litigation offset by repayments received from HMI of $2,032,000.
Cash requirements during the six months ended April 30, 1997 for operating and
investing activities were met through borrowings under the Credit Facility and
the net proceeds from the issuance of stock of $50,515,000. The Company also
made repayments of $10,883,000 of the revolving loan during the six months ended
April 30, 1997, primarily from the stock issuance proceeds.
Accounts Receivable. The Company maintains a cash management program that
focuses on the reimbursement function, as growth in accounts receivable has been
the main operating use of cash historically. At April 30, 1997 and October 31,
1996, $32,599,000 (19.7%) and $24,414,000 (26.9%), respectively, of the
Company's total assets consisted of accounts receivable substantially from
third-party payors. Such payors generally require 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.
Accounts receivable increased by $8,185,000 from October 31, 1996 to April
30, 1997 primarily due to an increase in accounts receivable at the Company's
specialty mail-order pharmacy and medical supply operations ($6,837,000) and the
infusion therapy operations ($1,480,000) primarily attributable to the
acquisition of USNJ.
During fiscal 1996 and during the first six months of 1997, the Company
experienced a significant increase in accounts receivable at one of its
specialty mail-order pharmacy and medical supplies operations, DermaQuest, Inc.
("DermaQuest"), whose main product lines include wound care and orthotic
products. The Medicare program, 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 applicable Medicare intermediary. This
has created significant delays in payments, in many cases extending beyond
twelve months, leading to the significant buildup in accounts receivable with
the 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
Page 20
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Liquidity and Capital Resources (cont.)
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 average, which would 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. At April 30, 1997, and October 31, 1996, the Company's
average DSOs were 142 and 109, respectively. The increase in DSOs was
principally due to delays in billing in the specialty mail-order pharmacy and
medical supplies operations and to a lesser extent to the factors previously
discussed. As the proportion of third-party payors' claims related to alternate
site health care increases, the Company believes that third-party payors are
likely to increase their review of such claims, the effect of which would be to
generally increase DSO's, however, the Company expects the DSO's to decline
during the next fiscal quarter as the billings in the specialty mail-order
pharmacy and medical supplies operations are brought current.
Credit Facility. On July 31, 1996, the Company completed a $100,000,000
senior secured revolving credit facility, with Bankers Trust Company as Agent
(the "Credit Facility"). 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 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 (ranging from 5.66% to 5.69% at April 30, 1997), plus 2%. As of
June 6, 1997, the Company had outstanding $35,455,000 under the Credit Facility.
Availability under the Credit Facility was $64,545,000 as of June 3, 1997.
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 April 30, 1997, the Company was in compliance with all financial
covenants contained in the Credit Facility. On January 13, 1997, the Company
amended the Credit Facility in order to accommodate the purchase of HMI's senior
secured indebtedness and the
Page 21
<PAGE> 22
Liquidity and Capital Resources (cont.)
8,964,000 shares of HMI common stock purchased by the Company pursuant to the
Stock Purchase Agreement (as defined herein). 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 April 17, 1997, the Company amended the Credit Facility in order to
accommodate the sale of the Additional Shares and the AP Shares (each as defined
herein), an amendment to the Merger Agreement (as defined herein), an advance
made on behalf of HMI of $3,200,000 for partial settlement of certain
shareholder litigation and the ability to make an additional payment of
$1,350,000 after the closing of the Merger Agreement, the ability to make
advances and loans to HMI for general corporate and working capital purposes up
to $2,000,000, the ability to purchase 1,765,000 shares of Omnicare plc
("Omnicare") from Hyperion Partners II L.P. ("HPII") and the ability to change
its corporate name to Transworld HealthCare, Inc.
On May 30, 1997 the Credit Agreement was amended to accommodate the offer
to acquire Omnicare (see Pending Omnicare Acquisition).
Radamerica Price Support Payment. In connection with the Company's
acquisition of Radamerica, Inc. ("Radamerica") the Company agreed that in the
event the market value of its common stock on August 5, 1997 is less than $20
per share, the Company will pay to each Radamerica seller, for each share of
common stock held by them at such time, an amount equal to the difference
between the market value on such date and $20 (the "Radamerica Price Support
Payment"). Based upon the closing price of the common stock on April 30, 1997,
the Company's obligation under the Radamerica Price Support Payment would have
been $2,593,750. 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 therefore, which demand must be exercised by February 5, 1998.
Any portion of the Radamerica Price Support Payment not paid when due will bear
interest at the rate of 12% per annum.
Pending VIP Acquisition. Pursuant to the stock purchase agreements, as
amended on April 24, 1997, the Company is required to pay to the sellers of VIP
Health Services, Inc. and Kwik Care, Ltd. (collectively, (the "VIP Companies")
at the closing of the acquisition of the VIP Companies (the "VIP Closing"),
$8,000,000 in cash. The Company has also posted as a contract deposit $750,000
and 145,455 shares of common stock valued at $750,000. 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 ($8,523,000 at December 31, 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.
Page 22
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Liquidity and Capital Resources (cont.)
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 amounts due to the former
officers/shareholders.
The Company has not received approval from its lenders under the Credit
Facility to consummate the acquisition of the VIP Companies (the "VIP
Acquisition") and there can be no assurance that such approval will be obtained
or, if obtained, will be on terms satisfactory to the Company. In addition, the
consummation of the VIP Acquisition is subject to, 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. The Company cannot predict when or whether all of the requisite
consents and approvals will be obtained 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.
Pending HMI Acquisition. On November 13, 1996, the Company acquired the
senior secured indebtedness of HMI under its credit agreement (the "HMI Credit
Agreement") from HMI's senior lenders for $21,263,000. HMI is currently in
default under the HMI Credit Agreement and the Company has agreed to forebear
from exercising any remedies until July 15, 1997.
On November 13, 1996, the Company and HMI also entered into a stock
purchase agreement, as amended (the "Stock Purchase Agreement"), pursuant to
which 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. At the closing of the Stock Purchase
Agreement, the Company and HMI also entered into a registration rights 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 the 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.
Page 23
<PAGE> 24
Liquidity and Capital Resources (cont.)
On November 13, 1996, the Company and HMI also entered into an agreement
and plan of merger, as amended (the "Merger Agreement"), whereby each
outstanding share of HMI common stock not already owned by the Company will be
acquired by the Company at a price of $.30 per share. Consummation of the Merger
Agreement is subject to various closing conditions, including final settlement
of certain shareholder litigation, approval of the Company's lenders under the
Credit Facility, receipt of certain regulatory approvals and approval by HMI's
shareholders. If the Merger Agreement is not consummated, it is likely that HMI
would seek protection under the Federal Bankruptcy laws.
If 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. The Credit Agreement, as amended, allows for advances and loans by
the Company of up to $2,000,000 to HMI for general corporate or working capital
purposes and as of June 12, 1997, the Company has advanced a net $900,000 to HMI
for working capital purposes. If HMI required more than $2,000,000 of additional
cash to fund operations there can be no assurance that such funds will continue
to be available to the Company, or if available, will be on terms acceptable to
the Company. If HMI does not continue satisfactory relationships with its
suppliers or payments on its receivables slows materially and such funds are not
made available to HMI, it is likely that HMI would seek protection under the
Federal Bankruptcy laws.
The aggregate cost of the acquisition, based on the amended Merger
Agreement, will be approximately $52,000,000 including the exchange of trade
payables of $12,187,488 for the issuance of the AP Shares (as defined below).
The Company has invested approximately $32,408,000 in the HMI transaction as of
June 12, 1997, including the $900,000 advanced for working capital. The Company
expects that any remaining cost of the acquisition will be provided through
either working capital or borrowings under the Credit Facility. The Company
anticipates completing this acquisition by the end of the Company's third fiscal
quarter of 1997.
The Company plans to undertake a detailed review of productivity enhancing
opportunities, as well as the carrying value of various assets, at certain
operations and subsidiaries of HMI. Accordingly, goodwill associated with the
acquisition of HMI will be reviewed for potential impairment, if any. The
Company anticipates that this review may result in restructuring and other
charges in the latter part of 1997. Based on the preliminary status of this
review, it is not currently practicable to estimate the amount of charges, if
any, that may result from these reviews.
Hyperion Transaction. On April 21, 1997, HPII purchased 898,877 shares of
the Company's common stock at $11.125 per share and Hyperion TW Fund L.P.
purchased 4,116,456 shares of the Company's common stock at $9.875 per share for
an aggregate purchase price of $50,650,000 (collectively, the "Additional
Shares").
Page 24
<PAGE> 25
Liquidity and Capital Resources (cont.)
On March 26, 1997, HPII agreed to invest an additional $12,187,488 of
equity capital, representing a purchase of 1,234,176 shares (the "AP Shares")
at $9.875 per share the consideration for which will be comprised of the
transfer to the Company of HPII's receivables from HMI, representing certain
trade payables of HMI, previously acquired by HPII. Completion of this
transaction is subject to customary closing conditions including, but not
limited to, shareholder approval.
Pending Omnicare Acquisition. On May 28, 1997 Transworld (UK) Limited
("Transworld UK"), a wholly owned subsidiary of the Company and Omnicare,
reached agreement on the terms of a recommended cash offer to acquire all the
issued and to be issued shares of Omnicare. The aggregate cost of the
acquisition will be approximately $32,000,000.
Omnicare provides respiratory equipment and services to patients at home
in the United Kingdom under the terms of contracts and licenses with various
United Kingdom National Health Service agencies. The Company also dispenses and
supplies a range of medical and surgical products, principally ostomy products,
to patients at home, as well as providing those patients with advisory and other
services through its network of regional care centers.
Transworld UK has received commitments from shareholders to sell 35.9%
of the outstanding shares of Omnicare. Transworld also acquired 1,765,000
Omnicare shares from HPII on May 28, 1997 for $2,856,500. As a result,
Transworld UK (including commitments from shareholders) would own an aggregate
of 6,014,500 shares, representing 50.8% of Omnicare's outstanding shares.
Completion of the transaction is subject to various conditions as set
forth in the definitive United Kingdom offering materials. The Company expects
to fund the acquisition with working capital. The Company anticipates
completing this transaction in July 1997.
Timothy M. Aitken, the Company's Chairman and Chief Executive Officer is a
director of both the Company and Omnicare, and accordingly has not participated
in either the Company's or Omnicare's board deliberations concerning the offer.
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 were seeking $12,580,000 in damages. The case was settled on April
16, 1997 for $760,000, of which the Company's portion amounted to $710,000, and
was paid on May 6, 1997 by the Company's insurance company. Since this
settlement was within the policy limits of the Company's insurance policies it
had no effect on the Company's consolidated financial position, results of
operations or cash flows.
Page 25
<PAGE> 26
Liquidity and Capital Resources (cont.)
The following information relating to certain legal proceedings concerning
HMI is derived from information contained in the HMI 13-E3 Transaction Statement
filed with the Commission on or about June 12, 1997. The information contained
herein is qualified in its entirety by reference to the HMI 13-E3 Transaction
Statement.
HMI and certain of its former directors and officers and its current
outside auditors, BDO Seidman, have been named as defendants in a consolidated
securities fraud lawsuit filed on February 29, 1996 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
consolidated action 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 previous securities filings.
The consolidated action purports to represent a class of persons who purchased
HMI shares of common stock between August 25, 1994 and February 27, 1996, the
date HMI announced that it would have to restate certain of its financial
statements. The consolidated actions seek unspecified monetary damages
reflecting the decline in the trading price of the HMI shares of common stock
that allegedly resulted from HMI's February 1996 announcements. HMI entered into
a Stipulation of Partial Settlement with plaintiffs' counsel and on September
18, 1996 such Stipulation of Partial Settlement received preliminary court
approval (the "Original Settlement"). The Original Settlement provided for,
among other things, the payment by HMI of $2,000,000 in cash and the issuance of
2,200,000 HMI shares of common stock and warrants to purchase 2,200,000 HMI
shares of common stock. As a condition to the Company's obligation to close the
Stock Purchase Agreement, preliminary court approval was obtained with respect
to a modified settlement providing for a $7,200,000 cash payment in lieu of the
consideration provided in the Original Settlement to be paid after the merger is
consummated. An Amended Stipulation of Partial Settlement to this effect was
executed on December 19, 1996 and preliminary approval by the U.S. District
Court for the Eastern District of New York was granted on December 20, 1996. As
a condition to closing the Merger Agreement, the Amended Stipulation of Partial
Settlement was further amended, on April 23, 1997, to provide for the settlement
of such class actions for a reduced settlement amount of $4,550,000, and
preliminary court approval and final court approval of such amended settlement
was received on April 25, 1997 and June 9, 1997, respectively. The Restated
Stipulation of Partial Settlement provides for the settlement of the lawsuit as
against HMI for $4,550,000 in cash, of which $3,200,000 has been paid into
escrow at the time the Restated Stipulation of Partial Settlement was signed and
will be released from escrow when the judgment entered by the court becomes
final. The remaining $1,350,000 is to be paid at the effective time. HMI is in
the process of negotiating with its directors and officers liability insurance
carrier with respect to coverages for damages in connection with the stockholder
class action lawsuit and certain payments received from such carrier may reduce
HMI's liability with respect to such settlement.
Page 26
<PAGE> 27
Liquidity and Capital Resources (cont.)
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 on March 15, 1996 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 previous
securities filings. 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 filed a motion
to dismiss the amended consolidated complaint on June 2, 1997. HMI's motion
argued, among other things, that plaintiffs failed to lodge a presuit demand
upon HMI's Board of Directors and that plaintiffs will lose standing upon the
consummation of the merger. A hearing on HMI's motion is currently scheduled to
take place on July 18, 1997. In December 1996, HMI and the plaintiffs' counsel
tentatively agreed on a cash settlement of $175,000; however, the parties
subsequently were unable to agree on the other terms of the settlement and
currently there is no settlement offer pending.
BDO Seidman has been named as a defendant, and HMI has been named as a
nominal defendant, in a derivative lawsuit filed on June 12, 1996 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 arising
out of alleged misrepresentations and omissions contained in certain of HMI's
securities filings. BDO Seidman 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
complain in this action as been adjourned indefinitely.
Certain of HMI's current and former officers have been named as defendants
in an alleged class action lawsuit filed on April 3, 1997 in the United States
District Court for the Eastern District of New York entitled Nicholas Volonnino
et al. v. Health Management, Inc., W. James Nicol, Paul S. Jurewicz and James
Mieszala, 97 Civ. 1646. This action alleges claims under Sections 10(b) and
20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated
thereunder arising out of misrepresentations and omissions by HMI in connection
with certain of its previous securities filings and press releases. The action
purports to represent a class of persons who purchased shares of HMI common
stock between September 15, 1996 and March 17, 1997, the date HMI announced that
it would have to restate certain of its financial statements and that it was
renegotiating its deal with the Company. The action seeks unspecified
compensatory damages for the harm sustained as a result of the alleged
wrongdoing. HMI intends to vigorously defend itself in such action.
Page 27
<PAGE> 28
Liquidity and Capital Resources (cont.)
Under HMI's Certificate of Incorporation and Bylaws, certain officers and
directors may be entitled to indemnification, or advancement of expenses for
legal fees in connection with the above lawsuits. HMI may be required to make
payments in respect thereof in the future.
HMI and the Company have been named as defendants in a lawsuit filed on
March 11, 1997 in the Chancery Court of the State of Delaware for New Castle
County entitled Drew Bergman v. Health Management, Inc. and Transworld Home
HealthCare, Inc., CA No. 15609NC. The plaintiff in the case sought reimbursement
and advancement of legal fees and expenses. The Company was dismissed as a
defendant from the lawsuit prior to its settlement on April 29, 1997, for
$275,000.
The enforcement division of the Securities and Exchange Commission has
issued 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 fully cooperating with this investigation and has
responded to the requests of the Securities and Exchange Commission 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 $10,000,000 in damages. 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 financial statements of HMI that were allegedly
fraudulent. On September 17, 1996 the Court granted APP's motion to amend its
complaint to add a fifth cause of action. HMI noticed an appeal of this order in
November, 1996. HMI's management 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.
According to HMI if the merger is not consummated, the outcomes of certain
of the foregoing lawsuits and the investigation are uncertain and the ultimate
outcomes could have a material adverse effect on HMI.
Page 28
<PAGE> 29
PART II
Item 2. Changes in Securities.
On April 21, 1997, Hyperion TW Fund L.P. purchased 4,116,456 shares
of the Company's common stock (the "Common Stock") at a purchase
price of $9.875 per share for an aggregate purchase price of
$40,650,000. On such date, HPII also purchased 898,877 shares of
Common Stock at a purchase price of $11.125 per share for an
aggregate purchase price of $10,000,000. The Common Stock issued in
each such transaction was issued in a transaction not involving a
public offering pursuant to Section 4(2) of the Securities Act of
1933, as amended.
Item 5. Other Information.
On May 28, 1997 Transworld (UK) Limited, a wholly owned subsidiary
of the Company and Omnicare plc ("Omnicare"), reached agreement on
the terms of a recommended cash offer to acquire all the issued and
to be issued share capital of Omnicare. See Part I - Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
3.1 Restated Certificate of Incorporation of the Company
filed on December 12, 1990, as amended on
August 7, 1992.
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 Certificate of Amendment to the Restated Certificate
of Incorporation of the Company filed on May 6, 1997.
10.1 Third Amendment to Credit Agreement, dated as of
April 17, 1997, among the Company, the lenders from
time to time party to the Credit Agreement, and
Bankers Trust Company.
10.2 Amended Agreement dated as of April 24, 1997, to the
Stock Purchase Agreement dated as of June 30, 1994,
as amended on June 30, 1994 and May 19, 1995, between
Shlomo Appel and the Company.
10.3 Amended Agreement dated as of April 24, 1997, to the
Stock Purchase Agreement dated as of June 30, 1994,
as amended on June 30, 1994 and May 19, 1995, between
Jack Schiff and the Company.
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
Page 29
<PAGE> 30
(b) Reports on Form 8-K.
The Company filed a Form 8-K/A (Amendment No. 1) dated
January 14, 1997 on or about March 21, 1997.
The Company filed a Form 8-K/A (Amendment No. 2) dated
January 14, 1997 on or about March 27, 1997.
The Company filed a Form 8-K dated April 1, 1997 on or about
April 16, 1997.
Page 30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: June 13, 1997
TRANSWORLD HEALTHCARE, INC.
By: /s/ Wayne A. Palladino
----------------------
Wayne A. Palladino
Senior Vice President and Chief Financial
Officer (Principal Financial Officer and
Officer Duly Authorized to Sign on Behalf of
Registrant)
Page 31
<PAGE> 32
EXHIBIT INDEX
Exhibit Description
3.1 Restated Certificate of Incorporation of the Company filed
on December 12, 1990, as amended on August 7, 1992.
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 Certificate of Amendment to the Restated Certificate of
Incorporation of the Company filed on May 6, 1997.
10.1 Third Amendment to Credit Agreement, dated as of April 17,
1997, among the Company, the lenders from time to time party
to the Credit Agreement, and Bankers Trust Company.
10.2 Amended Agreement dated as of April 24, 1997, to the Stock
Purchase Agreement dated as of June 30, 1994, as amended on
June 30, 1994 and May 19, 1995, between Shlomo Appel and the
Company.
10.3 Amended Agreement dated as of April 24, 1997, to the Stock
Purchase Agreement dated as of June 30, 1994, as amended on
June 30, 1994 and May 19, 1995, between Jack Schiff and the
Company.
11 Statement Re Computation of Per Share Earnings
27 Financial Data Schedule
Page 32
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE
OF
INCORPORATION
OF
UNITED STATES HOME HEALTH CARE CORP.
The undersigned being the Secretary and President of United States Home
Health Care Corp. (the "Corporation") pursuant to Section 807 of the Business
Corporation Law of the State of New York, do hereby restate, certify and set
forth:
1. The name of the Corporation is United States Home Health Care
Corp. The original Certificate of Incorporation was filed with the Secretary of
State of the State of New York on November 30, 1981.
2. Pursuant to Section 807 of the Business Corporation Law of the
State of New York, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the certificate of
incorporation of this Corporation.
3. The Certificate of Incorporation, as amended heretofore is
hereby further amended to effect the following amendments authorized by the
Business Corporation Law of the State of New York:
(a) to change the address for service of process upon the
Corporation;
1
<PAGE> 2
(b) (1) to change the number of issued common shares from
1,107,030 to 2,088,960 at the rate of 1 for 1 and
490,968;
-------
553,515
(2) to change the number of unissued common shares from
892,970 to 7,911,034 at the rate of 8.859 for 1.
(3) to create a class of 2,000,000 shares of preferred
stock, par value $.01 per share.
(c) to further define voting and other rights as among each
class of capital stock of the Corporation; and
(d) provide for indemnification of the Board of Directors of
the Corporation.
4. Effective upon the filing of this Restated Certificate of
Incorporation, the certificate of incorporation of this Corporation, as
heretofore amended or supplemented, shall be restated and further amended to
read in its entirety as follows:
ARTICLE FIRST: The name of the Corporation is United States
Home Health Care Corp.
ARTICLE SECOND: The purpose of the Corporation shall be to
engage in any lawful act or activity for which corporations may be
organized under the Business Corporation Law of the State of New York.
The Corporation is not formed to engage in any act or activity
requiring the consent or approval of any state official, department,
board, agency or other body.
2
<PAGE> 3
ARTICLE THIRD: The office of the Corporation is to be located in
the County of Westchester, State of New York. The Secretary of State is
designated as the agent of the Corporation upon whom process against the
Corporation may be served. The post office address to which the
Secretary of State shall mail a copy of any such process against the
Corporation served upon him is c/o Leslie J. Levinson, Esq., Dow, Lohnes
& Albertson, 437 Madison Avenue, New York, New York 10022.
ARTICLE FOURTH: The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is
twelve million (12,000,000) shares, consisting of ten million
(10,000,000) shares of Common Stock, par value $.01 per share (the
"Common Stock") and two million (2,000,000) shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock").
The designations, voting powers, preferences and relative
participating, optional and other special rights, and the
qualifications, limitations or restrictions thereof, in respect of each
class of such stock, and the express grant of authority to the Board of
Directors to fix by resolution the designations, voting powers,
preferences and relative participating, optional and other special
rights, and the qualifications, limitations or restrictions in respect
of each series of the Preferred Stock that are not fixed shall be as
follows:
I.
PREFERRED STOCK
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article FOURTH, to provide for the issuance
of the shares of Preferred Stock in one or more series, and by filing a
certificate pursuant to Section 502 of the Business Corporation Law of the
State of New York, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof.
3
<PAGE> 4
The authority of the Board of Directors with respect to each series of
Preferred Stock shall include, but not be limited to, the determination of the
following:
(a) The number of shares constituting that series and the
distinctive designation of that series;
(b) The dividend rate or rates, if any, on the shares of that
series and/or method of determining such rate or rates, whether dividends shall
be cumulative, and, if so, from which date or dates, the conditions and dates
upon which any dividends are payable, and the relative rights of priority, if
any, of payment of dividends on shares of that series;
(c) Whether or not the shares of that series shall have voting
rights, in addition to any voting rights provided by law, and, if so, the terms
of such voting rights;
(d) Whether or not the shares of that series shall have
conversion privileges, and, if so, the terms and conditions of such conversion,
including the price or prices or the rate or rates of conversion and any
provision for the adjustment of the conversion rate in such events as the Board
of Directors shall determine;
(e) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) Whether or not shares of that series shall have a sinking
fund for the redemption or purchase of shares of that series, and any other
requirement as to the redemption, purchase or other retirement by the
Corporation of the shares of that series, and, if so, the terms and amount of
such sinking fund or other requirement;
(g) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
4
<PAGE> 5
(h) Any other relative rights, preferences and limitations of
that series.
II.
COMMON STOCK
1. Dividends. Subject to the rights of the holders of any series
of Preferred Stock which may be outstanding and subject to any other provisions
of this Restated Certificate of Incorporation, as amended from time to time,
holders of Common Stock shall be entitled to receive equally on a per share
basis such dividends and other distributions in cash, stock or property of the
Corporation as may be declared thereon by the Board of Directors from time to
time out of assets or funds of the Corporation legally available therefor;
provided, however, that the Board of Directors shall declare no dividend, and no
dividend shall be paid, with respect to any outstanding share of Common Stock,
whether paid in cash or property (including, without limitation, shares of
Common Stock paid on or with respect to shares of Common stock (collectively,
"Stock Dividends")), unless, simultaneously, the same dividend (in the case of
Stock Dividends, stock of the class on or with respect to which the dividend is
paid in the same percentage, relative to the total number of shares of such
class issued and outstanding immediately prior to the payment of such dividend,
as the Stock Dividend on or with respect to the other class bears to the number
of shares of such class issued and outstanding immediately prior to the payment
of such dividend) is paid with respect to each share of Common Stock.
2. Voting.
(a) Each share of the Common Stock shall entitle the holder
thereof to one vote, in person or by proxy, at any and all meetings of the
stockholders of the Corporation on all propositions before such meetings on
which the stockholders are entitled to vote.
(b) Except as otherwise required by statute or specifically
provided by this Restated Certificate of Incorporation or resolutions providing
for the issuance of Preferred Stock, holders of the Common Stock shall have the
sole right and power to vote on all matters on which a vote
5
<PAGE> 6
of stockholders is to be taken. The holders of Common Stock shall vote together
as a single class, subject to any votes that may be granted to holders of any
series of Preferred Stock.
(c) Notwithstanding anything in this Section 2 to the
contrary, subject to the voting rights of the holders of any series of
Preferred Stock which may be outstanding, the holders of Common Stock shall
have exclusive voting power on all matters upon which, pursuant to this Restated
Certificate of Incorporation or applicable laws, the holders of common stock
are entitled to vote.
3. Liquidation Rights.
Upon any Liquidation, after payment in full of all amounts to the
holders of any series of Preferred Stock which may be outstanding, the remaining
assets and funds of the Corporation shall be divided among and paid ratably to
the holders of Common Stock.
III.
GENERAL PROVISIONS WITH RESPECT
TO ALL CLASSES OF STOCK
No holder of Preferred Stock or Common Stock shall have any right as
such holder to purchase or subscribe for any security of the Corporation now or
hereafter authorized or issued. All such securities may be issued and disposed
of by the Board of Directors to such persons, firms, corporations and
associations for such lawful considerations, and on such terms, as the Board of
Directors in its discretion may determine, without first offering the same, or
any part thereof, to the holders of Preferred Stock or Common Stock.
ARTICLE FIFTH: In furtherance and not in limitation of the
powers conferred by statute, the Board of Directors is expressly
authorized to make, alter or repeal the By-laws of the Corporation,
subject to any specific limitation on such power provided by any
By-laws adopted by the stockholders.
ARTICLE SIXTH: The Corporation is to have perpetual existence.
6
<PAGE> 7
ARTICLE SEVENTH: The number of directors of the Corporation shall be
such as from time to time shall be fixed by, or in the manner provided in, the
By-laws of the Corporation. Election of directors need not be by written ballot
unless the By-laws so provide.
ARTICLE EIGHTH:
(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 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 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.
(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
7
<PAGE> 8
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 2(b)
of this Article EIGHTH 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 subsection 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 as a director
or officer (and not in any other 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 subsection 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
8
<PAGE> 9
scope and effect as the foregoing indemnification of directors and officers.
(b) If a claim under subsection 2(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, shall be a defense to
the action or create a presumption that the claimant has not met the 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 subsection 2 shall not be exclusive of any other right which
any person may have or hereafter acquire under any statute, provision of this
Restated Certificate of Incorporation, By-law, 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
9
<PAGE> 10
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 NINTH: In addition to any other considerations which
the Board of Directors may lawfully take into account, in determining
whether to take or to refrain from taking corporate action on any
matter, including proposing any matter to the stockholders of the
Corporation, the Board of Directors may take into account the interests
of creditors, customers, employees and other constituencies of the
Corporation and its subsidiaries and the effect upon communities in
which the Corporation and its subsidiaries do business.
ARTICLE TENTH: The Corporation reserves the right to amend,
alter, change or repeal any provision contained in this Certificate of
Incorporation; any other provisions authorized by the laws of the
State of New York at the time in force may be added or inserted, in
the manner now or hereafter provided herein or by statute; and all
rights, preferences and privileges of whatsoever nature conferred upon
stockholders, directors or any other persons whomsoever by and pursuant
to this Restated Certificate of Incorporation in its present form or
as amended are granted subject to the rights reserved in this Article.
5. This Restated Certificate of Incorporation has been duly
authorized by unanimous written consent of the Board of Directors and by vote
of a majority of all the outstanding shares of the Corporation entitled to vote
thereon at a meeting of shareholders.
10
<PAGE> 11
IN WITNESS WHEREOF, the undersigned have executed and verified this
Restated Certificate of Incorporation of the Corporation and do affirm the
foregoing as true under penalties of perjury this 6th day of December, 1990.
United States Home Health Care Corp.
By: /s/ Robert Giuliano
--------------------------------
Robert Giuliano
President
/s/ Leslie J. Levinson
- ----------------------
Leslie J. Levinson
Secretary
11
<PAGE> 12
RESTATED CERTIFICATE OF INCORPORATION
OF
UNITED STATES HOME HEALTH CARE CORP.
Under Section 807 of the Business Corporation
Law of the State of New York
Dow Lohnes & Albertson
437 Madison Avenue
New York, New York 10022
12
<PAGE> 13
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
UNITED STATES HOME HEALTH CARE CORP.
UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW
WE, THE UNDERSIGNED, Gene Berger and Leslie J. Levinson, being,
respectively, the Vice President and the Secretary of United States Home Health
Care Corp. hereby certify:
1. The name of the corporation is United States Home Health Care Corp.
2. The original certificate of incorporation of said corporation was
filed by the Department of State on the 30th day of November, 1981. The
restated certificate of incorporation of said corporation was filed by the
Department of State on the 12th day of December, 1990.
3. The restated certificate of incorporation is amended as follows:
(i) to change the name of the corporation to Transworld Home HealthCare, Inc.,
(ii) to change the address for service of process upon the corporation, and
(iii) to effect a one-for-2.0914272 reverse stock split.
3. To effect the change of name of the corporation and the change of
address for service of process upon
1
<PAGE> 14
the corporation, the following Articles of the restated certificate of
incorporation of the corporation are hereby amended to read as follows:
"ARTICLE FIRST: The name of the Corporation is Transworld Home
HealthCare, Inc.",
"ARTICLE THIRD: The office of the Corporation is to be located
in the County of Westchester, State of New York. The Secretary of State
is designated as the agent of the Corporation upon whom process against
the Corporation may be served. The post office address to which the
Secretary of State shall mail a copy of any such process against the
corporation served upon him is c/o Leslie J. Levinson, Esq., Baer Marks
& Upham, 805 Third Avenue, New York, New York 10022."
5. To effect the reverse split, the following paragraph is
hereby stated:
Effective on the date that this Certificate of Amendment is
filed with the Secretary of State of the State of New York, and without
further action on the part of this corporation or the holders of its
outstanding common stock immediately prior thereto (the "Outstanding
Common"), each 2.0914272 shares of Outstanding Common shall be changed
into one share of fully paid and non-assessable common stock, except
that no fractional shares of common stock will be issued. Prior to the
reverse split becoming effective there were 4,528,736 shares of
Outstanding Common and 5,471,264 shares of unissued common stock, all
shares having a par value of $.01 per share. After the reverse split,
there will be 2,165,381 shares of Outstanding Common and 7,834,619
shares of unissued common stock, all shares having a par value of $.01
per share. Each holder of Outstanding Common who would be entitled to
receive any fraction of a share of common stock as a result of the
foregoing exchange ratio shall receive from the corporation cash for his
fractional share interest resulting from the reverse split based on an
amount to be determined by the Board of Directors of the
2
<PAGE> 15
corporation in its sole discretion. Effective on such date, each
certificate representing shares of Outstanding Common shall be
deemed to represent .4781424 of such shares of Outstanding Common.
Each currently authorized but unissued share will be changed into
1.4319578 unissued new share. After the reverse split, the corporation
shall continue to have authority to issue ten million (10,000,000)
shares of common stock, par value $.01 per share, and two million
(2,000,000) shares of preferred stock, par value $.01 per share.
6. Pursuant to the reverse split, as stated in paragraph five
above, the first paragraph of Article Fourth will continue to read as follows:
"ARTICLE FOURTH: The total number of shares of all classes of
capital stock which the Corporation shall have authority to issue is
twelve million (12,000,000) shares, consisting of ten million
(10,000,000) shares of Common Stock, par value $.01 per share (the
"Common Stock") and two million (2,000,000) shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock")."
7. The foregoing amendments of the restated certificate of
incorporation of the corporation were authorized by the unanimous written
consent of the Board of Directors of the corporation, followed by the vote of
the holders of at least a majority of all of the outstanding shares of the
corporation entitled to vote on the said amendments to the certificate of
incorporation.
IN WITNESS WHEREOF, we have subscribed this instrument on the
date set forth below and do hereby affirm,
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<PAGE> 16
under the penalties of perjury, that the statements contained therein have been
examined by us and are true and correct.
Dated: August 5, 1997
/s/ Gene Berger
-------------------------------
Gene Berger, Vice President
/s/ Leslie J. Levinson
-------------------------------
Leslie J. Levinson, secretary
4
<PAGE> 17
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
UNITED STATES HOME HEALTH CARE CORP.
(UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW)
BAER, MARKS & UPHAM
805 THIRD AVENUE
NY, NY 10022
5
<PAGE> 1
EXHIBIT 3.2
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> 2
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> 3
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> 1
EXHIBIT 3.3
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> 2
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> 3
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> 1
EXHIBIT 3.4
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 change the name of the corporation to Transworld HealthCare, Inc.
FOURTH: To accomplish the foregoing amendment, Article FIRST of the
certificate of incorporation, relating to the name of the corporation is hereby
amended to read as follows:
"FIRST: The name of the Corporation is Transworld HealthCare, Inc."
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.
1
<PAGE> 2
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 6, 1997.
/s/ Wayne A. Palladino
-------------------------
Wayne A. Palladino
Senior Vice President
/s/ Leslie J. Levinson
-------------------------
Leslie J. Levinson
Secretary
2
<PAGE> 3
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
3
<PAGE> 1
THIRD AMENDMENT TO CREDIT AGREEMENT
THIRD AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
April 17, 1997, among TRANSWORLD HOME HEALTHCARE, INC. (the "Borrower"), the
lenders from time to time party to the Credit Agreement referred to below (each
a "Bank" and, collectively, the "Banks"), and BANKERS TRUST COMPANY, as Agent
(the "Agent"). All capitalized terms used herein and not otherwise defined shall
have the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
WHEREAS, the Borrower, the Banks and the Agent are parties to a
Credit Agreement, dated as of July 31, 1996 (as in effect on the date hereof,
the "Credit Agreement");
WHEREAS, the Borrower has entered into the HMI Merger Agreement with
Health Management, Inc. ("HMI"), pursuant to which the Borrower may, subject to
obtaining the necessary consents pursuant to the Credit Agreement, merge IMH
Acquisition Corp., a Wholly-Owned Subsidiary of the Borrower, with and into HMI,
with HMI being the surviving company;
WHEREAS, the Borrower desires to amend the HMI Merger Agreement;
WHEREAS, the Borrower desires to consummate a stock purchase
agreement pursuant to which Hyperion TW Fund L.P. will acquire 4,116,456 shares
of common stock of the Borrower for an aggregate purchase price of $40,650,000;
WHEREAS, the Borrower desires to consummate a stock purchase
agreement pursuant to which Hyperion Partners II L.P. will acquire 1,234,176
shares of common stock of the Borrower in exchange for $15,196,948 in trade
payables;
WHEREAS, the Borrower desires to consummate a stock purchase
agreement pursuant to which Hyperion Partners II L.P. will acquire 898,877
shares of common stock of the Borrower for an aggregate price of $10,000,000;
<PAGE> 2
WHEREAS, the Borrower desires to pay $3,200,000 within five business
days after the execution of the Restated Stipulation of Partial Settlement of
the consolidated class actions under the caption In re Health Management, Inc.
Securities Litigation, Master File No. 96 Civ. 0889 (ADS) (the "Restated
Stipulation of Partial Settlement") and within five days after the Merger
Effective Date (as defined in the Restated Stipulation of Partial Settlement) to
pay an additional $1,350,000 pursuant to and in accordance with the Restated
Stipulation of Partial Settlement;
WHEREAS, the Borrower desires to make advances and loans to HMI for
its general corporate and working capital purposes in an aggregate principal
amount not to exceed $2,000,000;
WHEREAS, the Borrower desires to purchase 1,765,000 shares of common
stock of Omnicare PLC for approximately $3,100,000;
WHEREAS, the Borrower desires to change its corporate name to
Transworld HealthCare, Inc.;
WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement in connection with the transactions described in the eight preceding
recitals and to effect certain other changes to the Credit Agreement; and
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
NOW, THEREFORE, it is agreed:
I. Amendments and Modifications to Credit Agreement.
1. Section 3.03(e) of the Credit Agreement is hereby amended by
inserting the phrase "(u) the Supplemental Equity Financing," immediately after
the phrase "proceeds received from" appearing therein.
2. Section 8.01(k) of the Credit Agreement is hereby amended by
inserting immediately prior to the period at the end of the second sentence
thereof the following new proviso:
"; provided that notwithstanding the requirements set forth above,
the Borrower shall not be required to deliver the monthly report for
the month of February, 1997 until April 25, 1997".
-2-
<PAGE> 3
3. Section 8 of the Credit Agreement is hereby amended by adding the
following new Section 8.19 immediately after the existing Section 8.18 thereof:
"8.19 Supplemental Payables Equity Financing. The Borrower shall
consummate the Supplemental Payables Equity Financing and receive the
Hyperion Trade Payables within 180 days of the Third Amendment
Effective Date."
4. Section 9.04 of the Credit Agreement is hereby amended by (w)
deleting the word "and" at the end of clause (h) thereof, (x) relettering clause
(i) thereof as clause (j) and (y) inserting immediately prior to relettered
clause (j) the following new clause:
"(i) Indebtedness in the form of Contingent Obligations resulting
from the Borrower entering into the Restated Stipulation of Partial
Settlement; provided that the Borrower may make no payments with
respect to such Contingent Obligations except in accordance with the
terms hereof and the Restated Stipulation of Partial Settlement; and"
5. Section 9.05(a) of the Credit Agreement is hereby amended by
inserting the following new proviso immediately after the phrase "five
consecutive business days;" appearing in the first proviso thereto:
"provided further, that so long as no Default or Event of Default
then exists the preceding proviso shall not apply during the period
from and including the Third Amendment Effective date to and including
the nine month anniversary date of the Third Amendment Effective Date;"
6. Section 9.05 of the Credit Agreement is hereby amended by (x)
deleting the period at the end of clause (m) thereof and inserting in lieu
thereof a semi-colon and (y) inserting the following additional clauses at the
end thereof:
"(n) the Borrower may make the First Settlement Payment in
accordance with the terms of the Restated Stipulation of Partial
Settlement so long as (1) concurrently with the making of the First
Settlement Payment, HMI shall have delivered to the Borrower the HMI
$3.2 Million Note, (2) the Borrower shall have delivered the HMI $3.2
million Note to the Collateral Agent for pledge pursuant to the Pledge
Agreement, (3) no Default or Event of Default is in existence at the
time of the payment thereof or immediately after giving effect thereto,
(4) all representations and warranties contained herein and in the
other
-3-
<PAGE> 4
Credit Documents shall be true and correct in all material respects
with the same effect as though such representations and warranties had
been made on and as of the date of the making of the First Settlement
Payment (both before and after giving effect thereto), unless stated to
relate to a specific earlier date, in which case such representations
and warranties shall be true and correct in all material respects as of
such earlier date, (5) the First Restated Stipulation of Partial
Settlement Condition shall have been satisfied, (6) the HMI Merger
Agreement shall have been amended by the Second HMI Merger Agreement
Amendment in accordance with the permission granted by clause (z) of
the proviso to Section 9.12(a)(i) and (7) the Restated Stipulation of
Partial Settlement shall prohibit the HMI Escrow Agent from
distributing any funds to any Person for any purpose (other than up to
$100,000, in the aggregate, to pay costs and expenses, plus amounts
paid for taxes and tax expenses, in accordance with the terms of the
Second Restated Stipulation of Partial Settlement) until the Second
Restated Stipulation of Partial Settlement Condition shall have been
satisfied and shall require the Escrow Agent to return to the Borrower
all funds held by the HMI Escrow Agent (other than amounts expended in
accordance with the terms hereof) in the event that the Second Restated
Stipulation of Partial Settlement Condition is not satisfied or the
Restated Stipulation of Partial Settlement is terminated, cancelled, or
fails to become effective for any reason;
(o) the Borrower may make the Second Settlement Payment in
accordance with the terms of the Restated Stipulation of Partial
Settlement so long as (1) concurrently with the making of the Second
Settlement Payment, HMI shall have delivered to the Borrower the HMI
$1.35 Million Note, (2) the Borrower shall have delivered the HMI $1.35
million Note to the Collateral Agent for pledge pursuant to the Pledge
Agreement, (3) no Default or Event of Default is in existence at the
time of the payment thereof or immediately after giving effect thereto,
(4) all representations and warranties contained herein and in the
other Credit Documents shall be true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the date of the making of the
Second Settlement Payment (both before and after giving affect
thereto), unless stated to relate to a specific earlier date, in which
case such representations and warranties shall be true and correct in
all material respects as of such earlier date, (5) the Second Restated
Stipulation of Partial Settlement Condition shall have been satisfied
and (6) the HMI Merger shall have been consummated in accordance with
this Agreement (if same occurs);
(p) the Borrower may acquire and hold the Hyperion Trade Payables so
long as (1) no Default or Event of Default is in existence at the time
of the
-4-
<PAGE> 5
issuance thereof or immediately after giving effect thereto, (2) the
sole consideration for the acquisition of the Hyperion Trade Payables
shall consist of the issuance of shares of common stock of the Borrower
as part of the Supplemental Equity Financing, and (3) all
representations and warranties contained herein and in the other Credit
Documents shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made
on and as of the date of the acquisition of the Hyperion Trade Payables
(both before and after giving affect thereto), unless stated to relate
to a specific earlier date, in which case such representations and
warranties shall be true and correct in all material respects as of
such earlier date;
(q) the Borrower may consummate the Omnicare Stock Purchase so long
as (1) no Default or Event of Default is in existence at the time of
the consummation thereof or immediately after giving effect thereto,
(2) all consideration therefor shall be paid in cash in an aggregate
amount not to exceed $3,100,000, (3) all representations and warranties
contained herein and in the other Credit Documents shall be true and
correct in all material respects with the same effect as though such
representations and warranties had been made on and as of the date of
consummation of the Omnicare Stock Purchase (both before and after
giving affect thereto), unless stated to relate to a specific earlier
date, in which case such representations and warranties shall be true
and correct in all material respects as of such earlier date, (4)
neither the Borrower nor any of its Subsidiaries is or becomes liable
for any Indebtedness or other obligations of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether or not
due) of Omnicare or any of its Subsidiaries, (5) such purchase is
consummated in all respects pursuant to and in accordance with the
Omnicare Stock Purchase Documents and (6) all of the Omnicare stock
acquired pursuant Omnicare Stock Purchase Documents shall be pledged
pursuant to the Pledge Agreement (and, if requested by the Collateral
Agent or the Required Banks, another or a supplemental pledge agreement
governed by the laws of England) and the certificates, if any,
representing such stock together with stock powers duly executed in
blank, shall have been delivered to the Collateral Agent (and, to the
extent requested by the Collateral Agent or the Required Banks, such
additional steps or actions, if any, as shall be reasonably requested
under English law shall be taken with respect thereto); and
(r) the Borrower, in its discretion, may, at any time and from time
to time after the occurrence of the Third Amendment Effective Date make
advances and loans in the form of additional HMI Loans to the HMI
Borrowers for their general corporate and working capital purposes, so
long as (i) the
-5-
<PAGE> 6
aggregate amount (determined without regard to any write-downs or
write-offs thereof) of such additional HMI Loans made pursuant to this
clause (r) does not exceed $2,000,000 and (ii) each such additional HMI
Loan is evidenced by an HMI Note pledged by the Borrower pursuant to
the Pledge Agreement."
7. Section 9.07 of the Credit Agreement is hereby amended by (x)
deleting the word "and" at the end of clause (iv) thereof and inserting in lieu
thereof a comma and (y) inserting the following clauses at the end thereof:
", (vi) the Supplemental Equity Financing shall be permitted and (vii)
the Omnicare Stock Purchase shall be permitted".
8. Section 9.12(a)(i) of the Credit Agreement is hereby amended by (u)
inserting the phrase ", the Omnicare Stock Purchase Documents, the HMI $1.35
Million Note, the HMI $3.2 Million Note" immediately after the phrase "the
Existing Indebtedness" appearing therein, (v) relettering clauses (x) and (y) of
the second proviso thereto as clauses (v) and (w), respectively, (w) deleting
the word "and" appearing immediately before the relettered clause (w) of the
second proviso thereto and inserting in lieu thereof a comma, (x) inserting the
phrase the ", the Second HMI Merger Agreement and Stock Purchase Agreement
Amendment, the Third HMI Merger Agreement and Stock Purchase Agreement
Amendment, the Fourth HMI Merger Agreement and Stock Purchase Agreement
Amendment and the Fifth HMI Merger Agreement and Stock Purchase Agreement
Amendment" immediately after the phrase "the First HMI Merger Agreement and
Stock Purchase Agreement Amendment" appearing in the second proviso thereto and
(y) inserting the following additional clauses at the end thereof:
"(x) the HMI Merger Agreement may be amended by the Second HMI
Merger Agreement Amendment and (y) the Borrower may, in its discretion,
unless the Required Banks shall direct the Borrower otherwise, amend
the HMI Acknowledgement to extend the Additional Forbearance Period (as
defined in the HMI Acknowledgement Agreement) for successive periods of
up to 18 days".
9. Section 9.12(a)(ii) of the Credit Agreement is hereby amended by
deleting the word "or" appearing at the end thereof.
10. Section 9.12(a)(iii) of the Credit Agreement is hereby amended by
(x) inserting the phrase ", the Partners II First Stock Purchase Agreement, the
Partners II Second Stock Purchase Agreement and the TW Fund II Stock Purchase
Agreement"
-6-
<PAGE> 7
immediately after the phrase "any Shareholders' Agreement" appearing therein and
(y) deleting the period at the end thereof and inserting in lieu thereof the
phrase "; or".
11. Section 9.12(a) of the Credit Agreement is hereby amended by
inserting the following additional clause at the end thereof:
"(iv) amend or modify, or consent to the amendment or modification
of, the Restated Stipulation of Partial Settlement."
12. Section 10.03 of the Credit Agreement is hereby amended by
inserting the phrase ", 8.19" immediately prior to the phrase "or 9" appearing
therein.
13. Section 11 of the Credit Agreement is hereby further amended by
inserting in appropriate alphabetical order the following new definitions:
"Fifth HMI Merger Agreement and Stock Purchase Agreement Amendment"
shall mean the amendment to the HMI Merger Agreement and the HMI Stock
Purchase Agreement, dated January 10, 1997, among the Borrower, IMH
Acquisition Corp. and HMI.
"First Restated Stipulation of Partial Settlement Condition" shall
mean that the Restated Stipulation of Partial Settlement shall be in
the form required by the definition thereof and shall be executed by
all the parties thereto.
"First Settlement Payment" shall mean the payment by the Borrower to
the HMI Escrow Agent of $3,200,000 in cash in all respects pursuant to
and in accordance with the Restated Stipulation of Partial Settlement.
"Fourth HMI Merger Agreement and Stock Purchase Agreement Amendment"
shall mean the amendment to the HMI Merger Agreement and the HMI Stock
Purchase Agreement, dated December 23, 1996, among the Borrower, IMH
Acquisition Corp. and HMI.
"HMI $1.35 Million Note" shall mean that certain intercompany
promissory note in an aggregate principal amount of $1,350,000, issued
by HMI in favor of the Borrower, all the terms and conditions of which
shall be in form and substance satisfactory to the Agent.
"HMI $3.2 Million Note" shall mean that certain unsecured promissory
note in an aggregate principal amount of $3,200,000, issued by HMI in
favor
-7-
<PAGE> 8
of the Borrower, all the terms and conditions of which shall be in form
and substance satisfactory to the Agent.
"HMI Escrow Agent" shall mean the "Escrow Agent" under, and as
defined in the Restated Stipulation of Partial Settlement.
"Hyperion Partners II" shall mean Hyperion Partners II L.P., a
Delaware limited partnership.
"Hyperion Trade Payables" shall mean (i) $12,396,948 of face amount
of accounts receivables originally owed by HMI to FoxMeyer Corporation
and its subsidiaries and incurred on or before November 13, 1996 and
assigned to Hyperion Partners II by California Golden State Finance
Company pursuant to an Agreement of Transfer of Receivables, dated
November 19, 1996 and (ii) $2,800,000 of face amount of accounts
receivables originally owed by HMI to Bindley Western Industries, Inc.
and assigned to Hyperion Partners II by Bindley Western Industries,
Inc. pursuant to a Purchase and Sale Agreement, dated December 20,
1996.
"Hyperion TW Fund" shall mean Hyperion TW Fund L.P., a Delaware
limited partnership.
"Omnicare" shall mean Omnicare PLC, a British corporation.
"Omnicare Stock Purchase" shall mean the purchase by the Borrower of
1,765,000 shares of the common stock of Omnicare, representing not more
than 20% of the issued and outstanding share capital of Omnicare.
"Omnicare Stock Purchase Agreement" shall mean the stock purchase
agreement between the Borrower and Hyperion Partners II, all of the
terms and conditions of which shall be required to be satisfactory in
form and substance to the Agent and the Required Banks in their sole
and absolute discretion.
"Omnicare Stock Purchase Documents" shall mean the Omnicare Stock
Purchase Agreement and any other agreement entered into in connection
with the Omnicare Stock Purchase, together with any annexes, exhibits
or schedules thereto.
"Partners II First Stock Purchase Agreement" shall mean the Stock
Purchase Agreement, dated as of January 8, 1997, between the Borrower
and Hyperion Partners II.
-8-
<PAGE> 9
"Partners II Second Stock Purchase Agreement" shall mean the Stock
Purchase Agreement, dated as of March 26, 1997, between the Borrower
and Hyperion Partners II.
"Restated Stipulation of Partial Settlement" shall mean the Restated
and Amended Stipulation of Partial Settlement of the consolidated class
actions under the caption In re Health Management, Inc. Securities
Litigation Master File No. 96 Civ. 0889 (ADS) in the form of the draft
dated as of April 14, 1997 provided to the Agent or otherwise in form
and substance satisfactory to the Agent and the Required Banks.
"Second HMI Merger Agreement Amendment" shall mean the Second
Amendment to the HMI Merger Agreement, dated as of March 26, 1997,
among the Borrower, IMH Acquisition Corp. and HMI.
"Second HMI Merger Agreement and Stock Purchase Agreement Amendment"
shall mean the amendment to the HMI Merger Agreement and the HMI Stock
Purchase Agreement, dated November 27, 1996, among the Borrower, IMH
Acquisition Corp. and HMI.
"Second Restated Stipulation of Partial Settlement Condition" shall
mean that the Restated Stipulation of Partial Settlement shall be in
the form required by the definition thereof and such settlement shall
have been finally approved by the United States District Court and an
order of such court entered thereon, and all applicable proceedings for
review, appeals and rights of appeal of such order (other than a
proceeding or order, or any appeal or petition for a writ of
certiorari, pertaining solely to any plan of allocation and/or
application for attorneys' fees, costs or expenses) shall have been
exhausted or all applicable waiting periods during which any appeal or
other request for review of such order (other than a proceeding or
order, or any appeal or petition for a writ of certiorari, pertaining
solely to any plan of allocation and/or application for attorneys'
fees, costs or expenses) may be made shall have expired without any
appeal have being filed.
"Second Settlement Payment" shall mean the payment by the Borrower
to the HMI Escrow Agent of $1,350,000 in cash in all respects pursuant
to and in accordance with the Restated Stipulation of Partial
Settlement.
"Supplemental Cash Equity Financing" shall mean the issuance by the
Borrower of 4,116,456 shares of Borrower Common Stock for an aggregate
purchase price of $40,650,000 in all respects pursuant to and in
accordance with
-9-
<PAGE> 10
the TW Fund II Stock Purchase Agreement and the issuance by the
Borrower of 898,877 shares of Borrower Common Stock for an aggregate
purchase price of $10,000,000 in all respects pursuant to and in
accordance with the Partners II First Stock Purchase Agreement.
"Supplemental Equity Financing" shall mean the Supplemental Cash
Equity Financing and the Supplemental Payables Equity Financing.
"Supplemental Payables Equity Financing" shall mean the issuance by
the Borrower of 1,234,176 shares of Borrower Common Stock in return for
the transfer to the Borrower of the Hyperion Trade Payables in all
respects pursuant to and in accordance with the Partners II Second
Stock Purchase Agreement.
"Third Amendment Effective Date" shall mean the Third Amendment
Effective Date under, and as defined in, the Third Amendment, dated as
of April 17, 1997, to this Agreement.
"Third HMI Merger Agreement and Stock Purchase Agreement Amendment"
shall mean the amendment to the HMI Merger Agreement and the HMI Stock
Purchase Agreement, dated December 12, 1996, among the Borrower, IMH
Acquisition Corp. and HMI.
"TW Fund II Stock Purchase Agreement" shall mean the Stock Purchase
Agreement, dated as of March 26, 1997, between the Borrower and
Hyperion TW Fund L.P.
14. Notwithstanding anything to the contrary contained in the Credit
Agreement or the other Credit Documents, the Required Banks hereby consent to
the change of the name of the Borrower from "Transworld Home Healthcare, Inc."
to "Transworld HealthCare, Inc."; provided that (i) the Borrower shall give the
Agent and the Banks at least 30 days' prior written notice of the effective date
of such name change, (ii) the Borrower shall have delivered to the Agent
executed copies of amendment statements (Form UCC-3 or the appropriate local
equivalent) for filing under the UCC of each jurisdiction where a Financing
Statement Form UCC-1 or the appropriate equivalent was filed with respect to the
Borrower in connection with the Credit Agreement and (iii) the Borrower shall
have taken (and shall thereafter take) such other actions, at the Borrower's
expense, as may have been reasonably requested by the Agent, the Collateral
Agent or the Required Banks in connection with such name change, with respect to
the Security Documents and to protect the priority and perfection of the
security interests created thereunder.
-10-
<PAGE> 11
15. Notwithstanding anything to the contrary contained in the Credit
Agreement, the Borrower shall not be required to provide any budget not
delivered on or prior to the Third Amendment Effective Date which includes the
results of HMI and its Subsidiaries until April 25, 1997.
II. Miscellaneous Provisions.
1. In order to induce the Banks to enter into this Amendment, the
Borrower hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Third Amendment
Effective Date, both before and after giving effect to this Amendment;
and
(b) all of the representations and warranties contained in the
Credit Agreement and the other Credit Documents are true and correct in
all material respects on the Third Amendment Effective Date both before
and after giving effect to this Amendment, with the same effect as
though such representations and warranties had been made on and as of
the Third Amendment Effective Date (it being understood that any
representation or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date).
2. THE BORROWER ACKNOWLEDGES AND AGREES THAT THE BANKS HAVE ENTERED
INTO THIS THIRD AMENDMENT AT ITS REQUEST AND, TO INDUCE THE BANKS TO ENTER INTO
THIS THIRD AMENDMENT AND IN CONSIDERATION OF THEIR ENTERING INTO SAME, THE
BORROWER HEREBY ACKNOWLEDGES, AGREES AND CONFIRMS THAT, NOTWITHSTANDING THE
OCCURRENCE OF THE SUPPLEMENTAL EQUITY FINANCING OR ANY OTHER ACTION OR EVENT,
(1) THE BORROWER WILL NOT, AND WILL NOT PERMIT ANY OF ITS SUBSIDIARIES TO, ENTER
INTO ANY TRANSACTION OF MERGER OR CONSOLIDATION OR PURCHASE OR OTHERWISE ACQUIRE
(IN ONE OR A SERIES OF TRANSACTIONS) ANY PART OF THE CAPITAL STOCK, PROPERTY OR
ASSETS OF OMNICARE PLC OTHER THAN AS EXPLICITLY SET FORTH IN THE CREDIT
AGREEMENT AND (2) THE CONSUMMATION OF THE HMI MERGER WILL, AS PROVIDED IN
SECTION 13.20 OF THE CREDIT AGREEMENT, REQUIRE THE PRIOR WRITTEN CONSENT OF THE
REQUIRED BANKS. FURTHERMORE, THE BORROWER ACKNOWLEDGES AND AGREES THAT THE
REQUIRED BANKS MAY, IN THEIR SOLE DISCRETION, REFUSE TO CONSENT TO THE
CONSUMMATION OF ANY OF THE TRANSACTIONS (INCLUDING WITHOUT LIMITATION THE HMI
MERGER AND/OR THE EXERCISE OF THE RIGHT TO PURCHASE AND HOLD THE COMMON STOCK OF
HMI PURSUANT TO THE HMI OPTION) CONTEMPLATED BY THE HMI MERGER AGREEMENT AND/OR
THE HMI OPTION (OTHER THAN THE CONSUMMATION OF THE HMI STOCK PURCHASE IN
ACCORDANCE WITH THE TERMS OF THE CREDIT AGREEMENT) AND/OR ANY TRANSACTION
INVOLVING OMNICARE PLC OR ANY CAPITAL STOCK, PROPERTY OR ASSETS THEREOF OTHER
THAN AS EXPLICITLY SET FORTH IN
-11-
<PAGE> 12
THE CREDIT AGREEMENT OR IMPOSE CONDITIONS ON SUCH CONSENT, INCLUDING, WITHOUT
LIMITATION, THE CONTRIBUTION OF ADDITIONAL EQUITY TO THE BORROWER (IN ADDITION
TO THE SUPPLEMENTAL EQUITY FINANCING) OR FURTHER MODIFICATIONS IN THE CAPITAL
STRUCTURE OF THE BORROWER. THE PARTIES HERETO HEREBY AGREE THAT NO BANK SHALL
HAVE ANY LIABILITY WHATSOEVER TO ANY OF THE PARTIES HERETO, OR TO ANY OTHER
PERSON, AS A RESULT OF ANY REFUSAL (FOR ANY REASON WHATSOEVER) OF ONE OR MORE OF
THE BANKS TO GRANT THEIR CONSENT AS IS REQUIRED ABOVE WITH RESPECT TO THE
TRANSACTIONS DESCRIBED ABOVE.
3. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document.
4. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
5. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE
STATE OF NEW YORK.
6. This Amendment shall become effective on the date of the
consummation of the Supplemental Cash Equity Financing (the "Third Amendment
Effective Date"), so long as on or prior to such date the Borrower, each other
Credit Party and the Required Banks shall have signed a counterpart hereof
(whether the same or different counterparts) and shall have delivered (including
by way of facsimile transmission) the same to the Agent at its Notice Office. If
for any reason the Third Amendment Effective Date does not occur on or before
April 30, 1997, the Third Amendment Effective Date shall not thereafter occur
(unless the date set forth in this sentence is extended in writing by the
Required Banks).
7. From and after the Third Amendment Effective Date, all references in
the Credit Agreement and each of the other Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as modified
hereby.
* * *
-12-
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
TRANSWORLD HOME HEALTHCARE,
INC.,
as Borrower
By /s/ Wayne Palladino
----------------------------------
Title: Chief Financial Officer
BANKERS TRUST COMPANY,
Individually and as Agent
By /s/ Gina S. Thompson
----------------------------------
Title: Vice President
THE BANK OF NEW YORK (NJ)
By /s/ Vincent P. O'Leary
---------------------------------
Vincent P. O'Leary
Title: Senior Vice President
<PAGE> 14
BANQUE PARIBAS
By /s/ David L. Canavan
-----------------------------------
David L. Canavan
Title: Group Vice President
By /s/ Judith A. Kirshner
-----------------------------------
Judith A. Kirshner
Title: Vice President
Each of the undersigned, each being a Subsidiary Guarantor pursuant to the
Credit Agreement referenced in the foregoing Third Amendment and a party to
various Security Documents, hereby acknowledges and agrees to the foregoing
provisions of the Third Amendment, as well as to all prior amendments or
modifications to the Credit Agreement.
THE PROMPTCARE LUNG CENTER,
INC.,
as a Pledgor
By /s/ Wayne Palladino
-----------------------------------
Wayne Palladino
Title: Vice President
STERI-PHARM, INC.,
as a Pledgor
By /s/ Wayne Palladino
-----------------------------------
Wayne Palladino
Title: Vice President
<PAGE> 15
TRANSWORLD NURSES, INC.,
as a Pledgor
By /s/ Wayne Palladino
-------------------------
Title: Vice President
RADAMERICA, INC.,
as a Pledgor
By /s/ Wayne Palladino
-------------------------
Title: Vice President
RESPIFLOW, INC.,
as a Pledgor
By /s/ Wayne Palladino
-------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 10.2
AMENDMENT AGREEMENT
Amendment Agreement dated as of April 24, 1997, by and between
Shlomo Appel ("Seller") and Transworld Home HealthCare, Inc. ("Buyer").
WHEREAS, Buyer and Seller are parties to a certain Stock Purchase
Agreement dated as of June 30, 1994, as amended on June 30, 1994 and May 19,
1995 (the "Agreement"); and
WHEREAS, capitalized terms used herein and not otherwise defined have
the same meaning as set forth in the Agreement; and
WHEREAS, the parties desire to amend the Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual agreement set forth
herein, the parties hereto hereby agree as follows:
1. The definition of "Walkaway Date" and "Extended Walkaway Date" are
hereby amended in their entirety to read as follows:
"Walkaway Date" shall mean May 30, 1997 provided, however,
that if the Closing has not occurred by such date for any reason other
than a material breach by Buyer of any of its obligations hereunder,
Buyer shall have the right, in its sole discretion, to extend from time
to time upon notice to the Sellers, the Walkaway Date to a date (the
"Extended Walkaway Date") that is not later than November 28, 1997".
2. Section 1.3 of the Agreement is hereby amended in its entirety to
read as follows:
"1.3. Consideration. subject to the terms and conditions of
this Agreement:
(a) (i) Concurrent with the execution hereof, Buyer shall
deliver to the Escrow Agent (A) the sum of $450,000 and (B) within five business
days following the execution hereof, 145, 455 shares of the Buyer's common stock
(the "Buyer Stock") (clauses (A) and (B) being referred to collectively as the
"Deposit") which Deposit shall be held in escrow pursuant to the Escrow
Agreement in the form of Schedule 1.3(a) hereto.
(ii) At the Closing the Escrow Agent shall deliver
the Deposit to the Seller in accordance with the terms of the Escrow Agreement.
<PAGE> 2
(b) At the Closing, Buyer shall deliver to the Seller the sum
of $3,550,000 by certified or official bank check drawn on a New York Clearing
House member bank, to the order of Seller or at the option of Seller, by wire
transfer to such accounts as Seller shall advise Buyer of in writing at least
five days prior to the Closing.
3. The form of Employment Agreement attached as Exhibit 6.8 to the
Agreement is hereby superseded in its entirety by the form of Employment
Agreement attached as Exhibit A hereto.
4. Except as amended hereby, the Agreement as heretofore amended or
modified, is hereby ratified, confirmed and approved in all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
/s/ Shlomo Appel
- ------------------------- --------------------------------
Witness Shlomo Appel
Transworld Home HealthCare, Inc.
- -------------------------
Witness
By: /s/ Robert W. Fine
----------------------------
Name: Robert W. Fine
Title: President
-2-
<PAGE> 3
Exhibit A
Schedule 6.8
EMPLOYMENT AGREEMENT
THIS AGREEMENT ("Agreement"), dated as of , 1997, between KWIK
CARE, Ltd., a New York corporation (the "Company") and SHLOMO APPEL (the
"Executive")
W I T N E S S E T H
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to accept such employment, on the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises,
representations and warranties set forth herein, and for other good and valuable
consideration, it is hereby agreed as follows:
1. Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
2. Term. Subject to the provisions of Section 9 hereof, the
Executive's employment under this Agreement shall commence on , 1997 and shall
end on the third anniversary hereof (herein, the "Term").
3. Position and Duties. A. The Executive shall serve as
President of the Company and VIP Health Services, Inc. ("VIP", which together
with the Company, are sometimes referred to herein as the "Companies") and shall
have such other duties, as from time to time may be prescribed by the Chief
Executive Officer, the Chief Operating Officer or the Board of Directors (the
"Board") of Transworld Home HealthCare, Inc. ("Transworld").
B. During the Term, the Executive shall perform and
discharge the duties that may be assigned to him by the Company from time to
time in accordance with this Agreement, and the Executive shall devote his best
talents, efforts and abilities to the performance of his duties hereunder.
A-1
<PAGE> 4
C. During the Term, the Executive shall perform such
duties on a full-time basis and the Executive shall have no other employment and
no other related outside business activities whatsoever; provided, however, that
the Executive shall not be precluded from devoting such time to such personal
affairs as shall not materially interfere with the performance of his duties
hereunder. The Company acknowledges that the Executive is a member of the
Orthodox Jewish Faith and that religious observance will require him to leave
early on many Fridays and to absent himself from the office on certain Jewish
holidays.
4. Compensation. A. For the Executive's services hereunder,
the Company shall pay the Executive annual salary (the "Base Salary") of
$300,000 in year one of the Term; $330,000 during year two of the Term; and
$363,000 during year three of the Term payable in accordance with the customary
payroll practices of the Company.
B. Provided Executive is an employee of the Company,
in addition to the Base Salary, the Executive shall be entitled to a bonus equal
to 50% of the average combined Companies' Pretax Earnings in excess of
$2,250,000 of such Earnings during each year of the Term. By way of
illustration, if the combined excess Pretax Earnings are $250,000 in year one,
$100,000 in year two and $175,000 in year three, then Executive shall be
entitled to a bonus in each year equal to 50% of $175,000, or $87,500. For
purposes hereof, "Pretax Earnings" shall mean income before provision for income
taxes, as reflected on the Companies' statements of income prepared by the
Companies independent certified public accountants in accordance with GAAP
during such periods, but excluding therefrom any extraordinary income or expense
items (determined in accordance with GAAP) and corporate overhead charges from
Transworld and after deducting therefrom amounts paid or accrued with respect to
any Base Salary paid to Executive. In addition, for purposes hereof, in the
event that during any year of the Term, there is a special charge to the income
of the Companies on account of adjustments made by third party payors with
respect to periods prior to the date hereof, such charges shall also be deemed
extraordinary items, and shall not affect the calculation of Pretax Earnings. In
the event that during any year of the Term, there is a rate adjustment with
respect to the Companies' third-party payor billing rates for periods prior to
the date hereof which rates were preliminary at such time and have become final
during the Term and such adjustments result in an increase in Pretax Earnings
during the Term, then the amount of any such increases shall not be deemed an
extraordinary item and shall be included in Pretax Earnings in the year in which
such adjustment was added to the Companies' pretax income. Any bonus to which
Executive shall be entitled shall be paid within 90 days following the
calculation thereof. With respect to the first and second years of the Term, in
the event that as a result of averaging the second and third years an increase
or decrease is required to be made to any bonus paid for the first or second
years, such increase or decrease shall be settled in the second or third years
as the case may be.
A-2
<PAGE> 5
5. Benefit Plans. During the Term, the Company shall provide
to the Executive all fringe benefits then provided, as well as those which the
Company may generally make available to its senior executive employees,
including, without limitation, benefits provided under the Company's pension and
profit-sharing plans (if any), health benefit plans (such as medical and
hospitalization coverage), and insurance plans (such as life, supplemental life,
disability, business travel, accident and accidental death and dismemberment)
(collectively, the "Benefit Plans").
6. Automobile. During the Term, the Company shall provide the
Executive with an automobile allowance of $650 per month in connection with the
use of his automobile in the performance of his duties hereunder.
7. Reimbursement of Expenses. During the Term, the Company
shall pay or reimburse the Executive for all reasonable travel, entertainment
and other business expenses actually incurred or paid by the Executive in the
performance of his duties hereunder upon presentation of expense statements or
vouchers or such other supporting information as the Company may reasonably
require of the Executive.
8. Vacations. The Executive shall be entitled to no less than
four weeks of paid vacation during each year of the Term.
9. Termination. The employment of the Executive may be
terminated prior to the expiration of the Term in the manner described in this
Section 9.
A. Termination by the Company for Good Cause. The
Company shall have the right to terminate the employment of the Executive for
Good Cause (as such term is defined herein) by written notice to the Executive
specifying the particulars of the conduct of the Executive forming the basis for
such termination.
B. Termination by the Executive for Good Reason. The
Executive shall have the right to terminate his employment hereunder for Good
Reason (as such term is defined herein) by written notice to the Company
specifying the grounds constituting such Good Reason.
C. Termination upon Death. The employment of the
Executive hereunder shall terminate immediately upon his death.
D. The Company's Options upon Disability. If the
Executive becomes physically or mentally disabled during the Term so that he is
unable to perform the services required of him pursuant to this Agreement for a
period of three successive months, or an aggregate of three months in any
six-month
A-3
<PAGE> 6
period (the "Disability Period"), the Company shall have the option, in its
discretion, by giving written notice thereof, either to (A) terminate the
Executive's employment hereunder; or (B) continue the employment of the
Executive hereunder upon all the terms and conditions set forth herein except
that for the balance of the Term the Executive shall receive a Base Salary equal
to 50% of the Base Salary then in effect. Regardless of which option the Company
exercises or shall be deemed to have exercised, during the Disability Period,
the Executive shall continue to receive his full compensation and other benefits
provided herein net of any payments received under any disability policy or
program of which the Executive is a beneficiary or recipient.
E. Termination for any other Reason. Any party
purporting to terminate the employment of the Executive hereunder for any reason
not specified in the foregoing provisions of this Section 9 shall give the other
party notice of such termination in writing and shall specify in such notice the
reasons for such termination.
F. Termination Date. Any notice of termination given
pursuant to the provisions of this Agreement shall specify therein the effective
date of such termination (the "Termination Date").
G. Certain Definitions. For purposes of this
Agreement, the following terms shall have the following meanings:
(1) "Good Cause" shall exist if, and only
if, the Executive (a) wilfully or repeatedly fails to perform his obligations
hereunder as provided herein, provided that such Good Cause shall not exist
unless the Company shall first have provided the Executive with written notice
specifying in reasonable detail the factors constituting such failure and such
failure shall not have been cured by the Executive within 30 days after such
notice or such longer period as may reasonably be necessary to accomplish the
cure; (b) has been convicted of any crime which constitutes a felony or
misdemeanor under applicable law or has entered a plea of guilty or NOLO
CONTENDERE with respect thereto; (c) has committed any act which constitutes
fraud or gross negligence under applicable law; (d) is determined by the Board
to be dependant upon alcohol or drugs; and (e) or during the Term, Executive is
determined by the Board to be in violation of the provisions of Section 11 or 12
hereof.
(2) "Good Reason" means the occurrence of
any of the following events:
(a) the assignment to the Executive
of any duties inconsistent in any material respect with the Executive's then
position (including status, offices, titles and reporting relationships),
authority, duties or responsibilities or any other action by the Company which
results in a significant
A-4
<PAGE> 7
diminution in the Executive's position, authority, duties or responsibilities in
either case taken as a whole, excluding for this purpose any isolated,
immaterial and inadvertent action not taken in bad faith and which is remedied
by the Company promptly after receipt of notice thereof given by the Executive;
or
(b) the Company requiring the
Executive to be based at any location other than within 50 miles of the current
executive offices of the Company, except for requirements of temporary travel on
the Company's business;
(3) "Person" means any individual,
corporation, partnership, association, joint-stock company, trust,
unincorporated organization, joint venture, court or government (or political
subdivision or agency thereof).
10. Obligations of Company on Termination. The Company's
obligations on termination of the Executive's employment shall be as described
in this Section 10.
A. Amount of Severance Payment in Certain Events.
Upon termination of the Executive's employment pursuant to Sections 9(B), the
Company shall pay the Executive any accrued and unpaid bonuses (computed with
respect to the actual period Executive was employed) and unreimbursed expenses
together with a severance payment ("Severance Payment") equal to the product of
(a) the Base Salary then in effect, and (b) the number of years (or portion of a
year, as the case may be) then remaining under this Agreement.
B. Manner in which Severance Payment is to be Made.
The Severance Payment shall be payable as follows: (i) a down payment equal to
20% shall be paid within 30 days after the Termination Date and (ii) the balance
of the Severance Payment shall be paid in 12 consecutive equal monthly
installments commencing on the first day of the second calendar month following
the Termination Date. The obligation of the Company to pay such installments
shall be evidenced by a non-interest bearing promissory note of the Company (the
"Note") made payable to the order of the Executive and dated the date on which
the down payment is due. At its option, at any time and from time to time, the
Company may prepay all or any part of the principal balance of such Note in
multiples of $5,000 without premium or penalty. The Note shall also provide that
upon default in the payment of any installment thereunder, which default is not
cured within thirty (30) days after the due date for payment of same, the holder
of the Note shall be entitled to accelerate all payments due thereunder.
C. Payment Obligations of the Company in case of
Termination for Death, Voluntary Resignation or Good Cause. Upon termination of
the Executive's employment upon death, as a result of the voluntary resignation
of the Executive or for Good Cause, the Company shall have no payment
obligations to the
A-5
<PAGE> 8
Executive, except for the payment of any accrued and unpaid compensation or
reimbursement of any unreimbursed expenses. The Executive agrees that in the
event of his voluntary resignation, he shall provide the Company with not less
than 90 days prior written notice thereof.
D. Continued Medical Coverage. Upon the termination
of the Executive's employment, to the extent permitted by applicable law, the
Company shall continue to provide the Executive, at his cost, with medical and
hospitalization insurance coverage for a period of the longer of: (i) 18 months
from the Termination Date; (ii) the period prescribed by applicable law or (iii)
the period set forth in the applicable Benefit Plans.
11. Trade Secrets; Confidentiality. The Executive recognizes
and acknowledges that, in connection with his employment with the Company, he
has had and will continue to have access to valuable trade secrets and
confidential information of the Companies and Transworld and their affiliates
including, but not limited to, customer lists, business methods and processes,
marketing, promotional, pricing, financial information and data relating to
employees and consultants (collectively, "Confidential Information") and that
such Confidential Information is being made available to the Executive only in
connection with the furtherance of his employment with the Company. The
Executive agrees that during the Term and thereafter, the Executive shall not
disclose any of such Confidential Information to any Person, except that
disclosure of Confidential Information will be permitted: (1) to the Company,
its affiliates and their respective advisors; (2) if such Confidential
Information has previously become available to the public through no fault of
the Executive; (3) if required by any court or governmental agency or body or is
otherwise required by law; (4) if necessary to establish or assert the rights of
the Executive hereunder; or (5) if expressly consented to by the Company.
12. Covenants. A. During the Term and for a period of three
(3) years immediately following the termination of the Executive's employment,
the Executive agrees that he will not engage in or have any financial interest
in any business enterprise in competition with the Companies. For purposes of
this Section 12(a):
(1) A business enterprise in competition
with the Companies shall mean any enterprise which engages in any business as
that conducted by Companies, Transworld or any subsidiary or affiliate during
the twelve months preceding the date of Executive's termination of employment
which operates anywhere within a radius of 100 miles of any office maintained by
the Companies or Transworld as of the date of termination of employment; and
(2) The Executive shall be deemed to be
engaged in or to have a financial interest in such business enterprise if he is
an employee, officer,
A-6
<PAGE> 9
director, trustee, agent, consultant or partner of any Person which is engaged
in such business or if he owns, directly or indirectly, stock or securities
convertible into or exchangeable for stock or otherwise has any equity or
beneficial interest in such Person; provided, however, that the ownership of 5%
or less of the outstanding shares of a class of security, which is regularly
traded on a national securities exchange or quoted in an automated inter-dealer
quotation system, shall not be deemed to be engaging or having a financial
interest in the business of such Person.
B. During the Term and for a period of three (3)
years immediately following the termination of the Executive's employment, the
Executive agrees that he will not directly or indirectly solicit any employee of
the Companies or Transworld or any subsidiary or affiliate thereof or who was an
employee of the Companies or Transworld or any subsidiary or affiliate at any
time within the twelve-month period immediately prior thereto or encourage an
employee or agent of the Companies or Transworld or any subsidiary or affiliate
thereof to terminate such employment or agency relationship for the purposes of
accepting employment with any business enterprise which is in competition with
the Companies or Transworld as such term is defined herein.
C. The Executive acknowledges and agrees that the
covenants set forth in this Section 12 (the "Covenants") are reasonable and
valid in geographical and temporal scope and in all other respects. If any court
determines that any of the Covenants, or any part thereof, is invalid or
unenforceable, the remainder of the Covenants shall not thereby be affected and
shall be given full force and effect, without regard to the invalid or
unenforceable parts.
D. If any court determines that any of the Covenants,
or any part thereof, is invalid or unenforceable for any reason, such court
shall have the power to modify such Covenant, or any part thereof, and, in its
modified form, such Covenant shall then be valid and enforceable.
13. Equitable Relief. In the event of a breach or threatened
breach by the Executive of any of the covenants contained in Sections 11 and 12
hereof, the Company shall be entitled to a temporary restraining order, a
preliminary injunction and/or a permanent injunction restraining the Executive
from breaching or continuing to breach any of said covenants. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies that may be available to it for such breach or threatened breach,
including the recovering of damages.
14. Severability. Should any provision of this Agreement be
held, by a court of competent jurisdiction, to be invalid or unenforceable, such
invalidity or unenforceability shall not render the entire Agreement invalid or
unenforceable, and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.
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<PAGE> 10
15. Successors and Assigns. A. This Agreement and all rights
under this Agreement are personal to the Executive and shall not be assignable
other than by will or the laws of descent. All of the Executive's rights under
the Agreement shall inure to the benefit of his heirs, personal representatives,
designees or other legal representatives, as the case may be.
B. This Agreement shall inure to the benefit of and
be binding upon the Company and Executive and their respective successors and
assigns.
16. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, without
regard to the conflicts of laws rules thereof.
17. Notices. All notices, requests and demands given to or
made upon the respective parties hereto shall be deemed to have been given or
made three (3) business days after the date of mailing when mailed by registered
or certified mail, postage prepaid, or on the date of delivery if delivered by
hand, or one business day after the date of delivery by Federal Express or
similar overnight delivery service, addressed to the parties at their addresses
set forth below or to such other addresses furnished by notice given in
accordance with this Section 17: (a) if to the Company, to Attention: Robert W.
Fine, 75 Terminal Avenue, Clark, New Jersey; and (b) if to the Executive, to
85-39 Wicklow Place, Jamaica Estates, New York 11432.
18. Withholding. All payments required to be made by the
Company to the Executive under this Agreement shall be subject to withholding
taxes, social security and other payroll deductions in accordance with the
Company's policies applicable to employees of the Company at the Executive's
level and the provisions of the Benefit Plans.
19. Complete Understanding. This Agreement supersedes any
prior contracts, understandings, discussions and agreements relating to
employment between the Executive and the Company and constitutes the complete
understanding between the parties with respect to the subject matter hereof. No
statement, representation, warranty or covenant has been made by either party
with respect to the subject matter hereof except as expressly set forth herein.
20. Modification; Waiver. A. This Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Company and the Executive or in the case of a
waiver, by the party against whom the waiver is to be effective. Any such waiver
shall be effective only to the extent specifically set forth in such writing.
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<PAGE> 11
B. No failure or delay by any party in exercising any
right, 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, power or privilege.
21. Mutual Representations. A. The Executive represents and
warrants to the Company that the execution and delivery of this Agreement and
the fulfillment of the terms hereof (i) will not constitute a default under or
conflict with any agreement or other instrument to which he is a party or by
which he is bound and (ii) do not require the consent of any Person.
B. The Company represents and warrants to the
Executive that this Agreement has been duly authorized, executed and delivered
by the Company and that the fulfillment of the terms hereof (i) will not
constitute a default under or conflict with any agreement or other instrument to
which it is a party or by which it is bound and (ii) do not require the consent
of any Person.
C. Each party hereto warrants and represents to the
other that this Agreement constitutes the valid and binding obligation of such
party enforceable against such party in accordance with its terms.
22. Headings. The headings in this Agreement are for
convenience of reference only and shall not control or affect the meaning or
construction of this Agreement.
23. 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. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by the other party hereto.
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<PAGE> 12
IN WITNESS WHEREOF, the Company has caused this Agreement to
be duly executed in its corporate name by one of its officers duly authorized to
enter into and execute this Agreement, and the Executive has manually signed his
name hereto, all as of the day and year first above written.
KWIK CARE, LTD.
By:
- --------------------------- ---------------------------
Witness
- --------------------------- ------------------------------
Witness Shlomo Appel
A-10
<PAGE> 1
EXHIBIT 10.3
AMENDMENT AGREEMENT
Amendment Agreement dated as of April 24, 1997, by and between
Jack Schiff ("Seller") and Transworld Home HealthCare, Inc. ("Buyer").
WHEREAS, Buyer and Seller are parties to a certain Stock
Purchase Agreement dated as of June 30, 1994, as amended on June 30, 1994 and
May 19, 1995 (the "Agreement") and
WHEREAS, capitalized terms used herein and not otherwise
defined have the same meaning as set forth in the Agreement; and
WHEREAS, the parties desire to amend the Agreement as provided
herein,
NOW, THEREFORE, in consideration of the mutual agreements set
forth herein, the parties hereto hereby agree as follows:
1. The definition of "Walkaway Date" and "Extended Walkaway
Date" are hereby amended in their entirety to read as follows:
"Walkaway Date" shall mean May 30, 1997 provided, however,
that if the Closing has not occurred by such date for any reason other
than a material breach by Buyer of any of its obligations hereunder,
Buyer shall have the right, in its sole discretion, to extend from time
to time upon notice to the Sellers, the Walkaway Date to a date (the
"Extended Walkaway Date") that is not later than November 28, 1997".
2. Section 1.3 of the Agreement is hereby amended in its
entirety to read as follows:
"1.3 Consideration. Subject to the terms and conditions of
this Agreement:
(a) (i) Concurrent with the execution hereof, Buyer
shall deliver to the Escrow Agent the sum of $300,000 (the "Deposit") which sum
shall be held in escrow pursuant to the Escrow Agreement in the form of Schedule
1.3(a) hereto.
(ii) At the Closing the Escrow Agent shall
deliver the Deposit to the Seller in accordance with the terms of the Escrow
Agreement.
<PAGE> 2
(b) At the Closing, Buyer shall deliver to the Seller
the sum of $4,450,000 by certified or official bank check drawn on a New York
clearing house member bank, to the order of Seller or at the option of Seller,
by wire transfer to such accounts as Seller shall advise Buyer of in writing at
least five days prior to the Closing.
2. Except as amended hereby, the Agreement as heretofore
amended or modified is hereby ratified confirmed and approved in all respects.
IN WITNESS WHEREOF, the parties have executed this Amendment
Agreement as of the day and year first above written.
/s/ Jack Schiff
- --------------------------- --------------------------------
Witness Jack Schiff
Transworld Home HealthCare, Inc.
- --------------------------- --------------------------------
Witness
By: /s/ Robert W. Fine
-----------------------------
Name: Robert W. Fine
Title: President
-2-
<PAGE> 1
EXHIBIT 11
TRANSWORLD HEALTHCARE, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRIMARY COMPUTATION PRIMARY COMPUTATION
THREE MONTHS SIX MONTHS
ENDED APRIL 30, ENDED APRIL 30,
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 233 $ 119 $ 1,356 $ 940
Add: Interest on long-term, net of tax effect, after
application of treasury stock method 34 51
------- ------- ------- -------
Net income, as adjusted $ 233 $ 153 $ 1,356 $ 991
======= ======= ======= =======
Weighted average number of shares outstanding 10,560 5,473 10,273 5,272
Weighted average number of shares
contingently issuable per acquisition agreements 269 257 269 441
Incremental shares, after application of treasury
stock method, of stock options and warrants 754 1,046 818 1,049
------- ------- ------- -------
Shares used in calculation of net income per common share 11,583 6,776 11,360 6,762
======= ======= ======= =======
Primary net income per share $ 0.02 $ 0.02 $ 0.12 $ 0.15
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
FULLY DILUTED COMPUTATION FULLY DILUTED COMPUTATION
THREE MONTHS SIX MONTHS
ENDED APRIL 30, ENDED APRIL 30,
--------------------- ---------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 233 $ 119 $ 1,356 $ 940
Add: Interest on long-term, net of tax effect, after
application of treasury stock method 23 41
------- ------- ------- -------
Net income, as adjusted $ 233 $ 142 $ 1,356 $ 981
======= ======= ======= =======
Weighted average number of shares outstanding 10,560 5,473 10,273 5,272
Weighted average number of shares
contingently issuable per acquisition agreements 269 257 269 441
Incremental shares, after application of treasury
stock method, of stock options and warrants 754 1,046 819 1,049
------- ------- ------- -------
Shares used in calculation of fully diluted income per common share 11,583 6,776 11,361 6,762
======= ======= ======= =======
Fully diluted net income per share $ 0.02 $ 0.02 $ 0.12 $ 0.15
======= ======= ======= =======
</TABLE>
Page 33
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> FEB-01-1997
<PERIOD-END> APR-30-1997
<EXCHANGE-RATE> 1
<CASH> 37,263
<SECURITIES> 0
<RECEIVABLES> 39,940
<ALLOWANCES> 7,341
<INVENTORY> 1,985
<CURRENT-ASSETS> 79,246
<PP&E> 9,257
<DEPRECIATION> 5,173
<TOTAL-ASSETS> 165,497
<CURRENT-LIABILITIES> 10,141
<BONDS> 0
151
0
<COMMON> 0
<OTHER-SE> 112,799
<TOTAL-LIABILITY-AND-EQUITY> 165,497
<SALES> 20,669
<TOTAL-REVENUES> 20,669
<CGS> 10,250
<TOTAL-COSTS> 10,250
<OTHER-EXPENSES> 8,814
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 689
<INCOME-PRETAX> 916
<INCOME-TAX> 683
<INCOME-CONTINUING> 233
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
