TRANSWORLD HEALTHCARE INC, DEF 14A, 2000-05-26

TRANSWORLD HEALTHCARE INC
DEF 14A, 2000-05-26
HOME HEALTH CARE SERVICES

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]

Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12

TRANSWORLD HEALTHCARE, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

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(2) Aggregate number of securities to which transaction applies:

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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):

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(4) Proposed maximum aggregate value of transaction:

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(5) Total fee paid:

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[ ] Fee paid previously with preliminary materials.

[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.

(1) Amount previously paid:

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(2) Form, Schedule or Registration Statement No.:

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(3) Filing Party:

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(4) Date Filed:

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<PAGE>

TRANSWORLD HEALTHCARE, INC.
555 MADISON AVENUE
NEW YORK, NEW YORK 10022

---------------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

---------------------

JUNE 22, 2000

---------------------

To the Shareholders of
TRANSWORLD HEALTHCARE, INC.:

NOTICE IS HEREBY GIVEN that the annual meeting (the "Annual Meeting") of
shareholders of Transworld Healthcare, Inc. (the "Company") will be held at 805
Third Avenue, New York, New York 10022, 20th Floor, on June 22, 2000, at 10:00
a.m., local time, for the following purposes, all as more fully described in the
attached Proxy Statement:

I. To elect five directors to serve for a term of one year and until
their respective successors are duly elected and qualified.

II. To ratify the appointment by the Company's Board of Directors of
Ernst & Young LLP, as independent accountants of the Company for the fiscal
year ending September 30, 2000.

III. To transact such other business as may properly come before the
Annual Meeting and any and all adjournments thereof.

The accompanying Proxy Statement forms a part of this Notice.

The Board of Directors has fixed the close of business on May 15, 2000 as
the record date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting or any adjournment thereof.

A copy of the Company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1999 is enclosed.

YOU ARE EARNESTLY REQUESTED TO COMPLETE, SIGN, DATE AND RETURN THE
ACCOMPANYING FORM OF PROXY IN THE ENCLOSED ENVELOPE PROVIDED FOR THAT PURPOSE
(TO WHICH NO POSTAGE NEED BE AFFIXED IF MAILED IN THE UNITED STATES) WHETHER OR
NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON. THE PROXY IS REVOCABLE BY
YOU AT ANY TIME PRIOR TO ITS EXERCISE AND WILL NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IN THE EVENT YOU ATTEND THE ANNUAL MEETING. THE PROMPT RETURN OF THE
PROXY WILL BE OF ASSISTANCE IN PREPARING FOR THE ANNUAL MEETING AND YOUR
COOPERATION IN THIS RESPECT WILL BE GREATLY APPRECIATED.

By Order of the Board of Directors

/s/ Leslie J. Levinson
----------------------
Leslie J. Levinson
Secretary

May 26, 2000
- --------------------------------------------------------------------------------
YOUR VOTE IS IMPORTANT. TO VOTE YOUR SHARES,
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED
PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE.
- --------------------------------------------------------------------------------

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
INTRODUCTION ......................................................................... 1
Annual Meeting Matters .............................................................. 1
General ............................................................................. 1
VOTING RIGHTS AND VOTING SECURITIES .................................................. 2
Voting at the Annual Meeting ........................................................ 2
Security Ownership of Certain Beneficial Owners and Management ...................... 2
Compliance With Section 16(a) of the Securities Exchange Act of 1934 ................ 3
PROPOSAL I: ELECTION OF DIRECTORS .................................................... 3
Required Affirmative Vote ........................................................... 3
Directors and Officers of the Company ............................................... 4
Meetings of the Board of Directors .................................................. 5
Board Committees .................................................................... 6
Executive Compensation .............................................................. 6
Summary Compensation Table .......................................................... 7
Aggregate Option Exercises in Fiscal 1999 and 1999 Fiscal Year-End Option Values .... 7
Compensation of Directors ........................................................... 7
Employment Agreements; Termination of Employment and Change-in-Control
Arrangements ...................................................................... 8
Compensation Committee Interlocks and Insider Participation ......................... 8
Stock Option Plans .................................................................. 8
Indemnification ..................................................................... 9
Executive Bonus Plan ................................................................ 9
Compensation Committee Report ....................................................... 10
Comparative Performance of the Company .............................................. 12
Performance Graph ................................................................... 13
Certain Relationships and Related Transactions ...................................... 15
PROPOSAL II: RATIFICATION OF INDEPENDENT AUDITORS .................................... 17
Required Affirmative Vote ........................................................... 18
2000 SHAREHOLDER PROPOSALS ........................................................... 18
OTHER MATTERS ........................................................................ 18
SOLICITATION OF PROXIES .............................................................. 19
ADDITIONAL INFORMATION ............................................................... 19
EXHIBIT A -- Audit Committee Charter ................................................. A-1

</TABLE>

i
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TRANSWORLD HEALTHCARE, INC.
555 MADISON AVENUE
NEW YORK, NEW YORK 10022

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PROXY STATEMENT FOR THE
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 22, 2000

---------------------

INTRODUCTION

This Proxy Statement and the accompanying proxy are being furnished to
shareholders of Transworld Healthcare, Inc. (the "Company") in connection with
the solicitation of proxies by the Board of Directors for use in voting at the
Annual Meeting of Shareholders to be held at 805 Third Avenue, New York, New
York 10022, 20th Floor, on June 22, 2000, at 10:00 a.m., and at any and all
adjournments thereof (the "Annual Meeting"). This Proxy Statement, the attached
Notice of Annual Meeting of Shareholders, and the accompanying proxy, together
with a copy of the Annual Report of the Company on Form 10-K for the fiscal year
ended September 30, 1999, including the financial statements contained therein,
are first being mailed or delivered to shareholders of the Company on or about
May 26, 2000.

ANNUAL MEETING MATTERS

At the Annual Meeting, shareholders of the Company as of the close of
business on May 15, 2000 (the "Record Date") will consider and vote upon the
following: (i) Proposal I for the election of five directors to serve for a term
of one year and until their respective successors are duly elected and
qualified; and (ii) Proposal II for the ratification of the appointment by the
Company's Board of Directors of Ernst & Young LLP, as independent accountants of
the Company for the fiscal year ending September 30, 2000.

APPROVAL OF PROPOSAL I TO ELECT FIVE DIRECTORS REQUIRES THE AFFIRMATIVE
VOTE OF A PLURALITY OF THE SHARES OF THE COMPANY'S COMMON STOCK, PAR VALUE $0.01
PER SHARE (THE "COMMON STOCK") REPRESENTED IN PERSON OR BY PROXY AT THE ANNUAL
MEETING.

APPROVAL OF PROPOSAL II TO RATIFY THE APPOINTMENT OF ERNST & YOUNG LLP, AS
INDEPENDENT ACCOUNTANTS OF THE COMPANY FOR THE FISCAL YEAR ENDING SEPTEMBER 30,
2000 REQUIRES THE AFFIRMATIVE VOTE OF HOLDERS OF A MAJORITY OF THE SHARES OF
COMMON STOCK REPRESENTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING.

GENERAL

The enclosed proxy provides that each shareholder may specify that his or
her shares be voted "for," "against" or "abstain" from voting with respect to
each of the proposals. If the enclosed proxy is properly executed, duly returned
to the Company in time for the Annual Meeting and not revoked, your shares will
be voted in accordance with the instructions contained thereon. Where a signed
proxy is returned, but no specific instructions are indicated, your shares will
be voted FOR each of the proposals.

Proxies marked as abstaining will be treated as present for purposes of
determining a quorum for the Annual Meeting, but will not be counted as voting
in respect of any matter as to which abstinence is indicated. Proxies returned
by brokers as "non-votes" on behalf of shares held in street name because
beneficial owners' discretion has been withheld as to one or more matters on the
agenda for the Annual Meeting will not be treated as present for purposes of
determining a quorum for the Annual Meeting unless they are voted by the broker
on at least one matter on the agenda. Such shares will not be counted as to the
matters for which a non-vote is indicated on the broker's proxy.

Any shareholder who executes and returns a proxy may revoke it in writing
at any time before it is voted at the Annual Meeting by: (i) filing with the
Secretary of the Company, at the above address, written

<PAGE>

notice of such revocation bearing a later date than the proxy or a subsequent
proxy relating to the same shares; or (ii) attending the Annual Meeting and
voting in person (although attendance at the Annual Meeting will not in and of
itself constitute revocation of a proxy).

Representatives of PricewaterhouseCoopers LLP, the Company's former
independent accountants, are expected to be present at the Annual Meeting and
available to respond to appropriate questions. Such representatives also will
have the opportunity, should they so desire, to make any statements to the
shareholders which they deem appropriate. Representatives of Ernst & Young LLP
are not expected to be present at the Annual Meeting.

Whether or not you attend the Annual Meeting, your vote is important.
Accordingly, you are asked to sign and return the accompanying proxy regardless
of the number of shares you own. Shares can be voted at the Annual Meeting only
if the holder is represented by proxy or is present.

VOTING RIGHTS AND VOTING SECURITIES

VOTING AT THE ANNUAL MEETING

The Board of Directors has fixed the close of business on May 15, 2000 as
the Record Date for the determination of shareholders entitled to notice of, and
to vote at, the Annual Meeting. Only shareholders of record at the close of
business on the Record Date will be entitled to vote at the Annual Meeting or
any and all adjournments thereof. On the Record Date, the Company had 17,551,076
shares of Common Stock issued and outstanding. The Common Stock is the only
class of outstanding voting securities of the Company. Each shareholder of
Common Stock will be entitled to one vote per share, either in person or by
proxy, on each matter presented to the shareholders of the Company at the Annual
Meeting. The holders of a majority of all of the outstanding shares of Common
Stock entitled to vote at the Annual Meeting constitute a quorum at the Annual
Meeting. The affirmative vote of the holders of a plurality of the shares of
Common Stock represented in person or by proxy at the Annual Meeting is required
to approve Proposal I. The affirmative vote of the holders of a majority of the
shares of Common Stock represented in person or by proxy at the Annual Meeting
is required to approve Proposal II.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the number and percentage of shares of
Common Stock beneficially owned, as of the Record Date, by (i) all persons known
by the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock; (ii) each director of the Company; (iii) each of the "named
executive officers" as defined under the rules and regulations of the Securities
Act of 1933, as amended; and (iv) all directors and executive officers of the
Company as a group (7 persons).

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE
NAME OWNED BENEFICIALLY OWNED
---- ----- ------------------
<S> <C> <C>
Timothy M. Aitken(1) ................................................... 670,000 3.7%
Sarah L. Eames(2) ...................................................... 150,667 *
Wayne A. Palladino(3) .................................................. 224,190 1.3%
Gregory E. Marsella(4) ................................................. -- --
Lewis S. Ranieri(5) .................................................... 13,913,721 67.7%
Scott A. Shay(5) ....................................................... 13,913,721 67.7%
Jeffrey S. Peris(6) .................................................... 3,667 *
G. Richard Green(6) .................................................... 4,667 *
Hyperion Partners II L.P.(7) ........................................... 13,913,721 67.7%
Hyperion TW Fund L.P.(8) ............................................... 13,913,721 67.7%
All executive officers and directors as a group (7 persons)(9) ......... 14,966,912 69.7%
</TABLE>

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* Less than one percent.

2
<PAGE>

(1) Includes 650,000 shares subject to options exercisable within 60 days
from the Record Date.

(2) Includes 146,667 shares subject to options exercisable within 60 days
from the Record Date.

(3) Includes 135,000 shares subject to options exercisable within 60 days
from the Record Date.

(4) Mr. Marsella resigned as Vice President, General Counsel and Secretary,
effective September 3, 1999.

(5) Includes 6,765,265 shares of Common Stock and 3,000,000 shares of Common
Stock underlying the warrants (the "Warrants") exercisable within 60 days
from the Record Date acquired pursuant to the HPII Purchase Agreement (as
defined herein) which Hyperion Partners II L.P. ("HPII") has purchased
and 4,148,456 shares of Common Stock which Hyperion TW Fund L.P. (the
"Fund") (each of which are affiliates of Messrs. Ranieri and Shay) has
purchased and as to which Messrs. Ranieri and Shay disclaim beneficial
ownership. The business address of Messrs. Ranieri and Shay is 50 Charles
Lindbergh Parkway, Uniondale, New York 11553. See "Certain Relationships
and Related Transactions -- Transactions with Principal Shareholders."

(6) Includes 1,667 shares subject to options exercisable within 60 days from
the Record Date.

(7) Includes 4,148,456 shares of Common Stock which the Fund (an affiliate of
HPII) has purchased and as to which HPII disclaims beneficial ownership
and 3,000,000 shares of Common Stock subject to the Warrants exercisable
within 60 days from the Record Date. The address of HPII is 50 Charles
Lindbergh Parkway, Uniondale, New York 11553. See "Certain Relationships
and Related Transactions -- Transactions with Principal Shareholders."

(8) Includes 6,765,265 shares of Common Stock and 3,000,000 shares subject to
the Warrants exercisable within 60 days from the Record Date which HPII
(an affiliate of the Fund) has purchased and as to which the Fund
disclaims beneficial ownership. The address of the Fund is 50 Charles
Lindbergh Parkway, Uniondale, New York 11553.

(9) Includes all shares held by Messrs. Aitken, Palladino, Ranieri, Shay,
Peris and Green and Ms. Eames, and those shares subject to options and
Warrants held by such individuals exercisable within 60 days from the
Record Date.

COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934

The Securities and Exchange Commission (the "Commission") has comprehensive
rules relating to the reporting of securities transactions by directors,
officers and shareholders who beneficially own more than 10% of the Company's
Common Stock (collectively, the "Reporting Persons"). These rules are complex
and difficult to interpret. Based solely on a review of Section 16 reports
received by the Company from Reporting Persons during the fiscal year ended
September 30, 1999, the Company believes that no Reporting Person has failed to
file a Section 16 report on a timely basis during the fiscal year ended
September 30, 1999, other than G. Richard Green, a director of the Company, who
filed one Form 4 late with respect to one transaction which occurred in December
1998 and Jeffery S. Peris, a director of the Company, who inadvertently did not
timely file his Form 3 and one Form 4 with respect to one transaction which
occurred in December 1998.

PROPOSAL I: ELECTION OF DIRECTORS

At the Annual Meeting, five directors are to be elected to serve for a term
of one year and until their respective successors are duly elected and
qualified. All of the nominees are currently members of the Board of Directors.

The persons named in the enclosed proxy intend to vote for the election of
the Company's nominees, who are listed below, unless the proxy is marked to
indicate that such authorization is expressly withheld. Should any of the listed
persons be unable to accept nomination or election (which the Board of Directors
does not anticipate), it is the intention of the persons named in the enclosed
proxy to vote for the election of such persons as the Board of Directors may
recommend. Proxies cannot be voted for a greater number of persons than the
number of nominees named.

REQUIRED AFFIRMATIVE VOTE

Approval of Proposal I to elect five directors requires the affirmative
vote of a plurality of the shares of Common Stock represented in person or by
proxy at the Annual Meeting.

3
<PAGE>

DIRECTORS AND OFFICERS OF THE COMPANY

The following table sets forth certain information concerning the Company's
directors and officers including the nominees for the Board of Directors:

<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
Timothy M. Aitken* .......... 55 Chairman of the Board and Chief Executive Officer
Sarah L. Eames .............. 41 President
Wayne A. Palladino .......... 41 Senior Vice President and Chief Financial Officer
Leslie J. Levinson .......... 45 Secretary
Lewis S. Ranieri* ........... 53 Director
Scott A. Shay* .............. 42 Director
Jeffrey S. Peris* ........... 54 Director
G. Richard Green* ........... 61 Director
</TABLE>

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* Indicates nominee for Director.

Certain biographical information regarding each director and officer of the
Company is set forth below:

Timothy M. Aitken has served as Chairman of the Board and Chief Executive
Officer of the Company since January 15, 1997. Mr. Aitken also served as
President of the Company from January 1998 until May 1998. Prior to joining the
Company, Mr. Aitken served as an independent consultant to the health care
industry from November 1995 until January 1997. From June 1995 until November
1995, Mr. Aitken served as the vice chairman and president of Apria Healthcare
Group, Inc., a California based home health care company. He also served as
chairman of the board of Omnicare plc from September 1993 until its acquisition
by the Company. From 1990 until June 1995, Mr. Aitken served as chairman of the
board, president and chief executive officer of Abbey Healthcare Group Inc., a
California based home health care company.

Sarah L. Eames has served as President of the Company since May 1998, and
she served as Executive Vice President, Business Development and Marketing of
the Company from June 1997 to May 1998. Prior to joining the Company, Ms. Eames
was employed by Johnson & Johnson Professional, Inc. as a business development
consultant from 1996 to 1997. From June 1995 until November 1995, Ms. Eames
served as Vice President, Marketing for Apria Healthcare Group, Inc. From 1980
until June 1995 Ms. Eames held various marketing and business development
positions at Abbey Healthcare Group Inc., a predecessor company of Apria
Healthcare Group, Inc.

Wayne A. Palladino has been a Vice President and Chief Financial Officer of
the Company since February 1991 and Senior Vice President of the Company since
September 1996. From September 1989 until joining the Company, he served as the
vice president-finance and chief financial officer of ESC Electronics Corp., an
electronics manufacturer. From December 1985 until January 1991, he was a
principal in Pennwood Capital Corporation, a private investment concern. From
January 1984 through December 1985, Mr. Palladino was a senior associate in the
business development unit of W.R. Grace & Co., Inc.

Leslie J. Levinson has served as Secretary of the Company since September
1999 and had previously served in such capacity from October 1990 to July 1997.
Since June 1991, he has been a partner in the law firm of Baer Marks & Upham
LLP, which firm serves as counsel to the Company. From January 1988 until June
1991, he was a partner in the law firm of Dow, Lohnes & Albertson, which firm
served as counsel to the Company.

Lewis S. Ranieri has been a Director of the Company since May 1997. Since
1988 he has been the chairman of Bank United Corp. He was also the president and
chief executive of the predecessors of Bank United Corp. and the chairman of
Bank United, the subsidiary of Bank United Corp., from 1988 until July 15, 1996.
Mr. Ranieri is also the chairman and president of Ranieri & Co., Inc., positions
he has held since founding Ranieri & Co., Inc., in 1988. Mr. Ranieri is a
founder of Hyperion Partners L.P. and of

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<PAGE>

Hyperion Partners II L.P. He is also vice chairman of Hyperion Capital
Management, Inc., a registered investment advisor. Mr. Ranieri is a director of
The Hyperion Total Return Fund, Inc.; The Hyperion 1999 Term Trust, Inc.; The
Hyperion 2002 Term Trust, Inc. and Hyperion 2005 Investment Grade Opportunity
Trust, Inc. Mr. Ranieri is also chairman and president of various other
indirect subsidiaries of Hyperion Partners L.P. and Hyperion Partners II L.P.
He is also a director of American Marine Holdings, Inc. and Delphi Financial
Group, Inc. Mr. Ranieri is a former vice chairman of Salomon Brothers Inc.
where he was employed from 1968 to 1987, and was one of the principal
developers of the secondary mortgage market. He is a member of the National
Association of Home Builders Mortgage Roundtable.

Scott A. Shay has been a Director of the Company since January 1996 and
served as Acting Chairman of the Board of the Company from September 1996 until
January 1997. Mr. Shay has been a managing director of Ranieri & Co., Inc. since
its formation in 1988. Mr. Shay is currently a director of Bank United Corp.,
and Bank United, the subsidiary of Bank United Corp., Bank Hapoalim B.M., in Tel
Aviv, Israel, iOwn, Inc. and Hyperion Capital Management, Inc., as well as an
officer or director of other direct and indirect subsidiaries of Hyperion
Partners L.P. and Hyperion Partners II L.P. Mr. Shay is also a director of the
general partner of Cardholder Management Services, L.P. Prior to joining Ranieri
& Co., Inc., Mr. Shay was a director of Salomon Brothers Inc. where he was
employed from 1980 to 1988.

Jeffrey S. Peris has been a Director of the Company since May 1998. Dr.
Peris has been the vice president of business operation of Knoll Pharmaceutical
(BASF Pharma) where he is responsible for human resources and corporate
communications since April 1998. Dr. Peris had been a management consultant to
various Fortune 100 companies from May 1997 until April 1998. From 1972 until
May 1997, Dr. Peris was employed by Merck & Co., Inc., where he served as the
executive director of human resources from 1985 until May 1997, the executive
director of marketing from 1976 until 1985, and the director of clinical
biostatistics and research data systems from 1972 until 1976.

G. Richard Green has been a Director of the Company since August 1998. Mr.
Green has been the chairman since 1987 and a director since 1960 of J.H. & F.W.
Green Ltd a conglomerate based in the United Kingdom. Since 1960, Mr. Green has
held various positions at J.H. & F.W. Green Ltd. and several of its
subsidiaries. Mr. Green was also a director of Abbey Healthcare Group, Inc. from
1991 to 1995. He also held directorships of Omnicare plc and Medigas Ltd from
1993 to 1996.

All directors of the Company are elected by the shareholders for a one-year
term and hold office until the next annual meeting of shareholders of the
Company and until their successors are elected and qualified. There are no
family relationships among the directors and officers of the Company. All
directors who are not employees of the Company are entitled to receive a fee of
$10,000 per annum. In addition, all directors are reimbursed for all reasonable
expenses incurred by them in acting as a director or as a member of any
committee of the Board of Directors. Officers are chosen by and serve at the
discretion of the Board of Directors. See "Certain Relationships and Related
Transactions Transactions with Principal Shareholders."

Other than Timothy M. Aitken and Sarah L. Eames none of the Company's
executive officers have employment agreements or letters with the Company. See
"Executive Compensation" and "Employment Agreements; Termination of Employment
and Change-in-Control Arrangements."

MEETINGS OF THE BOARD OF DIRECTORS

The business affairs of the Company are managed under the direction of the
Board of Directors. Members of the Board of Directors are informed about the
Company's affairs through various reports and documents distributed to them,
through operating and financial reports routinely presented at meetings of the
Board of Directors and committee meetings by the Chairman and other officers,
and through other means. In addition, directors of the Company discharge their
duties throughout the year not only by attending Board of Directors meetings,
but also through personal meetings and other communications, including telephone
contact with the Chairman of the Board and others regarding matters of interest
and concern to the Company.

During the fiscal year ended September 30, 1999, the Company's Board of
Directors held four formal meetings and acted by unanimous written consent in
lieu of a meeting, on three separate occasions.

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<PAGE>

During the fiscal year ended September 30, 1999, no director attended fewer
than 75% of the Board meetings and any applicable committee meetings, except
for Messrs. Ranieri and Green, who each attended two out of the four Board
meetings and any applicable committee meetings.

BOARD COMMITTEES

The Company's Board of Directors has an Audit Committee and a Compensation
Committee but does not have a nominating committee. The members of each
committee are appointed by the Board of Directors.

Audit Committee. The Audit Committee recommends to the Board of Directors
the auditing firm to be selected each year as independent auditors of the
Company's financial statements and to perform services related to the completion
of such audit. The Audit Committee also has responsibility for: (i) reviewing
the scope and results of the audit; (ii) reviewing the Company's financial
condition and results of operations with management and integrity of the
Company's financial statements; (iii) considering the adequacy of the internal
accounting and control procedures of the Company and compliance with legal and
regulatory requirements; and (iv) reviewing any non-audit services and special
engagements to be performed by the independent auditors and considering the
effect of such performance on the auditor's independence. Since September 14,
1999 the Audit Committee has consisted of Messrs. Green, Shay and Peris and
prior thereto consisted of Messrs. Ranieri and Shay. The Audit Committee was
also in session during each of the Company's four formal meetings of its Board
of Directors during the fiscal year ended September 30, 1999.

On May 10, the Company adopted a charter for the Audit Committee, a copy of
which is attached as Exhibit A hereto. The Company may, prior to June 14, 2001,
reconstitute the Audit Committee if necessary to comply with recent changes to
Audit Committee structure and membership requirements adopted by the American
Stock Exchange.

Compensation Committee. The Compensation Committee reviews and approves
overall policy with respect to compensation matters, including such matters as
compensation plans for employees and employment agreements and compensation for
executive officers. The Compensation Committee consists of Messrs. Ranieri and
Shay. The Compensation Committee was also in session during each of the
Company's four formal meetings of its Board of Directors during the fiscal year
ended September 30, 1999.

EXECUTIVE COMPENSATION

The following table summarizes all compensation earned by or paid to the
Company's Chief Executive Officer and each of the four other most highly
compensated executive officers of the Company whose total annual salary and
bonus compensation exceeded $100,000 (collectively, the "Named Officers") for
services rendered in all capacities to the Company for the fiscal years ended
September 30, 1999 and 1998 and the eleven month period ended September 30, 1997
(the "Eleven Month Period").

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<PAGE>

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-------------------
ANNUAL
COMPENSATION RESTRICTED SECURITIES
------------ STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION
--------------------------- ----------- ------ ----- ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Timothy M. Aitken(1) ........... 1999 $250,000 $100,000 -- -- $ 39,228(4)
Chairman of the Board 1998 243,423 -- -- 150,000 52,742(4)
and Chief Executive Eleven Month
Officer Period 138,461 -- -- 500,000 53,428(4)

Sarah L. Eames(2) .............. 1999 $240,000 $100,000 -- -- $ 5,200(4)
President 1998 187,404 -- -- 100,000 --
Eleven Month
Period 47,115 -- -- 60,000 --

Wayne A. Palladino ............. 1999 $225,000 $100,000 -- -- $ 91,866(5)
Senior Vice President and 1998 181,731 -- -- 100,000 --
Chief Financial Officer Eleven Month
Period 154,807 -- -- 45,000 --

Gregory E. Marsella(3) ......... 1999 $120,192 $ -- -- -- $ 4,500(4)
Vice President, General 1998 121,154 -- -- -- --
Counsel and Secretary Eleven Month
Period 26,923 -- -- 48,000 --
</TABLE>

- ----------
(1) Mr. Aitken became Chief Executive Officer and Chairman of the Company
effective January 1997.

(2) Ms. Eames became Executive Vice President, Business Development and
Marketing of the Company in June 1997 and President of the Company in May
1998.

(3) Mr. Marsella became Vice President, General Counsel and Secretary of the
Company in July 1997 and resigned September 3, 1999.

(4) Reflects reimbursement for certain travel expenses.

(5) Reflects forgiveness of a loan and reimbursement of certain travel
expenses.

In fiscal 1999, there were no options granted to any of the Named Officers
pursuant to the Company's 1992 Stock Option Plan.

AGGREGATE OPTION EXERCISES IN FISCAL 1999
AND 1999 FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END(1)
NAME ON EXERCISE VALUE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Timothy M. Aitken .......... -- -- 516,666/133,334 $0/$0
Sarah L. Eames ............. -- -- 146,667/ 13,333 0/ 0
Wayne A. Palladino ......... -- -- 135,000/ 15,000 0/ 0
</TABLE>

- ----------
(1) Calculated on the basis of $2.00 per share, the closing sale price of the
Common Stock as reported on the American Stock Exchange on September 30,
1999, minus the exercise price.

COMPENSATION OF DIRECTORS

See "Directors and Executive Officers of the Registrant" with respect to
compensation of non-employee directors.

7
<PAGE>

EMPLOYMENT AGREEMENTS; TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

In January 1997, the Company entered into an employment agreement with Mr.
Aitken, which expired in January 1998. The agreement renewed for a one-year term
in January 1998 and will renew for one-year terms absent notice of non-renewal
from either party. This agreement provided for a base salary of $250,000,
increasing to $300,000 when the agreement was renewed in January 1998. The
agreement contains, among other things, customary confidentiality and
termination provisions and provides that in the event of the termination of the
executive following a "change of control" of the Company (as defined therein),
Mr. Aitken will be entitled to receive a cash payment of up to 2.9 times his
average annual base salary during the preceding five years.

In connection with Ms. Eames' employment with the Company, the Company has
agreed that if Ms. Eames' employment is terminated (other than for cause), she
will be entitled to one year's salary (currently $275,000) plus relocation
expenses to California.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The Compensation Committee of the Board of Directors consists of Messrs.
Ranieri and Shay. Messrs. Ranieri and Shay among others, control the general
partner of HPII and the Fund, each of which are principal shareholders of the
Company, which principal shareholders engaged in certain transactions with the
Company described herein under the heading "Certain Relationships and Related
Transactions -- Transactions with Principal Shareholders. See also "Directors
and Officers of the Company" and "Board Committees."

STOCK OPTION PLANS

1992 Stock Option Plan. In July 1992, the Company's Board of Directors and
shareholders approved the Company's 1992 Stock Option Plan (the "1992 Option
Plan"). The 1992 Option Plan provides for the grant of options to key
employees, officers, directors and non-employee independent contractors of the
Company. The 1992 Option Plan is administered by the Compensation Committee of
the Board of Directors. The number of shares of Common Stock available for
issuance thereunder is 3,175,361 shares as of September 30, 1999. Beginning in
fiscal 1998 and ending in July 2002 the number of shares available for issuance
under the 1992 Option Plan, as amended, increases by one percent of the number
of shares of Common Stock outstanding as of the first day of each fiscal year.
As of the Record Date, the number of shares of Common Stock available for
issuance thereunder is 3,350,872 shares.

Options granted under the 1992 Option Plan may be either incentive stock
options ("Incentive Options"), which are intended to meet the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended, or options that
do not qualify as Incentive Options ("Non-Qualified Options"). Under the 1992
Option Plan, the Compensation Committee may grant (i) Incentive Options at an
exercise price per share which is not less than the fair market value of a
share of Common Stock on the date on which such Incentive Options are granted
(and not less than 110% of the fair market value in the case of any optionee
who beneficially owns more than 10% of the total combined voting power of the
Company) and (ii) Non-Qualified Options at an exercise price per share which is
determined by the Compensation Committee (and which may be less than the fair
market value of a share of Common Stock on the date on which such Non-Qualified
Options are granted). The 1992 Option Plan further provides that the maximum
period in which options may be exercised will be determined by the Compensation
Committee, except that Incentive Options may not be exercised after the
expiration of ten years from the date the Incentive Option was initially
granted (and five years in the case of any optionee who beneficially owns more
than 10% of the total combined voting power of the Company). Under the 1992
Option Plan, if an optionee's employment is terminated, generally the
unexercised Incentive Options must be exercised within three months after
termination. However, if the termination is due to the optionee's death or
permanent disability, the option must be exercised within one year of the
termination of employment. If the optionee's employment is terminated for cause
by the Company, or if the optionee voluntarily terminates his employment,
generally his options will expire as of the termination date. Any option
granted under the 1992 Option Plan will be nontransferable, except by will or
by the laws of descent and

8
<PAGE>

distribution, and generally may be exercised upon payment of the option price
in cash or by delivery of shares of Common Stock with a fair market value equal
to the option price.

Shares delivered under the 1992 Option Plan will be available from
authorized but unissued shares of Common Stock or from shares of Common Stock
reacquired by the Company. Shares of Common Stock that are subject to options
under the 1992 Option Plan which have terminated or expired unexercised will
return to the pool of shares available for issuance under the 1992 Option Plan.

On December 15, 1998, the Company granted options to purchase shares of
Common Stock at $4.31 per share under the Option Plan as follows: (i) 5,000 to
Mr. Peris and (ii) 5,000 to Mr. Green.

1997 Non-Employee Director Plan. In May 1997, the Company adopted the
Company's 1997 Option Plan for Non-Employee Directors (the "Director Plan")
pursuant to which 100,000 shares of Common Stock of the Company were reserved
for issuance upon the exercise of options granted to non-employee directors of
the Company. The purpose of the Director Plan is to encourage ownership of
Common Stock by non-employee directors of the Company whose continued services
are considered essential to the Company's future progress and to provide them
with a further incentive to remain as directors of the Company. The Director
Plan is administered by the Board of Directors. Directors of the Company who
are not employees of the Company or any subsidiary or affiliate of the Company
are eligible to participate in the Director Plan. The Director Plan will
terminate in May 2007; however, options outstanding on the expiration of the
term shall continue to have full force and effect in accordance with the
provisions of the instruments evidencing such options. The Board of Directors
may suspend, terminate, revise or amend the Director Plan, subject to certain
limitations.

Under the Director Plan, the Board of Directors may from time to time at
its discretion determine which of the eligible directors should receive
options, the number of shares subject to such options and the dates on which
such options are to be granted. Each such option is immediately exercisable for
a period of ten years from the date of grant generally, but may not be
exercised more than 90 days after the date an optionee ceases to serve as a
director of the Company. Options granted under the Director Plan are not
transferable by the optionee other than by will, laws of descent and
distribution, or as required by law.

Common Stock may be purchased from the Company upon the exercise of an
option by payment in cash or cash equivalent, through the delivery of shares of
Common Stock having a fair market value equal to the cash exercise price of the
option or any combination of the above, subject to the discretion of the Board
of Directors.

INDEMNIFICATION

As permitted under the Business Corporation Law of the State of New York,
the Company's Restated Certificate of Incorporation provides that a director of
the Company will not be personally liable to the Company or its shareholders
for monetary damages for breach of a fiduciary duty owed to the Company or its
shareholders. By its terms and in accordance with the law of the State of New
York, however, this provision does not eliminate or otherwise limit the
liability of a director of the Company for any breach of duty based upon (i) an
act or omission (A) resulting from acts committed in bad faith or involving
intentional misconduct or involving a knowing violation of law or (B) from
which the director personally derived a financial benefit to which he was not
legally entitled, or (ii) an improper declaration of dividends or purchases of
the Company's securities.

The Company's Restated Certificate of Incorporation and By-Laws provide
that the Company shall indemnify its directors and officers to the fullest
extent permitted by New York law. The Company also has entered into
indemnification agreements with each of its directors and officers.

EXECUTIVE BONUS PLAN

The Company has adopted a performance-based bonus plan pursuant to which
it may grant bonuses to each of the Company's executive officers and certain
other employees of the Company as may be designated by the Board of Directors.
Under the bonus plan, participants may receive a bonus of up to

9
<PAGE>

50% of their base salary. The grant of any bonus is within the sole discretion
of the Compensation Committee and such bonuses may be paid, in whole or in
part, in cash or in shares of Common Stock.

COMPENSATION COMMITTEE REPORT

Overall Policy. The Company's executive compensation program is designed
to be closely linked to corporate performance and returns to shareholders. To
this end, the Company has developed a compensation strategy and specific
compensation plans that tie a significant portion of executive compensation to
the Company's success in meeting specified performance goals. The overall
objectives of this strategy are to attract and retain the best possible
executive talent, to motivate these executives to achieve the goals inherent in
the Company's business strategy and to provide a compensation package that
recognizes individual contributions as well as overall business results.

Each year the Compensation Committee conducts a review of the Company's
executive compensation program. This review includes comparing the Company's
executive compensation, corporate performance, stock price appreciation and
total return to shareholders to a peer group of public corporations that
represent the Company's most direct competitors for executive talent. The peer
groups used for compensation analysis generally are not the same as the peer
group index in the Performance Graph included in this Proxy Statement. The
Compensation Committee believes that the Company's most direct competitors for
executive talent are not necessarily all of the companies that would be
included in a peer group established for comparing shareholder returns. The
annual compensation reviews permit an ongoing evaluation of the link between
the Company's performance and its executive compensation in the context of the
compensation programs of other companies.

The Compensation Committee determines the compensation of the Named
Officers and sets the policies for and reviews the compensation awarded to
other executive officers of the Company.

The key elements of the Company's executive compensation program consist
of base salary, annual bonus and stock options. The Compensation Committee's
policies with respect to each of these elements are discussed below. Although
the elements of compensation described below are considered separately, the
Compensation Committee generally takes into account the full compensation
package afforded to the executive.

Base Salaries. The base salary for an executive officer is initially
determined by evaluating the responsibilities of the position held and the
experience of the individual, and by reference to the competitive marketplace
for executive talent, including a comparison to base salaries for comparable
positions at other companies.

Annual salary adjustments are exclusive of those which have been
determined pursuant to employment agreements, if any, and are determined by (i)
evaluating the performance of the Company and (ii) the performance of each
executive, including any new responsibilities assumed by such person. In the
case of executive officers with responsibility for a particular business
division, such division's financial results also are considered. In evaluating
the performance of the Company, the Compensation Committee, where appropriate,
also considers non-financial indicia, including, but not limited to, increased
market share, efficiency gains, improvements in quality and improvements in
relations with customers, suppliers and employees.

The base salary for fiscal 1999 and for fiscal 2000 for Mr. Aitken, the
Chairman and Chief Executive Officer of the Company was established pursuant to
the terms of his employment agreement with the Company entered into in January
1997.

Annual Bonuses. The Company's executive officers are eligible for an
annual bonus pursuant to a bonus program instituted in October 1994 which
provides for bonuses of up to 50% of their base salary. During the fiscal year
ended September 30, 1999, the Company did not exceed its pre-tax income goals.
Based on these results, no bonuses were awarded to executive officers.

Special Bonuses. During the fiscal year ended September 30, 1999, the
Compensation Committee awarded ad-hoc bonuses to Mr. Aitken, Ms. Eames and Mr.
Palladino of $100,000 each. These bonuses were awarded to recognize the
significant steps during the fiscal year ended September 30, 1998 and the

10
<PAGE>

Eleven Month Period to realign the Company's business as a focused regional
home health care provider and specialty pharmacy and medical supply distributor
in the United States ("U.S.") and as an integrated national provider of home
and alternate site health care products and services in the United Kingdom (the
"U.K."). These steps included (i) selling non-core assets such as the Company's
Radamerica, Inc. business which provided radiation therapy in the Baltimore,
Maryland area and the Company's Transworld HealthCare-Nursing Division, Inc.
operations, which provided nursing and para-professional services in New Jersey
and Florida; (ii) exiting businesses that were deemed not to have the potential
to earn an adequate return on capital over the long term (such as wound care
and orthotic product lines in the continental U.S., as well as the Company's
pulmonary rehabilitation center in Cherry Hill, New Jersey); and (iii)
completing the sale of substantially all of the assets of Health Management,
Inc. ("HMI"). In addition, these individuals successfully executed the
Company's strategy aimed at becoming one of the only integrated national
providers of home and alternative site health care in the U.K. through the 1997
purchases of Omnicare plc and Allied Medicare Ltd and the subsequent management
of these U.K. operations.

Subsequent to the fiscal year end the Compensation Committee awarded ad
hoc bonuses to each of Mr. Aitken, Ms. Eames and Mr. Palladino (aggregating
$140,000, $160,000 and $150,000, respectively) in recognition of achieving
substantial benefits for the Company in the areas of (i) creating enhanced
value in the Company's U.K. subsidiaries, both through acquisitions and in
operations, thereby enhancing the opportunities for refinancing (which
refinancing occurred in December 1999) and (ii) helping stabilize and improve
operations in the Company's domestic lines of businesses, specifically in the
specialty pharmacy operations and in its Promptcare subsidiary's markets.

Stock Options. Under the 1992 Option Plan, stock options may be granted
to, among others, the Company's directors, executive officers and employees.
The Compensation Committee sets guidelines for the size of stock option awards
based on similar factors as are used to determine base salaries and annual
bonuses. In the event of poor corporate performance, the Compensation Committee
can elect not to award any stock options.

Stock options are designed to align the interests of the Company's
directors, executives and employees with those of its shareholders. Stock
options are granted with an exercise price and vesting schedule designed to
encourage the creation of shareholder value over the long-term since the full
benefit of the compensation package cannot be realized unless stock price
appreciation occurs over a number of years.

In connection with his initial employment with the Company, Timothy M.
Aitken, the Chairman and Chief Executive Officer of the Company, received
options to purchase an aggregate of 500,000 shares of Common Stock at an
exercise price of $11.375 per share (which options were repriced to $7.25 per
share in August 1997) with 100,000 shares vesting at the date of grant, and the
balance vesting on the first, second and third anniversaries of the date of
grant.

No stock options were awarded by the Compensation Committee to the
Company's executive officers during the fiscal year ended September 30, 1999.

The Compensation Committee believes that significant equity interests in
the Company held by the Company's management align the interests of
shareholders and management.

Conclusion. As is indicated by the programs described above, a significant
portion of the Company's executive compensation is linked directly to
individual and corporate performance. The Compensation Committee intends to
continue its practice of linking executive compensation to corporate
performance and shareholders' returns, recognizing that the cyclical nature of
the Company's business may, from time to time, result in a temporary imbalance
over a particular period.

The Compensation Committee:

Scott A. Shay
Lewis S. Ranieri

11
<PAGE>

COMPARATIVE PERFORMANCE OF THE COMPANY

The Commission requires the Company to present a chart comparing the
cumulative total shareholder return on its Common Stock over a five-year period
with the cumulative total shareholder return of (i) a broad equity market index,
and (ii) a published industry index or peer group. Effective on April 30, 1999,
the Company commenced trading its Common Stock on The American Stock Exchange
("AMEX"). One chart, compares the Common Stock with (i) the NASDAQ National
Market Index (the "NASDAQ/NM Index"), and (ii) a group of public companies
listed on NASDAQ, each of which may be regarded as an alternate site healthcare
provider (the "NASDAQ Index of Alternate Site Healthcare Providers"), and
assumes an investment of $100 on October 31, 1994 in each of the Common Stock,
the securities comprising the NASDAQ/NM Index and the securities comprising the
NASDAQ Index of Alternate Site Healthcare Providers. The second chart compares
the Common Stock with (i) the AMEX Stock Market Index (the "AMEX Index") and
(ii) a group of public companies listed on AMEX, each of which may be regarded
as an alternate site healthcare provider (the "AMEX Index of Alternate Site
Providers"), and assumes an investment of $100 on October 31, 1994 in each of
the Common Stock, the securities comprising the AMEX Index and the securities
comprising the AMEX Index of Alternate Site Healthcare Providers.

12
<PAGE>

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
TRANSWORLD HEALTHCARE, INC.

Prepared by the Center for Research in Security Prices
Produced on 05/08/2000 including data to 09/30/1999

[GRAPHIC OMITTED]

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
LEGEND

Symbol CRSP Total Returns Index for: 10/1994 10/1995 10/1996 09/1997 09/1998 09/1999
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---- (square) Transworld Healthcare, Inc. 100.0 114.1 117.6 107.7 49.3 22.5
- ---- (star) Nasdaq Stock Market (US Companies) 100.0 134.6 158.9 220.7 224.2 366.1
- ---- (triangle) NASDAQ Stocks (SIC 8000-8099 US Companies) 100.0 103.0 118.0 138.1 91.6 82.7
Health services

NOTES:
A. The lines represent monthly index levels derived from compounded daily returns that include all dividends.
B. The indexes are reweighted daily, using the market capitalization on the previous trading day.
C. If the monthly interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.
D. The index level for all series was set to $100.0 on 10/31/1994.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

13
<PAGE>

COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS
PERFORMANCE GRAPH FOR
TRANSWORLD HEALTHCARE, INC.

Prepared by the Center for Research in Security Prices
Produced on 05/08/2000 including data on 09/30/1999

[GRAPHIC OMITTED]

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
LEGEND

Symbol CRSP Total Returns Index for: 10/1994 10/1995 10/1996 09/1997 09/1998 09/1999
- ------ ----------------------------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
- ---- (square) Transworld Healthcare, Inc. 100.0 114.1 117.6 107.7 49.3 22.5
- ---- (star) AMEX Stock Market (US Companies) 100.0 119.2 123.8 158.5 148.4 190.8
- ---- (triangle) AMEX Stock (SIC 8000-8099 US Companies) 100.0 98.1 100.3 175.8 117.9 130.2
Health services

14
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Transactions with Principal Shareholders. Under a unit purchase agreement
dated November 20, 1995, as amended (the "HPII Purchase Agreement") pursuant to
which HPII acquired its initial equity interest in the Company, until July 31,
2001, HPII has the right to designate to the Board of Directors of the Company
the greater of three directors or 40% of the number of directors constituting
the entire Board of Directors. Messrs. Ranieri and Shay are the HPII designees
presently serving on the Board of Directors.

The HPII Purchase Agreement also provides that for a period of five (5)
years commencing on May 30, 1996, all shares of Common Stock held by HPII will
be voted by HPII on any matter submitted to the shareholders in the same
proportion as the votes cast by the other holders of Common Stock.
Notwithstanding the foregoing, HPII retains its right to vote its shares of
Common Stock in any manner it chooses with respect to the following specified
matters: (i) the election to the Board of Directors of HPII's designees; (ii)
amendments to the Company's By-Laws or Certificate of Incorporation; (iii)
mergers and the sale, lease or exchange of the Company's assets; (iv) the
authorization or issuance of Company securities; (v) a reclassification of
securities or reorganization of the Company; (vi) the liquidation or
dissolution of the Company; and (vii) any affiliated party transaction. The
HPII Purchase Agreement provides that the requirement that HPII votes its
shares in proportion with all other shareholders shall terminate in the event
that the aggregate number of shares of Common Stock owned by Mr. Palladino and
certain former officers of the Company shall be less than 415,000 shares or on
the date when any person or group unaffiliated with HPII becomes the beneficial
owner of 25% or more of the then outstanding shares of the Company's capital
stock.

Mr. Palladino in his individual capacity, has agreed to take all steps
necessary, including voting his shares for the election of HPII's designees to
the Board of Directors, and to utilize his best efforts, to secure the election
by the Company's shareholders of HPII's designees to the Board of Directors.
The Company has also agreed to such provisions (other than the voting of
shares).

The HPII Purchase Agreement further provides that commencing July 31,
1996, all actions to be taken by the Board of Directors will require the
affirmative vote of a majority of the directors present at a duly constituted
meeting (which is the status currently), except that it shall require the
affirmative vote of 66 2/3% of the entire Board of Directors to authorize any
action taken with respect to a proposed acquisition, whether by purchase of
stock or assets, of another company and any action to increase above seven (7)
the number of directors constituting the entire Board of Directors.

In November and December 1996, HPII purchased from various unrelated third
parties certain trade payables of HMI (the "HMI Payables") aggregating
approximately $18,300,000 at various discounts. On March 26, 1997, HPII and the
Company entered into a stock purchase agreement, as amended (the "AP Stock
Purchase Agreement"), pursuant to which HPII and the Company agreed, subject to
the conditions stated in the AP Stock Purchase Agreement, that the Company
would issue such number of shares of Common Stock (the "Payable Shares") equal
to the Agreed Value (as defined herein) divided by the Agreed Price (as defined
herein) in consideration of the assignment by HPII to the Company of the HMI
Payables. For the purposes of the AP Stock Purchase Agreement, (A) "Agreed
Value" means the sum of the following amounts: (i) $4,000,000, plus (ii) 10% of
the first $20,000,000 of Net Recovery (as defined herein), plus (iii) 30% of
the next $10,000,000 of Net Recovery, plus (iv) 50% of any amount of Net
Recovery in excess of $30,000,000; (B) "Net Recovery" means the amount realized
or recovered by the Company on or after September 1, 1997 on or in respect of
(i) any indebtedness owed by HMI and/or its subsidiaries to the Company; (ii)
any investment made by the Company in HMI and/or its subsidiaries; and (iii)
the HMI Payables (including, without limitation, by reason of any claims
against third parties relating to the purchase of any of the foregoing), net of
(x) the merger consideration paid by the Company to acquire HMI and (y) all
reasonable out-of-pocket costs and expenses incurred by the Company in
connection with such realization or recovery. Net Recovery does not include any
tax benefit to the Company from the net loss on its equity and debt investments
in HMI; and (C) "Agreed Price" means the lesser of $7-5/8 and the closing price
of the Common Stock of the Company on the last trading day prior to the closing
of the AP Stock Purchase Agreement. This transaction was approved at a special
meeting

15
<PAGE>

of the shareholders held on March 17, 1998 and subsequently during April 1998,
HPII contributed the HMI Payables to the Company in exchange for 1,159,288
shares of the Company's Common Stock with a value per share of $6.00. The
aggregate value of the Payable Shares was $6,956,000. The shares of Common
Stock issued pursuant to this agreement are also covered by a registration
rights agreement entered into with HPII in connection with the HPII Purchase
Agreement. The Company will bear all expenses, other than underwriting
discounts and commissions, in connection with any such registration.

On April 13, 1998, a shareholder of the Company, purporting to sue
derivatively on behalf of the Company, commenced a derivative suit in the
Supreme Court of the State of New York, County of New York, entitled Kevin Mak,
derivatively and on behalf of Transworld Healthcare, Inc., Plaintiff, vs.
Timothy Aitken, Scott A. Shay, Lewis S. Ranieri, Wayne Palladino and Hyperion
Partners II L.P., Defendants, and Transworld Healthcare, Inc., Nominal
Defendant, Index No. 98-106401. The suit alleges that certain officers and
directors of the Company, and HPII, breached fiduciary duties to the Company
and its shareholders, in connection with the transaction, approved by a vote of
the Company's shareholders on March 17, 1998, in which the Company was to issue
the Payable Shares to HPII in exchange for the HMI Payables. The action seeks
injunctive relief against this transaction, damages and costs and attorneys'
fees in unspecified amounts. As noted above, the transaction subsequently
closed and the plaintiff has, on numerous occasions, stipulated to extend the
defendants' time to respond to this suit. The most recent stipulation provides
for an extension to July 7, 2000.

During the summer of 1999 the Company's United Kingdom operations were in
the process of acquiring three nursing and carer agencies when the Company was
informed by its senior lenders that they would not consent to these pending
acquisitions. The Company then requested that HPII complete these acquisitions
on the Company's behalf. Affiliates of HPII (the "HP Affiliates") completed
these acquisitions in August and September, 1999. Effective December 17, 1999,
the Company acquired all three businesses from the HPII Affiliates for the
aggregate amount of $2,992,000 representing HPII's acquisition cost plus,
interest at a rate of 12% per annum and reimbursement of transaction costs.
Messrs. Ranieri and Shay did not participate in any action by the Board of
Directors with respect to these acquisitions.

Transactions with Directors and Executive Officers. On December 14, 1992,
a former principal shareholder and a former director and officer of the
Company, each sold 6,666 shares of Common Stock at a price of $5.00 per share
to Mr. Palladino. On such date, the Company loaned Mr. Palladino the funds
necessary to consummate such purchases. On April 8, 1998, the Company forgave
the loan provided that Mr. Palladino remain employed by the Company as follows:
one-third as of April 9, 1998, one-third on January 1, 1999 and the remaining
one-third on September 30, 1999. In addition, the Company agreed to remit to
Mr. Palladino an amount equal to thirty percent of the amount forgiven, on each
such date, as reimbursement for any tax liability incurred as a result of such
agreement.

Mr. Palladino, among others, (collectively, the "Restricted Transferees")
have entered into a stock restriction agreement (the "Restriction Agreement"),
pursuant to which he agreed to limit the transferability of his shares of
Common Stock as well as other "Common Equivalents" to the extent described
therein. Unless otherwise consented to in writing by HPII, none of the
Restricted Transferees may transfer any of his shares of Common Stock or other
Common Equivalents owned by him if, at the time of such transfer or after
giving effect thereto, the Restricted Transferee's "Shareholder Percentage"
would be less than the lesser of 0.75 and the "HPII Percentage." For purposes
of the Restriction Agreement, the term "Shareholder Percentage" means a
fraction, the denominator of which is the number of Common Equivalents that
such shareholder and his related persons owned or had the right to acquire on
the date of the HPII Purchase Agreement, and the numerator of which is the
numerical amount of the denominator less the number of Common Equivalents
transferred by such Restricted Transferee; and the term "HPII Percentage" means
a fraction, the denominator of which is the number of Common Equivalents
purchased by HPII or which HPII has the right to purchase pursuant to the HPII
Purchase Agreement, and the numerator of which is the numerical amount of the
denominator less the number of Common Equivalents transferred by HPII. The
effect of the Restriction Agreement, in general, is to limit a Restricted
Transferee's ability to sell his shares of Common Stock to the extent that his
shareholdings would be less than 75% of his current holdings or, if less, the
HPII Percentage.

16
<PAGE>

In connection with the refinancing of the Company's senior indebtedness
which occurred on December 20, 1999, Mr. Aitken (the Company's Chairman and
Chief Executive Officer), Ms. Eames (the Company's President), Mr. Palladino
(the Company's Chief Financial Officer), Mr. Green (a director of the Company)
and certain other directors and officers of the Company's United Kingdom
subsidiary Transworld Healthcare UK Limited ("TW UK") and its subsidiaries,
co-invested, alongside the other purchasers of TW UK's senior subordinated
notes and warrants, approximately $800,000, $100,000, $25,000, $80,000 and
$1,020,000, respectively, in senior subordinated notes and also received
warrants exercisable into approximately 2% in the aggregate of the fully
diluted ordinary shares of TW UK. The terms of the senior subordinated notes
and warrants acquired by the foregoing persons are identical to the senior
subordinated notes and warrants acquired by the other purchasers in such
refinancing.

The Company's UK subsidiary TW UK adopted in January, 2000, the Management
Incentive Plan 2000 (the "UK Plan") in order to provide a financial incentive
to the management team and directors of TW UK who have and are expected to
continue to contribute to TW UK's growth and success.

Under the UK Plan, a new class of redeemable shares (having a nominal
value of 0.01p) in the capital of TW UK was created (the "Redeemable Shares")
and issued to participants in the UK Plan (the "Participants"). Pursuant to the
UK Plan 9,800,000 Redeemable Shares were reserved for issuance and 9,500,000
have been issued. Under the UK Plan the Redeemable Shares may be issued at
their nominal value and with an option price set by the board of TW UK (the
"Initial Value"). The Redeemable Shares which have been issued by TW UK have an
Initial Value of 105p per share. The redemption rights attached to the
Redeemable Shares are exercisable at any time during the period commencing on
the date of a qualified public offer in the UK and ending on the date 10 years
from the date of issue of the relevant Redeemable Shares (the "Exercise
Period"). The Redeemable Shares are redeemable by a Participant serving a
notice of redemption during the Exercise Period in respect of the Redeemable
Shares. The net effect of the exercise of redemption rights is that the
Participants acquire ordinary shares at a price per ordinary share equal to the
Initial Value of 105p per share. The UK Plan contains adjustment provisions
which will apply if there is any form of share capital reorganization to ensure
that the Redeemable Shares which are redeemed after such reorganization have
the same economic effect for the remaining Participant. The Redeemable Shares
do not carry any dividend or income rights and do not carry any right to vote
at general meetings of TW UK. On a return of capital or a winding up of TW UK,
the holders of the Redeemable Shares shall have the right to be repaid, in
priority to any repayment to the holders of any other class of shares in the
capital of TW UK, a sum equal to the capital paid up on the Redeemable Shares
held by those holders respectively (unless the holders have exercised a right
of election to require redemption after TW UK has been placed in liquidation).

The redemption rights attached to the Redeemable Shares lapse if (i) they
are not exercised before the end of the Exercise Period (ii) on the bankruptcy
of any holder and (iii) if any holder ceases to be employed or engaged by TW UK
as a result of a certain events (which include dismissal for cause and
voluntarily resignation) prior to the redemption rights being exercisable.

On March 7, 2000, TW UK issued 3,500,000, 1,800,000, 1,200,000 and
3,000,000 Redeemable Shares to Mr. Aitken, Ms. Eames, Mr. Palladino and various
employees and members of management of TW UK and its subsidiaries,
respectively.

Certain directors of the Company have been granted options to purchase
shares of Common Stock under the Company's stock option plans. See "Executive
Compensation -- Stock Option Plans."

PROPOSAL II: RATIFICATION OF INDEPENDENT AUDITORS

During the fiscal year ended September 30, 1999, PricewaterhouseCoopers
LLP ("PwC") audited the accounts of the Company and its subsidiaries and also
provided other audit and accounting services to the Company in connection with
Commission filings.

On May 12, 2000, the Company dismissed PwC as its independent accountants.

In connection with the audits conducted and during the subsequent period
through May 12, 2000, there were no disagreements between the Company and PwC
on any matter of accounting principles or

17
<PAGE>

practice, financial statement disclosure, auditing scope or procedures, which
disagreements, if not resolved to their satisfaction, would have caused them to
make reference in connection with their opinion to the subject matter of the
disagreement. In addition, the audit report of PwC on the consolidated
financial statements of the Company as of and for the years ended September 30,
1999 and 1998 did not contain any adverse opinion or disclaimer of opinion, nor
was it qualified or modified as to uncertainty, audit scope or accounting
principles.

On May 12, 2000, the Company retained Ernst & Young LLP as its independent
accountants to audit the Company's financial statements. During the two years
ended September 30, 1999 and 1998 and during the subsequent period ended May
12, 2000, neither the Company or anyone on its behalf consulted Ernst & Young
LLP regarding (i) the application of accounting principles to any transaction
either completed or proposed, or (ii) the type of audit opinion that might be
rendered by Ernst & Young LLP on the Company's financial statements.

Upon recommendation of the Audit Committee of the Board of Directors, the
Board has appointed Ernst & Young LLP as the independent accountants for the
fiscal year ending September 30, 2000. The shareholders are being asked to
ratify this action of the Board. The ratification requires a majority vote of
those shares of Common Stock represented at the Annual Meeting. In the event
the ratification is not approved, the Board of Directors will reconsider its
selection.

Representatives of PwC are expected to be present at the Annual Meeting
and available to respond to appropriate questions. Such representatives also
will have the opportunity, should they so desire, to make any statements to the
shareholders which they deem appropriate. Representatives of Ernst & Young LLP
are not expected to be present at the Annual Meeting.

REQUIRED AFFIRMATIVE VOTE

Approval of the ratification of Ernst & Young LLP, as independent
accountants of the Company for the fiscal year ending September 30, 2000
requires the affirmative vote of the holders of a majority of the shares of
Common Stock represented in person or by proxy at the Annual Meeting. The Board
of Directors unanimously recommends that the shareholders vote FOR Proposal II.

2000 SHAREHOLDER PROPOSALS

In order for shareholder proposals for the 2000 Annual Meeting of
Shareholders to be eligible for inclusion in the Company's 2000 Proxy
Statement, they must be received by the Company at its principal executive
offices, 555 Madison Avenue, New York, New York 10022 (Attn: Secretary), prior
to October 1, 2000. The Board of Directors will review any shareholder
proposals that are filed as required and will determine whether such proposals
meet applicable criteria for inclusion in the Company's 2000 Proxy Statement
for the Annual Meeting.

OTHER MATTERS

The Board of Directors does not know of any other matters that are to be
presented for consideration at the Annual Meeting. Should any other matters
properly come before the Annual Meeting, it is the intention of the persons
named in the accompanying proxy to vote such proxy on behalf of the
shareholders they represent in accordance with their best judgment.

18
<PAGE>

SOLICITATION OF PROXIES

Proxies are being solicited by and on behalf of the Board of Directors.
The Company will bear the costs of preparing and mailing the proxy materials to
its shareholders in connection with the Annual Meeting. The Company will
solicit proxies by mail and the directors and certain officers and employees of
the Company may solicit proxies personally or by telephone or telegraph. These
persons will receive no additional compensation for such services but will be
reimbursed for reasonable out-of-pocket expenses. The Company also will request
brokers, dealers, banks and their nominees to solicit proxies from their
clients, where appropriate, and will reimburse them for reasonable
out-of-pocket expenses related thereto.

ADDITIONAL INFORMATION

The Company will make available to any shareholder, without charge, and
upon a written request therefor, additional copies of the Company's Report on
Form 10-K for the fiscal year ended September 30, 1999. Any such request should
be directed to Transworld Healthcare, Inc., Attention: Wayne A. Palladino at
the following address: 555 Madison Avenue, New York, New York 10022.

Leslie J. Levinson
Secretary

May 26, 2000

<PAGE>

EXHIBIT A

TRANSWORLD HEALTHCARE, INC.
AUDIT COMMITTEE CHARTER

The Audit Committee is appointed by the Board to assist the Board in monitoring
(1) the integrity of the financial statements of the Company, (2) the
compliance by the Company with legal and regulatory requirements, and (3) the
independence and performance of the Company's external auditors.

The members of the Audit Committee shall meet the independence and experience
requirements of the American Stock Exchange. The members of the Audit Committee
shall be appointed by the Board.

The Audit Committee shall have the authority to retain special legal,
accounting or other consultants to advise the Committee. The Audit Committee
may request any officer or employee of the Company or the Company's outside
counsel or independent auditor to attend a meeting of the Committee or to meet
with any members of, or consultants to, the Committee.

The Audit Committee shall make regular reports to the Board.

The Audit Committee shall:

1. Review and reassess the adequacy of this Charter annually and recommend any
proposed changes to the Board for approval.

2. Review the annual audited financial statements with management, including
major issues regarding accounting and auditing principles and practices as
well as the adequacy of internal controls that could significantly affect
the Company's financial statements.

3. Discuss with management and the independent auditor the significant
financial reporting issues and judgements made in connection with the
preparation of the Company's financial statements.

4. Review with management and the independent auditor the Company's quarterly
financial statements prior to filing of the Form 10-Q.

5. Meet periodically with management to review the Company's major financial
risk exposures and the steps management has taken to monitor and control
such exposures.

6. Review major changes to the Company's auditing and accounting principles and
practices as suggested by the independent auditor or management.

7. Recommend to the Board the appointment of the independent auditor, which
firm is ultimately accountable to the Audit Committee and the Board.

8. Approve the fees to be paid to the independent auditor.

9. Receive periodic reports from the independent auditor regarding the
auditor's independence, discuss such reports with the auditor, and if so
determined by the Audit Committee, recommend that the Board take appropriate
action to satisfy itself of the independence of the auditor.

10. Evaluate together with the Board the performance of the independent auditor
and, if so determined by the Audit Committee, recommend that the Board
replace the independent auditor.

11. Meet with the independent auditor prior to the audit to review the planning
and staffing of the audit.

12. Obtain from the independent auditor assurance that it will inform the
Company's management concerning any information indicating that an illegal
act has or may have occurred that could have a material effect on the
Company's financial statements, and assure that such information has been
conveyed to the Audit Committee.

13. Discuss with management and the independent auditor any condition which
comes to their attention indicating the Company's subsidiaries and
affiliated entities, domestic and foreign, are not conforming to applicable
legal requirements.

A-1
<PAGE>

14. Discuss with the independent auditor that matters required to be discussed
by Statement on Auditing Standards No. 61, as amended, relating to the
conduct of the audit.

15. Review with the independent auditor any problems or difficulties the auditor
may have encountered and any management letter provided by the auditor and
the Company's response to that letter. Such review should include:

(a) Any difficulties encountered in the course of the audit work, including
any restrictions on the scope of activities or access to required
information.

(b) Any changes required in the planned scope of the audit.

16. Prepare the report required by the rules of the Securities and Exchange
Commission to be included in the Company's annual proxy statement.

17. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations.

18. Review with the Company's general counsel legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators or
governmental agencies.

19. Meet at least annually with the chief financial officer and the independent
auditor in separate executive sessions.

While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is
the responsibility of management and the independent auditor. Nor is it the
duty of the Audit Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditor or to
assure compliance with laws and regulations.

A-2

<PAGE>

P
R
O
X
Y TRANSWORLD HEALTHCARE, INC.

SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Sarah L. Eames and Wayne A. Palladino (with
full power to act without the other and with power to appoint his or her
substitute) as the undersigned's proxies to vote all of the undersigned's shares
of common stock of TRANSWORLD HEALTHCARE, INC., a New York corporation (the
"Company"), which the undersigned would be entitled to vote at the Annual
Meeting of Shareholders of the Company (the "Annual Meeting") to be held at 805
Third Avenue, New York, New York 10022, 20th Floor, on June 22, 2000 at 10:00
a.m., local time, and at any and all adjournments thereof as follows:

(Continued and to be dated and signed on reverse side)
<PAGE>

[X] PLEASE MARK YOUR
VOTES AS IN THIS
EXAMPLE

FOR ALL NOMINEES LISTED WITHOUT AUTHORITY TO
BELOW (EXCEPT AS MARKED VOTE FOR ALL NOMINEES
TO THE CONTRARY BELOW) LISTED BELOW

I. ELECTION OF [ ] [ ]
DIRECTORS

NOMINEES: TIMOTHY M. AITKEN, LEWIS S. RANIERI, SCOTT A. SHAY,
JEFFREY S. PERIS and G. RICHARD GREEN.

(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the line set forth below.)

- -------------------------------------------------------------------

II: FOR AGAINST ABSTAIN
Proposal to ratify the Board of
Directors' recommendation of Ernst
& Young LLP, certified public [ ] [ ] [ ]
accountants, as independent auditors
of the Company for the fiscal year
ending September 30, 2000.

III:
In their discretion, such other
business as may properly come before [ ] [ ] [ ]
the Annual Meeting and any and all
adjournments thereof.

THE SHARES OF COMMON STOCK REPRESENTED BY THIS PROXY WILL BE VOTED IN
ACCORDANCE WITH THE FOREGOING INSTRUCTIONS. IN THE ABSENCE OF ANY INSTRUCTIONS,
SUCH SHARES WILL BE VOTED FOR THE ELECTION OF ALL THE NOMINEES LISTED IN ITEM I
AND FOR THE PROPOSAL IN ITEM II.

The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders to be held on June 22, 2000, the Proxy Statement of the Company,
each dated May 26, 2000, and the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1999, each of which has been enclosed herewith.

The undersigned hereby revokes any proxy to vote shares of common stock of
the Company heretofore given by the undersigned.

Dated
-----------------------------------

-----------------------------------
Signature

-----------------------------------
Signature, if held jointly

-----------------------------------
Title (if applicable)

Please date, sign exactly as your name appears on this Proxy and promptly
return in the enclosed envelope. In the case of joint ownership, each joint
owner must sign. When signing as guardian, executor, administrator, attorney,
trustee, custodian, or in any other similar capacity, please give full title.
If a corporation, sign in full corporate name by president or other authorized
officer, giving title, and affix corporate seal. If a partnership, sign in
partnership name by authorized person.