UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Amendment No. 2
Under the Securities Exchange Act of 1934
THE WELLCARE MANAGEMENT GROUP, INC.
-----------------------------------
(Name of Issuer)
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class of Securities)
949470108
---------
(CUSIP Number)
LAWRENCE C. TUCKER
Brown Brothers Harriman & Co.
59 Wall Street
New York, New York 10005
(212) 493-8400
--------------------------------------
(Name, Address and Telephone Number of
Person Authorized to Receive Notices
and Communications)
January 14, 1998
--------------------------------------
(Date of Event which Requires Filing of
this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
<PAGE>
2
CUSIP No. 949470108
1 NAME OF REPORTING PERSON
THE 1818 FUND II, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
DELAWARE
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,125,000 (assuming full conversion
EACH of the Notes)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
3,125,000 (assuming full conversion
of the Notes)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,125,000
(assuming full conversion of the Notes)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
3
CUSIP No. 949470108
1 NAME OF REPORTING PERSON
BROWN BROTHERS HARRIMAN & CO.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
NEW YORK
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,125,000 (assuming full conversion
EACH of the Notes)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
3,125,000 (assuming full conversion
of the Notes)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,125,000
(assuming full conversion of the Notes)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38%
14 TYPE OF REPORTING PERSON
PN
<PAGE>
4
CUSIP No. 949470108
1 NAME OF REPORTING PERSON
T. MICHAEL LONG
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES OF AMERICA
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,125,000 (assuming full conversion
EACH of the Notes)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
3,125,000 (assuming full conversion
of the Notes)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,125,000
(assuming full conversion of the Notes)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
5
CUSIP No. 949470108
1 NAME OF REPORTING PERSON
LAWRENCE C. TUCKER
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) |_|
(b) |X|
3 SEC USE ONLY
4 SOURCE OF FUNDS
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(D) OR 2(E)
6 CITIZENSHIP OR PLACE OR ORGANIZATION
UNITED STATES OF AMERICA
7 SOLE VOTING POWER
NUMBER OF -0-
SHARES
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY 3,125,000 (assuming full conversion
EACH of the Notes)
REPORTING
PERSON 9 SOLE DISPOSITIVE POWER
WITH -0-
10 SHARED DISPOSITIVE POWER
3,125,000 (assuming full conversion
of the Notes)
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 3,125,000
(assuming full conversion of the Notes)
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
38%
14 TYPE OF REPORTING PERSON
IN
<PAGE>
6
This statement constitutes Amendment No. 2 to a statement on
Schedule 13D, as amended by Amendment No. 1 (the "Schedule 13D"), filed with the
Securities and Exchange Commission with respect to the Common Stock, par value
$.01 per share, of The WellCare Management Group, Inc., on behalf of The 1818
Fund II, L.P., Brown Brothers Harriman & Co., T. Michael Long and Lawrence C.
Tucker.
The information set forth in the Schedule 13D is hereby amended and
restated in its entirety as follows:
ITEM 1. SECURITY AND ISSUER.
Item 1 is hereby amended and restated in its entirety to read as
follows:
The securities to which this Statement on Schedule 13D relates are
the shares of common stock, par value $.01 per share (the "Common Stock"), of
The WellCare Management Group, Inc., a New York corporation (the "Company"),
whose principal executive office is located at Park West/Hurley Avenue
Extension, Kingston, New York 12401. Although no person identified in Item 2 has
acquired any shares of Common Stock, such persons may be deemed to be the
beneficial owners of the shares of Common Stock reported in Item 5 by virtue of
their acquisition of beneficial ownership of a 8.0% Subordinated Convertible
Note of the Company in the principal amount of $20,000,000 due December 31, 2002
(the "Note"), issued January 19, 1996, amended by a Letter Agreement dated
February 28, 1997 ("Amendment 1"), and further amended by a Letter Agreement
dated January 14, 1998 ("Amendment 2"), which Note, as
<PAGE>
7
amended, entitles the holder thereof to convert such Note into of 3,125,000
shares of Common Stock (subject to adjustment).
ITEM 2. IDENTITY AND BACKGROUND.
Item 2 is hereby amended and restated in its entirety to read as
follows:
(a), (b), (c) and (f). This Statement on Schedule 13D is being filed
by The 1818 Fund II, L.P., a Delaware limited partnership (the "Fund"), Brown
Brothers Harriman & Co., a New York limited partnership and general partner of
the Fund ("BBH & Co."), T. Michael Long ("Long") and Lawrence C. Tucker
("Tucker") (the Fund, BBH & Co., Long and Tucker are referred to collectively
herein as the "Reporting Persons").
The Fund was formed to provide a vehicle for institutional and
substantial corporate investors to acquire significant equity interests in
medium-sized publicly owned United States corporations that could benefit from
the presence of a large, management supportive shareholder with a relatively
long-term investment goal. BBH & Co. is a private bank. Pursuant to a resolution
adopted by the partners of BBH & Co., BBH & Co. has designated and appointed
Long and Tucker, or either of them, the sole and exclusive partners of BBH & Co.
having voting power (including the power to vote or to direct the voting) and
investment power (including the power to dispose or to direct the disposition)
with respect to the shares of Common Stock into which the Note is convertible.
The address of the principal business and principal offices of each
of the Fund and BBH & Co. is 59 Wall Street, New York, New York 10005.
<PAGE>
8
The business address of each of Long and Tucker is 59 Wall Street,
New York, New York 10005. The present principal occupation or employment of each
of Long and Tucker is as a general partner of BBH & Co. Long and Tucker are
citizens of the United States.
The name, business address, present principal occupation or
employment (and the name, principal business and address of any corporation or
other organization in which such employment is conducted) and the citizenship of
each general partner of BBH & Co. is set forth on Schedule I hereto and is
incorporated herein by reference.
(d) and (e). During the last five years, neither any Reporting Person nor,
to the best knowledge of each Reporting Person, any person identified on
Schedule I has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or was a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
which any such person was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 3 is hereby amended and restated in its entirety to read as
follows:
Pursuant to the Note Purchase Agreement (which was filed as Exhibit
1 to the Schedule 13D and is incorporated herein by reference), dated as of
January 19, 1996, as amended by Amendment 1 (which was filed as Exhibit 4 to
<PAGE>
9
the Schedule 13D and is incorporated herein by reference) and further amended by
Amendment 2 (which is filed as Exhibit 5 hereto and is incorporated herein by
reference), (the "Note Purchase Agreement"), by and between the Company and the
Fund, the Company issued, and the Fund acquired from the Company, the Note for a
purchase price (the "Purchase Price") of $20,000,000, upon the terms and subject
to the conditions set forth in the Note Purchase Agreement.
The funds used by the Fund to pay the Purchase Price were obtained
by the Fund from capital contributions made by its partners pursuant to
pre-existing capital commitments.
The Note (which was filed as Exhibit 2 to the Schedule 13D and is
incorporated herein by reference), as amended by Amendment 1 and Amendment 2,
may be converted at the holder's option into a number of shares of Common Stock
equal to the principal amount of the Note being converted divided by the
"Conversion Price." The Conversion Price, as amended, is (i) $4.00 with respect
to $5,000,000 aggregate principal amount of the Notes and (ii) $8.00 with
respect to the remainder of the Notes, in each case subject to adjustment.
ITEM 4. PURPOSE OF TRANSACTION.
Item 4 is hereby amended and restated in its entirety to read as
follows:
The Fund has acquired the Note for investment purposes. The Note
Purchase Agreement and the Registration Rights Agreement (which was filed as
Exhibit 3 to the Schedule 13D and incorporated herein by reference), dated
January 19, 1996, between the Company and the Fund (the "Registration Rights
<PAGE>
10
Agreement"), each as amended by Amendment 1 and Amendment 2, contain, among
other things, certain provisions which relate to (i) the acquisition of
additional securities of the Company, (ii) the disposition of securities of the
Company and (iii) a change in the present Board of Directors of the Company.
With respect to the Board of Directors of the Company, the Note Purchase
Agreement, as amended, requires the Company to create two vacancies of the Board
and to fill such vacancy with designees of the Fund, thereby resulting in two of
the seats on the Company's Board being filled by designees of the Fund.
In addition, the Note, as amended, provides that upon default by the
Company in the payment of interest on the Note that continues for 180 days or a
breach of any of the Company's agreements contained in the Note, the Note
Purchase Agreement or the Registration Rights Agreement that continues
unremedied for 180 days, the number of members of the Board of Directors of the
Company shall be increased by one and that the Company shall cause a designee of
the holders of a majority of the outstanding Notes to fill such vacancy. The
right of such holders to designate such director shall continue until such time
as all interest on the Note shall have been paid in full and there shall exist
no breach of the Company's agreements contained in the Note, the Note Purchase
Agreement or the Registration Rights Agreement.
The Note, as amended, provides that the Company may, at any time on
or after January 19, 2000, at its option, redeem all of the outstanding
principal amount of the Note; provided, that any such redemption may only occur
if it has
<PAGE>
11
been approved in advance by the Commissioner of Health of the State of New
York.
The Fund has agreed in the Note Purchase Agreement, as amended, that
it will not until the earlier of (i) the first anniversary of the date on which
the Fund ceases to hold any Notes and (ii) December 31, 2002, independently or
as a member of a group, purchase any shares of Common Stock that, if the price
for such shares when aggregated with the purchase price of any shares of Common
Stock (other then shares of Common Stock issued upon conversion of all or any
portion of the Notes) purchased thereby subsequent to the date of the Note
Purchase Agreement, exceeds $10,000,000. Subject to the above limitation, the
Reporting Persons may from time to time acquire additional shares of Common
Stock in the open market or in privately negotiated transactions, subject to
availability of the shares of Common Stock at prices deemed favorable, the
Company's business or financial condition and to other factors and conditions
the Reporting Persons deem appropriate. Alternatively, the Reporting Persons may
sell all or a portion of their Notes or shares of Common Stock in the open
market or in privately negotiated transactions subject to the terms of the Note
Purchase Agreement, as amended, and to the factors and conditions referred to
above.
Except as described in the Note Purchase Agreement, the Note and the
Registration Rights Agreement, each as amended, and as set forth above in the
immediately preceding paragraph, no Reporting Person has any present plans or
proposals that relate to or would result in: (a) the acquisition by any person
of additional securities of the issuer, or the disposition of securities of the
issuer;
<PAGE>
12
(b) an extraordinary corporate transaction, such as a merger, reorganization or
liquidation, involving the Company or any of its subsidiaries; (c) a sale or
transfer of a material amount of assets of the Company or of any of its
subsidiaries; (d) any change in the present board of directors or management of
the Company, including any plans or proposals to change the number or term of
such directors or to fill any existing vacancies on such board; (e) any material
change in the present capitalization or dividend policy of the Company; (f) any
other material change in the Company's business or corporate structure; (g)
changes in the Company's charter, by-laws or instruments corresponding thereto
or other actions that may impede the acquisition of control of the Company by
any person; (h) causing a class of securities of the Company to be delisted from
a national securities exchange or to cease to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association;
(i) a class of equity securities of the Company becoming eligible for
termination of registration pursuant to Section 12(g)(4) of the Securities
Exchange Act of 1934; or (j) any action similar to any of those enumerated
above.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 is hereby amended and restated in its entirety to read as
follows:
(a) through (c). As set forth above, on January 19, 1996, the
Company issued to the Fund, and the Fund acquired from the Company, the Note,
which is in the principal amount of $20,000,000.
<PAGE>
13
Giving effect to the conversion of the Note, as amended, the Fund
beneficially owns 3,125,000 shares of Common Stock, representing approximately
38% of the outstanding shares of Common Stock (assuming the conversion of the
Notes and based on the number of shares of Common Stock outstanding as of
November 1, 1997 as reported by the Company in its statement on Form 10-Q for
the period ending September 30, 1997).
By virtue of BBH & Co.'s relationship with the Fund, BBH & Co. may
be deemed to own beneficially the shares of Common Stock beneficially owned by
the Fund. By virtue of the resolution adopted by BBH & Co. designating Long and
Tucker, or either of them, as the sole and exclusive partners of BBH & Co.
having voting power (including the power to vote or to direct the voting) and
investment power (including the power to dispose or to direct the disposition)
with respect to the Notes, and the Common Stock issuable upon conversion of the
Notes, each of Long and Tucker may be deemed to own beneficially the shares of
Common Stock beneficially owned by the Fund.
Except as set forth above, no Reporting Person nor, to the best
knowledge of each Reporting Person, any person identified on Schedule I,
beneficially owns any shares of Common Stock or has effected any transaction in
shares of Common Stock during the preceding 60 days.
(d) To the best knowledge of the Reporting Persons, no person other
than the Reporting Persons has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the shares of
Common Stock issuable upon conversion of the Notes.
<PAGE>
14
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Item 6 is hereby amended and restated in its entirety to read as
follows:
The Company has entered into the Registration Rights Agreement, as
amended, with the Fund, on the terms and conditions set forth therein, giving
the Fund, among other things, the right, on the terms and conditions set forth
therein, to require the Company to register for sale to the public the Note and
any shares of Common Stock acquired by the Fund upon conversion of the Notes.
In addition, pursuant to the Note Purchase Agreement, Robert W.
Morey, Jr. and Edward A. Ullmann (the "Principal Shareholders") have entered
into an agreement pursuant to which each Principal Shareholder agrees that he
shall vote all shares of Common Stock of the Company, all other securities of
the Company that are entitled to vote for directors and all proxies (unless
otherwise directed by the stockholder submitting such proxy), in each case which
he has the right to vote or power to direct the vote, in favor of the election
to the Board of Directors of the Company (i) any nominee that the Fund shall
have the right to designate for election to the Board of Directors of the
Company pursuant to the Note Purchase Agreement and (ii) any nominee of the
holders of a majority of the outstanding principal amount of the Notes that such
holders shall have the right to designate for election to the Board of Directors
of the Company pursuant to the Notes.
<PAGE>
15
Also, the Company and each Principal Shareholder have each agreed
that it or he will promptly notify and consult with the Fund with respect to any
proposed recapitalization, merger, consolidation or other similar transaction,
any other transaction that could result in a Change of Control (as defined in
the Notes) of the Company or any proposed amendment to the Company's Certificate
of Incorporation or By-laws that could result in a change in corporate
governance of the Company, and, if any such event or transaction occurs, the
Company and each Principal Shareholder have agreed to act in the best interests
of all shareholders of the Company.
As a result of the agreements described in the two immediately
preceding paragraphs, Messrs. Ullmann and Morey and the Reporting Persons may be
deemed to be members of a group that beneficially owns all the shares
beneficially owned by the members of such group. Each of the Reporting Persons
disclaims membership in such group.
Moreover, pursuant to the Note Purchase Agreement, so long as the
Reporting Persons continue to hold at least 25% of the total number of shares of
Common Stock, if any Principal Shareholder at any time or from time to time
proposes or agrees to sell or transfer to a Person (as defined in the Note
Purchase Agreement) or a group of Persons, in any transaction or series of
related transactions, twenty percent (20%) or more of the shares of Common Stock
held by him, the Principal Shareholder(s) proposing such disposition is required
to give written notice of such proposed sale to the Reporting Persons within 15
Business Days (as defined in the Note Purchase Agreement) prior to the date of
such sale.
<PAGE>
16
Such notice must state the price and other terms of the proposed transaction, as
well as the number of shares proposed to be sold.
Amendment 2 amended the terms of the Note, the Note Purchase
Agreement and the Registration Rights Agreement by, among other things, changing
the interest rate on the Note to 8.0% and changing the Conversion Price to the
amounts set forth in Item 3 above.
Amendment 2 further provides that the Company will use its best
efforts to obtain, within 90 days from the date of Amendment 2, the approval of
the Commissioner of Health of the State of New York to the conversion of the
Note by the Fund and that, within 15 days of the receipt of such approval, the
Fund will convert $5,000,000 aggregate principal amount of the Note into Common
Stock.
Amendment 2 also provides that if the consolidated earnings before
income taxes of the Company and its subsidiaries for the quarter ended June 30,
1998 or September 30, 1998, as reported in the Company's Form 10-Q for the
relevant period (the "Earnings Condition") are greater than zero, then,
beginning on the date such Earnings Condition has been satisfied and ending on
December 31, 1998, the Company shall have the option to purchase from the Fund
50% of the aggregate outstanding principal amount of the Note and 50% of the
shares of Common Stock issued upon conversation of the Note for an aggregate
purchase price of $12,000,000 plus all accrued or unpaid interest on the Note to
the date of purchase. The Company will have no such option to purchase such Note
or such shares of Common Stock if the Earnings Conditions is not satisfied.
<PAGE>
17
Except as described elsewhere in this Statement and as set forth in
the Note Purchase Agreement, the Note, the Registration Rights Agreement,
Amendment 1 and Amendment 2, to the best knowledge of the Reporting Persons,
there exist no contracts, arrangements, understandings or relationships (legal
or otherwise) among the persons named in Item 2 or in Schedule I hereto and
between such persons and any person with respect to any securities of the
Company, including but not limited to transfer or voting of any securities of
the Company, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Item 7 is hereby amended and restated in its entirety to read as
follows:
1. Note Purchase Agreement, dated as of January 19, 1996, by
and between the Company and the Fund.*/
2. Subordinated Convertible Note Due December 31, 2002 in the
aggregate principal amount of $20,000,000 as issued to the Fund on January 19,
1996.*/
3. Registration Rights Agreement, dated as of January 19, 1996,
between the Company and the Fund.*/
- --------
*/ Filed as Exhibits to the original Schedule 13D filed by the Reporting
Persons on January 29, 1996 (the "Schedule 13D")
<PAGE>
18
4. Letter Agreement, dated as of February 28, 1997, by and between
the Company and the Fund.**/
5. Letter Agreement, dated as of January 14, 1998, by and between
the Company and the Fund.***/
- --------
**/ Filed as an Exhibit to Amendment No. 1 to the Schedule 13D.
***/ Filed herewith.
<PAGE>
19
SIGNATURE
After reasonable inquiry and to the best of its knowledge and
belief, each of the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Dated: January 20, 1998
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
General Partner
By: /s/ Lawrence C. Tucker
----------------------------------
Name: Lawrence C. Tucker
Title: Partner
BROWN BROTHERS HARRIMAN & CO.
By: /s/ Lawrence C. Tucker
----------------------------------
Name: Lawrence C. Tucker
Title: Partner
/s/ T. Michael Long
--------------------------------------
T. Michael Long
/s/ Lawrence C. Tucker
--------------------------------------
Lawrence C. Tucker
<PAGE>
20
SCHEDULE I
Set forth below are the names and positions of all of the general
partners of BBH&Co. The principal occupation or employment of each person listed
below is private banker, and, unless otherwise indicated, the business address
of each person is 59 Wall Street, New York, New York 10005. Unless otherwise
indicated, each person listed below is a citizen of the United States.
Business Address
(if other than as
Name indicated above)
- ---- ----------------
Peter B. Bartlett
Brian A. Berris
John J. Borland 125 South Wacker Drive
Chicago, Illinois 60606
Douglas A. Donahue, Jr. 40 Water Street
Boston, Massachusetts 02109
Anthony T. Enders
Alexander T. Ercklentz Veritas House
125 Finsbury Pavement
London EC2A 1PN, England
Terrence M. Farley
John A. Gehret 525 Washington Boulevard
Jersey City, New Jersey 07310
Elbridge T. Gerry, Jr.
Kristen F. Giarrusso 40 Water Street
Boston, Massachusetts 02109
Robert R. Gould
Noah T. Herndon 40 Water Street
Boston, Massachusetts 02109
Landon Hilliard
<PAGE>
21
Business Address
(if other than as
Name indicated above)
- ---- ----------------
Kyosuko Kashimoto 8-14 Nihonbashi 30-Chome Chuo-ku
(citizen of Japan) Tokyo 103, Japan
Radford W. Klotz
Michael Kraynak, Jr.
Susan Livingston 40 Water Street
Boston, Massachusetts 02109
T. Michael Long
Hampton S. Lynch
Michael W. McConnell
William H. Moore III
Donald B. Murphy
John A. Nielsen
Eugene C. Rainis
A. Heaton Robertson 40 Water Street
Boston, Massachusetts 02109
Jeffrey A. Schoenfeld
Stokley P. Towles 40 Water Street
Boston, Massachusetts 02109
Lawrence C. Tucker
Maarten van Hengel
Douglas C. Walker 1531 Walnut Street
Philadelphia, Pennsylvania 19102
Laurence F. Whittemore
Richard H. Witmer, Jr.
<PAGE>
22
INDEX TO EXHIBITS
-----------------
Page
Exhibit Description Number
------- ----------- ------
5 Letter Agreement, dated as of
January 14, 1998, by and between the
Company and the Fund.
Exhibit 5
THE 1818 FUND II, L.P.
January 14, 1998
The WellCare Management Group, Inc.
Park West/Hurley Avenue Extension
P.O. Box 4059
Kingston, NY 12401
Gentlemen:
Reference is made to (i) the Note Purchase Agreement (as amended to
date by Amendment No. 1 (hereinafter defined), the "Note Purchase Agreement")
dated as of January 19, 1996, between The WellCare Management Group, Inc., a New
York corporation (the "Company"), and The 1818 Fund II, L.P., a Delaware limited
partnership (the "Purchaser") and (ii) the 6.0% Subordinated Convertible Note
(as amended to date by Amendment No. 1, the "Note") due December 31, 2002 issued
by the Company to the Purchaser on January 19, 1996, each as amended by that
certain amendment No. 1 contained in a Letter Agreement, dated February 28,
1997, between the Company and the Purchaser ("Amendment No. 1"). Capitalized
terms used but not defined herein shall have the meanings specified in the Note
Purchase Agreement. The Note Purchase Agreement and the Note are collectively
referred to herein as the "Transaction Documents".
The Purchaser and the Company desire to effect certain additional
amendments to the Note pursuant to this amendment No. 2 and to take certain
other actions specified herein. Therefore, for good and valuable consideration,
the
<PAGE>
The WellCare Management Group, Inc. 2
sufficiency of which is hereby acknowledged, the Purchaser and the Company
hereby agree as follows:
I. AMENDMENTS OF THE NOTE: The Note is hereby amended as follows:
A. AMENDMENT TO HEADING. The heading of the Note is hereby amended by
changing the reference to "6.0% Subordinated Convertible Note" to "8.0%
Subordinated Convertible Note".
B. AMENDMENT TO SECTION 1. Section 1 of the Note is hereby amended by
changing all references to "6.0% Subordinated Convertible Note" to "8.0%
Subordinated Convertible Note".
C. AMENDMENT TO SECTION 2. Section 2 of the Note is hereby amended by (i)
changing the percentage in the (x) third line thereof from 6.0% to 8.0% and (y)
last line thereof from 8.0% to 10.0% and (ii) deleting the proviso.
D. AMENDMENT TO SECTION 5.1. Section 5.1 of the Note is hereby amended by
changing 130% to 150% in the seventh line thereof.
E. AMENDMENT OF SECTION 7.4(B). Section 7.4(b) of the Note is hereby
amended by changing the date in the fifth line thereof from June 30, 1996 to
January 14, 1998.
F. AMENDMENT OF SECTION 7.6. Section 7.6 of the Note is hereby amended by
adding the following sentence at the end of such Section:
"Within 10 days after the end of each fiscal quarter of the Company,
the Company will provide the Purchaser with a certificate signed by
one of the aforesaid officers, setting forth the Conversion Price as
of the end of such quarter and any increases or decreases in the
Conversion Price (and the events giving rise thereto) during such
quarter, which certificate shall be accompanied by a certification
from Deloitte & Touche LLP (or any successor thereto or another
nationally recognized independent accounting firm) of the
information set forth in the Company's certificate."
G. AMENDMENT OF SECTION 10.5. Section 10.5 of the Note is hereby deleted
in its entirety.
H. ADDITION OF SECTION 10.10. The following Section 10.10 is hereby added
to the Note:
<PAGE>
The WellCare Management Group, Inc. 3
10.10 ADDITIONAL INFORMATION. The Company will deliver to the holder
of this Note, as soon as available but no later than the 15th day of each month,
a notice specifying or attaching the following information as to the Company,
all certified by the Company's Chief Financial Officer:
(a) statement of cash receipts and disbursements for the
preceding month;
(b) statement of cash balances at preceding month end for
the Company and each of its Subsidiaries;
(c) itemized statement of selling, general and
administrative expenses of the Company and its
Subsidiaries for the preceding month;
(d) enrollment changes by category and region for the
preceding month;
(e) updated month-by-month projection of sources and uses of
cash for the next six months;
(f) copies of all correspondence with regulators in the
preceding month; and
(g) schedule of in-patient days per thousand by category of
business and region for the preceding month.
I. AMENDMENT OF SECTION 12. Section 12 of the Note is hereby amended
by deleting the definition of Conversion Price and replacing it with the
following new definition:
"'Conversion Price' shall mean (i) $4.00 with respect to $5,000,000
aggregate principal amount of the Notes and (ii) $8.00 with respect to the
remainder of the Notes, in each case subject to adjustment (after the date
of amendment No. 2) as set forth in Section 7.4(b)."
II. AMENDMENTS OF THE NOTE PURCHASE AGREEMENT. The Note Purchase Agreement
is hereby amended by changing all references to the "6.0% Subordinated
Convertible Note" to the "8.0% Subordinated Convertible Note."
III. AMENDMENTS OF THE REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement is hereby amended by changing all references to the "6.0% Subordinated
Convertible Note" to the "8.0% Subordinated Convertible Note."
<PAGE>
The WellCare Management Group, Inc. 4
IV. CONVERSION OF NOTES. The Company shall use its best efforts to obtain within
90 days from the date of this letter agreement the approval of the Commissioner
of Health of the State of New York to the conversion of the Notes by the
Purchaser. The Company shall promptly notify the Purchaser of the receipt of
such approval. Within 15 days of receipt of such approval, the Purchaser shall
convert $5,000,000 aggregate principal amount of the Notes in accordance with
Section 7 of the Note. The Company shall pay interest on the Note upon such
conversion pursuant to Section 7.3 of the Note.
V. OPTION TO PURCHASE. If the consolidated earnings before income taxes of the
Company and its Subsidiaries for the quarter ended June 30, 1998 or September
30, 1998, as reported in the consolidated financial statements of the Company
and its Subsidiaries included in the Company's Quarterly Report on Form 10-Q for
the quarterly period ended June 30, 1998 or September 30, 1998, as the case may
be, filed by the Company with the Commission and delivered to the Purchaser are
greater than zero (the "Earnings Condition"), then beginning on the date such
Earnings Condition has been satisfied and ending on December 31, 1998, the
Company shall have the option to purchase from the Purchaser 50% of the
aggregate outstanding principal amount of the Note and 50% of the Conversion
Shares for an aggregate purchase price of $12,000,000 plus all accrued and
unpaid interest on the Note to the date of purchase. Such option to acquire such
portion of the Note and such shares may be exercised only in its entirety and
only upon 30 days prior written notice to the Purchaser. The purchase price
shall be paid in immediately available funds to an account designated by the
Purchaser. Any transfer of Notes or shares pursuant to this Section shall be
made by the Purchaser without representation or warranty of any kind except that
the Purchaser will represent and warrant as to the absence of Liens created by
or through the Purchaser. If the Earnings Condition is not met, the Company
shall have no option to purchase Notes or Conversion Shares from the Purchaser.
VI. REPRESENTATIONS AND WARRANTIES TRUE. Except as set forth on Schedule VI, the
Company hereby represents and warrants to the Purchaser that on and as of the
date hereof, all representations and warranties of the Company contained in any
of the Transaction Documents (other than those specified in Section 5.11,
Section 5.12, Section 5.13 or, solely so far as it relates to any representation
or warranty specified in Section 5.11, 5.12 or 5.13, Section 5.21 of the Note
Purchase Agreement or those specified in Section V.C, D and E of Amendment No. 1
or, solely so far as it relates to any representation or warranty specified in
Section V.C, D, or E of Amendment No. 1, Section V.F. of Amendment No. 1) are
true and correct as of the date hereof as if made on the date hereof and with
the same effect as if set forth in this letter agreement except to the extent
superseded by the representations and warranties contained in Section VII
hereof.
<PAGE>
The WellCare Management Group, Inc. 5
VII. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchaser as follows:
A. DUE AUTHORIZATION. The execution, delivery and performance by the
Company of this Amendment have been duly authorized by all necessary corporate
action, and the provisions of this Amendment are valid and binding obligations
of the Company, enforceable in accordance with their respective terms.
B. GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. Other than, with
respect to the issuance of Conversion Shares, (i) any required pre-merger
notification and related filings under the HSR Act, (ii) the filing of a
notification with Nasdaq upon the first issuance of any Conversion Shares, (iii)
filings under the Securities Act and any applicable state securities or "blue
sky" laws upon the issuance of any Conversion Shares to any Person other than
the Purchaser and (iv) approval by the Commissioner of Health of the State of
New York, no approval, consent, exemption, authorization, or other action by, or
notice to, or filing with, any (i) Governmental Authority or (ii) any other
Person, is necessary or required in connection with the execution, delivery or
performance by the Company or enforcement against the Company of this letter
agreement or the transactions contemplated hereby except, in the case of (ii)
with respect to any Contractual Obligation, any such consent or other action
that would not, individually or in the aggregate, have a material adverse effect
on the Condition of the Company if not obtained.
C. LITIGATION. There are no actions, suits, proceedings, claims or
disputes pending, or to the Company's Knowledge, threatened, at law, in equity,
in arbitration or before any Governmental Authority against the Company or any
of its Subsidiaries:
(a) with respect to this letter agreement or any of the transactions
contemplated hereby; or
(b) except as set forth on Schedule VII.C, that would, if adversely
determined, (i) have a material adverse effect on the Condition of the Company
or (ii) have a material adverse effect on the ability of the Company to perform
its obligations under this letter agreement. No injunction, writ, temporary
restraining order, decree or any order of any nature has been issued by any
court or other Governmental Authority purporting to enjoin or restrain the
execution, delivery and performance of this letter agreement.
D. FINANCIAL CONDITION. The Company heretofore has delivered to the
Purchaser true and correct copies of the unaudited interim consolidated
financial statements of the Company and its Subsidiaries dated as of September
30, 1997 (the "September 30 Interim Financials"). The September 30 Interim
Financials have been prepared in accordance with GAAP applied consistently
throughout the periods
<PAGE>
The WellCare Management Group, Inc. 6
covered thereby except for normal recurring year-end adjustments. The September
30 Interim Financials present fairly the consolidated financial condition of the
Company as of the date thereof, and the consolidated results of operations of
the Company for the period then ended. Except as set forth on Schedule VII.D or
as set forth in the September 30 Form 10-Q (defined below), neither the Company
nor any of its Subsidiaries has any material direct or indirect indebtedness,
liability or obligation, whether known or unknown, fixed or unfixed, contingent
or otherwise, and whether or not of a kind required by GAAP to be set forth on a
financial statement (collectively "LIABILITIES"), other than (i) Liabilities
fully and adequately reflected on the September 30 Interim Financials and (ii)
those incurred since the date of the September 30 Interim Financials in the
ordinary course of business.
E. NO MATERIAL ADVERSE CHANGE. Since September 30, 1997, except as set
forth on Schedule VII.E, there has not been any material adverse change in the
Condition of the Company, nor in the opinion of the Company's senior management
is any such change probable.
F. QUARTERLY REPORTS ON FORM 10-Q; COMMISSION DOCUMENTS.
(a) The Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 1997 filed by the Company with the Commission on
November 14, 1997 (the "September 30 Form 10-Q") was true and accurate in all
material respects when filed with the Commission and in compliance in all
material respects with the requirements of its report form.
(b) The Company has, since August 14, 1996, filed all registration
statements, proxy statements, reports and other documents required to be filed
by it under the Securities Act and the Exchange Act, and all amendments thereto
(collectively, the "COMMISSION DOCUMENTS"); and the Company has furnished the
Purchaser correct and complete copies of all Commission Documents, each as filed
with the Commission, from and after August 14, 1996. Each Commission Document
filed after the September 30 Form 10-Q was true and accurate in all material
respects when filed with the Commission and in compliance in all material
respects with the requirements of its respective report form.
; PROVIDED that the Company shall not be deemed to have breached the
representations and warranties set forth in Section VII D. or F. to the extent
that (i) any inaccuracy in any such representations and warranties, together
with all other inaccuracies in such representations and warranties, give rise to
or result in liabilities, costs or expenses which have or could have an affect
on the cash of the Company and its Subsidiaries (on a consolidated basis) of
less than $5,000,000, in the aggregate, or (ii) any inaccuracy in any such
representations and warranties result from the shareholder
<PAGE>
The WellCare Management Group, Inc. 7
litigation or United States Attorney's investigation referred to in the
September 30 Form 10-Q.
VIII. AMENDMENT AND RESTATEMENT OF NOTES. The Company hereby agrees that if
requested to do so by the Purchaser, it will execute an amended and restated
Note (the "Amended and Restated Note") incorporating the amendments to the note
set forth in Section I of this letter agreement. Upon delivery of the Amended
and Restated Note, the Purchaser will surrender to the Company the Note
outstanding on the date hereof (the "Old Note"). The Amended and Restated Note
shall be dated the date of, and be in the same denomination as, the Old Note
replaced by it. From and after the date of delivery of the Amended and Restated
Note, all references in any Transaction Document, as amended hereby, to the term
"Note" or "Notes" shall be deemed to refer to the Amended and Restated Note.
IX. COUNTERPARTS. This letter agreement may be executed in counterparts, each
of which shall be deemed an original but all of which together shall constitute
one and the same instrument.
X. EFFECT ON TRANSACTION DOCUMENTS. The Purchaser hereby waives any claim under
Amendment No. 1 that, based upon facts known to the Purchaser on the date
hereof, any representation or warranty of the Company set forth in Section V.D.,
V.E. or V.F (in respect to Section V.F. solely with respect to the financial
statements and notes thereto, Management's Discussion and Analysis of Financial
Condition and Results of Operations and Selected Financial Information set forth
in any Commission Documents), was not true on the date of execution of Amendment
No. 1. The Purchaser hereby also waives (i) any default under Section 11.1 (g)
of the Note relating to the matters discussed in Item 3 of Part II of the
September 30 Form 10-Q, (ii) any default under Section V.B. of Amendment No. 1
to the extent it failed to set forth the governmental approvals or consents set
forth in Section VII.B. hereof, (iii) any violation that may have existed under
Section 8.2 (a) or (b) or Section 8.6 (b) (i) or (ii) through the date hereof,
to the extent notice was required thereunder with respect to any of the items
specified in the other numbered clauses of this sentence, (iv) any violation of
Section 10.5 of the Note that may have existed from February 28, 1997 to the
date hereof, and in each case any Event of Default (as defined in the Note) that
may have resulted therefrom. Except as specifically set forth in this letter
agreement, the Transaction Documents shall remain unmodified and in full force
and effect and are hereby ratified by the parties thereto, as amended. The
Company acknowledges and agrees that this letter agreement does not represent an
intention by the Purchaser (other than as set forth herein) to waive, modify or
forebear from exercising any of its rights, powers and privileges under any
Transaction Document and no such commitment, waiver, modification (other than as
set forth herein) or forbearance has been offered, granted, extended or agreed,
nor is any implied, by the Purchaser.
<PAGE>
The WellCare Management Group, Inc. 8
XI. ENTIRE AGREEMENT. This letter agreement (which constitutes the second
amendment of the Note), together with the Transaction Documents (including
Amendment No. 1 thereto), represents the complete understanding of the parties
with respect to the subject matter hereof.
XII. EXPENSES. The Company shall promptly pay or reimburse to the Purchaser the
fees and expenses (including fees, expenses and other charges of Paul, Weiss,
Rifkind, Wharton & Garrison) incurred by the Purchaser in connection with the
preparation, negotiation and execution of this letter agreement and the
transactions contemplated hereby.
XIII. HEADINGS. Headings in this letter agreement are for reference only, and
shall not affect the interpretation or meaning of any provision of this
Amendment.
XIV. GOVERNING LAW. This letter agreement shall be governed by, and construed
and interpreted in accordance with, the laws of the State of New York applicable
to agreements made and to be performed entirely within such State.
Very truly yours,
THE 1818 FUND II, L.P.
By: Brown Brothers Harriman & Co.,
its General Partner
By: /s/ Lawrence C. Tucker
------------------------------
Name: Lawrence C. Tucker
Title: Partner
ACKNOWLEDGED AND AGREED:
THE WELLCARE MANAGEMENT GROUP, INC.
By: /s/ Joseph R. Papa
------------------------
Name: Joseph R. Papa
Title: President/CEO
