Free Appendix - District Court of Delaware - Delaware

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR For 9/30/99 10-Q Document Corp

124-6

Filed 04/17/2007
IN---I

Page 1 of 30 Page
Just

34 of 55

10-Q

19thPageof

ITOCllstI

Previous

19th

that it terminated the The Company received notice from Aetna 15% respectively for infusion services effective 2000 April 12 April 1998 national agreement did not intend to renew The received notice from Aetna that Aetna CPS division its on agreement September The have the the with CPS that was scheduled to expire in accordance with its terms

30

1999
of the Master the Agreement and related Aetna that with dispute Network division refuses are to serviced the Aetna and may in

termination

effects on negative business infusion Companys services rendered or Agreement business doing with with the fees

other

Com lys

Resource

if

Master

by Coram to Aetna if Aetna causes its with

for example enrollees newly

for pay claims outside the affiliates
to

acquired cannot

Prudential

cease the dispute dispute

Coram

The but could

Aetna

Aetna

may have the Company

Company if the incur

predict in does not prevail Company additional substantial losses

ultimate

impact its

Further
legal

Company associated

that it will continue to incur significant anticipates with with pursuing the litigation related to the dispute

Aetna
Other currently are
as

Factors affecting

Results Affecting Recent Operating the Companys operating performance

Other and

factors significant financial condition

follows
restructure of its credit in facilities through the of its repayment of its former exchange Notes and the Series Credit Facility to the in the

former Notes August Series Exchange Series

senior in June Notes

credit debt for

subordinated 1998

facility January 1998 the issuance of the Series establishment of the of the conversion

1998
the

the

New

Senior

and

setting

Securities contemplated by the April 1999 offset the increased interest rate applicable to the Agreement by Notes also included in such April 1999 amendment expansion and improved sales efforts in

price applicable amendment to the

ii
division

Cornpans

CPS

iii
result
of

to managed competition

in the Companys infusion business as ongoing pricing pressure insurers an unfavorable shift in payor mix from private indemnity and other contracted care organizations payors and intense sets net forth revenue the from

table infusion The following among providers of the Compys infusion percentages therapy approximate certain of- payors categories

Download THREE

Table

MONTHS ENDED

SEPTEMBER 1999

30
1999

Private Payors

Indemnity

Insurance

and

Other Other

NonContracted
21% 23%
54% 23%

Care Managed and Medicare

and Organizations Medicaid Programs

Contracted

Payors

57%

22% 100%

Total

100%

iv

increased

to increase sought facilities and offices

competition the scope of

and physicians that hospitals services their they offer through offered services similar to those including

from

have the

by

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q Company
or that have

For 9/30/99 entered

Document 124-6
into

Filed 04/17/2007
have care relationships been delegated

Page 2 of 30 Page
with control the over

35 of 55

riskbearing

third-party payors the provision of services offered increased related by

to which they pursuant of health wide variety the

services

including

Compy
as

and

clinical well of that

staffing
increased

delivery
costs of

oncall

and

other and

volume

costs

as

certain

blood

blood

derivative

increasing and the increasing the On the with products October chronic this that

products numbers

are in short supply that have been required by the served infusion division by the Companys patients the therapies numbers of patients that require receiving are in short supply the Company received drug notice by that the Bayer

26
of

1999

Corporation

manufacturer

ProlastinR

furnished

condition called alphal antitrypsin of this drug to all traditional the drug suppliers including and end users of the product that the Company Bayer informed the Company would only be available an exclusive distribution product through source the three and nine months by Bayer During ended sponsored 30 September selling
18

to persons Company would cease defiency

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6
1st

Filed 04/17/2007
Next
services

Page 3 of 30 Page
Just
million

36 of 55

20th
1999
and to has

Page

of

29
sales of

Previous
and related

Bottom
were $2.1

20th

revenues $6.6

from

ProlastinR
Because

million

ProlastinR
transition been

is the only source for Bayer the Company has been forced to make arrangements with its patients their service to Bayer once the Companys supply of ProlastinR

respectively

depleted

The

distribution Results Three of

programs Operations Ended 1998 Net

has learned that Bayer may implement similar Company for other it manufactures GamimuneR drugs including

Months

September

30

1999

Compared

With

Three

Months

Ended

September Net million quarter million the in net

30

unaudited
revenue ended decreased September 1998 The Master $0.4 million from
is

Revenue
in the ended

or

0.3%

to

$143.2 in the

quarter

30

1999

$143.6

million

September decrease in net of from the the revenue in

30
Aetna

decrease

revenue infusion

from the business by

RNet
and

termination

Agreement

due to primarily $14.0 division primarily relating to and $12.7 million increase

ii

CPS

division sales

due

to

an See

overall

increase

Affecting
Gross gross or

served generated patients Recent Results Operating Profit
of Gross

internal

growth

Factors

margin gross

23.0%

margin of
Recent

decreased million to $32.9 million or $2.3 profit the quarter ended 30 1999 from $35.2 million September 24.5% in the quarter ended ptember 30 1998 See Factors in

Affecting

Operating and

Results
Administrative quarter

Selling
or to 13.2% the to million with

General

Expenses
ended

$28.3

million in the

in the quarter ended 30 September of the CPS division as well growth the dispute with Aetna See Factors AffectingRecent Interest

SGA increased $3.3 million 30 1999 from $25.0 September 1998 The increase is due primarily as fees incurred in conjunction legal
Operating

Results

Expense
three of ended

million the addition increase

in of in

the months

months $22.5

three

increased by $2.0 million to $8.1 expense ended 30 1999 from $6.1 million during September to the 30 1998 The increase is attributable September million on the Senior Credit the in

Interest

draws the

Facility
Series the

Subordinated outstanding change on The Series the

amount principal outstanding Unsecured Notes $1.8 million the Series Notes Senior from Series 9.875% to

under

$8.3 Senior

million

increase 11.5%

under

Subordinated

Unsecured beginning

amount principal and rate Notes on

pfjl

1999

period the Company Unaudited

that interest due related to the Series and anticipates Company notes will be reduced the six month $13 million over by as much as November result of the preliminary beginning 15 1999 as understanding has reached with the Holders Financial of Condensed Income the Consolidated such notes Statements an See Note to the

Operating million income during of $3.6

Loss
months

The

Company

had

operating

loss compared

of

$7.3
to operating The and the

three

ended

million during the ended 30 1998 September decline is due primarily to the decrease in gross profit of $2.4 million in SGA of $3.3 increase million as described above

September three months

30

1999

Costs The Comppy recorded cost of Restructuring plan restructuring in the amount the third quarter of $5.1 million associated with the of the RNet divisions New reorganization Whippany Jersey call center
during

operations
Net million discussed

Loss
compared

Net to

loss

for the

$2.8
decline

quarter million for can be

ended the

Sptember
ended the

30

1999

was

$15.2
1998
As

above

the

quarter attributed to

September decrease in

30

operating

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69Te.htm

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Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q
income and the increase in

For 9/30/99 interest

Document 124-6
expense

Filed 04/17/2007
See

Page 4 of 30 Page
Recent

37 of 55

Factors

Affecting

Operating Nine

Results
Months Ended September

30

1999

Compared

With

Nine

Months

Ended

September Net million nine

301998
Net

unaudited
increased $88.5 The
19

Revenue
in the ended

revenue

million 1999
is

or

24.0%
$368.5

to

$457.0 in the

nine

months

ended

September30
1998

from

million

months

September

30

increase

http

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.conildsvrp.69Te.htm

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Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 5 of 30 Page
Just

38 of 55

1O-Q

21st

Page

of

Previous

21st

due to $26.9 million increase in net revenue from the infusion primarily and partially business due to 5.5% increase in patient offset primarily census shift in payor mix $32.2 million increase in net revenue by an unfavorable from the RNet division of the Aetna primarily relating to the termination

ii

Master

iii
an

that was terminated effective June Agreement subsequently $28.9 million increase in net revenue from the CPS division number of patients

30

1999 growth

and from See

resulting

increased

served

generated

by

internal

sales

Factors

Affecting_Recent

Operating

Results
$16.1 ended million to $77.0 million or

Gross gross margin million or The decrease

Profit
of

Gross in

30 1999 from $93.1 September of 25.3% in the nine months ended gross margin 30 1998 September results primarily from the increase in net revenue discussed
Infusion with number current Recent the by and the CPS

16.9%

decreased profit the nine months

above
service

in the with caused

divisions
Master

offset

by

an

increase

in cost that

of

associated

Aetna

Agreement

variable

costs

fluctuate supplies

of patients costs of drugs served and higher market of certain blood products shortages Operating

and See

Factors

Affecting

Results

or

and Administrative Selling General Expenses ended 17.1% to $80.8 million in the nine months million in the nine months fees ended infusion incurred September growth
as

SGA

increased

$11.8 1999 and

million from
is

$69.0

30

September 1998 The

30

increase

due CPS

to the primarily division well as Expenses with costs office with increased

of the

business
in

R-Net

division

the

legal

associated

primarily with additional and legal

from

business fees Recent

with the Aetna conjunction dispute for salary and benefits along growth such as additional rent for personnel incurred in conjunction with the dispute Operating an

space telephone Aetna See Factors
Income the nine million

Affecting
The

Results
loss of to

Operating million during income of $4.6 decrease $16.1 ended in

Loss
months

operating coupled

during income is with an

had Company ended September the nine months

operating

$30.8
1998
operating The

3Q
ended

199

compared

million
September

due primarily to increase of $11.8

September the decline million in

30
in

SGA

of gross profit for the quarter

30

1999

Costs The Company recorded Restructuring approximately $0.9 million of in March 1999 relating to reorganization of the Companys charges management the first quarter structure of 1999 completed the third quarter during During of 1999 the Company recorded costs of of plan in t-he amount restructuring
$5.1 million New associated Jersey with call the reorganization
of

the

R-Netdivisions

Whippany

center

operations
expense decreased by $4.2 million to $22.2 1999 from $26.4 million during
is

Interest million the nine decrease cancelled $3.2 in of in the months

Expense
nine ended

Interest ended

months

September

30

$10.3 in by

30 1998 The September million in interest related
with the Securities to the the relating related to Unaudited

decrease to the

due

Rollover

to primarily which was Note

connection interest interest to

million offset

Exchange Agreement Warrants issued under Exchange Consolidated

and the

decrease Rollover
of

of

Note

Securities

million See Statements
The

Note

the

Condensed

Agreement Financial

$7.1

that interest due related to the Series and anticipates Company notes will be reduced the six month as $13 million over by as much November 15 1999 as result of the preliminary period beginning understanding the Company has reached with the Holders of such notes See Note to the Series Unaudited Net recognized Condensed Consolidated the of nine Financial months ended

Statements
September to

Loss

During net loss

30
net

1999
loss

the of

Company

$53.5

million

compared

$22.5

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Info

Case 1:04-cv-01565-SLR -Coram Healthcare Corp 10-Q
million decline offset during can be by the nine in attributed to

For 9/30/99 ended the

Document 124-6
September
in

Filed 04/17/2007
30
1998
As income operating

Page 6 of 30 Page
above
the

39 of 55

months

discussed

decrease

loss
Recent

partially

decrease

interest

expense

See

Factors_Affecting

Operating Liquidity The the New

Results
and Capital Resources credit under from operations and available generated its working and to fund capital requirements as of September 30 1999 was $70.1 working capital million months
at

uses Company Senior Credit The to the

cash

Fadility

operations
million

Companys
$64.6 nine

compared During assets

December September
20

million
in current

ended

an increase of $5.5 31 1998 the primary increases 30 1999

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007 IN--I
of $8.4

Page 7 of 30 Page

40 of 55

1O-Q

22ndPage oE29
related increase to in net an increase accounts

ITOCI15tI
in cash and
of

Previous
cash $12.5 sales

Just 22nd
million
due and to an

equivalents

ii

an

receivable

million

primarily

in approximate eight day increase sales volume the CPS division at

days and cash the

iii
million and

outstanding decrease in

DSO

additional

million

The

increase net of

in

cash

and on

borrowings

repayments

was equivalents New Senior Credit for

of $8.4 inventory due to primarily

Facility

consisted of $2.8 equipment purchases $1.8 million for furniture equipment durable in the accounts medical nine equipment ended months
of

computer current

improvements
Total

and Property and software systems and the purchase of liabilities increased in

for $2.1

million

restructuring As of

payable costs

$2.7 of

30 1999 primarily due to an increase September million and an increase in accrued and merger
million
the Company did not have any material

$2.7

September

30

1999

commitments

for capital Under available amount pursuant

expenditures
the to to the terms of the New of
or

Senior
as

the

equal to

Company the lesser agreement

defined

the

the the

Facility the maximum funds Credit Commitment -is an Revolving base as calculated Companys borrowing Companys
the total
as

Credit

total

million As of $59.3 million
revolver Senior Credit

September Offset by of

30

1999
of

the

letter $19.8

credit

credit commitment of $60.0 Credit Commitment was Revolving of $2.5 million and obligations revolving available credit under the New of

borrowings

$37.0 was

million

15

the 1999 $37.0 amount which includes in delivered

1999 As of October Facility Septernber30 Credit Commitment was $60.0 million Of that Companys Revolving the New Senior Credit Facility million had been drawn against
million $14.5 accordance million with that had been relating to the letters of credit the Aetna Master In addition after Agreement $2.5 million the totaling obligations $20.5 million as of October 15 1999 As with certain financial compliance debt The Company has agreements

the other letters of credit deducting under the facility is total available
of

and has

September 301999 the Company was not in other covenants set forth in its principal waivers reached

with In addition the Coinppy regard to such noncompliance an understanding with its lenders to which they have waived pursuant for with certain covenants under the New Senior Credit Facility non-compliance the period December 1999 The understanding also includes ending 31 provisions

received

whereby
period from

no

interest

would 1999

be

due

on the

the

Series of

and

Series

Notes

for the of the

November

15

though

earlier

final

resolution

with Aetna certain from the or litigation Nay 15 2000 and proceeds sale of any Company assetoutside of the ordinary course of business would be of the Series and the Series to redemption notes at applied partial par such amounts as the Holders of the Series and Series Notes designate of the proceeds that such derived from such application provided under the New Senior Credit by the lenders Facility The precise understanding have not be been finalized under violations and such there can be no will understanding further to whether and to whether the any Unaudited finalized sale
is

ii

in

waived

terms of such that such assurance be no in assurance future See
as

terms

There

can

covenant

necessary Condensed

will occur or defaults waivers will be forthcoming at that Consolidated Financial Statements

time

periods Note

The expected Agreement by $14.5 estimate nature to the business of

has experienced on liquidity due to the higher Company pressure costs of service described above with to the Master as respect and of

than debt

Aetnas

draws

on

letters

of has to be

credit

that

increased

million
all of

the Company Although service costs related

to record sought the Master Agreement no assurance that

good due

outstanding faith to
is

the amount and

uncertainties all assess

litigation
costs can

there be

can

the

exact

such

the impact of the revised for plan and formulating plans Master Agreement The Company is considering any needed liquidity including

identified The presently Master Agreement The Companjj
operations strategic

Company is also and

continuing its reviewing flow its without
to

cash with

alternatives

provide

possible

transaction

CPS

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q division
needed There can on be no

For 9/30/99

Document 124-6
that acceptable

Filed 04/17/2007
Company will be able

Page 8 of 30 Page
to obtain any

41

of 55

assurance

liquidity The

commercially the

terms

is

the

believes Company effect such issues of any the effects of could failure manner

most have

While in down the

all

may of such

risk with the Year 2000 problem significant on third party payors such as Medicare have not been identified noncompliance by the party

Company

these impact

third the

of accounts receivable payment can has not incurred issues to date which management Company any payment in connection with attribute to the Year 2000 problem directly any specific

timely in the

Companys

to resolve Year 2000 problems payors due to slow capital availability associated with these payors While

payor

no
21

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007
Next
occur
Such

Page 9 of 30 Page
Just

42 of 55

110Q
have

23rdPageof29
assurance operations Credit Year New 2000 2000 Senior can and be made adverse require that material

ITOC1stI
payment effect on Company issues the to

Previous
will not

23rd

Cornpgys
use

the

ability to available capital

an impact cash generate from the New

could from Senior

Facility

available

accounts receivable due to delays in collecting could reduce the capital problems experienced by third party payors the borrowing base under the terms of the to the Compy by reducing Significant Credit could $6.7

Facility
impact

In

problem Of the 36%

the

addition Companys

such

ability

delays due payment to meet its debt restructure

to

the

Year

obligations
the Company

million of remaining
future cash September and 2002

accrued
17%

costs
in the

estimates

that

the

expenditures

will

be

made

following

periods
through Although

through

30
30%

2000

through September

September

30
and

through to future and the Companys subject adjustment ability to successfully its business the Company believes it has implement strategy reserves adequate and liquidity of September related as 301999 to meet future expenditures to the that

gpember 30

30

2003

17% 2001 thereafter

plans
the

However
Company

there

is

no

assurance sufficient

that

the

reserves capital

will

be

will

generate

working

to meet

adequate future

or

expenditures
Year 2000 Issues Some in this

Background
programming result As or fail to
as

computers
calendar

software

and

other
is

code of

which design correct 2000

year data decision some of results
if

include equipment abbreviated to only two systems could to mean fail to

digits
operate rather

than

2000

produce These problems the

00

these

is

are

severity

Millennium

Bug

year or The

Year
Year

expected widely and are approaches 2000 Problem 2000 Problem could

interpreted to increase commonly

1900

in frequency and referred to as the

Assessment
other equipment

affect the

used

is reviewing Company the programs and systems

or operated its internal

maintained by
computer Year 2000 Company

softwae computers Company Accordingly
and systems to ensure

and the that

programs

will

be The

compliant
believes software that
it

Internal substantially used equipment

Infrastructure
all in of the

has

identified and related

major computers connection with its internal

applications

upgraded business
identified

or The

replaced Company upgrade

modification
as

that must be modified operations to minimize the possibility of material to its disruption of activity the majority relL-ated to the hascompleted or replacement of all major systems that have been affected and by Year for

completed branch payroll
collections the R-Net

adversely fully tested

2000
asset

systems

date tracking

To

all

work

has

been

general

accounting

operations

support pharmacy

and inventory operational division for billing and collections are compliant Systems and the CPS division for both the pharmacy benefit management systems have been completed locations have been upgraded areas Company of to complete remediation final include

including are fully

adrnissions

pharmacy billing management and in compliance Systems for that mail order

Equipment call for the

the Home Medical Systems that support and are also in operation Current plans remediation systems by September 30 the upgrade of the Resource Network
of our inventory management communications hardware and

1999
minor or

These

claims- adjudication system final deployment software to our data upgrades turnkey replacement of personal computer equipment

system

that

does

not

support

upgrade Year 2000

calculations Suppliers
At the end of

1998

the

to major suppliers six months of 1999 issues control involving over the

identify any potential the Compy reviewed Year 2000 of these

communicated with its Company formally adverse situations the first During these and worked to resolve responses has limited or no
it

the

actions

the Company problem However while the suppliers Thus

Company

believes

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q
has be with resolved no of all its

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 10 of 30Page

43 of 55

assurance with the

any Problems effect on

Year 2000 Problems with these significant suppliers there can these will resolve suppliers any or all Year 2000 Problems customers Any failure of these suppliers to resolve Year 2000 that systems could have timely manner financial and business condition in material results
of

their

adverse

Companys

operations
Third believes Management Party Payors for the Year2000 Problem is the that effect the most significant risk to

jpman
third agencies party of

such

as Medicare News reports have are having Year 2000 government difficulty becoming before the Year 2000 The Company has not yet undertaken compliant of the effects of such whether quantification noncompliance or to determine

payors
the

such

may have on indicated that various

issues

federal

such

quantification

is

even

possible

The

Company
22

has

communicated

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Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007
Next

Page 11 of 30Page
Bottom

44 of 55

24th
with its

Page

of
to payors Year 2000 of able be with 2000 no of to identify

Previous and

Just 24th

third

issues

involving the control over

party the

Problem

actions

these

to the extent to resolve possible the Company has limited or no However third party payors while the Company Thus Year 2000 Problems with any significant will resolve that these any or payors the occurrence of material systems before

that it will be expects these payors there can all Year 2000 to Problems the Year adverse disruption to payors have and

resolve

assurance the

their

business

Company
with th

resolve of

Problems on

material results

effect

third party Any failure of these their systems in manner could timely financial business condition cpmariys

operations Costs
is using internal and Company and implement the software and under this project The total cost

Remediation reprogram modifications remediation operating Company
or

The

external

resources 2000

to

replace
required

test

equipment of the Year

funded through is estimated at $0.8 million and is being project cash flows As of the nine months ended ptember 30 1999 the incurred these
as

had Of

process

costs

capitalized remediation estimate Company
is as

new

to this remediation $0.6 million related approximately and $0.2 million was $0.5 million has been expensed or software All of the remaining estimated equipment

of $0.1 million relate to equipment and monitored and will be revised in future being additional information becomes available

costs

software
public

This by the

filings

--

Plans The Companys focus in the area of contingency is Contingency plans on the development of plans to ensure the continuation of patient care primarily in the event of system failures related to Year 2000 that are beyond our control The types of contingencies for which plans are being include developed
local telephone system

failures
of of its

local

power

grid
In

failures

and

inadequacy/unavailability that remediation believes of September

medical

supplies

internal

30

1999

contingency

are personnel appropriate event of an unanticipated

immediately

plans available

the Company although was substantially as systems complete have also been developed to ensure

addition

to

address

any

situation

in

the

failure

believes that it is not possible to determine with Management complete have been that all Year 2000 Problems the Company identified certainty affecting or corrected The number of devices that could be affected and the interactions among these devices are simply many herein too

numerous

how accurately predict the severity duration information under the set forth 2000 Care Year Health recent

Year
is

2000

Problems

In addition the Company related failures will of

cannot occur or

orfinancial

consequences designed as and Readiness

Year

any inevitable 2000 Readiness Act of

Information

Disclosure

failures TheDisclosure 1998

Future In

Proposals

and

Legislation

introduced major

an increasing number of legislative initiatives have been years in Congress and in state legislatures that would effect or proposed in the health care or at the state changes system either nationally Various forms of payment by law bidding into

level

competitive reductions Clinton which $115

market
and the

in Medicare

consideration including and abuse and further expanded legislation Medicaid reimbursement On gust President 1997
fraud Balanced Act of 1997 the 1997 Budget Budget in Medicare and Medicaid of more than spending over five years is respectively Congress

control

are

under

signed

Act-

for reductions provides billion and $13 billion

presently

to

among

providers reductions direct medical the

that would provide limited financial relief considering legislation certain home health and skilled others hospital nursing facility that and home medical suppliers experienced equipment payment under for the 1997 entities Budget such fee

Act
as

In particular Company

relief

equipment

DME

the

schedule

would provide one proposal an update in the durable through to suppliers under Part of applicable

Medicare

program

http //www.secinfo

comldsvrp.69Te.htm

4/15/2007

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SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6
Administration rates The in of for

Filed 04/17/2007

Page 12 of 30Page

45 of 55

The that

Health

would

equipment is intended

Care Financing reimbursement change and supplies to be for budget
at

HCFA

PEN
neutral lower The

parenteral

rule recently proposed and enteral nutrients

reimbursement

rates

the

rule states that it to the proposed preamble its first year of application but would set the applicable rates paid in 1995 or 1998 the represent reimbursement for primary therapies from the Medicare

adjusted
which the

inflation
therapy

PEN

infusion

division

therapies receives

program
HCFA Act also to its proposed exercising Medicare fee schedule adjust has expanded amounts under the 1997 authority deems to be that the agency

Budget not inherently

reasonable

Under

this

23

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4/15/2007

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SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007
INexti

Page 13 of 30Page
Bottom
of if

46 of 55

25thPageof29
authority
providing comment
is

ITOI1st
contractors reductions

Previous

Just

25th

HCFA

or

its

limited

notice

may impose payment in excess of 15%

reductions can be made

up to 15% by notice and

criteria
payment would In

in the Federal and HCFA meets certain other provided Register In an August 1999 notice HCFA proposed inherent reasonableness reductions from 22% to 57% for six items of DME orthotics ranging
is considering that supplies Congress currently proposals or postpone HCFAs use of this inherent reasonableness authority the 1997 Budget authorized Act HCFA to conduct up to five

prosthetics addition
is

and

restrict

The first competitive projects bidding Florida using payment rates that are County lower than Medicares fee schedule for five existing of medical and supplies enteral nutrition categories including equipment and supplies second also covering products competitive bidding project is now being planned competitive bidding project between underway and 31% 13%
in

demonstration Polk

DME

The this will be

impact

of

time Moreover
adopted

reductions on the Company cannot be any payment the Company cannot whether predict any pending No assurance that the implementation can be given
or legislative on the business

determined proposals of the 1997 not have

at

Act or any other Budget material adverse effect ITEM The changes that are AND

initiatives regulatory of the Company ABOUT MARKET

will

QUANTITATIVE

QUALITATIVE

DISCLOSURES

RISK
risk could not related to

discusses the Companys following in interest rates This discussion subject
as

exposure contains Actual

to market results

forwardlooking

statements

to

risks of

and and

uncertainties
of those set

materially in changes Discussion Background As million annum 8.0%

result

number

factors
forth

interest and
--

rates

but including under Item

vary limited

to

Managements
Operations

of Financial Condition and Results of Analysis Factors Affecting Recent Results Operating

of gptember the Company had odtstanding debt of $289.7 30 1999 of which $162.2 million matures in May 2001 bears interest 11.5% per at and $89.7 million matures in April 2008 and bears interest at the rate of

per

annum

On

October

15
and due

1999
$1.8

Series

approximately cash payment Senior The rate New Credit

$4.7 million of interest Facility

million
such of in

providing

through for the letters matures was

and Series Notes totaling were issued in lieu respectively date The Company also has New of up to $60.0 other corporate and bears an As million

of for

acquisitions

working Senior Credit plus

capital
Facility which amount

availability credit and
as

purposes
interest of November

15
was

of prime the 1999

1.5%

9.75%

2001 February of October

15

1999

pmpys
would not have

under the New Senior Credit Facility outstanding $37.0 million Because all of the interest on approximately substantially debt is fixed 10.0% decrease in interest rates hypothetical principal material in interest on the Company Increases rates impact interest associated with future borrowings by expenses does not hedge interest rate changes against Company PART OTHER
II

increase could however the Company if any The

INFORMATION

ITEM

LEGAL

PROCEEDINGS

of the material to which the Company is Descriptions legal proceedings Unaudited Condensed are set forth in Note to the Comppjiys Consolidated party Financial Statements

cppApy
the normal course
of

is

also its other

party

to

of

business
actions

resolution

such

various other actions legal arising out believes that the ultimate Management will not have material effect adverse on

of the

http//www.secinfo

.comldsvrp.69Te.htm

4/15/2007

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SEC

Info

Case 1:04-cv-01565-SLR Coram Bealthcare Corp 10-Q
financial

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 14 of 30Page

47 of 55

of the Company or liquidity position results of operations due to the uncertainties inherent in litigation the ultimate Nevertheless of these.actions cannot be determined disposition presently ITEM Not CHANGE IN SECURITIES

ND

USE

OF

PROCEEDS

applicable
24

http

//www

secinfo

comldsvrp

69Te.htm

4/15/2007

Al 64

SEC

Info

Case 1:04-cv-01565-SLR Coram Healthcare Corp 10-Q
26th
ITEM

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 15 of 30Page
Bottom
Just

48 of 55

1O-Q

Page

of
UPON of SENIOR certain SECURITIES matters to such of potential defaults principal set forth and

26th

DEFAULTS discussion

noncompliance
and

with the

certain waivers

covenants received

contained

in the

Companys
is

Companys
ITEM The consider

Unaudited SUBMISSION

relating Condensed

matters

agreements in Note to the

debt

Consolidated

Financial

Statements

OF

MPTTERS

TO

VOTE

OF

SECURITY of

HOLDERS on August 1999 to

held its Company and vote upon Election of

Annual

Meeting

Stockholders

directors their

to

serve

until are

the

2000

Annual and

Meeting

of

Stockholders

and

until of

successors to the

duly

elected

qualified
Certificate shares from of of

Approval -Incorporatiog the Companys
as

an

amendment to value

Companys
number

Restated
of

amended
par

increase common

the stock

authorized

$.00l

the

Common

Stock

100000000

to

150000000
certain to four shares to purchase of the options directors of the Company Richard Pagliuca and Peter

Common William

of Approval Stock granted

Companys Fink

Casey
and

Stephen

Smith.on

September

1998

Ratification independent All proposals auditors were

of

the

of the

of Ernst appointment Young of the Companys 1999 Company The results of the voting are

LLP

as

fiscal
as

year

approved

follows
Table

Enlarge/Download
TOTAL VOTE FOR DIRECTOR TOTAL WITHHELD VOTE

FROM

EACH

EACH

DIRECTOR

For

election

as

director

Donald William Stephen Richard Richard Peter

2\maral

Casey Feinberg Fink Smith Smith

39952129 40057928 39560382 40036126 40039936 40046634

1638010 1532211 2029757 1554013 1550203 1543505 Download Table

FOR

AGAINST

ABSTAIN

BROKER NON-VOTE

Approval

of

the

amendment

of

the of

Companys

Restated certain of the

Certificate to options the Companys

Incorporation of Approval purchase Common Ernst ITEM On Donald interim
http

38355670

2966475 3680313
418363

248111

19833

Shares Stock of

37677435
appointment of LLP

232391

Ratification Young OTHER October Amaral basis

40640610

531166

INFORNTION

29

1999

the the

would

serve

as

announced that its Chairman of the Board Company the Companys Chief Executive Officer on an of Richard Smith
as

following

departure

the

Companys

Chief 4/15/2007

//www

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Al 65

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR 10-Q Corp
Executive the with Board the The Officer of and of

For 9/30/99

Document 124-6
Mr
Smith and

Filed 04/17/2007

Page 16 of 30Page
on

49 of 55

President

Directors

Comppys

subsidiaries

pqy

his position resigned subsequently all other offices and directorships

NYSE

received letter from Compapy dated October 201999 informing

the the

New

York

Stock

Exchange

criteria for the new NYSE minimum share price of

that it was Company minimum share price continued listing stock had traded below gmpanys
25

Inc below

the
The

standard

http

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secinfo

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4/15/2007

Al 66

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 17 of 30Page
Just

50 of 55

1O-Q
$1.00 1999 value this the

27th
over to

Page
30

of
trading-day stock trading result

27th

period
above

The the

Comppy
$1.00 to

has

six months both in the

from of

October absolute

20

raise the

the
30

price

level of for

terms stock and

and

period Securities

would

day average in immediate Commission less As of not

Failure

restore

price

within

suspension

and an

Exchange not will

SEC

trading NYSE in

delisting
new each

to application The NYSEs letter listing

further

included

early warning

requirement and market Form and

to maintain the

the regarding than $50 million the of the this

continued

stockholders
September listing

capitalization
Company

lO-Q

filing comply with notice

Compys
Exchange

30

equity 1999

continued

anticipates receiving the Company must notice demonstrates within review
18

another

from the

within 45 days with respond with these continued listing compliance months of receipt of that notice Committee
at

requirement of this Upon receipi business that plan standards no later than of this be the time will Exchange the Company will business plan or to trading
to required within 45 days it

the plan accept plan and will either be subject to quarterly for compliance monitoring will not accept the business plan and the Company the and delisting suspension by the issue release regarding press of has for

which

with will the

subject

SEC Additionally
the receipt has considered its of this CPS

is Company second letter

receipt
submit

Accordingly

the the

Company

certain

would

including other investigated the continued on the no

sale of possible alternatives trading of its common stock

division
no

of aspects plan to the NYSE and

trading

for Company if it is

common

stock

to

allow for

longer

eligible

trading

NYSE

While results Company ITEM

assurances can be given the Company believes that successful alternatives described in this document would allow strategic to maintain its listing with the NYSE from AND REPORTS ON FORM 8-K

the

EXHIBITS Exhibits

Download

Table

EXHIBIT NUMBER

DESCRIPTION

10.1 10.2 10.3 10.4 10.5 10.6 10.7
27

--

Letter

Amendment

to

Prime October

Vendor

Agreement

with

Cardinal dated

Health
Agreement November
--

Inc 11

dated

14

1999
and Richard

between

the to

Company

Smith
between the

1999
Employment Donald

Amendment Company

No
and

Amaral

Agreement dated as

of

pri123
and and and Richard Wendy Joseph and

1999

--

--

--

between the Company EmploymentAgreement Smith dated as of April 26 1999 between the Company Employment Agreement Simpson dated as of April 26 1999 between the Company Employment Agreement Smith dated as of April 26 1999 Form of Indemnification Officers Data Schedule Agreement certain Financial

for Directors

Reports

on

Form

8K
on Form 8-K relating to the report under Chapter 11 of the Bankruptcy of the Company subsidiary

On August the Company 23 1999 filed of an involuntary filing bankruptcy petition Code Coram Resource against Network Inc
26

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Al 67

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 18 of 30Page

51

of 55

http I/www.secinfo

comldsvrp.69Te.htm

4/15/2007

Al 68

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007
Next

Page 19 of 30Page
Bottom
Just

52 of 55

1O-Q

28thPage of29

TOCI1st

Previous

28th

SIGNATURES Pursuant Company has of the Securities requirements caused this report to be signed on duly thereunto duly authorized to the Act by of

Exchange its behalf

1934

the

the

undersigned

CORAM HEALTHCARE

CORPORATION SIMESON

By

/5/

WENDY

Wendy Executive Vice Chief November

Simpson President Officer

and

Financial

15

1999
27

http//www.secinfo.com/dsvrp.69Te.htm

4/15/2007

Al 69

SEC

Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q

For 9/30/99

Document 124-6

Filed 04/17/2007
Next

Page 20 of 30Page
Bottom
Just

53

of 55

1O-Q

Last Page

of

29

TOC
EXHIBIT_INDEX

29th

Download

Table

EXHIBIT NUMBER

DESCRIPTION

10.1 10.2 10.3 10.4 10.5 10.6 10.7
27

--

Letter

Amendment

to

Prime October

Vendor

Agreement

with

Cardinal dated

Health
--

Inc 11

dated

14

1999
and Richard

Agreement November Amendment Company

between

the to

Company

Smith
between the

1999
Employment Donald

--

No
and

Amaral

Agreement dated as the

of

--

between Employment Agreement Smith dated as of April 26 Employment

Company Company Company

1999 April 23 and Richard
and and Wendy Joseph and

1999
the the

--

Agreement
dated
as

between

Simpson
--

of

ApJ

26

1999

between Employment Agreement Smith dated as of April 26 Form of Indemnification Officers Data Schedule certain Financial

1999
for Directors

Agreement

http//www.secinfo

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4/15/2007

Al 70

SEC

Info

Coram Healthcare Case 1:04-cv-01565-SLR Corp 10-Q
Dates Referenced

For 9/30/99

Document 124-6
and Documents

Filed 04/17/2007
Incorporated

Page 21 of 30Page
Reference

54 of 55

Herein

By

Rferenced-On
This 1O-Qjffln Date
First

Page
Other Filings

Last

9/30/95 8/5/97 4/13/98 5/1/98 5/6/98 6/30/98 7/1/98 8/20/98 9/9/98 9/30/98 12/31/98 1/1/99 3/15/99 4/9/99 4/13/99 4/23/99 4/26/99 5/14/99 6/15/99 6/29/99 6/30/99 7/20/99 8/5/99 8/11/99 8/19/99 8/23/99

14

iQOLA

10-Q

24

IQ
12

fl

24 21 21
11

10-Q

10-K

10-KIA

20

SC 13D/A
27 27
11

29 29

14

12

21
12

26
11 14

PRE 14A DEF 14A

12 27 27
11 14

8-K

For The Period

Ended

9/30/99 10/4/99 10/13/99 10/14/99

27

29

-10/15/99
10/20/99 10/26/99 10/29/99 11/10/99 11/11/99 11/12/99 Filed

25
27
19 11

26

22
16

29

On

Filed

As Of

11/15/99 12/31/99 1/28/0 4/12/0 5/15/0 6/15/0 9/30/0 2/26/1 9/30/1 9/30/2 9/30/3 10
11

22

10-K

19 22 10-Q

23

iQQNT10-Q
10-Q10-Q/ANT1O-Q
10-Q.NT1O-Q

23

23

NT

10-Q 10-Q

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Info

Coram Healthcare Corp Case 1:04-cv-01565-SLR 10-Q Top

For 9/30/99

Document 124-6

Filed 04/17/2007

Page 22 of 30Page

55 of 55

List All Filings

Alternative

Formats

Rich Text

Word

.rtf Text txt_EDGAR
Company

gmi XML
Reserved
at

.xmi

et

al

Copyright

2007 Fran Finnegan Sun 15 Apr 2007

All Rights

www.secinfo.com

214904 GMT-

Hp

SEC

Info

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Al 72

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 23 of 30

PERSONAL

CONFIDENTIAL

16 November 1999

CONFIDENThL
Steve Feinberg

Dear Steve

brief

update

Amaral

and

continue

to

work

on an Employment

Agreement

accepted

base of $650000

asked for
did not accept

bonus

of

up

to

base target

Amaral did not accept

my

formula

and

my EBITDA
rolling

asked for

year contract

Amaral did not accept

my term
advantaged
option

asked for options price Amaral did

with

partial

vest

up front and

slightly

not accept

either

asked for

2.99 did

base

and

targeted either

bonus

in

the event

of

dismissal

not

for

cause

Arnaral

not accept

asked for
to

success

fee of did

1% in

the event the

that

could

engineer

sale/merger

move

CRH

Amaral

not accept

fee

.1

asked for the contract
to

to

continue
to

once myself

had

CRH
all

stabilized

and

that

have

an

option

appoint

CEO
to

replace

Amaral did and
of

not accept

this

Instead

he worded
date that

the contract appoint

cease as

my

contract

the obligations
at

on the
in

someone
in

CEO
but

Ultimately

we

arrived

wording

which

terms

remained

effect

pay would

be cut thereby

reducing

any
into the

incentive

might have
until

under the contract
sell

or effectively

freezing

me

CEOs

job

can

CRH
if

asked for protection golden parachue
Peat upside

under 280
rules

any of the contract

triggered this

an

excess

under IRS

Amaral did
to

not accept
the

am

having

Marwick

review the Agreement

see

if

IRS

limits

obviate

any real

on the deal

CONFIDENTIAL
EXHIBIT

ir

Al 73

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 24 of 30

CONFIDENTIAL
asked for the
later

DO

and

EO

covera.
this

Amaral refused to provide

this

He

relented

and

said

will receive

tomorrow

asked him did not would

how many
He
later

options said his
it

remain was

in

the option

pooi

He

told
told

me
inc

that that

he he

know

12000
to

He

subsequently
to

return

800000 of

own

options

be used

recruit

new

corporate

management team

Steve want and
it

because of our friendship
to is

and the other deal

we
you

are

in

together have
in

do
clear

what
to

can for

you

now make
need

see the deal the
to

and

writing

me
to

that

cannot
for

kind of return
in

want and

on one or two
to

deals succeed

For

this

work

me

be

several

deals

make them

all

So

lets

come

back

to

CRH

know

your debt

is

in

jeopardy

want

to

help

save it

The

reality
this

at

CRH
is

is

there
to

is

$300M

in debt

and

its

too

much

CRH

may
list

reduce

by $30M
and

$100M
the

on the possible

sale of

CPS the

of

potential

buyers
is

attached note Net
is

number
will

of financial

buyers
be

When
of
its

and

if
debt

CPS

sold

shut

CRH

have

lost

about will

$200M
left to at

approximately

$650M

top line

Infusion

and

Clinical in

service
this

the

Remember

Infusion

has about

$160M

revenue

in the red

time

Now
end

for

illustration in

purposes
to

result

my opinion
payments
of

if CPS sale reduces $250M At that level

the debt of

by

$50M
will

high

debt

CRH

have

to

make

Interest

roughly
is

$25M
will

year

forget

about principal
or restructuring point
is

repayment

The bad news
little

that in

leave of

zip for cap-ex

so the

CRH

has

very
still

going for

it

terms

improving

rfIe

that

debt will

be too high for

CRH
am
time
at

Suppose

that

in the next
to

year somehow
to at to

able
to

to

improve

EBITDA
task
to

on

the

$450M
there large

top line

roughly $30M
situation
is

$40M
this

7%

9%
its

No
fair

small for

given
expect
is

how reduced
will
arid

CRHs
not

think

you
the

be

significant
to

charge

be taken
soft

CRH

Certainly

AR

too

too old

expect

its

So what

Well

heres how

it

looks

to

me from here

Even with

the sale of

CPS
do

and

the potential for service

EBITDA
the
interest to

improvement on the debt
that to

CRH
13 With
turn

will

be able

to

little

more than
its

an

EBITDA
and

improvement
sell this

still

quite hard
to

imagine enough

we can make
this like

around
out

debt-ridden

firm

anyone

for

work

well for anyone

think abOut

whos

out there

to

buy something

CUNFJDENIIA

Al 74

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 25 of 30

COMFLDENTL
this

and

what

their

realistic

appetite

would

be for CR1-I and

its

large

debt

and
Theres
equity

no way
value
is

there

can be

any

real

equity shares

value

on the stock

Todays

roughly

$4QM 50M
owns

.75 cents

$37.5M
public in equity

Obviously
value
is

the debt

aheady

this

company and
incentive options
to

the present

mirage

right
rate
if

M.kes having

options

pointless value

my
to

opinion
materially

At any

one could expect
they ever

have

little

be

diluted

get in the

money month fore

Amaral told bearance on

me

that the debt

holders

are

now

offering

six

the interest

principal

and

covenants

My

reaction
to

is that

this

is

too short think

of

what

will
will

be needed
probably

by CR11 need
cash

It

really

needs

be more like be able can
to

year
service

CRH
in

$20M
holiday

versus
if
it

debt

2000

To

tell

the truth
six

$1OM to think CRH will
payment have

be lucky

show much improvement Then
guy
will

before

the

months
to

wears off
trashed
is

be

left to

be

disappointment CR1-I with

you

my
where

name name am

as the

who couldnt

turn

or

in

time
At

or

worse -my
point

on

BK
busting

and people associate

me

the failure

that

after

my me
for
to

butt

for

CR11

H-rn-rn-in

Now

if

you

were

what

would

you

do
some

Knowing
has

CRH

will

be

60-75

hour So and

week trench-war
theres
all

me

Obviously
that

CR11

been

horribly

mismanaged
in

no reason
to

think

theres

silver

lining waiting

the

wings

need

do

is

show up
do what
consider

absohnely want

to

can for you because you have you
friend

been
better

generous

with

me

this

past

year
that

and you deserve
delivered signed

outcome
in

In

fairness investment

hope
that

you feel that
clearly failed

have up

for you at WIL on
to

an have
to

had

until

help But

measure

the risk

reward

Wouldnt

you
should

am

seriously

asking

myself why
to

do this The upside
to

just

isnt there

The Board

isnt willing

pay

for

what

needs

be

done

Honestly

do
the

not see

how we can dayihe
Based

reasonably

expect
is

WIL

to

cover

the shortfall

What
going

if at to

end

of

the

value

write

me

check

on

W/L what
at

insufficient

Are you just

What

if

no matter
or its

how

clever Will for

am
you
to

or

how many hours
pay

work
would

CRH
that

just

cant

be improved

enough
realistic

still

me

and what

amount

be

dont

think

me

expect

anything

At the same

time

dont

CONFUENTtI\L

Al 75

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 26 of 30

COFIDENTIL
think

CRH
been

will for

be able to pay

me

either

In

that

case

all

of

my work

would

have

nothing

This

is

understandably been
called

very

sad situation earlier

but its

not

my

fault

should have

much

What

should happen working
for

now
all

is that

should
to

hired assess

as Crisis Manager

for

six

months
CR1-I

the creditors

CRH
Then

and determine
could

whether
the

can be

salvaged

or
is

must be liquidated
that

implement

plan

My

initial

inclination

CRH

may

.need of

to

be put into court

BK

and be

thoughtfully

restructured

under protection

am
table

open

to talking

about
is

this

but the reality

is

think

we

should
all

go back
to

to at this

ground

zero

What

your/Goldman/Foothills

goal

We

need

be

together

Weve
Amaral

screwed

around

with about

this this

lot

Ive been

much

tortured
to

by Smith and
foi-

Ive worried

endlessly

because

want

be there

you

am recommending Independent
people
the think

all

of

us including meet
in

the creditors

and

CRHs
what do
it
it is

Directors be done
the upside

New York am

and

determine
to

that if

can
is

Whether
that

the right effort

person

And

am

guy

what

covers

this

Sincerely

Al 76

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 27 of 30

4.
Dynamic
Health care

Soutions

November

19

1999

Mr

Mark

Neporent
Capital

Cerberus

Management

450 Park Avenue

28

Floor

New York NY
Dear

10022

Mr

Neporent

Enclosed executed
file

is

the revised

Employment
Please

Agreement
return
fully

with

two

original

signature page
for

pages our

by Dan Crowley

executed

signature

rely

Pamel9idley
Assisth
to

HelTera

Daniel

Crowley

Enclosure

PLAIN1-IFrs

4OOCapoLMaII

Suite

1250.SacramentoCA

95814

916.449.6056-91449.6059

fax

CRtB

01350

EXHIBIT

Al 77

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 28 of 30

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01351

Al 78

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 29 of 30

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01352

Al 79

Case 1:04-cv-01565-SLR

Document 124-6

Filed 04/17/2007

Page 30 of 30

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CERB

0135

Al 80