EXHIBIT 10.21
TAX BONUS, TAX LOAN AND TAX INDEMNIFICATION AGREEMENT
This TAX BONUS, TAX LOAN AND TAX INDEMNIFICATION AGREEMENT (the
"Agreement") is dated as of April 22, 2002 by and among Transworld Healthcare
(UK) Limited, a limited company incorporated in England and Wales (the
"Company"), Transworld Healthcare, Inc. a New York corporation ("TWUS") and
Xxxxxxx X. Xxxxxx ("Employee").
RECITALS
WHEREAS, the Employee currently holds the number of redeemable shares
of 0.01 xxxxx each in the capital of the Company (the "Redeemable Shares"), and
which are redeemable into ordinary shares of the Company of 5p each, set forth
on Schedule A hereto.
WHEREAS, the Employee and the Company have entered into an Irrevocable
Undertaking regarding restrictions on exercising the Redeemable Shares until the
Company makes Employee an offer to purchase or redeem such Redeemable Shares.
WHEREAS, the Employee desires to sell, and the Company desires to
purchase, all of Employee's Redeemable Shares to the Company at their nominal
value in accordance with Article 17 of the UK Charter.
WHEREAS, the TWUS wishes (i) to pay Employee a cash bonus and (ii) to
make Employee a loan, and the Company wishes to indemnify Employee for certain
United States, New York State, and New York City (as applicable) income taxes,
in each case in connection with income taxes that become due as a result of the
Issuance (as defined below).
WHEREAS, TWUS is issuing the number of shares of common stock, par
value $0.01 per share, of TWUS ("TWUS Common Stock") set forth on Schedule A
hereto to Employee as compensation simultaneous with the execution of this
Agreement (the "Issuance").
WHEREAS, the parties hereto acknowledge that certain of the
indemnification obligations provided for in this Agreement are subject to the
approval of certain of the Company's existing lenders, as described in further
detail herein.
NOW, THEREFORE, in consideration of the premises and of the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto hereby agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall
have the following respective meanings:
"Additional Loan Amount" has the meaning set forth in Section 6(a)
hereof.
"AHG" means Allied Heathcare Group Limited.
"Cash Bonus Amount" is the amount identified on Schedule A hereto.
"Closing" has the meaning set forth in Section 10 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Compensatory Issuance Income Amount" is the amount identified on
Schedule A hereto.
"Corporate Group" means the Company, TWUS and AHG.
"Excess Taxable Compensation Income" has the meaning set forth in
Section 6 hereto.
"Final Determination" means a determination by an administrative agency
or judicial court with respect to which the time for appeal or further contest
has expired, or to which agreement or settlement with respect thereto has been
reached by Employee and such agency or court to an extent and in a manner
reasonably satisfactory to the Company.
"Income Taxes" means income taxes imposed by the United States, New
York State, and, if applicable, New York City on Employee's Taxable Compensation
Income, together with the hospital insurance excise tax imposed by Code Section
3111(b).
"Issuance" has the meaning set forth in the Recitals hereto.
"Loan Amount" is the amount identified on Schedule A hereto.
"Redeemable Shares" has the meaning set forth in the Recitals hereto.
"Redeemable Share Amount" has the meaning set forth in Section 2
hereto.
"Reportable Compensatory Issuance Income Amount" has the meaning set
forth in Section 5 hereto
"Stock Purchase Agreement Closing" means the closing (including the
funding thereof) of the Stock Purchase Agreement by and among TWUS, Hyperion TWH
Fund II LLC, Triumph Partners III, L.P., and Triumph III Investors, L.P., dated
April 22, 2002 with respect to the purchase of an aggregate amount of $3,187,500
of TWUS Common Stock.
"Taxable Compensation Income" means the aggregate amount of taxable
compensation income required to be included by Employee in Employee's gross
income for United States federal, New York State, and, if applicable, New York
City income tax purposes pursuant to Section 83(a) of the Code (and any
corresponding New York State and New York City income tax provisions) solely as
a result of Employee's receipt of TWUS Common Stock in the Issuance.
"TWUS" has the meaning set forth in the Recitals hereto.
"TWUS Common Stock" has the meaning set forth in the Recitals hereto.
"UK Charter" means the articles of association of the Company.
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2. PURCHASE OF REDEEMABLE SHARES; RECEIPT OF CASH BONUS AND LOAN
AMOUNT. Subject to the terms and conditions of this Agreement, and in
particular, but not limited to, Section 6(b), and in reliance on the
representations, warranties and covenants set forth herein, the Company agrees
(subject to compliance with applicable laws) to purchase, and the Employee
agrees to sell, all of Employee's issued and outstanding Redeemable Shares at
their nominal value in accordance with Article 17 of the UK Charter.
Notwithstanding anything in the UK Charter or in any documentation governing the
Redeemable Shares to the contrary, the Employee shall sell [his/her] Redeemable
Shares by: (a) executing a stock transfer form duly transferring such Redeemable
Shares to the Company (b) surrendering the share certificates representing such
Redeemable Shares (or an indemnity for lost certificates in a form acceptable to
the Company) to the Company and (b) receiving from the Company (pound)413 (the
"Redeemable Share Amount"). Such sale shall occur when provided in Section
10(d).
3. CASH PAYMENT BY COMPANY. At the Closing, TWUS will pay to Employee
cash in an amount equal to the sum of the Cash Bonus Amount plus the Loan
Amount. Employee shall execute and deliver to the TWUS a promissory note in the
form of Exhibit A attached hereto, in a principal amount equal to the Loan
Amount.
4. PLEDGE AND SECURITY AGREEMENT. The Employee agrees to enter into a
pledge and security agreement in the form of Exhibit B, attached hereto (the
"Pledge Agreement"), pursuant to which the Employee will grant TWUS a security
interest in the Collateral (as defined in the Pledge Agreement) as specified
therein in order to secure the Employee's obligations under the promissory note
executed by the Employee pursuant to Section 3 of this Agreement.
5. TAX TREATMENT; PREPARATION OF TAX RETURNS. All United States, state,
local and foreign tax returns filed after the date of this Agreement by any
member of the Corporate Group or Employee shall be prepared and filed on a basis
consistent with (i) the treatment of the receipt of the Cash Bonus Amount as
compensation income paid to Employee by TWUS, (ii) the treatment of the Issuance
as compensation income paid to Employee by TWUS in an amount equal to the (x)
product of the number of shares of TWUS Common Stock received in the Issuance
and (y) the average of the high and low trading prices of TWUS Common Stock as
reported on the American Stock Exchange on the date of issuance (the "Reportable
Compensatory Issuance Income Amount") for purposes of the Code and subject to
the provisions of Code Section 83, and (iii) the treatment of the Redeemable
Shares as non-qualified stock options. Without limiting the foregoing, Employee
shall include in Employee's United States federal, New York State, and, if
applicable, New York City gross income compensation income for 2002 an amount
equal to the Cash Bonus Amount plus the Reportable Compensatory Issuance Income
Amount. Each party covenants and agrees that it will not take or assert any
position on any tax return, report or otherwise which is inconsistent with the
positions stated in the preceding sentence; provided, however, that nothing
herein shall prevent or prohibit Employee or any member of the Corporate Group
from complying with applicable laws.
6. INDEMNIFICATION FOR ADDITIONAL INCOME TAXES.
(a) The parties agree that following a Final Determination that
Employee must include Taxable Compensation Income in excess of the
Compensatory Issuance Income Amount in gross income, (such excess
amount, "Excess Taxable Compensation
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Income") the Company shall indemnify Employee for (i) 100% of any
resulting increase in Income Taxes, (ii) interest, penalties and
additions with respect to such increase, (iii) reasonable legal,
accounting and similar fees and expenses incurred by Employee in
connection with tax contests relating to any such increase in Income
Taxes, and (iv) any United States, New York State, and, if applicable,
New York City taxes payable by Employee as a result of payments
pursuant to this Section 6; provided, however, that the Company shall
forward to Employee any such amounts attributable to Excess Taxable
Compensation Income due to the difference between the Compensatory
Issuance Income Amount and the Reportable Compensatory Issuance Income
Amount at least five days prior to the date Employee files the
appropriate United States, New York State, and, if applicable, New York
City tax returns, as contemplated in Section 5 in New York State, and
if applicable New York City; and provided further, that the Company
shall not be obligated to make any payments or loans under this Section
6 in excess of $622,371 in the aggregate . Notwithstanding anything to
the contrary contained in this Agreement, with respect to any amounts
paid to Employee pursuant to this Section 6, an amount equal to 20% of
the Excess Taxable Compensation Income shall be considered to be an
additional Loan Amount, up to a maximum additional Loan Amount of
$175,427 (the "Additional Loan Amount"). Accordingly, the Company shall
not be required to forward to the Employee (or the relevant taxing
authority) any such amounts unless and until the Employee has executed
and delivered to the Company a promissory note in the form of Exhibit A
in a principal amount equal to the Additional Loan Amount.
(b) Notwithstanding anything to the contrary contained herein, the
Company shall have no obligations or liabilities with respect to the
purchase provisions of Section 2 and the indemnification provisions of
Section 6(a) unless and until the Company has received the requisite
consents pursuant to (i) that certain credit agreement originally dated
December 17, 1999 made between, among others, Allied Healthcare Group
Limited, certain of its subsidiaries as Borrowers and/or Guarantors and
Barclays Bank PLC as agent and security agent, as amended, stated and
restated from time to time, (ii) that certain credit agreement
originally dated December 17, 1999 made between, among others, AHG,
certain of its subsidiaries as Borrowers and/or Guarantors, BNP Paribas
as agent and Barclays Bank PLC as security agent, as amended, stated
and restated from time to time, and (iii) that certain intercreditor
deed originally dated December 17, 1999 made between, among others, the
parties to the agreements described in paragraphs (i) and (ii) above,
as amended, stated and restated from time to time.
7. INDEMNIFICATION BY EMPLOYEE; WITHHOLDING.
(a) Employee shall indemnify and hold harmless each member of the
Corporate Group to the extent that any such member is required by law
to withhold any amount with respect to Employee's Taxable Compensation
Income, Excess Taxable Compensation Income or any amount paid by the
Company to Employee under this Agreement; provided that Employee's
liability under this Section 7(a) shall not exceed the lesser of (i)
the actual amount paid to Employee pursuant to Section 3 and Section 6
hereof after subtracting any withholding by any member of the Corporate
Group pursuant to Section 7(b) hereof, and (ii) the amount owed by
Employee for Income Taxes after
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deducting the amounts thereof withheld by any member of the
Corporate Group and the amount thereof actually paid by Employee.
(b) The Company or any other member of the Corporate Group may
withhold from any amount owed or to be paid to Employee under this
Agreement any amount required by law to be withheld for taxes or
otherwise, including, without limitation, as a result of the Issuance,
or such greater amount as may be requested by Employee. Amounts
withheld by the Company or any other member of the Corporate Group from
any payment pursuant to Section 3 or Section 6 hereof shall be timely
paid to the appropriate taxing authority, and such payments shall be
treated as having been paid to Employee by the Company for purposes of
this Agreement.
8. COOPERATION AND EXCHANGE OF INFORMATION. Each party hereto agrees to
provide the other party hereto with such cooperation and information as such
other party shall reasonably request in connection with the preparation or
filing of any tax return or claim for tax refund not inconsistent with this
Agreement or in conducting any audit or other proceedings in respect of Income
Taxes or to carry out the provisions of this Agreement.
9. REPRESENTATION BY EMPLOYEE. Employee hereby represents and warrants
that none of the transactions contemplated by this agreement will subject
Employee to any income tax in any jurisdiction other than the United States, New
York State, or New York City.
10. THE CLOSING; DELIVERIES.
(a) Upon the terms and subject to the conditions of this
Agreement, the consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxx
Raysman Xxxxxxxxx Xxxxxx & Xxxxxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, XX
00000, on the date of the Stock Purchase Agreement Closing, unless
another date and/or place is agreed in writing by each of the parties
hereto.
(b) At the Closing, TWUS shall deliver or cause to be delivered to
the Employee (unless previously delivered), the following:
(i) a duly executed pledge and security agreement by and
between TWUS and the Employee in the form attached hereto as
Exhibit B; and
(ii) cash in the form of immediately available funds in an
amount equal to the Cash Bonus Amount plus the Loan Amount.
(c) Deliveries by the Employee. At the Closing, the Employee shall
deliver to TWUS (unless previously delivered), the following:
(i) a duly executed promissory note from the Employee to TWUS
in the form attached hereto as Exhibit A;
(ii) a pledge and security agreement by and between the
Company and the Employee in the form attached hereto as Exhibit B
that has been duly executed by the Employee and the affiliates of
the Employee.
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(d) Notwithstanding the foregoing, but subject always to Section
6(b), immediately following the receipt of necessary approval of the
stockholders of the Company, the Employee and the Company shall
complete the purchase and sale of the Redeemable Shares in accordance
with Section 2. At such time, (i) the Company shall deliver or cause to
be delivered to Employee cash in the form of immediately available
funds in an amount equal to the Redeemable Share Amount, and (ii) the
Employee shall deliver to the Company a duly executed stock transfer
form transferring the Redeemable Shares to the Company, and the share
certificates representing such Redeemable Shares (or an indemnity for
lost certificates in a form acceptable to the Company).
11. GENERAL PROVISIONS.
(a) FURTHER ASSURANCES. Each party hereto shall cooperate
reasonably with the other parties, and execute and deliver, or use its
reasonable best efforts to cause to be executed and delivered, all
instruments, including instruments of conveyance, assignment and
transfer, and to make all filings with, and to obtain all consents,
approvals or authorizations of, any governmental or regulatory
authority or any other person under any permit, license, agreement,
indenture or other instrument, and take all such other actions as such
party may reasonably be requested to take by any other party hereto
from time to time, consistent with the terms of this Agreement, in
order to effectuate the provisions and purposes of this Agreement.
(b) ENTIRE AGREEMENT. This Agreement, the promissory note
delivered by the Employee at Closing, and the pledge and security
agreement delivered at Closing shall constitute the entire agreement
between the parties hereto with respect to the subject matter hereof,
superseding all previous negotiations, commitments and writings with
respect to such subject matter.
(c) GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
(d) NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been
duly given or made as of the date delivered or sent if delivered
personally or sent by telecopier or sent by prepaid overnight carrier
to the parties at the following addresses (or at such other addresses
as shall be specified by the parties by like notice):
(i) if to the Company:
Transworld Healthcare (UK) Limited
Xxxxx Xxxxxxxx Xxxx
Xxxxxx Xxxx
Xxxxx
Xxxxxxxxxxxxx XXX0 OTL
Fax: 00000 000 000
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(ii) if to TWUS:
Transworld Healthcare, Inc.
000 Xxxxxxx Xxx.
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxx
Fax: (000) 000-0000
(iii) if to Employee:
Transworld Healthcare (UK) Limited
Xxxxx Xxxxxxxx Xxxx
Xxxxxx Xxxx
Xxxxx
Xxxxxxxxxxxxx XXX0 OTL
Fax: 00000 000 000
(e) AMENDMENT AND MODIFICATION. This Agreement may be amended,
modified or supplemented, and rights hereunder may be waived, only by a
written agreement signed by the Employee and duly authorized officers
of the Company and TWUS. No waiver of any term, provision or condition
of or failure to exercise or delay in exercising any rights or remedies
under this Agreement, in one or more instances, shall be deemed to be,
or construed as, a further or continuing waiver of such term,
provision, condition, right or remedy or as a waiver of any other term,
provision or condition of, or right or remedy under, this Agreement.
(f) COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in any number of separate counterparts, each
such counterpart being deemed to be an original instrument, and all
such counterparts shall together constitute the same agreement.
(g) EFFECT OF HEADINGS; CONSTRUCTION. The descriptive headings in
this Agreement have been inserted for convenience only and shall not be
deemed to limit or otherwise affect the construction of any provision
thereof or hereof. The parties have participated jointly in the
negotiation and drafting of this Agreement (including the promissory
note and pledge and security agreement contemplated to be entered into
at Closing) with counsel sophisticated in investment transactions. In
the event an ambiguity or question of intent or interpretation arises,
this Agreement and the agreements, documents and instruments executed
and delivered in connection herewith shall be construed as if drafted
jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of
any provisions of this Agreement and the agreements, documents and
instruments executed and delivered in connection herewith.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above individually or by their duly
authorized representatives.
TRANSWORLD HEALTHCARE (UK) LIMITED
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman/CEO
TRANSWORLD HEALTHCARE, INC.
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Chairman/CEO:
EMPLOYEE
By: /s/ Xxx Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
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SCHEDULE A
Xxxxxx Eames Total
------ ----- -----
A. Redeemable Shares 4,130,000 2,940,000 7,070,000
B. TWUS Shares in Issuance 684,258 487,099 1,171,357
C. Compensatory Issuance Income Amount(1) $2,737,032 $1,948,396 $4,685,428
D. Estimated Total Tax Payable $1,439,233 $873,267 $2,312,500
E. Loan Amount(2) $550,000 $390,000 $940,000
F. Estimated Gross Up Amount(3) $512,030 $362,970 $875,000
G. Cash Bonus Amount(4) $1,401,263 $846,237 $2,247,500
H. Total to be paid by Company at $1,951,263 $1,236,237 $3,187,500
Closing (Line "E" plus Line "G")
---------
(1) Based on assumed price of TWUS Common Stock of $4.00.
(2) Negotiated Amount.
(3) Calculated as sum of Line "G" plus Line "E" less Line "D".
(4) Negotiated amounts.
