TRANSWORLD HOME HEALTHCARE, INC.
00 Xxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
November 13, 1996
Health Management, Inc.
and the other Loan Parties
under and as defined in the
Credit Agreement referred to below
0000-X Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxxx
Re: HMI Senior Credit Facility
--------------------------
Ladies and Gentlemen:
Reference is made to (a) the Credit Agreement dated as of March 31,
1995 (as heretofore, herein or hereafter amended, restated, supplemented or
otherwise modified, the "Credit Agreement") among Health Management, Inc.
("HMI"), Home Care Management, Inc., HMI Illinois, Inc., HMI Pennsylvania,
Inc., the Guarantors named therein, the Lenders named therein and The Chase
Manhattan Bank (formerly known as Chemical Bank), as Agent; (b) the agreement
dated July 26, 1996 (the "First Forbearance Agreement") among The Chase
Manhattan Bank, individually and as Agent, European American Bank and the
Loan Parties; (c) the agreement dated October 18, 1996 (the "Second
Forbearance Agreement") among The Chase Manhattan Bank, individually and as
Agent, European American Bank and the Loan Parties; and (d) the Credit
Agreement dated as of July 31, 1996 (as amended, restated, supplemented or
otherwise modified, the "BT Credit Agreement") among Transworld Home
HealthCare, Inc., various lenders (the "NL Lenders") and Bankers Trust
Company as agent (the "NL Agent").
On the date hereof, The Chase Manhattan Bank (individually and as
Agent) ("Chase"), European American Bank ("EAB") and Transworld Home
Healthcare, Inc. (the "New Lender") have entered into Purchase and Sale
Agreements (collectively, the "Purchase and Sale Agreements") whereby, inter
-----
alia, the New Lender has purchased the Assigned Rights (as defined in the
----
Purchase and Sale Agreements) of the Agent and the Lenders under the Loan
Documents. Also on the date hereof, Transworld Home HealthCare, Inc., IMH
Acquisition Corp. and Health Management, Inc., have executed and delivered an
Agreement and Plan of Merger, (the "Merger Agreement").
Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Credit Agreement, the First Forbearance
Agreement and the Purchase and Sale Agreements, as applicable. To the extent
there is any inconsistencies in the definitions, the priority of the
agreements (and definitions set forth therein) shall be: the First
Forbearance Agreement, the Second Forbearance Agreement, the Credit Agreement
and the Purchase and Sale Agreement.
1. Consent to Purchase and Sale Agreements
---------------------------------------
The Loan Parties hereby consent and agree to the transactions
contemplated by the Purchase and Sale Agreements, including, without
limitation, by waiving any requirement of section 11.03(c) of the Credit
Agreement with respect thereto. The Loan Parties acknowledge in favor of
the New Lender that the New Lender (i) has acquired the Assigned Rights of
the Agent and the Lenders under the Credit Agreement, the Security Documents
and the other Loan Documents and (ii) hereafter will be authorized to take
such actions and exercise such powers under the Credit Agreement, the
Security Documents and the other Loan Documents as are granted or delegated
to, or required of, the Agent and the Lenders together with such powers as
are reasonably incidental thereto.
2. Forbearance
-----------
You have requested that the New Lender agree to extend the First
Forbearance Period and forbear from exercising any of its legal, contractual
or equitable rights or remedies in respect of any of the Existing Events of
Default (as set forth in the First Forbearance Agreement and/or the Second
Forbearance Agreement) or any other Defaults or Events of Default under the
Credit Agreement, the First Forbearance Agreement or the Second Forbearance
Agreement during the period commencing on the date hereof through December
12, 1996 (the "Additional Forbearance Period"). Subject to the agreement of
the Loan Parties to the terms and conditions set forth herein as evidenced by
their signature below, the New Lender agrees to forbear during the Additional
Forbearance Period from exercising any of its legal, contractual or equitable
rights or remedies in respect of any of the Existing Events of Default or any
other currently existing Defaults or Events of Default under the Credit
Agreement, the First Forbearance Agreement or the Second Forbearance
Agreement.
3. Additional Revolving Credit Loans
---------------------------------
Pursuant to Section 5.01 of the Credit Agreement, the obligation of
the New Lender to make Loans and to issue or cause to be issued Letters of
Credit is subject to, inter alia, the conditions precedent that (i) no Event
of Default shall have occurred and be continuing and (ii) no material adverse
change in the business, assets, operations or financial condition of any
Borrower or any of its subsidiaries shall have occurred since April 30, 1994.
You acknowledge that you have not satisfied all applicable conditions
precedent set forth in Section 5.01 of the Credit Agreement by virtue of,
inter alia, the occurrence of such a material adverse change and the
continuance of the Existing Events of Default, and you further acknowledge
that you have not complied with all of the representations, warranties,
terms, covenants and conditions contained in the First Forbearance Agreement
and the Second Forbearance Agreement. Notwithstanding the foregoing, you
have requested that the New Lender make additional Revolving Credit Loans to
the Borrowers up to a maximum aggregate amount equal to $3,000,000.
Notwithstanding the failure to satisfy the conditions precedent set
forth in Section 5.01 of the Credit Agreement and all of the representations,
warranties, terms, covenants and conditions contained in the First
Forbearance Agreement, the New Lender is willing, subject to its continuing
sole and absolute discretion, to make additional Revolving Credit Loans to
the Borrowers up to an aggregate amount of $3,000,000 from time to time in
accordance with the foregoing request, subject, however, without limiting the
------- -------
New Lender's sole and absolute discretion as aforesaid, to (i) satisfaction
of all other applicable conditions precedent set forth in Section 5.01 of the
Credit Agreement with respect to each such Revolving Credit Loan and (ii) the
agreement of the Loan Parties, evidenced by their signature below, (1) to the
terms and conditions hereof, (2) that the proceeds of any such Revolving
Credit Loan shall be used solely and exclusively for the proper operation of
the Borrowers' businesses under their present circumstances in the ordinary
course, including, without limitation, the payment of professional fees and
expenses incurred in connection with the transactions contemplated in this
Agreement and the Merger Agreement, and all other agreements between the New
Lender and the Loan Parties contemplated to be executed and delivered
simultaneously therewith, and (3) that each such Revolving Credit Loan shall
be and shall remain an Alternate Base Loan. Nothing herein shall constitute
or be deemed to constitute a waiver of any conditions precedent set forth in
Section 5.01 of the Credit Agreement, the First Forbearance Agreement or the
Second Forbearance Agreement with respect to any Credit Event.
Notwithstanding (i) that the New Lender may, subject to its
continuing sole and absolute discretion, make Revolving Credit Loans in
accordance with the foregoing terms and conditions, and (ii) anything to the
contrary in any other agreement, you agree and acknowledge that the Total
Commitment and the obligations of the New Lender to issue or cause to be
issued Letters of Credit has terminated and has not been renewed or
reinstated by this agreement or by any act or failure to act by the New
Lender.
The willingness of the New Lender to make Revolving Credit Loans to
the Borrowers from time to time as provided above is subject to, inter alia,
the Borrowers' reaffirmation of certain of their obligations under the First
Forbearance Agreement and the Second Forbearance Agreement for the benefit of
the New Lender, and their agreement to certain other terms and conditions, as
follows:
(a) The Loan Parties shall provide to the New Lender no later
than the 15th day following the end of each month hereafter a
report in form, scope and substance satisfactory to the New Lender
indicating that HMI's Consolidated gross sales revenues for each
such month exceeded $12,000,000 for each month covered by this
Agreement, each such report to be certified as true and correct by
your chief financial or chief operating officer.
(b) The Loan Parties shall provide to the New Lender no later
than the 15th day following the end of each month hereafter a
report in form, scope and substance satisfactory to the New Lender
indicating that the aggregate dollar amount of all accounts
receivable of HMI and its Consolidated subsidiaries that were
outstanding as of the last day of such month for 120 days or less
exceeded $22,500,000.
(c) The Loan Parties shall provide to the New Lender no later
than the 10th day following the end of each calendar week hereafter
a "flash" report providing information substantially similar in
form and scope to the four-page summary report contained in the
"flash reports" which in the past were prepared by Ernst & Young,
LLP, with respect to HMI and its subsidiaries, which "flash
reports" shall be certified as true and correct by your chief
financial or chief operating officer, provided, however, that the
-------- -------
Loan Parties shall provide to the New Lender upon its request the
documentation supporting such report.
(d) The Loan Parties shall provide to the New Lender such
other and further financial and operational information and
reports, and satisfy such other and further financial requirements,
as to which the New Lender is or may be subject, or is required or
may be requested to deliver, pursuant to the BT Credit Agreement or
the requirements of the board of directors of the New Lender, in
form, scope and substance, and in compliance with applicable timing
requirements with respect thereto, as set forth in the BT Credit
Agreement or necessary for compliance with the requirements of the
New Lender, in all cases in form, scope and substance satisfactory
to the New Lender and, if requested, prepared as if the fiscal year
of the Loan Parties ended on October 31.
(e) The Loan Parties shall execute, acknowledge, deliver and
cause to be duly filed all such instruments and other documents,
and shall take all such actions, as the New Lender may from time to
time request to assure the validity, enforceability, attachment,
perfection and first priority of the New Lender's Liens in the
Collateral including, without limitation, as required in or
permitted by the Security Documents.
(f) All other (i) obligations or actions required of the Loan
Parties under the Credit Agreement or the Loan Documents including,
without limitation, those set forth in Articles VI and VII of the
Credit Agreement, or (ii) non-payment obligations or actions (to
the extent applicable and practicable) of the Borrower under the BT
Credit Agreement or the Credit Documents (as defined in the BT
Credit Agreement, including, without limitation, those set forth in
Sections 8 and 9 of the BT Credit Agreement, shall be performed by
the Loan Parties for the benefit of the New Lender. Without
limiting the generality of the foregoing, the Loan Parties shall
provide to the New Lender, to the NL Agent and the NL Lenders all
documents, reports, filings and information heretofore required to
be provided to the Agent and/or the Lenders under the Credit
Agreement or the Loan Documents, or to be provided to the NL Agent
and/or the NL Lenders under the BT Credit Agreement or the Credit
Documents (to the extent applicable and practicable), in each case
in form, scope and substance satisfactory to the New Lender and the
NL Agent.
(g) Notwithstanding anything to the contrary contained in
Section 2.09(c) of the Credit Agreement, unless the New Lender, in
its sole and absolute discretion, otherwise consents in writing,
the net proceeds of any issuance of any debt or equity securities
of HMI or its subsidiaries shall be applied to reduce the
Obligations until all Obligations have been repaid in full.
(h) Notwithstanding anything to the contrary contained in the
Credit Agreement, Section 2.05(a) of the Credit Agreement is hereby
deleted in its entirety and replaced, amended and restated as
follows:
(a) Subject to the provisions of Section 2.05(c) and
Section 2.08 hereof, each Alternate Base Loan shall bear
interest at a rate per annum equal to the Applicable
Margin plus the Base Rate (the two preceding capitalized
terms, as defined in the BT Credit Agreement) in effect
from time to time, plus .50%.
(i) Section 11.01(b) of the Credit Agreement is hereby
amended such that notices, consents and other communications
provided for in the Credit Agreement or the Loan Documents, if to
the Agent, shall be delivered, mailed or telecopied (with receipt
confirmed) to Transworld Home Healthcare, Inc., 00 Xxxxxxxx Xxxxxx,
Xxxxx, Xxx Xxxxxx 00000, Attn: Xx. Xxxxx X. Xxxxxxxxx, with a copy
to Proskauer Xxxx Xxxxx & Xxxxxxxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, Attn: Xxxxx X. Xxxx, Esq., and to Bankers Trust
Company, Xxx Xxxxxxx Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attn:
Xxxxxxxx Xxxxx.
(j) Notwithstanding anything to the contrary contained in the
Credit Agreement, a "Change of Control" with respect to the Credit
Agreement shall be deemed to have occurred if (i) any person or
group (within the meaning of Rule 13d-5 of the Securities and
Exchange Commission as in effect on the date hereof) shall acquire,
directly or indirectly, beneficially or of record, shares
representing more than 20% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of HMI or
(ii) HMI shall cease to own 100% of all classes of stock of each
other Borrower.
4. Miscellaneous
-------------
Except to the extent otherwise expressly set forth in the Merger
Agreement (including the disclosure schedules attached hereto), each of the
Loan Parties reaffirms and restates for the benefit of the New Lender the
representations and warranties set forth in Article IV of the Credit
Agreement and section 7 of the Security Agreement and all such
representations and warranties are true and correct in all material respects
on the date hereof with the same force and effect as if made on such date
(except to the extent that they relate expressly to an earlier date in which
case they were true and correct as of such date). In addition, each of the
Loan Parties represents and warrants (which representations and warranties
shall survive the execution and delivery hereof) to the New Lender that:
(a) it has the power and authority to execute, deliver and
carry out the terms and provisions of this agreement and the
transactions contemplated hereby (including, without limitation,
those contemplated in the Purchase and Sale Agreements) and has
taken or caused to be taken all necessary actions to authorize the
execution, delivery and performance of this agreement and the
transactions contemplated hereby;
(b) no consent of any other person (including, without
limitation, shareholders or creditors of any Loan Party) and no
action of or filing with any governmental or public body or
authority is required to be maintained by any Loan Party to
authorize, or is otherwise required in connection with the
execution, delivery and performance of this agreement or the
consummation of the transactions contemplated hereby;
(c) this agreement has been duly executed and delivered by or
on behalf of it and constitutes its legal, valid and binding
obligation enforceable in accordance with its terms;
(d) the execution, delivery and performance of this agreement
will not violate any law, statute or regulation, or any order or
decree of any court or governmental instrumentality applicable to
it, or conflict with, or result in the breach of, or constitute a
default under any contractual obligations of the Loan Parties; and
(e) as of the date hereof there exists no Default or Event of
Default other than the Existing Events of Default.
(i) it has no defense, offset, claim, counterclaim or recoupment,
whether with respect to any of its Obligations under the Credit Agreement
(including, without limitation, the payment when due of all principal,
interest, fees and other Obligations), any Note, any other Loan Document or
otherwise; (ii) the aggregate outstanding principal amount of the Obligations
to Chase under the Seller's Revolving Credit Loans, Seller's Term Loan and
Seller's Letters of Credit as of the date hereof is $24,181,095.19 (the
"Chase Principal Amount"), the aggregate amount of all accrued and unpaid
interest on the Chase Principal Amount (together with all fees payable to
Chase under or pursuant to the Loan Documents) as of the date hereof is
$68,926.44, the aggregate amount of all out-of-pocket expenses reimbursable
by the Loan Parties to Chase under or pursuant to the Loan Documents
approximately equals $112,500, the aggregate outstanding principal amount of
the Obligations to EAB under the Seller's Revolving Credit Loans, Seller's
Term Loan and Seller's Letters of Credit as of the date hereof is
$4,168,904.76 (the "EAB Principal Amount"), and the aggregate amount of all
accrued and unpaid interest on the EAB Principal Amount (together with all
fees payable to EAB under or pursuant to the Loan Documents) as of the date
hereof is $12,858.35; (iii) the Obligations are secured by the Collateral
described in the Security Documents and the New Lender has a valid,
perfected, enforceable and non-avoidable first priority Lien on and security
interest in the Collateral; (iv) no claims or causes of action exist in favor
of the Loan Parties against the Agent, the Lenders or the New Lender,
including, without limitation, claims or causes of action (1) under
principles of lender liability, (2) that would enable the Loan Parties to
equitably subordinate any of the Obligations under the Credit Agreement owing
to the New Lender to the claims of other creditors or interests of equity
security holders of the Loan Parties, (3) that would give rise to any
avoidance or recovery actions against the New Lender under sections 542, 544,
545, 547, 548, 549, 550, 551 and 553 of 11 U.S.C. SS 101 et seq. ("the
-- ---
Bankruptcy Code"), (4) that any of the Agent, the Lenders or the New Lender
is an insider of the Loan Parties as defined in section 101(31) of the
Bankruptcy Code; or (5) under any other principle or theory whether similar
or dissimilar to the foregoing; and, if any such claims and causes of action
exist as of the date hereof, all such claims and causes of action are hereby
waived and released by each of the Loan Parties. Notwithstanding the
foregoing, the Loan Parties hereby waive and release any claim or cause of
action against the Agent, the Lenders or the New Lender described in this
paragraph that exists or could be asserted as of the date hereof.
This agreement constitutes a Loan Document and a default by the
Loan Parties with respect to any of their obligations hereunder (which are
joint and several), including, without limitation, under any covenant
contained herein, shall constitute an immediate Event of Default.
Each Guarantor confirms that the principal and interest of the
Revolving Credit Loan described herein, if and when made, shall constitute
Obligations guaranteed by it pursuant to Article XIII of the Credit
Agreement, and each Grantor confirms that the principal and interest of such
Revolving Credit Loan shall constitute Obligations secured by all Collateral
pledged by such Grantor pursuant to each Loan Document to which it is a
party.
The Credit Agreement and each of the other Loan Documents is hereby
ratified and confirmed in all respects and all of the representations,
warranties, terms, covenants and conditions of the Credit Agreement and each
of the other Loan Documents, and all obligations of the Loan Parties
thereunder, shall remain unamended, unwaived and in effect in accordance with
their respective terms. Each of the Loan Parties hereby acknowledges and
agrees that any willingness of the New Lender to make Revolving Credit Loans
under section 3 above shall be subject to the continuing sole and absolute
discretion of the New Lender and shall not be deemed to constitute an
amendment to, or waiver or modification of, any term or provision of any Loan
Document or any other document or instrument referred to herein or therein.
The New Lender's willingness, subject to its continuing sole and
absolute discretion, to make Revolving Credit Loans in accordance with this
agreement does not, and shall not, create (nor shall the Borrowers rely upon
the existence of or claim or assert that there exists) any obligation of the
New Lender to consider or agree to any amendment to or waiver or modification
of any term or provision of any Loan Document or any other document or
instrument referred to herein or therein. In the event that the New Lender
subsequently agrees to consider any such amendment, waiver or modification,
neither the New Lender's willingness, subject to its continuing sole and
absolute discretion, to make Revolving Credit Loans as set forth herein, nor
anything else contained in this agreement nor any other conduct of the New
Lender, shall be of any force or effect on the New Lender's consideration or
decision with respect to any such requested amendment, waiver or
modification, and the New Lender shall have no obligation whatsoever to
consider or agree to any amendment to or waiver or modification of any Loan
Document or any other document referred to herein or therein or waive or
forbear with respect to any Default or Event of Default.
The New Lender reserves all legal, contractual and equitable rights
and remedies available to it as a result of any past, present or future
Default or Event of Default.
This agreement shall be governed by the laws of the State of New
York (other than the conflicts of law principles thereof). This agreement
may be executed in counterparts and shall become effective upon the New
Lender's receipt of copies hereof (which may include facsimile copies)
executed by the New Lender and acknowledged and agreed to by each Loan Party.
[End of Text]
Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.,
as New Lender
By:
----------------------------
Name:
Title:
ACCEPTED AND AGREED:
HEALTH MANAGEMENT, INC.
HOME CARE MANAGEMENT, INC.
HMI ILLINOIS, INC.
HMI PENNSYLVANIA, INC.
HEALTH REIMBURSEMENT CORPORATION
HMI RETAIL CORP., INC.
HMI PMA, INC.
HMI MARYLAND, INC.
By:
--------------------------------
Name:
Title:
