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
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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
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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
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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
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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.
Each of the Loan Parties confirms in favor of the New Lender that as
of the date hereof (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.
xx.xx. 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.
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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
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]
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Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.,
as New Lender
By: /s/ Xxxxx Xxxxxxxxx
-------------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chief Financial Officer
Senior Vice President
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: Xxxx X. Xxxxxxxx
---------------------------
Name: Xxxx X. Xxxxxxxx
Title: CFO
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