1
TRANSWORLD HOME HEALTHCARE, INC.
00 XXXXXXXX XXXXXX
XXXXX, XXX XXXXXX 00000
March 26, 1997
Health Management, Inc.
0000-X Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated
as of November 13, 1996, as amended by letter agreements, dated November 27,
1996, December 12, 1996, December 23, 1996, January 10, 1997 and January 13,
1997, among Transworld Home HealthCare, Inc. ("Transworld"), IMH Acquisition
Corp. ("Newco"), and Health Management, Inc. (the "Company") (as amended, the
"Merger Agreement"). Terms defined in the Merger Agreement shall have their
defined meanings herein, unless otherwise defined herein.
The parties have agreed that in view of the Company's publicly
announced restatement of its financial statements for the quarterly periods
ended July 31, 1996 and October 31, 1996, and the Company's publicly announced
charge for the quarterly period ended January 31, 1997, it is appropriate to
further amend the Merger Agreement, among other things, to further reduce the
Merger Consideration.
Accordingly, the parties hereto agree as follows:
1. Section 1.6(b) of the Merger Agreement is hereby amended by
changing the amount "$1.50" to "$0.30".
2. Section 7.1(e) of the Merger Agreement is hereby deleted
(it being acknowledged by Transworld for purposes hereof and Section 7.3(b) of
the Merger Agreement that the Company will not obtain a fairness opinion with
respect to the Merger Consideration, as reduced by this amendment).
3. Section 7.3(b) of the Merger Agreement is hereby amended in
its entirety and, as so amended, shall read as follows:
"The representations and warranties of the Company set forth
in this Agreement shall be true and correct in all material respects at and as
of the Effective Time as if made at and as of such time, except for changes
contemplated by this Agreement and by the Disclosure Schedule, the Deferred
Schedules, the Supplemental Disclosure Schedule dated January 13, 1997 and the
Supplemental Disclosure Schedule dated March 26, 1997 and changes
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Health Management, Inc.
March 26, 1997
Page 2
reflecting historical facts and current trends disclosed in the Company's
Quarterly Reports on Form 10-Q for the quarterly period ended January 31, 1997,
on Form 10-Q/A-2 for the quarterly period ended October 31, 1996 and on Form
10-Q/A for the quarterly period ended July 31, 1996 (it being agreed, however,
that (i) all descriptions therein as to the effect of Olanzapine or other
antipsychotic drugs shall be deemed superseded and replaced by the description
set forth in item A. of Section 3.19 of the Supplemental Disclosure Schedule
dated January 13, 1997 and (ii) notwithstanding the disclosure of a current
trend, a Material Adverse Effect may nevertheless be deemed to have occurred by
reason of a material change in such current trend), and except to the extent
that any such representation or warranty is made as of a specified date, in
which case such representation or warranty shall have been true and correct in
all material respects as of such date."
4. Section 7.3(h) of the Merger Agreement is hereby amended in
its entirety and, as so amended, shall read as follows:
"At or prior to April 11, 1997, the Amended Stipulation of
Partial Settlement of the consolidated class actions under the caption In re
Health Management, Inc. Securities Litigation, Master File No. 96-CV-889 (ADS),
dated December 19, 1996, shall have been further amended, in form and substance
satisfactory to Transworld and Newco, to provide for the settlement of such
actions for a reduced settlement amount not to exceed $4.55 million, and at or
prior to the Effective Time, such Amended Stipulation of Partial Settlement, as
so amended, shall have been finally approved by the United States District Court
and such Court shall have entered a judgment (including a bar order)
substantially in the form of Exhibit B to such Amended Stipulation and all
applicable proceedings for review, appeals, and rights of appeal of such
judgment (other than a proceeding or order, or any appeal or petition for a writ
of certiorari, pertaining solely to any plan of allocation and/or application
for attorneys' fees, costs, or expenses) shall have been exhausted or all
applicable waiting periods during which any appeal or other request for review
of such judgment (other than a proceeding or order, or any appeal or petition
for a writ of certiorari, pertaining solely to any plan of allocation and/or
application for attorneys' fees, costs, or expenses) may be made shall have
expired without any appeal having been filed."
5. Section 7.3(k) of the Merger Agreement is hereby deleted
(it being acknowledged by the Company that Transworld will not obtain an updated
opinion of UBS Securities LLC as to the fairness of the consideration being paid
by Transworld).
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Health Management, Inc.
March 26, 1997
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* * *
Except to the extent amended hereby, the Merger Agreement
shall remain in full force and effect and nothing herein shall affect, or be
deemed to be a waiver of, the other terms and provisions of the Merger
Agreement.
The effectiveness of this amendment shall be subject, at the
option of Transworld and Newco, to the receipt by Transworld of the written
consent to this amendment by the lenders (the "Banks") party to the Credit
Agreement, dated as of July 31, 1996, as amended, among Transworld, the Banks
and Bankers Trust Company, as agent. If the written consent of the Banks has not
been obtained on or prior to April 11, 1997, then at any time thereafter
Transworld may, in its sole discretion, terminate this amendment (in which case
this amendment shall be null and void ab initio) and terminate the Merger
Agreement.
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Health Management, Inc.
March 26, 1997
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If this letter correctly sets forth our understanding with
respect to the foregoing matters, kindly execute and return the enclosed copy of
this letter to evidence our binding agreement.
Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.
By /s/ Xxxxxx X. Fine
------------------------------
Name: Xxxxxx X. Fine
Title: President
IMH ACQUISITION CORP.
By /s/ Xxxxxx X. Fine
------------------------------
Name: Xxxxxx X. Fine
Title: President
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ Wm. Xxxxx Xxxxx
-------------------------------------
Name: Wm. Xxxxx Xxxxx
Title: President and Chief
Executive Officer
