Transworld Home HealthCare, Inc.
00 Xxxxxxxx Xxxxxx
Xxxxx, Xxx Xxxxxx 00000
January 13, 1997
Health Management, Inc.
0000-X Xxxxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Ladies and Gentlemen:
Reference is made to (i) 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 and January 10, 1997, among
Transworld Home HealthCare, Inc. ("Transworld"), IMH Acquisition Corp.
("Newco"), and Health Management, Inc. (the "Company") (as amended, the
"Merger Agreement") and (ii) the Stock Purchase Agreement, dated as of
November 13, 1996, as amended by letter agreements, dated November 27, 1996,
December 12, 1996, December 23, 1996 and January 10, 1997, among Transworld
and the Company (as amended, the "Stock Purchase 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 recent
business performance, it is appropriate to amend the Merger Agreement, among
other things, to 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 "$2.00" to "$1.50". The Company hereby represents and
warrants to Transworld and Newco that the Company has received the opinion of
NatWest that the Merger Consideration, as hereby amended, is fair, from a
financial point of view, to the stockholders of the Company.
2. 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 and the Supplemental Disclosure Schedule dated January 13, 1997 and
changes disclosed in the Company's Quarterly Report on Form 10-Q for the
Quarterly Period ended October 31, 1996 (it being agreed, however, that 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drugs shall be deemed superseded and replaced by the description set forth in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 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."
3. 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 the Effective Time, the Amended Stipulation of
Partial Settlement of the consolidated class actions under the caption In re
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Health Management, Inc. Securities Litigation, Master File No. 96-CV-889
---------------------------------------------
(ADS), dated December 19, 1996, 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
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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
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allocation and/or application for attorneys' fees, costs, or expenses) may be
made shall have expired without any appeal having been filed."
4. Section 7.3(i) of the Merger Agreement is hereby amended in its
entirety, and, as so amended, shall read as follows:
"At or prior to the Effective Time, the lenders (the "Banks") party
to the Credit Agreement, dated as of July 31, 1996, as amended (the "Credit
Agreement"), among Transworld, the Banks, and Bankers Trust Company, as agent,
shall have consented to the Merger, shall have agreed to amendments to the
Credit Agreement in order to permit the Merger and shall have loaned to
Transworld the funds necessary for Transworld to consummate the Merger, all in
the sole and absolute discretion of such Banks."
5. Transworld hereby waives the condition set forth in Section
7.3(l) of the Merger Agreement insofar as such condition applies to the
$3,000,000 Subordinated Note dated March 31, 1995 made by HMI Illinois, Inc.
in favor of Caremark Inc. which was purchased from Caremark Inc. by Hyperion
Partners II L.P.
6. Section 8.1(c) of the Merger Agreement is hereby amended in its
entirety and, as so amended, shall read as follows:
"This Agreement may be terminated by Transworld at any time prior to
the Effective Time, whether prior to or after approval hereof by the
stockholders of the Company, if the condition set forth in Section 7.3(i) of
this Agreement shall not have been satisfied by June 30, 1997."
7. Notwithstanding anything to the contrary in the Merger
Agreement, Transworld hereby consents to the settlement by the Company of (i)
the consolidated derivative action filed in the United States District Court
for the Eastern District of New York entitled In re Health Management, Inc.
Stockholders' Derivative Litigation, Master File No. 96 Civ. 1208 (TCP) and
(ii) the derivative lawsuit filed in the Supreme Court of the State of New
York, County of New York entitled Xxxxxx Xxxxx, et al. v. BDO Xxxxxxx, LLP, et
al., Index No. 96-603064, for an aggregate payment by the Company not to
exceed $175,000 (it being understood that the Company will preserve all of its
claims against the defendants named in such actions, other than Messrs.
Xxxxxxx and Xxxxxxxxxxx).
* * *
The parties acknowledge and agree that, notwithstanding anything
contained in the letter agreement dated January 10, 1997 among Transworld,
Newco and the Company, in no event shall Transworld be deemed to have waived
the condition to Transworld's obligation to close the Merger Agreement set
forth in Section 7.3(i) of the Merger Agreement, and such condition, as hereby
amended in Section 4 hereof, is in full force and effect.
Except to the extent amended hereby, the Merger Agreement and the
Stock Purchase 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 or the Stock Purchase Agreement, including
without limitation the other termination provisions thereof.
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/ XXXXXXX X. XXXXXX
----------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President and Chief
Administrative Officer
IMH ACQUISITION CORP.
By /s/ XXXXXXX X. XXXXXX
--------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Executive Vice President and Chief
Administrative Officer
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ WM. XXXXX XXXXX
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Name: Wm. Xxxxx Xxxxx
Title: President and Chief
Executive Officer
