SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Date of Report (Date of earliest event reported) November 13, 1996.
HEALTH MANAGEMENT, INC.
-----------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 0-18472 75-2096632
---------------------------------------------------------------
(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
1371-A Abbott Court, Buffalo Grove, Illinois 60089
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(847) 913-2700
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- -----------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
<PAGE>
Item 5. Other Events.
On November 13, 1996, Transworld Home HealthCare, Inc., a New York
corporation ("Transworld"), acquired the bank debt of Health Management,
Inc., a Delaware corporation (the "Company"), having a face value of
approximately $28 million (the "Debt Acquisition"). In connection with the
Debt Acquisition, Transworld extended the Forbearance Agreement, which was to
terminate on November 15, 1996, to December 12, 1996 (thereby agreeing to
forebear from exercising any remedies to which Transworld was entitled with
respect to such acquired bank debt) and agreed to extend up to an additional
$3 million to the Company under the revolving line of credit.
Also on November 13, 1996, the Company entered into a Stock Purchase
Agreement with Transworld, which provides for Transworld's purchase of
8,964,262 newly issued shares of the common stock of the Company
(representing approximately 49% of the outstanding shares after giving effect
to such issuance) and an option for an additional 746,713 shares of common
stock of the Company (representing approximately 2% of the outstanding shares
after giving effect to the exercise of such option). The consideration for
the 8,964,262 shares includes, (i) Transworld entering into the Merger
Agreement (described below), (ii) the Debt Acquisition, (iii) Transworld
forebearing under the Credit Agreement until on or about December 12, 1996,
(iv) Transworld agreeing to extend an additional $3 million under the
revolving credit facility, (v) Transworld causing to be cancelled certain
warrants to purchase 5% of the outstanding stock of the Company on a fully
diluted basis, at an exercise price of $2.00 per share, to which the
Company's senior lenders were entitled, and (vi) $1.00 per share of Common
Stock. The exercise price for the option is $1.00 per share and the term
extends for the one-year period following the consummation of the stock
purchase transaction. In addition, the shares purchased, as well as the
shares subject to the option, will be entitled to certain demand and
piggyback registration rights. The closing in connection with the Stock
Purchase Agreement is expected to occur on the latter of December 12, 1996 or
the date of the fulfillment of the closing conditions, which include, among
others, approval by Transworld's lenders and preliminary court approval of a
modified settlement agreement to the pending class action lawsuit against the
Company providing for the settlement of such action for, among other things,
an aggregate cash payment of $7.2 million (the "Modified Settlement"). Of
the approximately $8.9 million proceeds expected to be obtained in connection
with the consummation of the stock purchase, any amounts loaned by Transworld
under the revolving line of credit from November 13, 1996, and interest
thereon, shall be repaid.
<PAGE>
Additionally on November 13, 1996, the Company entered into an Agreement
and Plan of Merger with Transworld pursuant to which a newly-formed
subsidiary of Transworld will merge into the Company and the stockholders of
the Company (excluding Transworld) will receive cash consideration equal to
$2.00 per share. The consummation of the merger is subject to certain
conditions including, without limitation, final court approval of the
Modified Settlement, the expiration or termination period of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and other regulatory approvals. If the merger is not
consummated by June 30, 1997 either party may terminate the agreement.
In connection with the proposed merger, the Board of Directors of the
Company received a fairness opinion from National Westminster Bank, Plc. to
the effect that the $2.00 per share cash price is fair, from a financial
point of view, to the stockholders of the Company.
The above summary of the Merger Agreement, Stock Purchase Agreement and
Forbearance Agreement is not intended to be complete and is qualified in its
entirety by reference to the detailed provisions of each of these agreements,
which are attached hereto as Exhibits. In addition, a copy of the press
release issued by the Company in connection with the above-stated
transactions is attached hereto as Exhibit 99.1 to this Form 8-K and is
incorporated herein by reference.
<PAGE>
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number Description
- ------------- ----------
2.1. Stock Purchase Agreement, dated as of
November 13, 1996, between the Company
and Transworld.
2.2. Agreement and Plan of Merger, dated as
of November 13, 1996, among Transworld,
IMH Acquisition Corp., and the Company.
2.3. Forbearance Agreement, dated as of
November 13, 1995, between the Company
and Transworld.
99.1 Press release dated November 14, 1996 issued by the Company.
Exhibits 2.1, 2.2 and 2.3 listed above omit certain schedules and
exhibits, which are referred to therein. The Company agrees to furnish
a copy of any such omitted schedule or exhibit supplementally upon
request from the Commission's staff.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTH MANAGEMENT, INC.
(Registrant)
Date: November 27, 1996
/s/ W. JAMES NICOL
----------------------
Name: W. James Nicol
Its: President
<PAGE>
Index to Exhibits
Exhibit
Number Description
- ----- ----------
2.1. Stock Purchase Agreement, dated as of
November 13, 1996 between the Company
and Transworld Home Healthcare, Inc.
2.2. Agreement and Plan of Merger, dated as
of November 13, 1996, among Transworld
Home Healthcare, Inc., IMH Acquisition
Corp., and the Company.
2.3. Forbearance Agreement, dated as of
November 13, 1995, between the Company
and Transworld Home Healthcare, Inc.
99.1 Press release dated November 14, 1996
issued by the Registrant.
STOCK PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of November 13, 1996 (this "Agreement"),
---------
between Health Management, Inc. (the "Company"), a Delaware corporation with
-------
offices at 1371-A Abbott Court, Buffalo Grove, Illinois 60089, and Transworld
Home HealthCare, Inc. (the "Purchaser"), a New York corporation with offices
---------
at 75 Terminal Avenue, Clark, New Jersey, 07066.
WHEREAS, the Boards of Directors of the Company and the Purchaser
have each approved an Agreement and Plan of Merger of even date herewith (the
"Merger Agreement") among the Company, the Purchaser, and a wholly-owned
----------------
subsidiary of the Purchaser ("Newco"), providing for the merger (the
-----
"Merger") of Newco with and into the Company in accordance with the General
------
Corporation Law of the State of Delaware and upon the terms and subject to
the conditions set forth in the Merger Agreement;
WHEREAS, also in furtherance of such acquisition, the Purchaser is
today purchasing the rights of the Company's senior lenders under the Credit
Agreement dated as of March 31, 1995, as amended (the "Credit Agreement"),
----------------
and the Company, its subsidiaries, and the Purchaser are entering into a
letter agreement (the "Letter Agreement") relating to the Credit Agreement;
----------------
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Purchaser and the Company hereby agree as follows:
ARTICLE I
Purchase and Sale of the Shares; Grant of Option
-----------------------------------------------
1.01 Agreement to Purchase and Sell. Subject to and in accordance
------------------------------
with the terms and conditions of this Agreement, on the Shares Closing Date
(as hereinafter defined), the Company shall sell to the Purchaser, and the
Purchaser shall purchase from the Company, 8,964,292 shares (the "Shares") of
------
Common Stock, par value $.03 per share (the "Company Common Stock"), of the
--------------------
Company. In consideration of the issuance and sale of such Shares to the
Purchaser, (i) concurrently herewith (a) the Purchaser is entering into the
Merger Agreement, (b) the Purchaser is purchasing the rights of the Company's
senior lenders under the Credit Agreement, (c) the Purchaser is entering into
the Letter Agreement (which includes, among other things, certain limited
forbearances), (d) the Purchaser is making additional revolving credit loans
to the Company in the amount of $3,000,000, and (e) the Purchaser is causing
to be cancelled rights to certain warrants to which the senior lenders were
entitled in connection with the Credit Agreement; and (ii) on the Shares
Closing Date (as hereinafter defined) the Purchaser shall pay to the Company
$8,964,292 (the "Cash Purchase Price").
-------------------
1.02 The Closing. The closing (the "Shares Closing") of the
----------- --------------
purchase and sale of the Shares shall take place at the offices of Proskauer
Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New York at 10:00 a.m.
on the later of (i) December 12, 1996 and (ii) the day on which all the
conditions set forth in Article IV are satisfied or waived, or at such other
place and time as the parties shall agree (the time and date of the Shares
Closing being herein referred to as the "Shares Closing Date"). On the
-------------------
Shares Closing Date, the Company will deliver to the Purchaser a certificate
for the Shares registered in the name of the Purchaser against delivery by
the Purchaser to the Company of a certified or bank check in the amount of
the Cash Purchase Price payable to the order of the Company or (at the
Purchaser's election) by wire transfer; provided, however, that the Purchaser
-------- -------
shall be entitled to deduct as an offset to the Cash Purchase Price all
amounts loaned by the Purchaser to the Company on or subsequent to the date
hereof under the Credit Agreement and which are outstanding on the Shares
Closing Date (the amount of any such deduction to be treated as a repayment
first of the accrued interest on, and thereafter of the outstanding principal
amount of, the indebtedness under the Credit Agreement).
1.03 Option.
------
(a) The Company hereby grants to the Purchaser the option
(the "Option"), during the one-year period commencing on the Shares Closing
------
Date (the "Option Period"), to purchase up to an additional 746,713 shares
-------------
(the "Transworld Option Shares") of Company Common Stock at a cash purchase
------------------------
price of $1.00 per Transworld Option Share (the "Exercise Price"), subject to
--------------
adjustment pursuant to Section 1.03(c).
(b) The Option may be exercised at any time or from time to
time during the Option Period by written notice delivered to the Company
pursuant to the provisions of Section 6.01 and shall specify the number of
Transworld Option Shares to be purchased. The closing of the Option exercise
(the "Option Closing") shall take place at the offices of Proskauer Rose
--------------
Goetz & Mendelsohn LLP, 1585 Broadway, New York, New York, at 10:00 a.m. on
the fifth Business Day after the giving of notice (the "Option Closing
Date"). The number of Transworld Option Shares being purchased at the Option
Closing shall be multiplied by the Exercise Price and the resulting total
(the "Total Exercise Price") shall be paid to the Company at the Option
--------------------
Closing by certified or bank check payable to the order of the Company or (at
the Purchaser's election) by wire transfer against delivery of certificates
representing the Transworld Option Shares so purchased, registered in the
name of the Purchaser; provided, however, that the Purchaser shall be
-------- -------
entitled (to the extent not previously offset as of the Shares Closing Date)
to deduct as an offset to the Total Exercise Price all amounts loaned by the
Purchaser to the Company on or subsequent to the date hereof under the Credit
Agreement which are outstanding on the Option Closing Date (the amount of any
such deduction to be treated as a repayment first of the accrued interest on,
and thereafter of the outstanding principal amount of, the indebtedness under
the Credit Agreement).
(c) If, at any time within the Option Period, the Company
shall reclassify, split, reverse split, or pay a stock or cash dividend on
any of its securities, or if the Company shall be reorganized, or
consolidated or merged with another corporation, the Purchaser shall, at such
time as it exercises the Option, be entitled to receive the same number and
kind of shares of stock or other securities or property as it would have been
entitled to receive upon the occurrence of any of the events described in
this Section 1.03(c), if it had exercised the Option and been a holder of
shares of Company Common Stock prior to such occurrence. Similarly, upon the
occurrence of any of the events described in this Section 1.03(c), the
Exercise Price will be adjusted accordingly, so that upon exercising the
Option, the Purchaser will be required to pay the same Total Exercise Price
after the occurrence of such event(s) as it would have paid prior thereto.
ARTICLE II
Representations, Warranties, Covenants,
and Agreements of the Company
----------------------------
2.01 Incorporation by Reference. The Company hereby makes to the
--------------------------
Purchaser all of the representations and warranties of the Company set forth
in Article III of the Merger Agreement and all of the covenants and
agreements of the Company set forth in Sections 4.1, 4.2, 4.4, 6.3, 6.4, 6.5,
6.6, and 9.11 (to the extent applicable to the period of time prior to the
Shares Closing), and 6.8 of the Merger Agreement, and all such provisions are
hereby incorporated in this Agreement as if such provisions, together with
all definitions applicable to such provisions, were set forth herein in their
entirety, provided that (i) when used herein references in the Merger
Agreement to "this Agreement" shall mean the Merger Agreement and references
to the "Stock Purchase Agreement" shall mean this Agreement and (ii) the
covenants and agreements incorporated herein from such Sections 4.1, 4.2,
4.4, 6.3, 6.4, 6.5, 6.6, and 6.8, for the purposes of this Agreement, shall
terminate on the earlier of the effective date of the Merger and June 30,
1997.
2.02 NASDAQ Notice. Promptly following the date hereof, the
-------------
Company shall take such action as may be necessary to comply with Section
6(i), Part III, of Schedule D of the By-laws of the National Association of
Securities Dealers, Inc., including the mailing to its stockholders of the
notice required by such section.
2.03 Listing of Shares. Promptly following the date hereof, the
-----------------
Company shall take all appropriate action to list on the NASDAQ/NMS (and any
other securities exchange on which the Common Stock is traded) the Shares and
the Option Shares upon notice of their issuance.
ARTICLE III
Representations, Warranties, and Agreements of the Purchaser
------------------------------------------------------------
The Purchaser represents and warrants to, and agrees with, the
Company as follows:
3.01 Accredited Investor. The Purchaser is an "accredited
-------------------
investor," as that term is defined in Rule 501 of Regulation D promulgated
under the Securities Act of 1933 (the "Securities Act"). The Purchaser has
--------------
received all requested documents from the Company and has had an opportunity
to review carefully such documents and to ask questions of and receive
answers from the officers of the Company concerning the Company and this
offering of the Shares. The Purchaser has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment.
3.02 Investment Intent. The Purchaser is acquiring the Shares
-----------------
for its own account for investment and not with a view to, or for sale in
connection with, any public distribution thereof in violation of the
Securities Act. The Purchaser understands that the Shares have not been
registered for sale under the Securities Act or qualified under applicable
state securities laws and that the Shares are being offered and sold to the
Purchaser pursuant to one or more exemptions from the registration or
qualification requirements of such securities laws and that the
representations and warranties contained in this Article III are given with
the intention that the Company may rely thereon for purposes of claiming such
exemptions. The Purchaser understands that it must bear the economic risk of
its investment in the Company for an indefinite period of time, as the Shares
cannot be sold unless subsequently registered under the Securities Act and
qualified under state securities laws, unless an exemption from such
registration and qualification is available. The Purchaser is not purchasing
the Shares as a result of or pursuant to any advertisement, article, notice,
or other communication published in any newspaper, magazine, or similar media
or broadcast over television or radio.
3.03 Transfer of Shares. The Purchaser will not sell or otherwise
------------------
dispose of any of the Shares unless (a) a registration statement with respect
thereto has become effective under the Securities Act and such Shares have
been qualified under applicable state securities laws or (b) there is
presented to the Company notice of the proposed transfer and, if it so
requests, a legal opinion reasonably satisfactory to the Company that such
registration and qualification are not required. The Purchaser consents that
the Company's transfer agent may be instructed not to transfer any of the
Shares unless it receives satisfactory evidence of compliance with the
foregoing provisions, and that there may be endorsed upon any certificate
representing the Shares (and any certificates issued in substitution
therefor) the following legend calling attention to the foregoing
restrictions on transferability of the Shares, stating in substance:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR QUALIFIED UNDER ANY STATE SECURITIES LAW. THESE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION IS AVAILABLE."
The Company shall issue a new stock certificate without such legend if (i)
the security evidenced by such certificate has been effectively registered
under the Securities Act and qualified under any applicable state securities
law and sold by the Purchaser or the holder thereof in accordance with such
registration and qualification or (ii) the Purchaser or such holder shall
have delivered to the Company a legal opinion reasonably satisfactory to the
Company to the effect that the restrictions set forth herein are no longer
required or necessary under the Securities Act or any applicable state law.
3.04 Authorization. All actions on the part of the Purchaser
-------------
necessary for the authorization, execution, delivery, and performance by the
Purchaser of this Agreement have been taken. This Agreement has been duly
authorized, executed, and delivered by the Purchaser, is the legal, valid,
and binding obligation of the Purchaser, and is enforceable as to such
Purchaser in accordance with its terms.
ARTICLE IV
Conditions to Closing
---------------------
4.01 Conditions Precedent to the Company's Obligations. The
-------------------------------------------------
obligation of the Company to consummate the sale of the Shares or the
Transworld Option Shares is subject to the fulfillment, prior to or on the
Shares Closing Date or the Option Closing Date, as the case may be, of each
of the following conditions, any one or more of which may be waived in
writing by the Company:
(a) Representations and Warranties True. All of the
-----------------------------------
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects as of the Shares Closing
Date or the Option Closing Date, as the case may be, except for changes
contemplated by this Agreement 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.
(b) Litigation. There shall be no injunction, restraining
----------
order, or other order of any nature, issued by a court of competent
jurisdiction, which shall direct that this Agreement or any of the
transactions contemplated hereby not be consummated as herein provided.
(c) Compliance Certificate. The President or any Vice
----------------------
President of the Purchaser shall have delivered to the Company at the Shares
Closing a certificate certifying that the representations and warranties of
the Purchaser contained in Article III are true and correct in all material
respects as of the Shares Closing Date.
4.02 Conditions Precedent to the Purchaser's Obligations. The
---------------------------------------------------
obligation of the Purchaser to consummate the purchase of the Shares is
subject to the fulfillment prior to or on the Shares Closing Date of each of
the following conditions, any one or more of which may be waived in writing
by the Purchaser:
(a) Representations and Warranties. All of the
------------------------------
representations and warranties of the Company contained in this Agreement and
the Merger Agreement shall be true and correct in all material respects as of
the Shares Closing Date as if made on and as of the Shares Closing Date,
except for changes contemplated by this Agreement 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.
(b) Performance. The Company shall have performed and
-----------
complied in all material respects with all agreements, covenants, obligations
and conditions contained in this Agreement and the Merger Agreement that are
required to be performed or complied with by it on or before the Shares
Closing Date.
(c) Compliance Certificate. The Chief Executive Officer of
----------------------
the Company shall have delivered to the Purchaser at the Shares Closing a
certificate certifying that the conditions specified in paragraphs (a) and
(b) of this Section 4.02 have been fulfilled.
(d) Litigation. There shall be no injunction, restraining
----------
order, or other order of any nature, issued by a court of competent
jurisdiction, which shall direct that this Agreement or any of the
transactions contemplated hereby not be consummated as herein provided.
(e) Registration Rights Agreement. The Company shall have
-----------------------------
executed and delivered to the Purchaser the Registration Rights Agreement,
substantially in the form annexed hereto as Exhibit A.
(f) Legal Matters. All actions, proceedings, instruments,
-------------
and documents required to consummate the transactions contemplated herein and
all other related legal matters shall have been approved by counsel to the
Purchaser, and the Purchaser shall have received the opinion of McDermott,
Will & Emery, counsel to the Company, dated the Shares Closing Date, in form
and substance reasonably satisfactory to the Purchaser, as to (i) the valid
existence and good standing of the Company and its subsidiaries in their
respective jurisdictions of incorporation and qualification and good standing
of the Purchaser and its subsidiaries in certain foreign jurisdictions,
(ii) the corporate power and authority of the Company to own its properties
and to conduct its business, (iii) the corporate power and authority of the
Company to execute and deliver this Agreement and the Registration Rights
Agreement and the due authorization thereof, (iv) the due execution and
delivery and enforceability of this Agreement and the Registration Rights
Agreement, (v) the absence of conflicts with the Company's charter, bylaws,
or material agreements, (vi) the absence of consents or approvals required to
consummate the transactions contemplated by this Agreement and the
Registration Rights Agreement, (vii) the absence of litigation regarding this
Agreement or the Registration Rights Agreement or any actions taken hereunder
or thereunder, (viii) the authorized capital stock of the Company, and
(ix) the due and valid issuance, authorization, and non-assessable nature of
the Shares and the Transworld Option Shares.
(g) Additional Conditions. The conditions set forth in
---------------------
Section 7.1(b) (with the reference to "hereby" being construed as a reference
to this Agreement) and Section 7.3(a), (b), (d), (i) and (j) of the Merger
Agreement shall have been satisfied (with all references therein to the
"Effective Time" being deemed to be references to the "Shares Closing Date"),
and that certain Stipulation of Partial Settlement of the consolidated class
actions under the caption In re Health Management, Inc. Securities
Litigation, Master File No. 96 Civ. 0889 (ADS) shall have been amended to
provide for the settlement of such actions for an aggregate cash payment of
$7.2 million at the effective time of the Merger, and such settlement shall
have been preliminarily approved by the United States District Court.
ARTICLE V
Termination
----------
5.01 Termination Prior to Shares Closing. This Agreement may be
-----------------------------------
terminated at any time prior to the Shares Closing:
(a) by the mutual consent of the Purchaser and the Company;
(b) by the giving of notice by the Purchaser at any time
after December 31, 1996 (or such later date as shall have been agreed to in
writing by the parties hereto), if at the time notice of such termination is
given the Shares Closing shall not have been consummated (other than by
reason of the Purchaser's breach or failure to perform in any material
respect any of its covenants or agreements contained herein); or
(c) (i) by the Purchaser, if there has been a material
misrepresentation or material breach on the part of the Company in any of the
representations, warranties, covenants or agreements of the Company set forth
herein or in the Merger Agreement, or if there has been any material failure
on the part of the Company to comply with its obligations hereunder or under
the Merger Agreement, or (ii) by the Company, if there has been a material
misrepresentation or material breach on the part of the Purchaser in any of
the representations, warranties, covenants or agreements of the Purchaser set
forth herein or in the Merger Agreement, or if there has been any material
failure on the part of the Purchaser to comply with its obligations hereunder
or under the Merger Agreement.
5.02 Liability Upon Termination.
--------------------------
(a) In the event of termination of this Agreement pursuant to
Sections 5.01(a) or 5.01(b) no party hereto shall have any liability or
further obligation to any other party hereto except as provided in Section
6.04.
(b) In the event of termination pursuant to Section 5.01(c),
(i) all costs and expenses shall be allocated as set forth in Section 6.04,
and (ii) the non-breaching party shall have the right to pursue all rights
and remedies available to it hereunder or otherwise provided at law or
equity, including without limitation, the right to seek specific performance
and money damages.
ARTICLE VI
Miscellaneous
-------------
6.01 Communications. All notices or other communications
--------------
hereunder shall be in writing and shall be given by registered or certified
mail (postage prepaid and return receipt requested), by personal delivery, by
an overnight courier service which obtains a receipt to evidence delivery, or
by telex or facsimile transmission (provided that written confirmation of
receipt is provided), to the addresses of the parties hereto set forth in the
preamble hereof or such other address as any party may designate to the other
in accordance with the aforesaid procedure. All notices and other
communications sent by overnight courier service shall be deemed to have been
given as of the second Business Day after delivery thereof to such courier
service, those given by personal delivery shall be deemed given when
delivered, those given by telex or facsimile transmission shall be deemed
given when sent, and all notices and other communications sent by mail shall
be deemed given as of the third Business Day after the date of deposit in the
United States mail. As used herein, "Business Day" shall mean any day other
------------
than Saturday, Sunday, or any other day when banks in New York City are
required or permitted to be closed.
6.02 Successors and Assigns. The Company may not sell, assign,
----------------------
transfer, or otherwise convey any of its rights or delegate any of its duties
under this Agreement. This Agreement (including the Option) shall be binding
upon and inure to the benefit of and be enforceable by the Purchaser and its
successors and assigns. Without limiting the foregoing, the Purchaser and
its successors and assigns may assign their rights hereunder to their bank
lenders. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement.
6.03 Amendments and Waivers. Neither this Agreement nor any term
----------------------
hereof may be changed or waived (either generally or in a particular
instance and either retroactively or prospectively) absent the written
consent of the Company and the Purchaser.
6.04 Expenses. (a) If this Agreement is terminated pursuant to
--------
Section 5.01(b) or clause (i) of Section 5.01(c) the Company shall reimburse
the Purchaser for all reasonable out-of-pocket expenses and fees (including,
without limitation, bank commitment fees, all reasonable fees and expenses of
counsel, accountants, experts, financial advisors, and consultants to the
Purchaser and their lenders and financial advisors) incurred or required to
be paid by it or on its behalf in connection with this Agreement and the
transactions contemplated hereby.
(b) If this Agreement is terminated by the Company pursuant to
clause (ii) of Section 5.01(c) the Purchaser shall reimburse the Company for
all reasonable out-of-pocket expenses and fees (including, without
limitation, all reasonable fees and expenses of counsel, accountants,
experts, and consultants to the Company) incurred or required to be paid by
the Company or on its behalf in connection with this Agreement and the
consummation of the transactions contemplated hereby.
(c) Except as provided otherwise in Sections 6.04(a) and 6.04(b)
hereof, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring
such expenses.
6.05 Survival of Representations, Etc. The representations,
--------------------------------
warranties, covenants, and agreements made herein (including those that are
incorporated herein by reference) or in any certificate or document executed
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the Shares. For purposes of this
Agreement, the provisions in the Merger Agreement which are incorporated by
reference in this Agreement shall survive the termination of the Merger
Agreement or the abandonment of the Merger. Neither any investigation by or
on behalf of the Purchaser, nor the receipt by the Purchaser of any data or
information from the Company, shall in any way affect the right of the
Purchaser to rely on the representations, warranties, covenants, and
agreements of the Company or the right of the Purchaser to terminate this
Agreement as provided in Article V.
6.06 Delays or Omissions; Waiver. No delay or omission to
---------------------------
exercise any right, power, or remedy accruing to either the Company or the
Purchaser upon any breach or default by the other under this Agreement shall
impair any such right, power, or remedy nor shall it be construed to be a
waiver of any such breach or default, or any acquiescence therein or in any
similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring.
6.07 Entire Agreement. This Agreement and the exhibits hereto
----------------
contain the entire understanding of the parties with respect to the subject
matter hereof and all prior negotiations, discussions, commitments, and
understandings heretofore had between them with respect thereto are merged
herein and therein.
6.08 Headings. All article and section headings herein are
--------
inserted for convenience only and shall not modify or affect the construction
or interpretation of any provision of this Agreement.
6.09 Counterparts; Governing Law. This Agreement may be executed
---------------------------
in any number of counterparts, each of which shall be deemed an original but
all of which together shall constitute one and the same instrument. This
Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to rules governing the conflict
of laws.
6.10 Further Actions. At any time and from time to time, each
---------------
party agrees, without further consideration, to take such actions and to
execute and deliver such documents as may be reasonably necessary to
effectuate the purposes of this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed on the
date hereinabove set forth.
HEALTH MANAGEMENT, INC.
By
--------------------------------
Name:
Title:
TRANSWORLD HOME HEALTHCARE, INC.
By
--------------------------------
Name:
Title:
Exhibit A - Registration Rights Agreement
AGREEMENT AND PLAN OF MERGER
Among
TRANSWORLD HOME HEALTHCARE, INC.
IMH ACQUISITION CORP.,
and
HEALTH MANAGEMENT, INC.
Dated as of November 13, 1996
TABLE OF CONTENTS
Section Page
- ------ ----
ARTICLE I THE MERGER 1
SECTION 1.1. The Merger. 1
SECTION 1.2. Effective Time. 2
SECTION 1.3. Effect of the Merger. 2
SECTION 1.4. Certificate of Incorporation; By-Laws. 2
SECTION 1.5. Directors and Officers. 2
SECTION 1.6. Conversion of Securities. 3
SECTION 1.7. Surrender and Payment. 3
SECTION 1.8. Dissenter's Rights. 5
SECTION 1.9. Options and Restricted Shares. 6
SECTION 1.10. Closing. 7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
TRANSWORLD AND NEWCO 7
SECTION 2.1. Corporate Organization. 7
SECTION 2.2. Authority Relative to this Agreement, the Stock
Purchase Agreement, and the Registration Rights
Agreement. 8
SECTION 2.3. No Conflict; Required Filings and Consents. 9
SECTION 2.4. Proxy Material. 10
SECTION 2.5. Litigation. 10
SECTION 2.6. Brokers. 10
SECTION 2.7. Financing 11
SECTION 2.8. Board Recommendation 11
SECTION 2.9. Fairness Opinion 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 11
SECTION 3.1. Organization and Qualification; Subsidiaries. 11
SECTION 3.2. Certificate of Incorporation and By-Laws. 12
SECTION 3.3. Capitalization. 12
SECTION 3.4. Authority Relative to this Agreement, the
Stock Purchase Agreement, and the Registration
Rights Agreement. 13
SECTION 3.5. No Conflict; Required Filings and Consents. 14
SECTION 3.6. SEC Filings; Financial Statements. 15
SECTION 3.7. Absence of Certain Changes or Events. 16
SECTION 3.8. Absence of Litigation. 17
SECTION 3.9. Employee Benefit Plans. 17
SECTION 3.10. Permits and Licenses. 20
SECTION 3.11. Proxy Material. 20
SECTION 3.12. Brokers. 21
SECTION 3.13. Properties, Contracts, and Insurance. 21
SECTION 3.14. Board Recommendation. 22
SECTION 3.15. Fairness Opinion. 22
SECTION 3.16. Compliance with Environmental Laws 23
SECTION 3.17. Employment Matters. 26
SECTION 3.18. Tax Returns, Audits, and Liabilities. 27
SECTION 3.19. Full Disclosure. 29
ARTICLE IV COVENANTS OF THE COMPANY 30
SECTION 4.1. Conduct of Business by the Company Pending
the Merger. 30
SECTION 4.2. No Solicitation of Transactions. 33
SECTION 4.3. Option Plans, Convertible Debt, Options,
and Warrants. 34
SECTION 4.4. State Takeover Statutes. 34
SECTION 4.5. Consents and Approvals. 34
ARTICLE V COVENANTS OF TRANSWORLD AND NEWCO 35
SECTION 5.1. Directors' and Officers' Indemnification. 35
ARTICLE VI ADDITIONAL AGREEMENTS OF THE PARTIES 35
SECTION 6.1. Proxy Material. 35
SECTION 6.2. Meeting of Stockholders of the Company. 36
SECTION 6.3. HSR Act. 36
SECTION 6.4. Access to Information; Confidentiality. 36
SECTION 6.5. Notification of Certain Matters. 37
SECTION 6.6. Further Action. 38
SECTION 6.7. Public Announcements. 38
SECTION 6.8. Government Compliance. 38
ARTICLE VII CONDITIONS OF THE MERGER 39
SECTION 7.1. Conditions to Obligations of Each Party to
Effect the Merger. 39
SECTION 7.2. Additional Conditions to Obligation of the
Company to Effect the Merger. 40
SECTION 7.3. Additional Conditions to Obligations of
Transworld and Newco to Effect the Merger. 41
ARTICLE VIII TERMINATION, AMENDMENT, AND WAIVER 43
SECTION 8.1. Termination. 44
SECTION 8.2. Effect of Termination. 45
SECTION 8.3. Fees and Expenses. 45
SECTION 8.4. Amendment. 46
SECTION 8.5. Waiver. 46
ARTICLE IX GENERAL PROVISIONS 47
SECTION 9.1. Survival of Representations, Warranties,
and Agreements. 47
SECTION 9.2. Notices. 47
SECTION 9.3. Certain Definitions. 48
SECTION 9.4. Headings. 48
SECTION 9.5. Entire Agreement. 48
SECTION 9.6. Parties in Interest; Assignment. 49
SECTION 9.7. Governing Law. 49
SECTION 9.8. Counterparts. 49
SECTION 9.9. Severability. 49
SECTION 9.10. Specific Performance. 49
SECTION 9.11. Schedules 50
LIST OF DISCLOSURE SCHEDULES
----------------------------
Section
- ------
3.1 Names of jurisdictions of incorporation, capitalization and
percentage of outstanding capital stock of Subsidiaries owned by
the Company
3.3 Warrants, options, convertible debt and convertible securities
3.5(a) Breaches or conflicts with existing agreements
3.5(b) Healthcare related licenses
3.6 Liabilities
3.7 Changes in business, etc. and material transactions
3.8 Litigation
3.9 Employee benefits
3.13(a) Trademarks; trade names
3.13(b) Material contracts, etc.
3.13(c) Insurance coverage
3.16 Environmental laws and regulations
3.17(b) Change in ownership or control provisions
3.17(c) Labor dispute or litigation
3.18 Tax matters
4.1(f) Acquisitions; dispositions
4.1(i) Taxes
4.1(k) Contracts
9.11 Deferred schedules
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of November 13, 1996 (this
"Agreement"), among Transworld Home HealthCare, Inc., a New York corporation
---------
("Transworld"), IMH Acquisition Corp., a Delaware corporation and a wholly-
----------
owned subsidiary of Transworld ("Newco"), and Health Management, Inc., a
-----
Delaware corporation (the "Company").
-------
WHEREAS, the Boards of Directors of Transworld, Newco, and the
Company have each approved the merger (the "Merger") of Newco with and into
------
the Company in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law") and upon the terms and subject to the conditions
------------
set forth herein; and
WHEREAS, Transworld and the Company have entered into a Stock
Purchase Agreement of even date herewith (the "Stock Purchase Agreement")
------------------------
providing for (a) the purchase (the "Stock Purchase") by Transworld from the
--------------
Company of certain shares (the "Agreement Shares") of Company Common Stock
----------------
(as defined in Section 1.6(a)) and the grant by the Company to Transworld of
an option (the "Transworld Option") to purchase shares of Company Common
-----------------
Stock (the "Transworld Option Shares") and (b) the execution and delivery by
------------------------
Transworld and the Company of a Registration Rights Agreement (the
"Registration Rights Agreement") relating to the registration of the
-----------------------------
Agreement Shares under applicable Federal and state securities laws;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Transworld, Newco, and the Company hereby agree as follows:
ARTICLE I
THE MERGER
----------
SECTION 1.1. The Merger.
----------
At the Effective Time (as defined in Section 1.2) and subject to
and upon the terms and conditions of this Agreement and Delaware Law, Newco
shall be merged with and into the Company, the separate corporate existence
of Newco shall cease, and the Company shall continue as the surviving
corporation. The Company as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "Surviving Corporation."
---------------------
SECTION 1.2. Effective Time.
--------------
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article VII and after the Closing referred to in
Section 1.10, the parties hereto shall cause the Merger to be consummated by
delivering a Certificate of Merger (the "Certificate of Merger") to the
---------------------
Secretary of State of the State of Delaware, in such form as required by,
and executed in accordance with the relevant provisions of, Delaware Law,
for filing by the Secretary of State (the time of such filing being the
"Effective Time").
--------------
SECTION 1.3. Effect of the Merger.
--------------------
At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of Delaware Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all
the rights, privileges, powers, franchises, and property of the Company and
Newco shall vest in the Surviving Corporation, and all restrictions,
disabilities, duties, debts, and liabilities of the Company and Newco shall
become the restrictions, disabilities, duties, debts, and liabilities of the
Surviving Corporation.
SECTION 1.4. Certificate of Incorporation; By-Laws.
------------------------------------
At the Effective Time, the Certificate of Incorporation and By-
Laws of Newco shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until thereafter amended, except that, effective as of
the Effective Time, such Certificate of Incorporation will be amended in
order to change the name of the Surviving Corporation to "Health Management,
Inc."
SECTION 1.5. Directors and Officers.
----------------------
The directors of the Surviving Corporation shall be the directors
of Newco immediately prior to the Effective Time, and the officers of the
Surviving Corporation shall be the officers of the Company immediately prior
to the Effective Time, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 1.6. Conversion of Securities.
-----------------------
At the Effective Time, by virtue of the Merger and without any
action on the part of Newco, the Company, or the holders of any of the
following securities:
(a) each share of Common Stock, par value $.03 per share
("Company Common Stock"), of the Company then held by the Company as a
--------------------
treasury share or then held by Transworld or Newco shall be cancelled and
extinguished without payment of any consideration therefor and without any
conversion thereof;
(b) each share of Company Common Stock then issued and
outstanding (other than those referred to in Section 1.6(a) and other than
Dissenting Shares (as defined in Section 1.8)), shall, subject to and in
accordance with Section 1.7 hereof, be automatically cancelled and
extinguished and thereafter shall represent the right to receive $2.00 in
cash, without interest (the "Merger Consideration"); and
--------------------
(c) each share of common stock, par value $.01 per share, of
Newco issued and outstanding immediately prior to the Effective Time shall
be converted into and thereupon and thereafter shall represent one validly
issued, fully paid, and nonassessable share of common stock, par value $.03
per share, of the Surviving Corporation.
SECTION 1.7. Surrender and Payment.
---------------------
(a) Prior to the Effective Time, Newco shall designate a
commercial bank or trust company organized under the laws of the United
States or any state of the United States with capital, surplus, and
undivided profits of at least $100,000,000 to act as agent (the "Exchange
--------
Agent") for the purpose of exchanging certificates representing shares of
- -----
Company Common Stock for the Merger Consideration. At or prior to the
Effective Time, Transworld shall deposit in trust with the Exchange Agent
the funds necessary to pay the Merger Consideration for shares of Company
Common Stock converted by reason of the Merger. Promptly after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
send to each holder of record of shares of Company Common Stock at the
Effective Time a letter of transmittal in customary form for use in such
exchange (which shall specify that the delivery of certificates shall be
effected, and risk of loss and title shall pass, only upon proper delivery
of the certificates representing shares of Company Common Stock to the
Exchange Agent).
(b) Each holder of shares of Company Common Stock that have been
converted into a right to receive the Merger Consideration, upon surrender
to the Exchange Agent of a certificate or certificates representing such
shares of Company Common Stock, together with a properly completed letter of
transmittal covering such shares of Company Common Stock, will be entitled
to receive the Merger Consideration payable in respect of such shares.
After the Effective Time, each such certificate shall, until so surrendered,
represent for all purposes only the right to receive such Merger
Consideration.
(c) If any portion of the Merger Consideration is to be paid to a
person other than the registered holder of the shares of Company Common
Stock represented by the certificate or certificates in exchange therefor,
it shall be a condition to such payment that the certificate or certificates
surrendered shall be properly endorsed or otherwise be in proper form for
transfer and that the person requesting such payment shall pay to the
Exchange Agent any transfer or other taxes required as a result of such
payment to a person other than the registered holder of such shares of
Company Common Stock or establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not payable.
(d) After the Effective Time, there shall be no further
registration of transfers of shares of Company Common Stock outstanding
prior to the Effective Time. If, after the Effective Time, certificates
representing shares of Company Common Stock outstanding prior to the
Effective Time are presented to the Surviving Corporation, they shall be
cancelled and exchanged for the Merger Consideration provided for, and in
accordance with the procedures set forth, in this Agreement.
(e) Any portion of the funds deposited with the Exchange Agent
pursuant to Section 1.7(a) that remains unclaimed by the holders of shares
of Company Common Stock one year after the Effective Time shall be returned
to the Surviving Corporation upon demand, and any such holder who has not
exchanged his shares of Company Common Stock for the Merger Consideration in
accordance with this Section 1.7 prior to that time shall thereafter look
only to the Surviving Corporation for payment of the Merger Consideration in
respect of his shares of Company Common Stock, but shall have those rights
against the Surviving Corporation as may be accorded to general creditors
under applicable law. Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to any holder of shares of Company Common
Stock for any amount paid to a public official pursuant to applicable
abandoned property laws. Any portion of the funds remaining unclaimed by
holders of shares of Company Common Stock as of a date which is immediately
prior to such time as such portion would otherwise escheat to or become
property of any governmental entity shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and
clear of any claims or interest of any person previously entitled thereto.
(f) Any portion of the funds deposited with the Exchange Agent
pursuant to Section 1.7(a) to pay for Dissenting Shares shall be returned to
the Surviving Corporation upon demand.
(g) The funds deposited with the Exchange Agent shall be invested
by the Exchange Agent as directed by the Surviving Corporation in direct
obligations of the United States of America, obligations for which the full
faith and credit of the United States of America is pledged to provide for
the payment of principal and interest, commercial paper rated of the highest
quality by Moody's Investors Services, Inc. or Standard & Poor's
Corporation, or certificates of deposit issued by a commercial bank having
combined capital, surplus, and undivided profits aggregating at least
$500,000,000, or a fund, substantially all of the assets of which are
invested in the foregoing types of investments, and any net earnings with
respect thereto shall be paid to the Surviving Corporation as and when
requested by the Surviving Corporation.
SECTION 1.8. Dissenter's Rights.
------------------
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Common Stock outstanding immediately prior
to the Effective Time held by a holder who has demanded and perfected the
right for appraisal of those shares of Company Common Stock in accordance
with the provisions of Section 262 of Delaware Law and as of the Effective
Time has not withdrawn or lost such right to such appraisal ("Dissenting
----------
Shares") shall not be converted into or represent a right to receive the
- ------
Merger Consideration pursuant to Section 1.6(b), but the holder shall only
be entitled to such rights as are granted by Delaware Law. If a holder of
shares of Company Common Stock who demands appraisal of those shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect
or otherwise) the right to appraisal, then, as of the Effective Time or the
occurrence of such event, whichever occurs later, each such share of Company
Common Stock shall be converted into and represent the right to receive the
Merger Consideration as provided in Section 1.6(b), without interest, upon
the surrender of the certificate or certificates representing those shares.
The Company shall give Transworld: (i) prompt notice of any written demands
for appraisal of any shares of Company Common Stock, attempted withdrawals
of such demands, and any other instruments served pursuant to Delaware Law
and received by the Company relating to stockholders' rights of appraisal
and (ii) the authority to direct all negotiations and proceedings with
respect to demands for appraisal under Delaware Law. The Company shall not,
except with the prior written consent of Transworld, voluntarily make any
payment with respect to any demands for appraisals of shares of Company
Common Stock, offer to settle or settle any such demands, or approve any
withdrawal of any such demands.
(b) Each holder of Dissenting Shares who becomes entitled under
Delaware Law to payment for his Dissenting Shares shall receive payment
therefor after the Effective Time from the Surviving Corporation (but only
after the amount thereof shall have been agreed upon or finally determined
pursuant to Delaware Law) and such shares of Company Common Stock shall
thereupon be cancelled.
SECTION 1.9. Options and Restricted Shares.
-----------------------------
(a) Immediately following the Effective Time, each outstanding
stock option (an "Option") granted under the Company's 1989 Stock Option
------
Plan, 1996 Employee Stock Option Plan, the Shareholder Value Incentive Plan,
or 1996 Nonemployee Director Stock Option Plan (the "Option Plans"), whether
------------
or not then vested or exercisable, shall be converted into the right to
receive an amount equal to the product of (i) the number of shares of
Company Common Stock subject to the Option and (ii) the excess, if any, of
the Merger Consideration over the exercise price per share of Company Common
Stock of such Option (the "Option Consideration").
--------------------
(b) Immediately following the Effective Time, each outstanding
Option and warrant granted under any plan, agreement, or arrangement of the
Company other than the Option Plans, whether or not then vested or
exercisable, shall be cancelled and the holders thereof shall be entitled to
receive from the Company, in cancellation and settlement of the Option or
warrant, an amount equal to the Option Consideration.
(c) All awards of shares of Company Common Stock (the "Share
-----
Awards") outstanding under any plan, agreement, or arrangement of the
- ------
Company, when vested, shall be cancelled and each holder of a cancelled
Share Award shall be entitled to receive from the Company upon vesting in
such Share Award, in cancellation and settlement of the vested Share Award,
an amount equal to the product of (i) the number of shares of Company Common
Stock subject to the vested Share Award and (ii) the Merger Consideration.
(d) Any amounts payable pursuant to this Section 1.9 shall be
subject to any required withholding of taxes and shall be paid without
interest.
(e) The Company shall (without the payment of additional
consideration): (i) make any amendments to the Option Plans and any other
plan, agreement, or arrangement of the Company; (ii) use all reasonable best
efforts to obtain any consents or releases; and (iii) take any other action
necessary to effect the transactions contemplated by this Section 1.9.
Notwithstanding any other provision of this Section 1.9, payment may be
withheld in respect of any Option or Share Award until any necessary
consents or releases are obtained.
SECTION 1.10. Closing.
-------
The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Proskauer Rose Goetz &
-------
Mendelsohn LLP, 1585 Broadway, New York, New York, at 11:00 a.m., local
time, on the day on which the conditions set forth in Article VII hereof are
satisfied or waived, or at such other place and time and on such other date
as Transworld and the Company shall agree (the "Closing Date").
------------
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRANSWORLD AND NEWCO
------------------------------------------------------
Transworld and Newco hereby jointly and severally represent and
warrant to the Company that:
SECTION 2.1. Corporate Organization.
----------------------
Each of Transworld and Newco is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of
its incorporation and has the requisite corporate power and authority and
any necessary governmental authority to own, operate, or lease the
properties that it purports to own, operate, or lease and to carry on its
business as it is now being conducted, and is in good standing in each
jurisdiction where the character of its properties owned, operated, or
leased or the nature of its activities makes such qualification necessary,
except for such failures which, individually or in the aggregate, would not
have a Material Adverse Effect on Transworld. Newco is a newly formed
corporation which has not engaged in any business other than in connection
with its organization and the transactions contemplated by this Agreement.
The term "Material Adverse Effect," as used in this Agreement with respect
-----------------------
to Transworld or the Company, means any change or effect that is materially
adverse to the business, results of operations, assets, liabilities,
condition (financial or otherwise), or prospects of Transworld and its
Subsidiaries (as defined in Section 3.1), taken as a whole, or the Company
and its Subsidiaries, taken as a whole, as the case may be.
SECTION 2.2. Authority Relative to this Agreement, the Stock
-----------------------------------------------
Purchase Agreement, and the Registration Rights
-----------------------------------------------
Agreement.
---------
Each of Transworld and Newco has all necessary corporate power and
authority to enter into this Agreement, the Stock Purchase Agreement, and
the Registration Rights Agreement and to carry out its obligations hereunder
and thereunder. The execution and delivery of this Agreement, the Stock
Purchase Agreement, and the Registration Rights Agreement by Transworld and
Newco and the consummation by Transworld and Newco of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Transworld and Newco. This Agreement, the
Stock Purchase Agreement, and the Registration Rights Agreement have been
duly executed and delivered by Transworld and Newco and, assuming the due
authorization, execution, and delivery hereof and thereof by the Company,
constitute legal, valid, and binding obligations of Transworld and Newco,
enforceable against each in accordance with their respective terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws relating to or affecting creditors'
rights generally, by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law) or by
an implied covenant of good faith and fair dealing.
SECTION 2.3. No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement, the Stock
Purchase Agreement, and the Registration Rights Agreement by Transworld and
Newco do not, and neither the performance of this Agreement, the Stock
Purchase Agreement, or the Registration Rights Agreement by Transworld and
Newco nor the Merger or other transactions contemplated hereby or by the
Stock Purchase Agreement or the Registration Rights Agreement will
(i) conflict with or violate the Certificate of Incorporation or By-Laws of
Transworld or the Certificate of Incorporation or By-Laws of Newco,
(ii) conflict with or violate in any material respect any law, rule,
regulation, order, judgment, or decree applicable to Transworld or Newco or
by which either of them or their respective properties is bound or affected
(assuming compliance with the requirements set forth in clauses (i), (ii),
(iii), and (iv) of Section 2.3(b)) or (iii) result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration, or cancellation of, or result in the creation of a
material lien or encumbrance on any of the property or assets of Transworld
or Newco pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, or other instrument or
obligation to which Transworld or Newco is a party or by which Transworld or
Newco or any of their respective properties is bound or affected, except as
contemplated by Section 7.3(i) and except for any such breaches, defaults,
or other occurrences which would not, individually or in the aggregate, have
a Material Adverse Effect on Transworld.
(b) The execution and delivery of this Agreement, the Stock
Purchase Agreement, and the Registration Rights Agreement by Transworld and
Newco do not, and the performance of this Agreement, the Stock Purchase
Agreement, and the Registration Rights Agreement by Transworld and Newco
will not require Transworld or Newco to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to,
any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements of state securities laws ("Blue Sky Laws"),
-------------
Federal securities laws, and filing and recordation of the Certificate of
Merger as required by Delaware Law, (ii) filings required pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations promulgated thereunder (the "HSR Act"), (iii) filings
-------
with respect to Medicare and Medicaid provider number licenses and other
healthcare related licenses, and (iv) where failure to obtain such consents,
approvals, authorizations, or permits, or to make such filings or
notifications, would not prevent or materially delay consummation of the
Merger, or otherwise prevent Transworld or Newco from performing their
respective obligations under this Agreement.
SECTION 2.4. Proxy Material.
-------------
None of the information supplied or to be supplied by Transworld
or any of its affiliates or representatives for inclusion in (i) the proxy
statement to be mailed to holders of Company Common Stock in connection with
the special meeting of stockholders of the Company (the "Company
-------
Stockholders Meeting") (such proxy statement, together with the letter to
- --------------------
stockholders, notice of meeting, and form of proxy being hereinafter
collectively referred to as the "Definitive Proxy Material") or any
-------------------------
amendment or supplement thereto, or (ii) any other documents to be filed
with the Securities and Exchange Commission (the "SEC") or any other
---
regulatory agency in connection with the transactions contemplated hereby,
will, at the respective time such documents are filed, and, in the case of
the Definitive Proxy Material or any amendment thereof or supplement
thereto, at the time of the Company Stockholders Meeting or at the time of
mailing of the Definitive Proxy Material to stockholders of the Company, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein, at the time
and in light of the circumstances under which they were made, not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Company
Stockholders Meeting.
SECTION 2.5. Litigation.
----------
As of the date hereof, there is no suit, action, proceeding, or
investigation pending or, to the knowledge of Transworld or Newco,
threatened, against Newco or Transworld which seeks to prevent or challenge
the transactions contemplated by this Agreement, the Stock Purchase
Agreement, or the Registration Rights Agreement.
SECTION 2.6. Brokers.
-------
No broker, finder, or investment banker is entitled to any
brokerage, finder's, or similar fee or commission in connection with the
transactions contemplated by this Agreement, the Stock Purchase Agreement,
and the Registration Rights Agreement, based upon arrangements made by or on
behalf of Transworld or Newco, except UBS Securities LLC, in connection with
providing a fairness opinion and certain financial advisory services to
Transworld and BT Securities Corporation in connection with certain other
services, none of which will be paid by the Company, except as provided in
Section 8.3(a) hereof.
SECTION 2.7. Financing.
---------
Subject to the receipt by Transworld of an amendment or consent
under its existing credit facility as contemplated by Section 7.3(i),
Transworld will have sufficient funds to enable it to consummate the Merger
and the Stock Purchase.
SECTION 2.8. Board Recommendation.
--------------------
The Board of Directors of Transworld, at a meeting of such board
duly called and held on November 11, 1996, by the unanimous vote of all
directors present, approved and adopted this Agreement, the Merger, and the
other transactions contemplated hereby, and the Stock Purchase Agreement,
the Registration Rights Agreement, and the transactions contemplated
thereby.
SECTION 2.9. Fairness Opinion.
----------------
Transworld has received the opinion of UBS Securities LLC that the
consideration paid by Transworld in connection with the purchase by
Transworld of certain indebtedness of the Company, the Merger, and the Stock
Purchase is fair, from a financial point of view, to Transworld.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company hereby represents and warrants to Transworld and Newco
that, except as set forth in the Disclosure Schedule previously delivered by
the Company to Transworld (the "Disclosure Schedule"):
-------------------
SECTION 3.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing, and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and any necessary governmental authority to own, operate, or lease
the properties that it purports to own, operate, or lease and to carry on
its business as it is now being conducted, and is in good standing in each
jurisdiction where the character of its properties owned, operated, or
leased or the nature of its activities makes such qualification necessary,
except for such failures which, individually or in the aggregate, would not
have a Material Adverse Effect on the Company. Section 3.1 of the
Disclosure Schedule sets forth the name, jurisdiction of incorporation,
capitalization, and percentage of outstanding capital stock owned, directly
or indirectly, by the Company with respect to each of its Subsidiaries.
Except as set forth in Section 3.1 of the Disclosure Schedule, all the
outstanding capital stock and other ownership interests or equity
equivalents of each of the Subsidiaries of the Company is duly authorized,
validly issued, fully paid, and nonassessable and is owned by the Company or
another Subsidiary of the Company free and clear of any claim, lien, or
encumbrance. Except as disclosed in Section 3.1 of the Disclosure Schedule,
neither the Company nor any of its Subsidiaries directly or indirectly
controls or owns any interest in any other corporation, partnership, joint
venture, or other business association or entity. The term "Subsidiary" of
----------
a person as used in this Agreement shall mean any corporation or other legal
entity of which that person (either alone or together with other
Subsidiaries of that person) owns, directly or indirectly, more than 50% of
the stock or other equity interests which are ordinarily and generally, in
the absence of contingencies or understandings, entitled to vote for the
election of a majority of the board of directors or governing body.
SECTION 3.2. Certificate of Incorporation and By-Laws.
----------------------------------------
The Company has heretofore furnished to Transworld a complete and
correct copy of the Certificate of Incorporation and By-Laws, each as
amended to date, of the Company. Such Certificate of Incorporation and By-
Laws are in full force and effect. The Company is not in violation of any
of the provisions of its Certificate of Incorporation or By-Laws.
SECTION 3.3. Capitalization.
--------------
The authorized capital stock of the Company consists of 39,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock
("Company Preferred Stock"). As of the date hereof, (i) no shares of
-----------------------
Company Preferred Stock are outstanding or reserved for issuance,
(ii) 9,330,182 shares of Company Common Stock are issued and outstanding,
(iii) 1,011,668 shares of Company Common Stock are reserved for issuance
pursuant to outstanding warrants, convertible debt, and Options, and
(iv) 9,711,005 shares of Company Common Stock are reserved for issuance
pursuant to the Stock Purchase Agreement. The names of the holders of all
such warrants, convertible debt, and Options, and the number of shares of
Company Common Stock subject to such warrants, convertible debt, and Options
are set forth in Section 3.3 of the Disclosure Schedule. Except as set
forth in such Section 3.3 of the Disclosure Schedule, there are no
securities convertible into capital stock or other ownership interests or
equity equivalents, options, warrants, or other rights, agreements,
arrangements, or commitments of any character relating to the issued or
unissued capital stock, or ownership or equity equivalent of the Company or
any Subsidiary or obligating the Company or any Subsidiary to issue or sell
any shares of capital stock of, or other ownership interests or equity
equivalents in, the Company or a Subsidiary or any agreement to issue any
such convertible securities, options, warrants, rights, agreements,
arrangements, or commitments. All issued and outstanding shares of Company
Common Stock are, and all shares of Company Common Stock reserved for
issuance as aforesaid, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, shall be, duly
authorized, validly issued, fully paid, and nonassessable. Without limiting
the foregoing, the Agreement Shares and the Transworld Option Shares, upon
issuance on the terms and conditions specified in the Stock Purchase
Agreement, (x) will be duly authorized, validly issued, fully paid, and
nonassessable, (y) will be free of any pledges, liens, security interests,
or other encumbrances of any kind, and (z) will not be issued in violation
of any preemptive rights. There are no voting trusts or other agreements or
understandings to which the Company or any Subsidiary is a party with
respect to the voting of the capital stock of the Company or any Subsidiary.
SECTION 3.4. Authority Relative to this Agreement, the Stock
-----------------------------------------------
Purchase Agreement, and the Registration Rights
-----------------------------------------------
Agreement.
---------
The Company has all necessary corporate power and authority to
enter into this Agreement, the Stock Purchase Agreement, and the
Registration Rights Agreement and to carry out its obligations hereunder and
thereunder, and the execution and delivery of this Agreement, the Stock
Purchase Agreement, and the Registration Rights Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the
part of the Company, subject, in the case of this Agreement and the Merger,
to the calling and holding of the Company Stockholders Meeting and approval
of the Merger and adoption of this Agreement by a vote of the holders of a
majority of the outstanding shares of Company Common Stock ("Company
-------
Stockholder Approval"). This Agreement, the Stock Purchase Agreement, and
- --------------------
the Registration Rights Agreement have been duly executed and delivered by
the Company and, assuming the due authorization, execution, and delivery by
Transworld and Newco, constitute legal, valid, and binding obligations of
the Company, enforceable against the Company in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium, and other similar laws relating to
or affecting creditors' rights generally, by general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), or by an implied covenant or good faith and fair dealing.
SECTION 3.5. No Conflict; Required Filings and Consents.
------------------------------------------
(a) The execution and delivery of this Agreement, the Stock
Purchase Agreement, and the Registration Rights Agreement by the Company do
not, and neither the performance of this Agreement, the Stock Purchase
Agreement, and the Registration Rights Agreement by the Company nor the
Merger or other transactions contemplated hereby or by the Stock Purchase
Agreement or the Registration Rights Agreement (nor any change in control of
the Company resulting therefrom), subject to obtaining Company Stockholder
Approval, will (i) conflict with or violate the Certificate of Incorporation
or By-Laws of the Company or any of its Subsidiaries, (ii) conflict with or
violate in any material respect any law, rule, regulation, order, judgment,
or decree applicable to the Company or any of its Subsidiaries or by which
any of their respective properties are bound or affected (assuming
compliance with the requirements set forth in clauses (i), (ii), (iii), (iv)
and (v) of Section 3.5(b)), or (iii) result in any breach of or constitute a
default (or an event which with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration, or cancellation of, or give to others any other rights
pursuant to, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its Subsidiaries pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise, or other instrument or obligation to which the
Company or its Subsidiaries is a party or by which the Company or its
Subsidiaries or any of their assets is bound or affected, except as set
forth in Section 3.5(a) of the Disclosure Schedule and except for any such
breaches, defaults, or other occurrences which would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
(b) The execution and delivery of this Agreement, the Stock
Purchase Agreement, and the Registration Rights Agreement by the Company do
not, and the performance of this Agreement, the Stock Purchase Agreement,
and the Registration Rights Agreement by the Company will not, require the
Company or any of its Subsidiaries to obtain any consent, approval,
authorization, or permit of, or to make any filing with or notification to,
any governmental or regulatory authority, domestic or foreign, except
(i) for applicable requirements of Federal securities laws, Blue Sky Laws,
and filing and recordation of the Certificate of Merger as required by
Delaware Law, (ii) in connection with the Stock Purchase Agreement, a waiver
by the NASDAQ Stock Market of a section of the By-Laws of the National
Association of Securities Dealers, Inc., (iii) filings pursuant to the HSR
Act, (iv) filings with respect to MediCare and Medicaid provider number
licenses and other healthcare related licenses as set forth in Section
3.5(b) of the Disclosure Schedule, and (v) where failure to obtain such
consents, approvals, authorizations, or permits, or to make such filings or
notifications, would not prevent or materially delay consummation of the
Merger, or otherwise prevent the Company from performing its obligations
under this Agreement, the Stock Purchase Agreement, or the Registration
Rights Agreement and would not have a Material Adverse Effect on the
Company.
SECTION 3.6. SEC Filings; Financial Statements.
---------------------------------
(a) As of their respective dates, all reports, schedules,
registration statements, and definitive proxy statements filed by the
Company with the SEC since April 30, 1994 (collectively, the "Company SEC
-----------
Reports"), except as described in subsequently filed Company SEC Reports
- -------
(that have been filed with the SEC prior to the date hereof) (i) complied
as to form in all material respects with the requirements of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as the case may be, and (ii) did not contain any
------------
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. None of the Company's Subsidiaries is required to file any
forms, reports, or other documents with the SEC.
(b) Except as described in subsequently filed Company SEC Reports
(that have been filed with the SEC prior to the date hereof), each of the
consolidated financial statements (including, in each case, any related
notes thereto) contained in the Company SEC Reports has been prepared in
accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods involved (except as may be indicated
in the notes thereto), and each fairly presents the consolidated financial
position of the Company and its consolidated Subsidiaries as at the
respective dates thereof and the consolidated results of its operations and
changes in financial position for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as set forth in Section 3.6 of the Disclosure
Schedule, neither the Company nor any Subsidiary has any liability or
obligation of any nature whatsoever (whether known or unknown, due or to
become due, accrued, fixed, contingent, liquidated, unliquidated, or
otherwise), other than liabilities and obligations (i) which are set forth
in the consolidated balance sheet of the Company and its consolidated
Subsidiaries as of April 30, 1996 or reflected in the notes thereto or (ii)
which arose in the ordinary course since April 30, 1996 and do not and will
not individually or in the aggregate, have a Material Adverse Effect on the
Company.
SECTION 3.7. Absence of Certain Changes or Events.
------------------------------------
Except as contemplated by this Agreement or disclosed in the
Company SEC Reports or Section 3.7 of the Disclosure Schedule, since April
30, 1996, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, (i) there has not been any change in the
business, assets, liabilities, results of operations, or condition
(financial or otherwise) of the Company or its Subsidiaries having a
Material Adverse Effect on the Company, and (ii) the Company and its
Subsidiaries have not entered into any material transaction with any third
party.
SECTION 3.8. Absence of Litigation.
---------------------
Except as set forth in Section 3.8 of the Disclosure Schedule or
in the Company SEC Reports, no claim, action, proceeding, or investigation
is pending or, to the best knowledge of the Company, threatened against the
Company or its Subsidiaries which would, individually or in the aggregate,
if adversely determined, have a Material Adverse Effect on the Company. As
of the date hereof, there are no actions, suits, or proceedings pending or,
to the knowledge of the Company, threatened against the Company or any of
its Subsidiaries arising out of or in any way related to this Agreement, the
Stock Purchase Agreement, the Registration Rights Agreement, or any of the
transactions contemplated hereby or thereby. From the date hereof until the
Effective Time, the Company shall promptly advise Transworld and Newco if
any such claim, suit, governmental proceeding, or litigation is commenced
against the Company or any of its Subsidiaries or is, to the knowledge of
the Company, threatened against the Company or any of its Subsidiaries.
SECTION 3.9. Employee Benefit Plans.
----------------------
True, correct, and complete copies, as in effect on the date
hereof, of the employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and
-----
related summary plan descriptions, currently or previously established,
maintained, sponsored or contributed to (or with respect to which any
obligation to contribute has been undertaken) by the Company or its
Subsidiaries or any entity that would be deemed a "single employer" with the
Company or any of its Subsidiaries (an "ERISA Affiliate") within the meaning
---------------
of Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as
amended (the "Code"), and all bonus, stock option, stock purchase, stock
----
appreciation right, incentive, deferred compensation, supplemental
retirement, severance, welfare, medical, life, vacation, sickness, change in
control, death benefit, and other similar fringe or employee benefit plans,
programs, policies, or arrangements, all employment, consulting, or
executive compensation agreements for the benefit of, or relating to, any
employee, former employee, consultant, director, or retiree of the Company
or any Subsidiary thereof or any ERISA Affiliate (including their family
members and other beneficiaries) (collectively, the "Employee Plans"), and
--------------
written descriptions of any oral arrangements or agreements with respect to
the foregoing, have been provided or made available to Transworld prior to
the date hereof and are listed in Section 3.9 of the Disclosure Schedule;
provided that an Employee Plan that is no longer maintained by the Company
or an ERISA Affiliate shall not be listed in Section 3.9 of the Disclosure
Schedule and copies thereof need not be made available to Transworld prior
to the date hereof. With respect to any Employee Plans (i) each Employee
Plan intended to qualify under Section 401(a) of the Code has been qualified
since inception and has received a favorable determination letter under
Revenue Procedure 93-39 and subsequent revenue procedures from the Internal
Revenue Service (the "IRS") and delivered to Transworld for any such
---
Employee Plan evidencing its qualified status, and with respect to each such
Employee Plan, no event has occurred or condition exists that could
disqualify such Employee Plan or cause the loss of any tax deductions for
contributions made to such Employee Plan; (ii) no such Employee Plan is or
has ever been a "multiemployer plan" within the meaning of Section 3(37) or
4001(a)(3) of ERISA or Section 414(f) of the Code or a single employer
pension plan within the meaning of Section 4001(a)(15) of ERISA which is
subject to Sections 4063 and 4064 of ERISA (a "Multiple Employer Plan"), and
----------------------
neither the Company nor any ERISA Affiliate has had an obligation to
contribute to any multiemployer plan; (iii) there has been no "prohibited
transaction" within the meaning of Section 4975(c) of the Code or Section
406 of ERISA, involving the assets of the Employee Plans, in connection with
which the Company or any of its ERISA Affiliates could be subject either to
a civil penalty assessed pursuant to Section 502(i) of ERISA or a tax
imposed by Section 4975 of the Code; (iv) all payments required by any
Employee Plan, any collective bargaining agreement or other agreement, or by
law (including, without limitation, all contributions, insurance premiums,
or intercompany charges) required to have been made shall have been made
prior to the Closing or provided for by the Company as applicable, by full
accruals as if all targets required by such Employee Plan had been or will
be met at maximum levels) on its financial statements; (v) no Employee Plan
is or has ever been subject to Section 412 of the Code, Section 302 of
ERISA, or Title IV of ERISA; (vi) except as disclosed in Section 3.9 of the
Disclosure Schedule no claim, lawsuit, arbitration or other action has been
threatened, asserted, instituted, or anticipated against the Employee Plans
(other than non-material routine claims for benefits, and appeals of such
claims), any trustee or fiduciaries thereof, the Company, any ERISA
Affiliate, any director, officer, or employee thereof, or any of the assets
of any trust of the Employee Plans; (vii) each Employee Plan complies and
has been maintained and operated in all material respects in accordance with
its terms and applicable law, including, without limitation, ERISA and the
Code; (viii) no Employee Plan is or expected to be under audit or
investigation by the IRS, U.S. Department of Labor, or any other
governmental authority and no such completed audit, if any, has resulted in
the imposition of any tax or penalty; (ix) each Employee Plan intended to
meet requirements for tax-favored treatment under any provision of the Code,
including, without limitation, Sections 79, 105, 106, 117, 120, 125, 127,
129, 132, 162(m), 404, 404A, 419, 419A, or 501(c)(9) of the Code satisfies
the applicable requirements under the Code; (x) with respect to each
Employee Plan that is funded mostly or partially through an insurance
policy, neither the Company nor any ERISA Affiliate has any liability in the
nature of retroactive rate adjustment, loss sharing arrangement or other
actual or contingent liability arising wholly or partially out of events
occurring on or before the Closing; and (xi) the Company will make available
to Transworld as to each Employee Plan, a true and correct copy of the most
recent annual report (Form 5500) filed with the IRS and the most recent
report.
Except as listed in Section 3.9 of the Disclosure Schedule or as
required by Section 4980B(f) of the Code, no plan or arrangement provides
medical, death, or welfare benefits (whether or not insured) with respect to
current or former employees of the Company or its Subsidiaries beyond their
retirement or other termination of employment.
The consummation of the transactions contemplated by this
Agreement will not give rise to any liability, including, without
limitation, liability for severance pay, unemployment compensation,
termination pay, or withdrawal liability, or accelerate the time of payment
or vesting or increase the amount of compensation or benefits due to any
employee, or director of the Company, its Subsidiaries or ERISA Affiliates
(whether current, former, or retired) or their beneficiaries solely by
reason of such transactions. No amounts payable under any Employee Plan
will fail to be deductible for federal income tax purposes by virtue of
Section 280G or 162(m) of the Code. Except as disclosed in Section 3.9 of
the Disclosure Schedule, neither the Company nor any ERISA Affiliate, or any
officer or employee thereof, has made any promises or commitments, whether
legally binding or not, to create any additional plan, agreement, or
arrangement, or to modify or change any existing Employee Plan. Neither the
Company nor any ERISA Affiliate maintains a pension plan (as defined in
Section 3(2) of ERISA), including, without limitation, a nonqualified
deferred compensation plan or excess benefit plan, that is unfunded. No
event, condition, or circumstance exists that would prevent the amendment or
termination of any Employee Plan.
SECTION 3.10. Permits and Licenses.
--------------------
Except as set forth in Section 3.10 of the Disclosure Schedule,
the Company and its Subsidiaries are now, and on the Closing Date will be,
the holder of all licenses, franchises, ordinances, authorizations, permits,
and certificates, domestic or foreign (collectively, the "Company
-------
Licenses"), necessary to enable them to continue to conduct their businesses
- --------
in all material respects as presently conducted, except where the failure to
have such Company Licenses, individually or in the aggregate, would not have
a Material Adverse Effect on the Company. Except as set forth in
Section 3.10 of the Disclosure Schedule, all of the Company Licenses are
now, and (assuming satisfaction of all requirements set forth in Section
3.5(b)(iv) and (v)) on the Closing Date will be, in full force and effect.
The Company has no reason to believe that any Federal, state, or local
government or agency having jurisdiction will revoke, cancel, rescind,
refuse to renew in the ordinary course, or modify any of the Company
Licenses. Except as disclosed in the Company SEC Reports or except as set
forth in Section 3.10 of the Disclosure Schedule, there is not now pending,
or, to the best knowledge of the Company, threatened, any investigation
before any such Federal, state, or local governments or agencies which,
either individually or in the aggregate, would have a Material Adverse
Effect on the Company. Except as disclosed in the Company SEC Reports, each
of the Company and its Subsidiaries has conducted its business so as to
comply with all applicable laws, regulations, ordinances, and codes,
domestic and foreign, including, without limitation, laws, regulations,
ordinances, and codes relating to the protection of the environment, the
failure to comply with which could have, either individually or in the
aggregate, a Material Adverse Effect on the Company.
SECTION 3.11. Proxy Material.
--------------
None of the information supplied or to be supplied by the Company
or any of its affiliates or representatives for inclusion, or included or
incorporated by reference, in (i) the Definitive Proxy Material or (ii) any
other documents to be filed with the SEC or any other regulatory agency in
connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and, in the case of the Definitive
Proxy Material or any amendment thereof or supplement thereto, at the time
of the Company Stockholders Meeting or at the time of mailing of the
Definitive Proxy Material to stockholders of the Company, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary in order to make the statements therein, at the time and in
light of the circumstances under which they were made, not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Company
Stockholders Meeting. The Definitive Proxy Material and any amendment
thereof or supplement thereto will comply as to form in all material
respects with the provisions of the Exchange Act.
SECTION 3.12. Brokers.
-------
No broker, finder, or investment banker, other than National
Westminster Bank Plc. ("NatWest"), is entitled to any brokerage, finder's,
-------
or other fee or commission in connection with the transactions contemplated
by this Agreement, the Stock Purchase Agreement, or the Registration Rights
Agreement, based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Transworld a complete and correct copy
of all agreements between the Company and NatWest pursuant to which such
firm would be entitled to any payment as a result of the transactions
contemplated hereby.
SECTION 3.13. Properties, Contracts, and Insurance.
------------------------------------
(a) Except as set forth in Section 3.13(a) to the Disclosure
Schedule, the Company and its Subsidiaries own, or are licensed to use, or
lease, all property and assets, real and personal, tangible and intangible
(including, but not limited to, all patents, trademarks, trade names,
copyrights, technology, know-how, and processes), used in or necessary for
the conduct of their businesses as currently conducted except where the
failure so to own, license, or lease would not have a Material Adverse
Effect on the Company. To the knowledge of the Company, the use of such
patents, trademarks, trade names, copyrights, technology, know-how, and
processes by the Company or its Subsidiaries does not infringe on the rights
of any person, subject to such claims and infringement which, individually
or in the aggregate, have not had and will not have a Material Adverse
Effect on the Company.
(b) Section 3.13(b) of the Disclosure Schedule sets forth a true
and complete list of all contracts, agreements, notes, bonds, mortgages,
indentures, guarantees, instruments, or commitments (written or oral)
relating to the Company or any of its Subsidiaries which are material to the
Company and its Subsidiaries, taken as a whole (other than those relating to
insurance coverage), and all agreements which impose operational,
geographic, or other restrictions upon the ability of the Company or any of
its Subsidiaries to engage in any business. To the best knowledge of the
Company and except as set forth in Section 3.13(b) of the Disclosure
Schedule, all of such material contracts of the Company and its Subsidiaries
are presently valid and existing and in full force and effect, and there is
no violation, default or claim of violation or default by any party thereto
and no condition or event has occurred which with notice or lapse of time or
both would constitute a violation or default thereunder, except for any such
failure to be valid and existing and in full force and effect, or any such
violation, default, or claim, which would not have a Material Adverse Effect
on the Company.
(c) Section 3.13(c) of the Disclosure Schedule sets forth a true
and correct list of all insurance coverage maintained by or for the benefit
of the Company and its Subsidiaries with respect to their operations or any
incident, event, or thing arising therefrom or relating thereto, setting
forth (i) the name of the carrier, (ii) the nature and dollar limits of the
coverage, (iii) the policy number and scheduled expiration date, (iv) the
premium rate and date through which paid, and (v) the named insureds
thereunder. Except as set forth in Section 3.13(c) of the Disclosure
Schedule, all such policies are in full force and effect, no notice of
default or termination has been given thereunder, and no effect, occurrence,
or thing has occurred which, with notice or lapse of time or both, could
result in the early termination thereof.
SECTION 3.14. Board Recommendation.
--------------------
The Board of Directors of the Company, at a meeting of such board
duly called and held on November 12, 1996 (prior to the time of the
execution of this Agreement and the Stock Purchase Agreement), by the
unanimous vote of all directors voting, (a) determined that the Merger and
the Stock Purchase are fair to the Company and its stockholders, and
approved and adopted this Agreement, (b) approved (i) this Agreement, the
Merger and the other transactions contemplated hereby, and (ii) the Stock
Purchase Agreement, the Registration Rights Agreement, and the transactions
contemplated thereby, and (c) resolved to recommend approval and adoption of
the Merger and this Agreement by the Company's stockholders.
SECTION 3.15. Fairness Opinion.
----------------
The Company has received the opinion of NatWest that the Merger
Consideration is fair, from a financial point of view, to the stockholders
of the Company.
SECTION 3.16. Compliance with Environmental Laws. For the
----------------------------------
purposes of this Section 3.16:
"Contaminant" shall mean all Hazardous Materials and all those
-----------
substances which are regulated by or form the basis of liability under
Federal, state or local environmental, health and safety statutes or
regulations including, without limitation, asbestos, polychlorinated
biphenyls ("PCBs"), and radioactive substances, or any other material or
----
substance which constitutes a material health, safety or environmental
hazard to any person or property.
"Environmental Claim" shall mean any written notice of violation,
-------------------
claim, demand, abatement or other order by any governmental authority or any
person for personal injury (including sickness, disease or death), tangible
or intangible property damage, damage to the environment, nuisance,
pollution, contamination or other adverse effects on the environment, or for
fines, penalties or deed or use restrictions, resulting from or based upon
(i) the existence, or the continuation of the existence, of a Release
(including, without limitation, sudden or non-sudden, accidental or
nonaccidental Releases), of, or exposure to, any substance, chemical,
material, pollutant, contaminant, odor, or audible noise or other release or
emission in, into or onto the environment (including, without limitation,
the air, ground, water or any surface) at, in, by or from any of the
properties of the Company or any of its Subsidiaries, (ii) the environmental
aspects of the transportation, storage, treatment, or disposal of materials
in connection with the operation of any of the properties of the Company or
any of its Subsidiaries, or (iii) the violation, or alleged violation by the
Company or any of its Subsidiaries, of any statutes, ordinances, orders,
rules, regulations, permits or licenses of or from any governmental
authority, agency or court relating to environmental matters connected with
any of the properties of the Company or any of its Subsidiaries, under any
applicable Environmental Law.
"Environmental Laws" shall mean the Comprehensive Environmental
------------------
Response, Compensation, and Liability Act (42 U.S.C. S 9601 et seq.), the
------
Hazardous Material Transportation Act (49 U.S.C. S 1801 et seq.), the
------
Resource Conservation and Recovery Act (42 U.S.C. S 6901 et seq.), the
------
Federal Water Pollution Control Act (33 U.S.C. S 1251 et seq.), the Oil
------
Pollution Act of 1990 (P.L. 101-380), the Safe Drinking Water Act (42 U.S.C.
S 300(f), et seq.), the Clear Air Act (42 U.S.C. S 7401 et seq.), the Toxic
------ ------
Substances Control Act, as amended (15 U.S.C. S 2601 et seq.), the Federal
------
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. S 136 et seq.), and
------
the Occupational Safety and Health Act (29 U.S.C. S 651 et seq.), as such
-----
laws have been and hereafter may be amended or supplemented, and any related
or analogous present or future Federal, state or local, statutes, rules,
regulations, ordinances, licenses, permits and interpretations and orders of
regulatory and administrative bodies and the common law.
"Hazardous Material" shall mean any pollutant, contaminant,
------------------
chemical, or industrial or hazardous, toxic or dangerous waste, substance or
material, defined or regulated as such in (or for purposes of) any
Environmental Law and any other toxic, reactive, or flammable chemicals,
including (without limitation) any asbestos, any petroleum (including crude
oil or any fraction), any radioactive substance and any PCBs; provided, in
--------
the event that any Environmental Law is amended so as to broaden the meaning
of any term defined thereby, such broader meaning shall apply subsequent to
the effective date of such amendment; and provided, further, to the extent
-------- -------
that the applicable laws of any state establish a meaning for "hazardous
material," "hazardous substance," "hazardous waste," "solid waste" or "toxic
substance" which is broader than that specified in any Environmental Law,
such broader meaning shall apply.
"Release" shall mean any releasing, spilling, leaking, seepage,
-------
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping, in each case as defined in Environmental
Law, and shall include any "Threatened Release," as defined in Environmental
Law.
"Remedial Work" shall mean any investigation, site monitoring,
-------------
containment, cleanup, removal, restoration or other remedial work of any
kind or nature with respect to any property of the Company or any of its
Subsidiaries (whether such property is owned, leased, subleased or used),
including, without limitation, with respect to Contaminants and the Release
thereof.
(a) Except as disclosed in Section 3.16 of the Disclosure
Schedule: (i) the operations of the Company and its Subsidiaries comply in
all material respects with all applicable Environmental Laws; (ii) the
Company, its Subsidiaries, and all of their present facilities or
operations, and, to the knowledge of the Company or any of its Subsidiaries,
their past facilities or operations, are not subject to any judicial
proceeding or administrative proceeding or any outstanding written order or
agreement with any governmental authority or private party regarding (a) any
Environmental Law, (b) any Remedial Work, or (c) any Environmental Claims
arising from the Release of a Contaminant into the environment; (iii) to the
best of the knowledge of the Company and its Subsidiaries, none of their
operations is the subject of any Federal or state investigation evaluating
whether any Remedial Work is needed to respond to a Release of any
Contaminant into the environment; (iv) neither the Company nor any of its
Subsidiaries, nor any predecessor of the Company or any of its Subsidiaries,
has filed any notice under any Environmental Law indicating past or present
treatment, storage, or disposal of a Hazardous Material or reporting a spill
or Release of a Contaminant into the environment; (v) to the best of the
knowledge of the Company and its Subsidiaries, neither the Company nor any
of its Subsidiaries has any contingent liability in connection with any
Release of any Contaminant into the environment; (vi) none of the operations
of the Company and its Subsidiaries involve the generation, transportation,
treatment, or disposal of Hazardous Materials; (vii) neither the Company nor
any of its Subsidiaries has disposed of any Contaminant by placing it in or
on the ground or waters of any premises owned, leased or used by any of them
and to the knowledge of the Company and its Subsidiaries neither has any
lessee, prior owner, or other person; (viii) no underground storage tanks or
surface impoundments are on any property of the Company or any of its
Subsidiaries; and (ix) no lien in favor of any governmental authority for
(A) any liability under any Environmental Law or regulation, or (B) damages
arising from or costs incurred by such governmental authority in response to
a Release of a Contaminant into the environment, has been filed or attached
to the property of the Company or any of its Subsidiaries.
(b) Except as set forth in Section 3.16 of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries has contractually,
nor, to the knowledge of the Company or any of its Subsidiaries, by
operation of law, or under any Environmental Law, assumed or succeeded to
any material environmental liabilities relating to any Environmental Claims
of any predecessor or other person or entity.
(c) None of the matters set forth in Section 3.16 of the
Disclosure Schedule have, or are likely to have, individually or in the
aggregate, a Material Adverse Effect on the Company.
SECTION 3.17. Employment Matters.
------------------
(a) Except as set forth in Section 3.17 of the Disclosure
Statement, each of the Company and its Subsidiaries: (i) is in compliance in
all material respects with all applicable Federal and state laws, rules, and
regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
current, former, or retired employees or consultants of the Company or any
of its Subsidiaries (collectively "Employees"); (ii) has withheld all
---------
amounts required by law or by agreement to be withheld from the wages,
salaries, and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; and (iv) (other than routine payments to be made in the
ordinary course of business and consistent with past practice) is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation
benefits, social security or other benefits for Employees, except in each
case, for immaterial amounts.
(b) Except as set forth in Section 3.17(b) of the Disclosure
Schedule, no Employee Plans, employment or other agreements, or trusts exist
that expressly or impliedly make reference to, or provide that payments be
made or benefits provided, upon any "change in ownership or control,"
pursuant to which, with or without notice, the lapse of time or action by
the Company or any of its Subsidiaries or by any Employee or other person,
the payment, vesting, or funding of compensation or benefits is or may be
provided or accelerated, or a reversion to the Company or any of its
Subsidiaries of assets from an Employee Plan may be prohibited, or an
obligation to sell assets may arise, by reason of or in connection with the
consummation of a transaction contemplated by this Agreement or the Stock
Purchase Agreement (collectively, "Change of Control Provisions").
----------------------------
(c) Except as set forth in Section 3.17(c) of the Disclosure
Schedule, neither the Company nor any of its Subsidiaries is involved in or,
to the knowledge of the Company, threatened with, any labor dispute,
grievance, or litigation relating to labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries has
engaged in any unfair labor practices within the meaning of the National
Labor Relations Act which would, individually or in the aggregate, directly
or indirectly, have a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries is presently or has been in the past a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated by the Company or any of its Subsidiaries.
SECTION 3.18. Tax Returns, Audits, and Liabilities.
------------------------------------
(a) Except as set forth in Section 3.18 of the Disclosure
Schedule, each of the Company and its Subsidiaries has (i) timely filed in
accordance with all applicable laws, all Returns (as defined below) required
to be filed by them, (ii) paid all Taxes (as defined below) shown to have
become due pursuant to such Returns, and (iii) paid all Taxes (other than
those being contested in good faith, all of which are disclosed in Section
3.18 of the Disclosure Schedule) for which a notice of, or assessment or
demand for, payment has been received or which are otherwise due and
payable, in each case other than failures to file or pay that would not, in
the aggregate, have a Material Adverse Effect on the Company. All Returns
filed by each of the Company and each of its Subsidiaries with respect to
Taxes were true and correct in all material respects as of the date on which
they were filed or as subsequently amended to the date hereof. Except as
set forth in Section 3.18 of the Disclosure Schedule, complete copies of (i)
consolidated federal Income Tax Returns (as defined below) for the Company
and its Subsidiaries and (ii) state and local Income Tax and other Tax
Returns of the Company and its Subsidiaries for each of the years ended
April 30, 1995 and 1996, have heretofore been delivered or made available to
Transworld. Except as set forth in Section 3.18 of the Disclosure Schedule,
(A) there is no action, suit, proceeding, investigation, audit, claims or
assessment pending or proposed with respect to any liability for Tax that
relates to the Company or any of its Subsidiaries for which a material
amount of Tax is at issue, (B) all material amounts required to be collected
or withheld by the Company and each of its Subsidiaries with respect to
Taxes have been duly collected or withheld and any such amounts that are
required to be remitted to any taxing authority have been duly remitted,
(C) no extension of time within which to file any material Return that
relates to the Company or any of its Subsidiaries has been requested which
Return has not since been filed, (D) there are no waivers or extensions of
any applicable statute of limitations for the assessment or collection of
Taxes with respect to any material Return that relates to the Company or any
of its Subsidiaries which remain in effect, (E) there are no tax rulings,
requests for rulings, or closing agreements relating to the Company or any
of its Subsidiaries which could materially affect their liability for Taxes
for any period after the Effective Time, (F) all material Federal, state,
and local Income Tax Returns of the Company and each of its Subsidiaries
with respect to taxable periods through the year ended April 30, 1992 have
been examined and closed or are Returns with respect to which the applicable
statute of limitations has expired without extension or waiver, (G) no power
of attorney has been granted by the Company or any of its Subsidiaries with
respect to any matter relating to Taxes of the Company and its Subsidiaries
which is currently in force, (H) no excess loss account (as referred to in
Treasury Regulation Section 1.1502-19) exists with respect to any Subsidiary
of the Company, (I) neither the Company nor any of its Subsidiaries has any
deferred gain or loss (i) arising from deferred intercompany transactions
(as referred to in Treasury Regulation Sections 1.1502-13 and 1.1502-13T),
or (ii) with respect to the stock or obligations of any other member of the
Company's affiliated group (as described in Treasury Regulation Sections
1.1502-14 and 1.1502-14T) and (J) neither the Company nor any Subsidiary has
filed a consent under Section 341(f) of the Code or any comparable provision
of state revenue statutes. The Company has filed a consolidated Return for
Federal Income Tax purposes on behalf of itself and other members of the
affiliated group (within the meaning of Section 1504 of the Code) of which
it is the parent corporation since at least the date on which each was
incorporated. The accruals for deferred Federal income taxes reflected in
the audited financial statements of the Company for the year ended April 30,
1996 are adequate in all material respects to cover any deferred Federal
Income Tax liability of the Company and its Subsidiaries determined in
accordance with generally accepted principles through the date thereof. The
accruals and reserves for Taxes in such financial statements are adequate in
all material respects to cover any liability of the Company and its
Subsidiaries for Taxes for periods through the date thereof.
(b) The Company has heretofore provided Transworld with complete
copies (or, if oral, written descriptions) of any Tax Sharing Arrangement to
which the Company or any of its Subsidiaries is a party.
(c) For purposes of this Agreement, except as otherwise expressly
provided, unless the context otherwise requires:
"Income Taxes" means any Federal, state, local, or foreign
-----------
income, or franchise Tax and in each instance any interest, penalties, or
additions to tax attributable to such Tax;
"Return" means any report, return, statement, estimate,
------
declaration, form, or other information required to be supplied to a taxing
authority in connection with Taxes;
"Tax" or "Taxes" means taxes of any kind, levies or other
--- -----
like assessments, customs, duties, imposts, charges or, including, without
limitation, income, gross receipts, ad valorem, value added, excise, real or
personal property, asset, sales, use, license, payroll, transaction,
capital, net worth and franchise taxes, estimated taxes, withholding,
employment, social security, workers compensation, utility, severance,
production, unemployment compensation, occupation, premium, windfall
profits, transfer and gains taxes or other governmental taxes imposed or
payable to the United States, or any state, county, local, or foreign
government or subdivision or agency thereof, and in each instance such term
shall include any interest, penalties, or additions to tax attributable to
any such Tax; and
"Tax Sharing Arrangement" means any written or unwritten
-----------------------
agreement or arrangement for the allocation or payment of or with respect to
Tax liabilities or Tax benefits.
SECTION 3.19. Full Disclosure.
---------------
No statement herein or in the Disclosure Schedule hereto or in any
certificate delivered pursuant to the requirements of this Agreement by or
on behalf of the Company contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV
COVENANTS OF THE COMPANY
------------------------
SECTION 4.1. Conduct of Business by the Company Pending the
----------------------------------------------
Merger.
------
The Company covenants and agrees that, between the date of this
Agreement and the Effective Time, except as otherwise contemplated by this
Agreement or unless Transworld shall otherwise give its prior written
consent, the business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of business
and in a manner consistent with past practice (including financial and other
controls of the Company instituted since the commencement of the current
fiscal year), and the Company will use its commercially reasonable efforts
to continue its business development activities, to maintain in effect all
licenses, approvals, and authorizations, to preserve intact its business
organization and to maintain existing relationships with licensors,
licensees, suppliers, contractors, distributors, customers, and others
having business relationships with it, and Transworld and Newco agree to
cooperate reasonably, if required by the Company, with the Company in
connection with the foregoing. By way of amplification and not limitation,
except as contemplated by this Agreement, neither the Company nor any of its
Subsidiaries shall, between the date of this Agreement and the Effective
Time, do or agree to do any of the following without the prior written
consent of Transworld:
(a) amend or otherwise change its Certificate of Incorporation or
By-Laws;
(b) issue, sell, pledge, dispose of, encumber, or authorize the
issuance, sale, pledge, disposition, or encumbrance of (i) any shares of
capital stock of any class, or any options, warrants, convertible
securities, subscriptions, or other rights of any kind to acquire any shares
of capital stock, or any other ownership interest or equity equivalent, of
the Company or any of its Subsidiaries (including, without limitation, stock
appreciation rights) or any other securities in respect of, in lieu of, or
in substitution for any outstanding shares (other than, in the case of the
Company, shares of Company Common Stock issuable pursuant to the exercise of
outstanding convertible debt, warrants, or Options as set forth in Section
3.3 of the Disclosure Schedule) or grant or accelerate any right to convert
or exercise or otherwise amend in any respect any such outstanding
convertible debt, warrants, or Options or (ii) any material assets of the
Company or any of its Subsidiaries, except for sales of goods or services in
the ordinary course of business and in a manner consistent with past
practice;
(c) declare, set aside, make, or pay any dividend or other
distribution, payable in cash, stock, property, or otherwise, with respect
to any of its capital stock, any other ownership interest or equity
equivalent, or any other securities, or reclassify, combine, split,
subdivide, redeem, purchase, or otherwise acquire, directly or indirectly,
any such capital stock, ownership interest, equity equivalent, or other
securities, or adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such liquidation or a dissolution,
restructuring, recapitalization, or other reorganization or, except to the
extent required by fiduciary obligations under applicable law, a merger or
consolidation;
(d) (i) except in the ordinary course of business and consistent
with past practice, issue any debt securities or assume, guarantee, or
endorse the obligations of any other person, except for immaterial amounts;
(ii) except in the ordinary course of business and consistent with past
practice, make any loans, advances, or capital contributions to, or
investments in, any other person (other than to or in the Company or its
Subsidiaries or customary loans or advances to employees in amounts not
material to the maker of such loan or advance); (iii) pledge or otherwise
encumber shares of capital stock of or other ownership interests or equity
equivalents in the Company or any of its Subsidiaries; or (iv) except in the
ordinary course of business and consistent with past practice, mortgage or
pledge any of its material assets, tangible or intangible, or create or
suffer to exist any material lien thereupon;
(e) except as set forth in Section 4.3, enter into, adopt,
establish, or (except as may be required by law) amend or terminate any
collective bargaining agreement, bonus, profit sharing, thrift,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock purchase
agreement, pension, retirement, deferred compensation, employment,
severance, or other employee benefit agreement, trust, plan, fund, or other
arrangement for the benefit or welfare of any director, officer, or
employee, or (except for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expenses) increase in any
manner the compensation or benefits of any director, officer, or employee or
pay any benefit not required by any plan or arrangement as in effect as of
the date hereof (including, without limitation, the granting of stock
appreciation rights or performance units), increase the amount or change in
any material respect the terms of any insurance covering directors or
officers;
(f) except as set forth in Section 4.1(f) to the Disclosure
Schedule, acquire, sell, license, lease, or dispose of any assets outside
the ordinary course of business which in the aggregate are material to the
Company or enter into any commitment or transaction outside the ordinary
course of business consistent with past practice;
(g) change any of the accounting principles or practices used by
it;
(h) (i) acquire (by merger, consolidation, or acquisition of
stock or assets) any corporation, partnership, or other business
organization or division thereof or any interest therein; (ii) enter into
any partnership, joint venture, or similar agreement or arrangement or any
contract or agreement other than in the ordinary course of business
consistent with past practice; (iii) authorize any new capital
expenditure(s) which, individually, is in excess of $50,000 or, in the
aggregate, are in excess of $100,000; or (iv) amend or modify any material
existing agreement, arrangement, or understanding which would increase the
obligations or impair or diminish the rights of the Company or any of its
Subsidiaries in any material respect;
(i) except as set forth in Section 4.1(i) to the Disclosure
Schedule, make any tax election or settlement or compromise any income tax
liability material to the Company or its Subsidiaries;
(j) except as set forth in Section 4.1(j) to the Disclosure
Schedule, pay, discharge, or satisfy any claims, liabilities, or obligations
(absolute, accrued, asserted, or unasserted, contingent or otherwise), other
than the payment, discharge, or satisfaction in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the
consolidated financial statements (or the notes thereto) of the Company and
its consolidated Subsidiaries or incurred in the ordinary course of business
consistent with past practice, except for fees and expenses (including legal
fees and expenses) incurred in connection with this Agreement, the Stock
Purchase Agreement and the Registration Rights Agreement and the
transactions contemplated hereby and thereby and except as required by
applicable law.
(k) except as set forth in Section 4.1(k) to the Disclosure
Schedule, enter into (in writing or otherwise) any contract, agreement,
commitment, arrangement, or understanding to do any of the foregoing; or
(l) take, or agree to take, any action which would make any
representation or warranty untrue or incorrect in any material respect.
SECTION 4.2. No Solicitation of Transactions.
-------------------------------
From and after the date hereof through the earlier to occur of the
Effective Date and the date of termination of this Agreement, the Company
shall not, directly or indirectly, through any officer, director, agent, or
otherwise, solicit, initiate, or encourage submission of, proposals or
offers from any person relating to any acquisition or purchase of all or a
substantial portion of the assets of, or any equity interest in, the Company
or any of its Subsidiaries or any business combination with the Company or
any of its Subsidiaries or, except to the extent required by fiduciary
obligations under applicable law, participate in any negotiations regarding,
or furnish to any other person any information with respect to, or
encourage, any effort or attempt by any other person to do or seek any of
the foregoing; provided, however, that nothing contained in this Section 4.2
-------- -------
shall prohibit the Company or its Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a tender
offer by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act or from making such other disclosure to the Company's
stockholders which, in the judgment of the Board of Directors with advice of
counsel, may be required under applicable law. The Company will immediately
cease and cause to be terminated any existing activities, discussions, or
negotiations with any parties conducted heretofore with respect to any of
the foregoing, and shall immediately demand the return or destruction of any
non-public information concerning the Company distributed to other persons
for the purpose of soliciting or encouraging any of the foregoing; provided,
--------
however, that nothing in this sentence shall restrict the Company to the
- ------
extent required by fiduciary obligations under applicable law from
participating in any activities, discussions, or negotiations with any such
parties. The Company shall as soon as practicable (a) notify Transworld if
any such proposal or offer, or any inquiry or contact with any person with
respect thereto, is made and (b) disclose to Transworld the terms and
conditions of such proposal or offer and the identity of the offeror or
potential offeror.
SECTION 4.3. Option Plans, Convertible Debt, Options, and
--------------------------------------------
Warrants.
---------
(a) The Company shall take such action, if any, as may be
necessary to terminate the Option Plans at the Effective Time and shall take
the actions contemplated by Section 1.9(e).
(b) The Company shall use commercially reasonable efforts to
amend the terms of the outstanding convertible debt of the Company (as
disclosed in Section 3.3 of the Disclosure Schedule) in order to provide
that such convertible debt will cease to be convertible into equity of the
Company on and after the Effective Time.
(c) The Company shall take such action, if any, as may be
necessary to cause the outstanding Options and warrants (as disclosed in
Section 3.3 of the Disclosure Schedule) to be cancelled and settled in the
manner provided in Section 1.9(b).
SECTION 4.4. State Takeover Statutes.
-----------------------
The Company, will, upon the request of Transworld, take all
reasonable steps to (i) exempt the Merger from the requirements of any state
takeover law by action of the Company's Board of Directors or otherwise and
(ii) assist in any challenge by Transworld or Newco to the validity or
applicability to the Merger of any state takeover law, it being understood
that the Company may condition any such action on the consummation of the
Merger. The phrase "state takeover law" does not include the New York State
statute relating to the taxation of corporate transactions.
SECTION 4.5. Consents and Approvals.
----------------------
The Company shall use commercially reasonable efforts to obtain
the consents and approvals required with respect to the items described in
Sections 3.5(a) and (b) of the Disclosure Schedule.
ARTICLE V
COVENANTS OF TRANSWORLD AND NEWCO
---------------------------------
SECTION 5.1. Directors' and Officers' Indemnification.
----------------------------------------
From and after the Effective Time, Transworld and the Surviving
Corporation shall jointly and severally (to the same extent as the Company
currently indemnifies its officers and directors pursuant to the Company's
Certificate of Incorporation and By-Laws as in effect on the date hereof),
indemnify, defend, and hold harmless the present officers and directors (the
"Indemnified Parties") of the Company against all losses, claims, damages,
------------------
or liabilities ("Claims") arising out of actions or omissions occurring at
------
or prior to the Effective Time that are based on or arising out of the fact
that such person is or was a director or officer of the Company prior to the
Effective Time, including, without limitation, any Claim arising out of this
Agreement, the Stock Purchase Agreement, or the Registration Rights
Agreement or the transactions contemplated hereby and thereby.
ARTICLE VI
ADDITIONAL AGREEMENTS OF THE PARTIES
------------------------------------
SECTION 6.1. Proxy Material.
--------------
The Company shall prepare and, subject to the prior consent of
Transworld, file with the SEC preliminary proxy material relating to the
transactions contemplated by this Agreement (the "Preliminary Proxy
-----------------
Material") as soon as reasonably practicable. The Company shall use its
- --------
best efforts to respond to the comments of the SEC, provide a copy of all
amended Preliminary Proxy Material to Transworld, file such amended
Preliminary Proxy Material with the SEC with Transworld's prior consent, and
cause the Definitive Proxy Material to be mailed to the stockholders of the
Company. Each of the Company, Newco, and Transworld shall notify the other
parties promptly of the receipt of any comments of the SEC and of any
request by the SEC for amendments or supplements to the Preliminary Proxy
Material or the Definitive Proxy Material, or for additional information.
Each of the Company, Newco, and Transworld shall supply the other parties
with copies of all correspondence with the SEC with respect to any of the
foregoing filings. If at any time prior to the Company Stockholders
Meeting, any event should occur relating to the Company or any of its
officers, directors, or affiliates which should be described in an amendment
or supplement to the Definitive Proxy Material, the Company shall promptly
inform Transworld. If at any time prior to the Company Stockholders
Meeting, any event should occur relating to Transworld or any of its
officers, directors, or affiliates which should be described in an amendment
or supplement to the Definitive Proxy Material, Transworld shall inform the
Company. Whenever any event occurs which should be described in an
amendment or supplement to the Definitive Proxy Material, the Company,
Newco, and Transworld shall, upon learning of such event, cooperate with
each other to promptly file and clear with the SEC and, if applicable, mail
such amendment or supplement to the stockholders of the Company.
SECTION 6.2. Meeting of Stockholders of the Company.
--------------------------------------
The Company shall as promptly as reasonably practicable take all
action necessary in accordance with Delaware Law and its Certificate of
Incorporation and By-Laws duly to call, convene, and hold the Company
Stockholders Meeting. The Company shall, subject to the fiduciary
obligations of the Company's directors under applicable law as advised by
outside counsel, use reasonable efforts to solicit from stockholders of the
Company proxies in favor of the Merger and shall take such other action as
is reasonably necessary to secure the vote of stockholders required by
Delaware Law to effect the Merger. Transworld shall vote, or cause to be
voted, in favor of the Merger all shares of Company Common Stock
beneficially owned by it.
SECTION 6.3. HSR Act.
-------
Each of Transworld and the Company shall promptly following the
date hereof, file duly completed and executed Pre-Merger Notification and
Report Forms as required pursuant to the HSR Act and use its best efforts to
comply promptly with any requests made by the Federal Trade Commission or
the Department of Justice pursuant to the HSR Act.
SECTION 6.4. Access to Information; Confidentiality.
--------------------------------------
(a) Subject to applicable law, from the date hereof to the
Effective Time, the Company shall afford the officers, employees, and
authorized agents of Transworld reasonable access, during normal business
hours and upon reasonable notice, to its officers, employees, authorized
agents, properties, offices, books, and records and shall furnish Transworld
with all financial and operating data and other information regarding the
assets, properties, goodwill, and business of the Company as Transworld may
from time to time reasonably request.
(b) In the event of the termination of this Agreement and the
Stock Purchase Agreement, Transworld and Newco shall, and shall cause their
respective affiliates and their officers, directors, employees, and agents
to, (i) return promptly every document furnished to them by the Company or
any of its officers, directors, employees, and agents in connection with the
transactions contemplated hereby and any copies thereof, and shall use its
best efforts to cause others to whom such documents may have been furnished
promptly to return such documents and any copies thereof any of them may
have made, other than documents filed with the SEC or otherwise publicly
available and (ii) destroy promptly all documents created by them from any
data, information, or document furnished by the Company or any of its
officers, directors, employees, and agents in connection with the
transactions contemplated hereby and any copies thereof, and shall use its
best efforts to cause others to whom such documents may have been furnished
promptly to destroy the same and any copies thereof, other than documents
created from data, information or documents filed with the SEC or otherwise
publicly available. The terms of the Confidentiality Agreement dated
October 23, 1996 among Hyperion Partners II L.P., the Company, and
Transworld shall survive the termination hereof.
(c) No investigation pursuant to this Section 6.4 or other
investigation shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties hereto.
SECTION 6.5. Notification of Certain Matters.
-------------------------------
The Company shall give prompt notice to Transworld, and Transworld
shall give prompt notice to the Company, of (i) the occurrence, or non-
occurrence, of any event, the occurrence or non-occurrence of which would be
likely to cause any representation or warranty of such party contained in
this Agreement to be untrue or inaccurate at or prior to the Effective Time
and (ii) any failure of the Company, Transworld, or Newco, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the
-------- -------
delivery of any notice pursuant to this Section 6.5 shall not limit or
otherwise affect the remedies available hereunder to the party receiving
such notice.
SECTION 6.6. Further Action.
--------------
Upon the terms and subject to the conditions hereof, and subject,
in the case of the Company, to the exercise by the Board of Directors of the
Company of its fiduciary obligations, each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all other things necessary, proper, or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and to obtain in a timely manner all
necessary waivers, consents, and approvals and to effect all necessary
registrations and filings, including, but not limited to: (i) reasonable
efforts to lift or rescind any injunction or restraining order or other
order which may be entered; (ii) cooperation in reasonable tax planning
measures for the Company and the Surviving Corporation in light of the
transactions contemplated hereby so long as no action shall be required to
be taken which would result in adverse tax consequences to the stockholders
of the Company or, if the Merger does not occur, to the Company; and
(iii) reasonable cooperation in respect of the filing of the Definitive
Proxy Material and any amendment or supplement thereto and other filings to
be made in connection with the Merger and the transactions contemplated
hereby.
SECTION 6.7. Public Announcements.
--------------------
Transworld and the Company shall consult with each other before
issuing any press release or otherwise making any public statements with
respect to the Merger and shall not issue any such press release or make any
such public statement prior to such consultation, except as may be required
by law or by the NASDAQ Stock Market.
SECTION 6.8. Government Compliance.
---------------------
Each of the Company, Transworld, and Newco agrees promptly to
effect all necessary registrations, filings, applications, and submissions
of information requested by governmental authorities.
ARTICLE VII
CONDITIONS OF THE MERGER
------------------------
SECTION 7.1. Conditions to Obligations of Each Party to Effect
-------------------------------------------------
the Merger.
-----------
The respective obligations of each party to effect the Merger
shall be subject to the fulfillment at or prior to the Effective Time of the
following conditions:
(a) This Agreement shall have been approved and adopted by the
requisite vote of the stockholders of the Company in accordance with the
Company's Certificate of Incorporation and Delaware Law.
(b) The Company and Transworld shall have received evidence, in
form and substance reasonably satisfactory to Transworld, that such
licenses, permits, consents, approvals, authorizations, qualifications,
orders of governmental authorities, and third parties as are required in
connection with the consummation of the transactions contemplated hereby or
necessary to conduct the business of the Company and its Subsidiaries as
presently conducted have been obtained and are in full force and effect
other than those which, if not obtained, would not, either individually or
in the aggregate, have a Material Adverse Effect on Transworld or the
Company.
(c) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(d) At the Effective Time, there shall be no effective
injunction, writ, or preliminary restraining order or any order of any
nature issued by a court or governmental agency of competent jurisdiction
directing that the transactions provided for herein not be consummated as
herein provided.
(e) The Company shall have received from NatWest a written
opinion addressed to the Company, for inclusion in the Definitive Proxy
Material, that the Merger Consideration is fair, from a financial point of
view, to the stockholders of the Company.
SECTION 7.2. Additional Conditions to Obligation of the Company
-------------------------------------------------
to Effect the Merger.
--------------------
The obligation of the Company to effect the Merger is also subject
to each of the following conditions:
(a) Each of Transworld and Newco shall in all material respects
have performed each obligation to be performed by it hereunder on or prior
to the Effective Time.
(b) The representations and warranties of each of Transworld and
Newco 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 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.
(c) The Company shall have received a certificate of Transworld,
dated the Closing Date, signed by the Chief Executive Officer of Transworld,
to the effect that, to the best of the knowledge, information, and belief of
such officer, the conditions specified in Section 7.2(a) and (b) have been
fulfilled.
(d) The Company shall have received an opinion from Proskauer
Rose Goetz & Mendelsohn LLP, counsel to Transworld and Newco, dated the
Closing Date, in form and substance reasonably satisfactory to the Company
as to (i) the valid existence and good standing of Transworld and Newco in
their respective jurisdictions of incorporation, (ii) the corporate power
and authority of Transworld and Newco to own their properties and to conduct
their business, (iii) the corporate power and authority of Transworld and
Newco to execute and deliver this Agreement and the due authorization
thereof, (iv) the due execution and delivery and enforceability of this
Agreement, (v) the absence of conflicts with the charter, bylaws or material
agreements of Transworld and Newco, (vi) the absence of material consents or
approvals required to consummate the transactions contemplated by this
Agreement, and (vii) the absence of litigation regarding the transaction.
(e) All actions, proceedings, instruments, and documents required
to carry out the transactions contemplated hereby or incidental hereto and
all other related legal matters shall have been reasonably satisfactory to
and approved by counsel for the Company and such counsel shall have been
furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have
reasonably requested.
SECTION 7.3. Additional Conditions to Obligations of Transworld
-------------------------------------------------
and Newco to Effect the Merger.
-------------------------------
The obligations of Transworld and Newco to effect the Merger are
also subject to each of the following conditions:
(a) The Company shall in all material respects have performed
each obligation to be performed by it hereunder on or prior to the Effective
Time.
(b) 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 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.
(c) Transworld shall have received a certificate of the Company,
dated the Closing Date, signed by the Chief Executive Officer of the
Company, to the effect that, to the best of the knowledge, information and
belief of such officer, the conditions specified in paragraphs (a) and (b)
of this Section 7.3 have been fulfilled.
(d) There shall not have been any action taken, or any statute,
rule, regulation, or order enacted, promulgated, or issued or deemed
applicable to the Merger by any Federal or state government or governmental
authority or court, which would (i) prohibit the Surviving Corporation's or
Transworld's ownership or operation of all or a material portion of the
Company's business or assets, or compel the Surviving Corporation or
Transworld to dispose of or hold separate all or a material portion of the
Company's business or assets, as a result of the Merger; (ii) render Newco
unable to consummate the Merger; (iii) make such consummation illegal; or
(iv) impose or confirm material limitations on the ability of Transworld
effectively to exercise full rights of ownership of shares of the capital
stock of the Surviving Corporation, including without limitation, the right
to vote any such shares on all matters properly presented to the
stockholders of the Surviving Corporation, and no such action shall have
been taken or any such statute, rule, regulation, or order enacted,
promulgated, issued, or deemed applicable to the Merger which in the
reasonable judgment of Transworld will produce such result.
(e) Transworld and Newco shall have received an opinion from
McDermott, Will & Emery, counsel to the Company, dated the Closing Date, in
form and substance reasonably satisfactory to Transworld and Newco, as to
(i) the valid existence and good standing of the Company and its
Subsidiaries in their respective jurisdictions of incorporation and
qualification and good standing of the Company and its Subsidiaries in
certain foreign jurisdictions, (ii) the corporate power and authority of the
Company and its Subsidiaries to own their properties and to conduct their
business, (iii) the corporate power and authority of the Company to execute
and deliver this Agreement and the due authorization thereof, (iv) the due
execution and delivery and enforceability of this Agreement, (v) the absence
of conflicts with the Company's charter, bylaws or material agreements,
(vi) the absence of material consents or approvals required to consummate
the transactions contemplated by this Agreement, and (vii) the absence of
litigation regarding the transaction.
(f) All actions, proceedings, instruments, and documents required
to carry out the transactions contemplated hereby or incidental hereto and
all other related legal matters shall have been reasonably satisfactory to
and approved by counsel for Transworld and such counsel shall have been
furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as it shall have
reasonably requested.
(g) On or prior to the Closing Date, the Option Plans shall have
been terminated or arrangements for termination reasonably acceptable to
Transworld shall have been made.
(h) At or prior to the Effective Time that certain Stipulation of
Partial Settlement of the consolidated class actions under the caption In re
-----
Health Management, Inc. Securities Litigation, Master File No. 96 Civ. 0889
- ---------------------------------------------
(ADS) shall have been amended to provide for the settlement of such actions
for an aggregate cash payment of $7.2 million at the Effective Time, and
such settlement shall have been finally approved by the United States
District Court.
(i) At or prior to December 12, 1996, (A) Transworld's lenders
shall have completed their due diligence investigation of the Company and
the transactions contemplated by this Agreement, the Stock Purchase
Agreement, and the Registration Rights Agreement, and such due diligence
investigation and such transactions shall be satisfactory in all respects to
such lenders, (B) such lenders shall have consented to the Merger and the
Stock Purchase, and (C) such lenders shall have agreed to amend Transworld's
credit facility in order to lend, and shall have agreed to lend, to
Transworld the funds necessary for Transworld to consummate the Merger and
the Stock Purchase, all in the sole and absolute discretion of such lenders.
(j) At or prior to the Effective Time, the Company shall have
received waivers, in form and substance satisfactory to Transworld, from
each employee, director, officer, or consultant who is a party to any of the
agreements listed in Section 3.17(b) of the Disclosure Schedule and who will
be offered employment with the Surviving Corporation after the Effective
Time, of his or her rights under such Change of Control Provisions in such
agreements.
(k) As of the Effective Time, the opinion of UBS Securities LLC
referred to in Section 2.9 hereof shall not have been modified or withdrawn.
(l) At or prior to the Effective Time, the outstanding
convertible debt of the Company (as disclosed in Section 3.3 of the
Disclosure Schedule) shall no longer be outstanding or the terms thereof
shall have been amended to provide that such convertible debt is no longer
convertible into equity of the Company on and after the Effective Time.
(m) At or prior to the Effective Time, the Company shall have
received all the consents or approvals required with respect to the items
described in Sections 3.5(a) and (b) of the Disclosure Schedule, except
where the failure to obtain such consents and approvals, individually or in
the aggregate, would not have a Material Adverse Effect on the Company.
ARTICLE VIII
TERMINATION, AMENDMENT, AND WAIVER
---------------------------------
SECTION 8.1. Termination.
-----------
(a) This Agreement may be terminated at any time prior to the
Effective Time, whether prior to or after approval hereof by the
stockholders of the Company:
(i) By mutual written consent duly authorized by the Boards
of Directors of Transworld and the Company;
(ii) By the Board of Directors of the Company acting on
behalf of the Company, if (x) a corporation, partnership, person, or other
entity or group shall have made a bona fide proposal that the Board of
Directors believes, in good faith after consultation with its outside legal
counsel and financial advisors, is more favorable to the Company's
stockholders than the Merger (a "Superior Proposal") and (y) Newco does not
-----------------
make, within five business days of Newco's receiving notice of such third-
party proposal, an offer that the Board of Directors believes, in good faith
after consultation with its outside legal counsel and financial advisors, is
at least as favorable to the Company's stockholders as such Superior
Proposal;
(iii) By Transworld if the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to Transworld or Newco
its approval or recommendation of this Agreement or the Merger or shall have
approved or recommended another offer or proposal;
(iv) By either Transworld or the Company if the Merger shall
not have been consummated by June 30, 1997, unless the absence of such
consummation shall be due to the failure of the party seeking to terminate
this Agreement (or its subsidiaries or affiliates) to perform its
obligations under this Agreement required to be performed by it at or prior
to the Effective Time;
(v) By either Transworld or the Company, if at the Company
Stockholders Meeting (including any adjournment thereof), the stockholders
of the Company fail to approve and adopt this Agreement and the Merger;
(vi) By either Transworld or the Company if a United States
or state governmental authority, agency, or commission or United States or
state court of competent jurisdiction shall have issued an order, decree, or
ruling or taken any other action (which order, decree, ruling, or action the
parties hereto shall use their best efforts to lift), in each case
permanently restraining, enjoining, or otherwise prohibiting the Merger, and
such order, decree, ruling, or action shall have become final and non-
appealable; or
(vii) (A) By Transworld, if the Company shall breach or fail
to perform in any material respect any of its material covenants or
agreements contained herein, or (B) by the Company, if Transworld or Newco
shall breach or fail to perform in any material respect any of their
respective material covenants or agreements contained herein.
(b) This Agreement may be terminated by Transworld, at any time
prior to 10 days after the Schedules Delivery Date (as defined in
Section 9.11), if Transworld in its sole discretion is not satisfied with
the disclosures made in the Deferred Schedules (as defined in Section 9.11)
when delivered.
(c) This Agreement may be terminated by Transworld at any time on
or prior to December 16, 1996 if the condition set forth in Section 7.3(i)
shall not have been satisfied.
SECTION 8.2. Effect of Termination.
---------------------
In the event of termination of this Agreement as provided in
Section 8.1, there shall be no liability or further obligation on the part
of any party hereto except (i) as set forth in Sections 8.3 and 9.1 hereof
and (ii) nothing herein shall relieve any party from liability for any
breach of this Agreement.
SECTION 8.3. Fees and Expenses.
----------------
(a) If this Agreement is terminated pursuant to
Sections 8.1(a)(ii), 8.1(a)(iii), 8.1(a)(iv), 8.1(a)(v), 8.1(a)(vii)(A), or
8.1(b), and neither Transworld nor Newco is in material breach of its
material covenants and agreements under this Agreement, the Company shall
reimburse each of Transworld, Newco, and their respective affiliates (not
later than five days after submission of statements therefor itemizing in
reasonable detail such fees and expenses) for all reasonable out-of-pocket
expenses and fees (including, without limitation, bank commitment fees, all
reasonable fees and expenses of counsel, accountants, experts, financial
advisors, and consultants to Transworld and Newco and their lenders and
financial advisors) incurred or required to be paid by it or them or on its
or their behalf in connection with all transactions contemplated by this
Agreement, the Stock Purchase Agreement, or the purchase by Transworld of
certain indebtedness of the Company.
(b) If this Agreement is terminated by the Company pursuant to
Section 8.1(a)(vii)(B) and the Company is not in material breach of its
material covenants and agreements under this Agreement, Transworld shall
reimburse the Company (not later than five days after submission of
statements therefor itemizing in reasonable detail such fees and expenses)
for all reasonable out-of-pocket expenses and fees (including, without
limitation, filing fees, all reasonable fees and expenses of printers, all
reasonable fees and expenses of NatWest and its counsel, and all reasonable
fees and expenses of counsel, accountants, experts, and consultants to the
Company) incurred or required to be paid by the Company or on its behalf in
connection with the Merger and the consummation of all transactions
contemplated by this Agreement.
(c) Except as provided otherwise in Sections 8.3(a) and 8.3(b)
hereof, all costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party
incurring such expenses, and the costs of printing the Preliminary Proxy
Material, Definitive Proxy Material, and any other filings to be printed,
and in each case all exhibits, amendments, or supplements thereto shall be
paid by the Company.
SECTION 8.4. Amendment.
---------
This Agreement may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after approval of the
-------- -------
Merger by the stockholders of the Company, no amendment may be made which
would change the Merger Consideration into which each share of Company
Common Stock shall be converted upon consummation of the Merger. This
Agreement may not be amended except by an instrument in writing signed by
the parties hereto.
SECTION 8.5. Waiver.
------
At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if
set forth in an instrument in writing signed by the parties hereto. The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of such rights.
ARTICLE IX
GENERAL PROVISIONS
------------------
SECTION 9.1. Survival of Representations, Warranties, and
--------------------------------------------
Agreements.
-----------
The representations, warranties, and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this
Agreement pursuant to Section 8.1, as the case may be, except that the
agreements set forth in Sections 1.7, 1.8, 1.9, 5.1, 6.7, 9.1, and 9.7 shall
survive the Effective Time indefinitely and those set forth in Sections
6.4(b) and (c), 6.7, 8.2, 8.3, 9.1, and 9.7 shall survive termination
indefinitely.
SECTION 9.2. 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, if delivered personally or mailed by registered or
certified mail (postage prepaid, return receipt requested) or sent by
Federal Express or similar overnight delivery or courier service or by
telecopy to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Transworld or Newco:
75 Terminal Avenue
Clark, New Jersey 07066
Attention: Vincent J. Caruso
with a copy to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attention: Bruce L. Lieb, Esq.
(b) if to the Company:
1371-A Abbott Court
Buffalo Grove, Illinois 60089
Attention: W. James Nicol
with a copy to:
McDermott, Will & Emery
50 Rockefeller Plaza
New York, New York 10020
Attention: Cheryl V. Reicin, Esq.
SECTION 9.3. Certain Definitions.
-------------------
For purposes of this Agreement, the term:
(a) "affiliate" of a person means a person that directly or
---------
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "beneficial owner" has the meaning in Rule 13d-3 under the
----------------
Exchange Act;
(c) "control" (including the terms "controlled by" and "under
------- ------------- -----
common control with") means the possession, directly or indirectly or as
- -------------------
trustee or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise; and
(d) "person" means an individual, corporation, partnership,
------
association, trust, or any unincorporated organization.
SECTION 9.4. Headings.
--------
The headings contained in this Agreement and the Disclosure
Schedule are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement or the Disclosure Schedule.
SECTION 9.5. Entire Agreement.
----------------
This Agreement constitutes the entire agreement and supersedes all
prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof and, except as
otherwise expressly provided herein, is not intended to confer upon any
other person any rights or remedies hereunder.
SECTION 9.6. Parties in Interest; Assignment.
-------------------------------
This Agreement shall not be assigned by operation of law or
otherwise, except that Transworld and Newco may assign all or any of their
rights hereunder to a wholly-owned subsidiary of Transworld or of Newco or
to their lenders; provided, however, that no such assignment shall relieve
the assigning party of its obligations hereunder. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto and such
permitted assigns of Transworld and Newco, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights
or remedies of any nature whatsoever under this Agreement, except that any
of the Indemnified Parties shall be entitled after the Effective Time to
enforce the provisions of Section 5.1.
SECTION 9.7. Governing Law.
-------------
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts executed in
and to be performed in that State, without regard to conflicts of laws,
except that Delaware Law shall apply to the Merger.
SECTION 9.8. Counterparts.
------------
This Agreement may be executed in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 9.9. Severability.
------------
If any provision of this Agreement is invalid, illegal, or
unenforceable, the balance of this Agreement shall remain in effect, and if
any provision is inapplicable to any person or circumstance, it shall
nevertheless remain applicable to all other persons and circumstances.
SECTION 9.10. Specific Performance.
--------------------
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be entitled, in
addition to any other right or remedy available to it, to an injunction
restraining such breach or a threatened breach and to specific performance
of any such provision of this Agreement, and in either case no bond or other
security shall be required in connection therewith, and the parties hereby
consent to the issuance of such injunction and to the ordering of specific
performance.
SECTION 9.11. Schedules.
---------
It is acknowledged that the schedules listed in Section 9.11 of
the Disclosure Schedule are not being delivered in their entirety by the
Company on the date hereof (collectively, the "Deferred Schedules" and each,
------------------
a "Deferred Schedule"). The Company will use all reasonable best efforts
-----------------
promptly to deliver to Transworld and Newco each Deferred Schedule, and the
Company will have delivered to Transworld and Newco all of the Deferred
Schedules no later than 10 days after the date hereof. The date on which
the last of the Deferred Schedules is delivered to Transworld and Newco is
referred to as the "Schedules Delivery Date".
-----------------------
IN WITNESS WHEREOF, Transworld, Newco, and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
TRANSWORLD HOME HEALTH CARE, INC.
By
--------------------------------
Name:
Title:
IMH ACQUISITION CORP.
By
--------------------------------
Name:
Title:
HEALTH MANAGEMENT, INC.
By
--------------------------------
Name:
Title:
TRANSWORLD HOME HEALTHCARE, INC.
11 Skyline Drive
Hawthorne, New York 10532
November 13, 1996
Health Management, Inc.
and the other Loan Parties
under and as defined in the
Credit Agreement referred to below
1371-A Abbott Court
Buffalo Grove, Illinois 60089
Attention: Mr. Paul Jurewicz
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., 75 Terminal Avenue,
Clark, New Jersey 07066, Attn: Mr. Wayne A. Palladino, with a copy
to Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York,
New York 10036, Attn: Bruce L. Lieb, Esq., and to Bankers Trust
Company, One Bankers Trust Plaza, New York, New York 10006, Attn:
Patricia Hogan.
(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:
Health Management, Inc.
1371-A Abbott Court
Buffalo Grove, Illinois 60089
Tel: 847-913-2700
Fax: 847-913-2715
FOR IMMEDIATE RELEASE
HEALTH MANAGEMENT, INC. ANNOUNCES FINANCING AND MERGER TRANSACTIONS WITH
TRANSWORLD HOME HEALTHCARE, INC.
Buffalo Grove, Illinois, -- November 14, 1996 -- Health Management, Inc.
("HMI")(NNM:HMIS) announced today that Transworld Home Healthcare, Inc.
("Transworld") (NNM:TWHH) has acquired the Company's senior debt, has
extended the present Forbearance Agreement until December 12, 1996 and has
also extended an additional $3 million under its revolving line of credit
agreement.
In addition, HMI entered into a Stock Purchase Agreement with Transworld for
approximately 49% of the common stock of HMI and an option for an additional
2% of the common stock of HMI. The consideration to be given to HMI for the
stock includes, among other things, $1.00 per share and the assignment of any
rights to the warrants for 5% of the stock of HMI to which the bank may have
been entitled. The closing of the Stock Purchase Agreement is expected to
occur on or about December 12, 1996, subject to certain conditions including,
among others, obtaining lender approval. Any funds borrowed under the
additional revolving line of credit agreement will be repaid from the
anticipated $8.9 million proceeds from the Stock Purchase Agreement for the
purchase of the common stock.
The Company has also entered into a Merger Agreement with Transworld,
pursuant to which a newly formed subsidiary of Transworld will merge into HMI
and the stockholders of HMI will receive cash consideration equal to $2.00
per share. The merger is subject to certain conditions, including, without
limitation, certain regulatory approvals, which the Company believes could be
satisfied by Spring 1997, but, in accordance with the agreement, must be
concluded by June 30, 1997.
The Board of Directors received a fairness opinion from National Westminster
Bank, Plc. to the effect that the $2.00 per share cash price is fair, from a
financial point of view, to HMI's shareholders.
Health Management, Inc. is a national provider of integrated pharmacy
management services to patients with chronic medical conditions and to health
care professionals, pharmaceutical manufacturers and third-party payers
involved in their care.
Transworld Home Healthcare, Inc. is a regional provider of a broad range of
alternate site healthcare services and products, and provides specialized
mail order pharmacy services and medical supplies to patients nationwide.
# # #
For additional information:
At Edelman Financial:
Diane Perry or Joseph Kist (Investors) Mark Danes (Media)
212-704-8293 or 212-704-8239 212-704-4464
At HMI:
Jim Nicol, President and CEO Paul Jurewicz, CFO
847-913-2404 847-913-2407
