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) January 13, 1997.
HEALTH MANAGEMENT, INC.
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(Exact Name of Registrant as Specified in its Charter)
Delaware 0-18472 75-2096632
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.)
incorporation)
1371-A Abbott Court, Buffalo Grove, Illinois 60089
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(Address of principal executive offices) (Zip Code)
(847) 913-2700
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report.)
Page 1 of 5
Sequentially Numbered Pages
Exhibit Index on page 5
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Item 1. Change of Control of Registrant.
See Item 5- Other Events for information regarding a potential change of
control of Health Management, Inc. (the "Company").
Item 5. Other Events.
On January 13, 1997, the Company consummated the transactions
contemplated by the Stock Purchase Agreement (the "Stock Purchase Agreement")
entered into on November 13, 1996 with Transworld Home HealthCare, Inc.
("Transworld"). Pursuant to the Stock Purchase Agreement, Transworld, through
its wholly-owned subsidiary, IMH Acquisition Corp. ("IMH"), purchased
8,964,292 newly issued shares (or approximately 49%) of the Company's common
stock in consideration of, among other things, $1.00 per share. In addition,
Transworld also received an option to purchase an additional 746,713 shares
(or approximately 2%) of the Company's common stock, for $1.00 per share,
which option expires on or about January 12, 1998.
Of the $8,964,262 of cash proceeds obtained in connection with the
consummation of the transactions contemplated by the Stock Purchase Agreement,
$4,649,285 was used by the Company to repay to Transworld all loans made by
Transworld to the Company from November 13, 1996 through January 13, 1997 and
$107,248 was used by the Company to pay interest to Transworld on amounts owed
under the Company's Credit Agreement with Transworld.
As previously reported, on November 13, 1996, the Company, Transworld and
IMH entered into an Agreement and Plan of Merger (the "Merger Agreement")
pursuant to which IMH would merge into the Company and the stockholders of the
Company (excluding Transworld and its subsidiaries) would receive cash
consideration equal to $2.00 per share. On January 13, 1997, the Company and
Transworld amended the Merger Agreement (the "Merger Agreement Amendment") to
provide for, among other things, (i) a reduction of the cash consideration to
be paid by Transworld to the stockholders of the Company from $2.00 per share
to $1.50 per share, and (ii) an extension of the time for Transworld's
financing contingency to the date of the closing of the merger. The other
terms of the Merger Agreement remain substantially unchanged. The
consummation of the merger continues to be subject to certain conditions
including, without limitation, the approval of the Company's stockholders and
Transworld's lenders, the expiration or termination period of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and final court approval of the settlement agreement with respect
to the pending stockholder class action lawsuit against the Company.
In connection with the Merger Agreement Amendment, the Board of Directors
of the Company received a fairness opinion from National Westminster Bank,
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lc. to the effect that the $1.50 per share cash price to be received by
stockholders of the Company in the merger (other than Transworld and its
subsidiaries) is fair, from a financial point of view, to such stockholders
of the Company.
The above summary of the Merger Agreement Amendment is not intended to be
complete and is qualified in its entirety by reference to the detailed
provisions of the Merger Agreement Amendment, which is attached hereto as an
Exhibit. In addition, a copy of the press release issued by the Company in
connection with the above-described transactions is attached hereto as Exhibit
99.1 to this Form 8-K and is incorporated herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit Number Description
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2.1. Merger Agreement Amendment, dated as of
January 13, 1997, between the Company
and Transworld.
99.1 Press release, dated January 14, 1997, issued by the Company.
Exhibit 2.1 listed above omits certain schedules, 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.
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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)
/s/ W. JAMES NICOL
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Name: W. James Nicol
Date: January 27, 1997 Its: Chief Executive Officer,
President, Chief Financial
Officer, Treasurer and
Secretary
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Index to Exhibits
Exhibit Sequential
Number Description Page No.
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2.1. Merger Agreement Amendment, dated as of
January 13, 1997 between the Company
and Transworld Home Healthcare, Inc.
99.1 Press release dated January 14, 1997
issued by the Registrant.
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Transworld Home HealthCare, Inc.
75 Terminal Avenue
Clark, New Jersey 07066
January 13, 1997
Health Management, Inc.
1371-A Abbott Court
Buffalo Grove, Illinois 60089
Ladies and Gentlemen:
Reference is made to (i) the Agreement and Plan of Merger, dated as
of November 13, 1996, as amended by letter agreements, dated November 27,
1996, December 12, 1996, December 23, 1996 and January 10, 1997, among
Transworld Home HealthCare, Inc. ("Transworld"), IMH Acquisition Corp.
("Newco"), and Health Management, Inc. (the "Company") (as amended, the
"Merger Agreement") and (ii) the Stock Purchase Agreement, dated as of
November 13, 1996, as amended by letter agreements, dated November 27, 1996,
December 12, 1996, December 23, 1996 and January 10, 1997, among Transworld
and the Company (as amended, the "Stock Purchase Agreement"). Terms defined
in the Merger Agreement shall have their defined meanings herein, unless
otherwise defined herein.
The parties have agreed that in view of the Company's recent
business performance, it is appropriate to amend the Merger Agreement, among
other things, to reduce the Merger Consideration.
Accordingly, the parties hereto agree as follows:
1. Section 1.6(b) of the Merger Agreement is hereby amended by
changing the amount "$2.00" to "$1.50". The Company hereby represents and
warrants to Transworld and Newco that the Company has received the opinion of
NatWest that the Merger Consideration, as hereby amended, is fair, from a
financial point of view, to the stockholders of the Company.
2. Section 7.3(b) of the Merger Agreement is hereby amended in its
entirety and, as so amended, shall read as follows:
"The representations and warranties of the Company set forth in this
Agreement shall be true and correct in all material respects at and as of the
Effective Time as if made at and as of such time, except for changes
contemplated by this Agreement and by the Disclosure Schedule, the Deferred
Schedules and the Supplemental Disclosure Schedule dated January 13, 1997 and
changes disclosed in the Company's Quarterly Report on Form 10-Q for the
Quarterly Period ended October 31, 1996 (it being agreed, however, that all
descriptions therein as to the effect of Olanzapine or other antipsychotic
drugs shall be deemed superseded and replaced by the description set forth in
item A. of Section 3.19 of the Supplemental Disclosure Schedule dated January
13, 1997), and except to the extent that any such representation or warranty
is made as of a specified date, in which case such representation or warranty
shall have been true and correct in all material respects as of such date."
3. Section 7.3(h) of the Merger Agreement is hereby amended in its
entirety and, as so amended, shall read as follows:
"At or prior to the Effective Time, the Amended Stipulation of
Partial Settlement of the consolidated class actions under the caption In re
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Health Management, Inc. Securities Litigation, Master File No. 96-CV-889
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(ADS), dated December 19, 1996, shall have been finally approved by the United
States District Court and such Court shall have entered a judgment (including
a bar order) substantially in the form of Exhibit B to such Amended
Stipulation and all applicable proceedings for review, appeals, and rights of
appeal of such judgment (other than a proceeding or order, or any appeal or
petition for a writ of certiorari, pertaining solely to any plan of allocation
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and/or application for attorneys' fees, costs, or expenses) shall have been
exhausted or all applicable waiting periods during which any appeal or other
request for review of such judgment (other than a proceeding or order, or any
appeal or petition for a writ of certiorari, pertaining solely to any plan of
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allocation and/or application for attorneys' fees, costs, or expenses) may be
made shall have expired without any appeal having been filed."
4. Section 7.3(i) of the Merger Agreement is hereby amended in its
entirety, and, as so amended, shall read as follows:
"At or prior to the Effective Time, the lenders (the "Banks") party
to the Credit Agreement, dated as of July 31, 1996, as amended (the "Credit
Agreement"), among Transworld, the Banks, and Bankers Trust Company, as agent,
shall have consented to the Merger, shall have agreed to amendments to the
Credit Agreement in order to permit the Merger and shall have loaned to
Transworld the funds necessary for Transworld to consummate the Merger, all in
the sole and absolute discretion of such Banks."
5. Transworld hereby waives the condition set forth in Section
7.3(l) of the Merger Agreement insofar as such condition applies to the
$3,000,000 Subordinated Note dated March 31, 1995 made by HMI Illinois, Inc.
in favor of Caremark Inc. which was purchased from Caremark Inc. by Hyperion
Partners II L.P.
6. Section 8.1(c) of the Merger Agreement is hereby amended in its
entirety and, as so amended, shall read as follows:
"This Agreement may be terminated by Transworld at any time prior to
the Effective Time, whether prior to or after approval hereof by the
stockholders of the Company, if the condition set forth in Section 7.3(i) of
this Agreement shall not have been satisfied by June 30, 1997."
7. Notwithstanding anything to the contrary in the Merger
Agreement, Transworld hereby consents to the settlement by the Company of (i)
the consolidated derivative action filed in the United States District Court
for the Eastern District of New York entitled In re Health Management, Inc.
Stockholders' Derivative Litigation, Master File No. 96 Civ. 1208 (TCP) and
(ii) the derivative lawsuit filed in the Supreme Court of the State of New
York, County of New York entitled Howard Vogel, et al. v. BDO Seidman, LLP, et
al., Index No. 96-603064, for an aggregate payment by the Company not to
exceed $175,000 (it being understood that the Company will preserve all of its
claims against the defendants named in such actions, other than Messrs.
Clifton and Dimitriadis).
* * *
The parties acknowledge and agree that, notwithstanding anything
contained in the letter agreement dated January 10, 1997 among Transworld,
Newco and the Company, in no event shall Transworld be deemed to have waived
the condition to Transworld's obligation to close the Merger Agreement set
forth in Section 7.3(i) of the Merger Agreement, and such condition, as hereby
amended in Section 4 hereof, is in full force and effect.
Except to the extent amended hereby, the Merger Agreement and the
Stock Purchase Agreement shall remain in full force and effect and nothing
herein shall affect, or be deemed to be a waiver of, the other terms and
provisions of the Merger Agreement or the Stock Purchase Agreement, including
without limitation the other termination provisions thereof.
If this letter correctly sets forth our understanding with respect
to the foregoing matters, kindly execute and return the enclosed copy of this
letter to evidence our binding agreement.
Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.
By /s/ VINCENT J. CARUSO
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Name: Vincent J. Caruso
Title: Executive Vice President and Chief
Administrative Officer
IMH ACQUISITION CORP.
By /s/ VINCENT J. CARUSO
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Name: Vincent J. Caruso
Title: Executive Vice President and Chief
Administrative Officer
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ WM. JAMES NICOL
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Name: Wm. James Nicol
Title: President and Chief
Executive Officer
Exhibit 99.1
HEALTH MANAGEMENT, INC. ANNOUNCES COMPLETION OF STOCK
PURCHASE AGREEMENT WITH TRANSWORLD HOME HEALTH CARE, INC.
AND REDUCTION OF MERGER CASH CONSIDERATION
Buffalo Grove, IL -- January 14, 1997 ...Health Management, Inc. ("HMI")
(NNM:HMIS) announced today the completion of its Stock Purchase Agreement with
Transworld Home Healthcare, Inc. ("Transworld") (NASDAQ:TWHH) and an amendment
to the Merger Agreement between Transworld and HMI.
Under the terms of the Stock Purchase Agreement, Transworld purchased
8,964,292 newly issued shares of HMI common stock at a price of $1.00 per
share, which constitutes 49% of the outstanding shares of HMI. Transworld
also received an option to purchase an additional 746,713 shares, and upon
exercise of such option, would hold 51% of the outstanding shares of HMI.
The Company noted that the $8.9 million stock purchase provided a much
needed equity infusion to the Company. HMI further noted, however, that it
continues to operate with only short-term forbearance of its various defaults
under its senior credit facility, now held by Transworld.
As previously announced, Transworld and HMI entered into a Merger
Agreement on November 13, 1996, pursuant to which, a newly formed subsidiary
of Transworld is to merge into HMI. The original Merger Agreement provided
for HMI stockholders to receive $2.00 per share in cash. Under the amended
agreement, the consideration has been reduced to $1.50 per share and
Transworld's financing contingency has been extended to the date of the
merger. The amendment followed an assessment by Transworld of HMI's recent
business performance. The other terms of the transaction remain substantially
unchanged.
The closing of the Merger Agreement is subject to certain conditions,
including, among others, approvals of the Company's stockholders and
Transworld's lenders, certain governmental approvals and final court approval
of the stockholder class action lawsuit.
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.
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For additional information:
at HMI:
Jim Nicol, President, CEO and CFO
847-913-2404
At Edelman Financial:
Diane Perry or Joseph Kist (investors) Mark Danes (media)
212-704-8293 or 212-704-8239 212-704-4464
