<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Amendment No. 1)
Under the Securities Exchange Act of 1934
HEALTH MANAGEMENT, INC.
-----------------------
(NAME OF ISSUER)
Common Stock, par value $.03 per share
--------------------------------------
(TITLE OF CLASS OF SECURITIES)
42219B10
--------------
(CUSIP NUMBER)
Vincent J. Caruso
Transworld Home HealthCare, Inc.
75 Terminal Avenue
Clark, New Jersey 07066
(908) 340-1144
- --------------------------------------------------------------------------------
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS)
January 13, 1997
- --------------------------------------------------------------------------------
(DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b) (3) or (4), check the following box: [ ]
Check the following box if a fee is being paid with the statement: [ ]
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CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person Transworld Home
HealthCare, Inc.
S.S. or I.R.S. Identification No.
of Above Person (Intentionally
Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds BK
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization New York
- --------------------------------------------------------------------------------
VII. Sole Voting -0-
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,711,005
Power
------------------------------------------------------
IX. Sole Dis- -0-
positive Power
------------------------------------------------------
X. Shared Dis- 9,711,005
positive Power
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially
Owned By Each Reporting Person 9,711,005 shares
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by
Amount in Row (11) 51.0%
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person CO
- --------------------------------------------------------------------------------
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CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person IMH Acquisition
Corp.
S.S. or I.R.S. Identification No.
of Above Person (Intentionally Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds BK
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization Delaware
- --------------------------------------------------------------------------------
VII. Sole Voting -0-
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,711,005
Power
------------------------------------------------------
IX. Sole Dis- -0-
positive Power
------------------------------------------------------
X. Shared Dis- 9,711,005
positive Power
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially
Owned By Each Reporting Person 9,711,005 shares
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by
Amount in Row (11) 51.0%
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person CO
- --------------------------------------------------------------------------------
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<PAGE>
CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person Hyperion
Partners II L.P.
S.S. or I.R.S. Identification No.
of Above Person (Intentionally Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds BK,OO
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization Delaware
- --------------------------------------------------------------------------------
VII. Sole Voting - 0 -
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,966,773
Power
------------------------------------------------------
IX. Sole Dis- - 0 -
positive Power
------------------------------------------------------
X. Shared Dis- 9,966,773
positive Power
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially 9,966,773 shares
Owned By Each Reporting Person
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by
Amount in Row (11) 51.6%
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person PN
- --------------------------------------------------------------------------------
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CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person Hyperion
Ventures II L.P.
S.S. or I.R.S. Identification No.
of Above Person (Intentionally Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds OO
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization Delaware
- --------------------------------------------------------------------------------
VII. Sole Voting - 0 -
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,966,773
Power
------------------------------------------------------
IX. Sole Dis- - 0 -
positive Power
------------------------------------------------------
X. Shared Dis- 9,966,773
POSITIVE POWER
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially 9,966,773 shares
Owned By Each Reporting Person
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by 51.6%
Amount in Row (11)
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person PN
- --------------------------------------------------------------------------------
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<PAGE>
CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person Hyperion
Funding II Corp.
S.S. or I.R.S. Identification No.
of Above Person (Intentionally Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds OO
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization Delaware
- --------------------------------------------------------------------------------
VII. Sole Voting - 0 -
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,966,773
Power
------------------------------------------------------
IX. Sole Dis- - 0 -
positive Power
------------------------------------------------------
X. Shared Dis- 9,966,773
positive Power
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially 9,966,773 shares
Owned By Each Reporting Person
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by
Amount in Row (11) 51.6%
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person CO
- --------------------------------------------------------------------------------
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<PAGE>
CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person Lewis S. Ranieri
S.S. or I.R.S. Identification No.
of Above Person (Intentionally Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds OO
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization United States of America
- --------------------------------------------------------------------------------
VII. Sole Voting - 0 -
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,966,773
Power
------------------------------------------------------
IX. Sole Dis- - 0 -
positive Power
------------------------------------------------------
X. Shared Dis- 9,966,773
positive Power
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially 9,966,773 shares
Owned By Each Reporting Person
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount
in Row (11) Excludes Certain Shares [ ]
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by 51.6%
Amount in Row (11)
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person IN
- --------------------------------------------------------------------------------
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CUSIP No. 42219B10
- ------------------
I. Name of Reporting Person Scott A. Shay
S.S. or I.R.S. Identification No.
of Above Person (Intentionally Omitted)
- --------------------------------------------------------------------------------
II. Check the Appropriate Box if a (a) [ ]
Member of a Group (b) [X]
- --------------------------------------------------------------------------------
III. SEC Use Only
- --------------------------------------------------------------------------------
IV. Source of Funds OO
- --------------------------------------------------------------------------------
V. Check if Disclosure of Legal Proceedings
is Required Pursuant to Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
VI. Citizenship or Place of Organization United States of America
- --------------------------------------------------------------------------------
VII. Sole Voting - 0 -
Power
------------------------------------------------------
Number of Shares VIII. Shared Voting 9,966,773
Power
------------------------------------------------------
IX. Sole Dis- - 0 -
positive Power
------------------------------------------------------
X. Shared Dis- 9,966,773
positive Power
- --------------------------------------------------------------------------------
XI. Aggregate Amount Beneficially 9,966,773 shares
Owned By Each Reporting Person
- --------------------------------------------------------------------------------
XII. Check Box if the Aggregate Amount [ ]
in Row (11) Excludes Certain Shares
- --------------------------------------------------------------------------------
XIII. Percent of Class Represented by 51.6%
Amount in Row (11)
- --------------------------------------------------------------------------------
XIV. Type of Reporting Person IN
- --------------------------------------------------------------------------------
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<PAGE>
Items 2, 3, 4, 5, 6, and 7 of the Schedule 13D, dated November 13, 1996,
relating to the Common Stock, par value $.03 per share, of Health Management,
Inc., are hereby amended by adding thereto the information and exhibits
described herein. Terms which are defined in such Schedule 13D shall have their
defined meanings herein, unless otherwise defined herein.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D (Amendment No. 1) is being filed by Transworld Home
HealthCare, Inc., a New York corporation ("Transworld"), IMH Acquisition Corp.,
a Delaware corporation ("Newco"), Hyperion Partners II L.P. (the "Fund"),
Hyperion Ventures II L.P. (the "General Partner"), Hyperion Funding II Corp.
("Funding"), Lewis S. Ranieri, and Scott a Shay (individually, a "Reporting
Person" and collectively, the "Reporting Persons").
Newco is a wholly-owned subsidiary of Transworld, which was organized for
the purpose of merging into the Issuer in order to effect the Merger. Newco has
no operations. Certain information regarding the directors and executive
officers of Newco is set forth on Annex A hereto. To the best knowledge of
Newco, each of its directors and executive officers is a citizen of the United
States of America. Newco maintains its principal office at 75 Terminal Avenue,
Clark, New Jersey 07066.
On January 15, 1997, Timothy M. Aitken became Chairman of the Board and
chief executive officer of Transworld. Prior to joining Transworld, Mr. Aitken
was Vice Chairman of the Board and President of Apria Healthcare Group, Inc. (a
health care
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<PAGE>
provider) and, prior thereto he was the Chairman of the Board, President, and
chief executive officer of Abbey Health Care Group, Inc. (a health care
provider). Mr. Aitken is a citizen of the United States of America, and his
address is 75 Terminal Avenue, Clark, New Jersey 07066.
On January 15, 1997, the day of Mr. Aitken's appointment to the offices
described above, Robert W. Fine ceased to be the acting chief executive officer
of Transworld and Scott A. Shay ceased to be the acting Chairman of the Board of
Transworld.
During the past five years none of the Reporting Persons or, to the best
knowledge of the Reporting Persons, any of Transworld's or Newco's directors or
executive officers, or David M. Golush or Robert A. Perro (i) has been convicted
in a criminal proceeding (excluding traffic violations and similar misdemeanors)
or (ii) was a party to a civil proceeding of a judicial or administrative body
of competent jurisdiction resulting in his having been or being subject to a
judgment, decree, or final order enjoining future violations of, or prohibiting
or mandating activities subject to, Federal or state securities laws or finding
any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS
Transworld used $8,964,292 to effect the Stock Purchase, including amounts
loaned to the Issuer during the period commencing on the date of the execution
of the Stock Purchase Agreement and ending on the date of the consummation of
the Stock Purchase, which amounts, pursuant to the terms of the Stock
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<PAGE>
Purchase Agreement, were deducted as a credit to the purchase price for the
shares purchased by Transworld. Transworld borrowed these funds under the
Credit Agreement, as amended by the First Amendment and by the second amendment,
dated January 13, 1997 (the "Second Amendment"), to the Credit Agreement.
Reference is made to the Second Amendment (which is filed herewith as Exhibit 2)
and which is incorporated herein by reference. Substantially all of
Transworld's assets, including its rights under the Stock Purchase Agreement and
the Debt Purchase Agreements, are pledged to secure Transworld's indebtedness
under the Credit Agreement. Transworld transferred to Newco, its wholly-owned
subsidiary, all shares of Common Stock purchased pursuant to the Stock Purchase
Agreement, and Transworld has pledged all of the outstanding shares of Newco to
secure its indebtedness under the Credit Agreement. The shares of Common Stock
purchased pursuant to the Stock Purchase Agreement have not been pledged to
secure Transworld's indebtedness under the Credit Agreement.
To purchase the Issuer Payables, including the Convertible Note, the Fund
used $11.3 million, which was derived from capital calls from the Fund's
partners (which the Fund makes from time to time in the ordinary course of its
business) and from borrowings under a $40,000,000 amended secured credit
facility maintained by the Fund with The Bank of New York to fund working
capital needs and to make investments.
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<PAGE>
ITEM 4. PURPOSE OF TRANSACTION
On January 13, 1997, Transworld purchased from the Issuer 8,964,292 shares
of Common Stock pursuant to the Stock Purchase Agreement.
Transworld and the Issuer have entered into an amendment to the Debt
Agreement (the "Debt Agreement Amendment No. 1") which provides, among other
things, that Transworld will forebear until January 31, 1997 from exercising any
remedies to which it is entitled (including declaring an event of default on the
Issuer's senior debt) as a result of purchasing and holding the Issuer's senior
debt. For further information with respect to the Debt Agreement Amendment No.
1, reference is made to the Debt Agreement Amendment No. 1 (which is filed as
Exhibit 3 hereto), which is incorporated herein by reference.
On November 27, 1996, December 12, 1996, December 23, and January 10, 1997,
Transworld, the Issuer, and Newco entered into letter agreements, which extended
the date by which Transworld and Newco were entitled to terminate the Merger
Agreement and the Stock Purchase Agreement under certain circumstances. For
further information with respect to such letter agreements, reference is made to
Exhibits 4, 5, 6, and 7 hereto), which are incorporated herein by reference.
On January 13, 1997, Transworld, the Issuer, and Newco entered into a
letter agreement (the "January 13 Amendment"), which amended certain provisions
of the Merger Agreement. The January 13 Amendment decreases from $2.00 to $1.50
the amount per share that each holder (other than Transworld and its
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<PAGE>
subsidiaries) will receive if the Merger is consummated. In addition, pursuant
to the January 13 Amendment, it is a condition to the obligations of Transworld
and Newco to effect the Merger that: (i) the Amended Stipulation of Partial
Settlement of the consolidated class actions under the caption, IN RE HEALTH
MANAGEMENT, INC. SECURITIES LITIGATION, dated December 19, 1996, shall have been
finally approved by the United States District Court and such court shall have
entered a judgment substantially in the form of the exhibit to such amended
Stipulation and all appeals therefrom shall have been exhausted or applicable
waiting periods for any such appeals shall have expired without an appeal having
been filed; and (ii) Transworld's lenders shall have consented to the Merger,
shall have amended the Credit Agreement to permit the Merger, and shall have
loaned to Transworld the funds necessary for Transworld to consummate the
Merger. If the foregoing conditions (and the other conditions contained in the
Merger Agreement, as amended) are not satisfied by June 30, 1997, Transworld may
terminate the Merger Agreement. For further information with respect to the
January 13 Amendment, reference is made to the January 13 Amendment (which is
filed as Exhibit 8 hereto), which is incorporated herein by reference.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As described in Item 4 above, Transworld is the beneficial owner of
8,964,292 shares of Common Stock which it purchased on January 13, 1997 under
the Stock Purchase Agreement (representing 49% of the outstanding shares of
Common Stock) and immediately transferred to Newco, its wholly-owned subsidiary,
and 746,713
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<PAGE>
shares of Common Stock subject to the Option. After giving effect to the
exercise, if any, of the Option, Transworld would thereafter own 51% of the
outstanding shares of Common Stock (including the shares owned by Newco),
assuming, in each case, that none of the Issuer's outstanding options (other
than the Option) or warrants are exercised or convertible securities are
converted into Common Stock.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
Except for the Merger Agreement, as amended, the Stock Purchase Agreement,
the Registration Rights Agreement, the Debt Purchase Agreements, the Debt
Agreement, and the Debt Agreement Amendment No. 1, the Reporting Persons have no
contracts, arrangements, understandings, or relationships, legal or otherwise,
with any person with respect to any securities of the Issuer, including, but not
limited to, transfer or voting of any of the securities, finders' fees, joint
ventures, loan or option agreements, puts or calls, guarantees of profits,
division of profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS
Exhibit 1 - Joint Filing Agreement
Exhibit 2 - Second Amendment (to Credit Agreement)
Exhibit 3 - Debt Agreement Amendment No. 1
Exhibit 4 - Letter agreement, dated November 27, 1996, amending
Merger Agreement
Exhibit 5 - Letter agreement, dated December 12, 1996, amending
Merger Agreement
Exhibit 6 - Letter agreement, dated December 23, 1996, amending
Merger Agreement
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<PAGE>
Exhibit 7 - Letter agreement, dated January 10, 1997, amending
Merger Agreement
Exhibit 8 - Letter agreement, dated January 13, 1997, amending
Merger Agreement
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<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of the knowledge and belief
of each of the undersigned, each of the undersigned certifies that the
information set forth in this statement is true, complete, and correct.
TRANSWORLD HOME HEALTHCARE, INC.
January 17, 1997 By /s/ Vincent J. Caruso
---------------------------------
Vincent J. Caruso
Executive Vice President
HYPERION PARTNERS II L.P.
By: Hyperion Ventures II L.P.,
its general partner
By: Hyperion Funding II Corp.,
its general partner
By /s/Scott A. Shay
----------------------
Scott A. Shay
Executive Vice
President
HYPERION VENTURES II L.P.
By: Hyperion Funding II Corp.,
its general partner
By /s/Scott A. Shay
----------------------------
Scott A. Shay
Executive Vice President
HYPERION FUNDING II CORP.
By /s/Scott A. Shay
---------------------------------
Scott A. Shay
Executive Vice President
/s/ Lewis A. Ranieri
------------------------------------
Lewis A. Ranieri
/s/Scott A. Shay
------------------------------------
Scott A. Shay
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<PAGE>
IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso
---------------------------------
Vincent J. Caruso
Executive Vice President
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<PAGE>
ANNEX A
EXECUTIVE OFFICERS AND DIRECTORS
--------------------------------
IMH ACQUISITION CORP. ("NEWCO")
-------------------------------
ROBERT W. FINE. Mr. Fine is the President, Chief Operating Officer,
Chief Executive Officer, and a director of Newco and the President and Chief
Operating Officer of Transworld. Mr. Fine's address is 75 Terminal Avenue,
Clark, New Jersey 07066.
VINCENT J. CARUSO. Mr. Caruso is an Executive Vice President and the Chief
Administrative Officer of Transworld and of Newco. Mr. Caruso's address is 75
Terminal Avenue, Clark, New Jersey 07066.
WAYNE A. PALLADINO. Mr. Palladino is Senior Vice President and Chief
Financial Officer of Transworld and of Newco. Mr. Palladino's address is 75
Terminal Avenue, Clark, New Jersey 07066.
SCOTT A. SHAY. Mr. Shay is a director of Newco. Mr. Shay is acting
Chairman of the Board and a director of Transworld. Mr. Shay is Executive Vice
President, Assistant Secretary, a director, and a stockholder of Funding. He
also is a Managing Director of Ranieri & Co., Inc., a registered broker dealer,
and President, director, and stockholder of SAS Hyperion Corp. and Chairman and
President, director and shareholder of SAS Hyperion Corp., general partners of
the sole general partner of Hyperion Partners L.P., a Delaware private
investment limited partnership. His principal business and office address is 50
Charles Lindbergh Boulevard, Suite 500, Uniondale, New York 11553.
<PAGE>
EXHIBIT 1
The undersigned agree that the statement to which this Exhibit is attached,
and any amendment thereto, is filed on behalf of each of them in the capacities
set forth below.
TRANSWORLD HOME HEALTHCARE, INC.
Dated: January 17, 1997
By /s/ Vincent J. Caruso
--------------------------------
Vincent J. Caruso
Executive Vice President
HYPERION PARTNERS II L.P.
By: Hyperion Ventures II L.P.,
its general partner
By: Hyperion Funding II Corp.,
its general partner
By /s/Scott A. Shay
-----------------------
Scott A. Shay
Executive Vice
President
HYPERION VENTURES II L.P.
By: Hyperion Funding II Corp.,
its general partner
By /s/Scott A. Shay
---------------------------
Scott A. Shay
Executive Vice President
HYPERION FUNDING II CORP.
By /s/Scott A. Shay
--------------------------------
Scott A. Shay
Executive Vice President
/s/Lewis S. Ranieri
-----------------------------------
Lewis S. Ranieri, individually
/s/Scott A. Shay
-----------------------------------
Scott A. Shay, individually
IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso
--------------------------------
Vincent J. Caruso
Executive Vice President
<PAGE>
EXHIBIT 2
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as of
January 13, 1997, among TRANSWORLD HOME HEALTHCARE, INC. (the "Borrower"), the
lenders from time to time party to the Credit Agreement referred to below (each
a "Bank" and, collectively, the "Banks"), and BANKERS TRUST COMPANY, as Agent
(the "Agent"). All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in the Credit Agreement.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Borrower, the Banks and the Agent are parties to a Credit
Agreement, dated as of July 31, 1996 (as in effect on the date hereof, the
"Credit Agreement");
WHEREAS, the Borrower has purchased certain senior secured
indebtedness of Health Management, Inc. ("HMI");
WHEREAS, the Borrower has entered into the HMI Stock Purchase
Agreement with HMI, pursuant to which the Borrower may acquire 49% (calculated
after giving effect to the HMI Stock Purchase) of the common stock of HMI and
has acquired an option to purchase an additional 2% (calculated after giving
effect to the HMI Stock Purchase) of the common stock of HMI;
WHEREAS, the Borrower has entered into the HMI Merger Agreement with
HMI, pursuant to which the Borrower may merge IMH Acquisition Corp., a
Wholly-Owned Subsidiary of the Borrower, with and into HMI, with HMI being the
surviving company;
WHEREAS, the Borrower has requested certain amendments to the Credit
Agreement in order to consummate the HMI Stock Purchase described in the second
preceding recital and to effect certain other changes to the Credit Agreement;
WHEREAS, the parties hereto wish to amend the Credit Agreement as
herein provided;
<PAGE>
NOW, THEREFORE, it is agreed:
I. AMENDMENTS AND MODIFICATIONS TO CREDIT AGREEMENT.
1. Section 6 of the Credit Agreement is hereby amended by adding the
following new section immediately prior to the final paragraph thereof:
"6.05 REGULATIONS G AND U. On the date of each Credit Event,
none of the collateral under the Security Documents shall constitute
Margin Stock and, except as permitted by Section 9.17, at no time
shall the Borrower and its Subsidiaries own Margin Stock with a fair
market value in excess of $100,000."
2. Section 7.01 of the Credit Agreement is hereby amended by inserting
the parenthetical "(other than CEOI and Fertilitext)" immediately prior to the
phrase "is a duly organized and validly existing corporation" appearing therein.
3. Section 7.05 of the Credit Agreement is hereby amended by (x)
inserting immediately prior to the phrase "no part of any Credit Event"
appearing in clause (b) thereof the following new clause:
", other than as necessary to consummate the HMI Stock Purchase
and, if same subsequently occurs, to exercise the HMI Option in
accordance with the terms hereof,"
and (y) inserting at the end thereof the following additional clause:
"(c) The Obligations hereunder are not "secured directly or
indirectly" by Margin Stock under Regulation G or U, as applicable.
At no time will the aggregate fair market value of all Margin Stock
held by the Borrower and its Subsidiaries exceed 25% of the value of
the assets of (x) the Borrower or (y) the Borrower and its
Subsidiaries taken as a whole."
4. Section 7.15 of the Credit Agreement is hereby amended by inserting
the parenthetical "(other than CEOI and Fertilitext)" immediately prior to the
phrase "have been duly and validly issued," appearing therein.
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<PAGE>
5. Section 8.01 of the Credit Agreement is hereby amended by (x)
inserting the following new parenthetical "(or, in the case of fiscal year 1997
only, 120 days)" immediately following the phrase "60 days" appearing in clause
(d) thereof and (y) inserting the following new sentence immediately at the end
of clause (k) thereof:
"Without limiting the foregoing, for each fiscal month of HMI
beginning after the HMI Stock Purchase Effective Date, there shall be
delivered to the Banks monthly reports with respect to HMI in
substantially the form required by Section 8.01(a), with such changes
as may be acceptable to the Agent, and such other financial
information with respect to HMI and its Subsidiaries as may be
requested from time to time in accordance with the immediately
preceding sentence."
6. Section 8.03(c) of the Credit Agreement is hereby amended by inserting
the phrase ", to the extent required hereby," immediately prior to the phrase
"fail to so name the Collateral Agent," appearing therein.
7. Section 8.10 of the Credit Agreement is hereby amended by inserting
the following new proviso immediately prior to the period at the end thereof:
"; PROVIDED that prior to the 60th day following the consummation of
the HMI Merger (if same occurs) HMI and its Subsidiaries may have a
fiscal year end of April 30 of each year (and fiscal quarters
consistent therewith)"
8. Section 8.13 of the Credit Agreement is hereby amended by (x)
inserting "(i)" immediately prior to the phrase "as permitted pursuant to"
appearing in the parenthetical therein, (y) inserting the phrase "and (ii) CEOI
and Fertilitext" immediately prior to the closing parenthesis of the
parenthetical contained therein and (z) inserting the following new sentence
immediately after the first sentence thereof:
"Notwithstanding anything to the contrary contained in the immediately
preceding sentence, at any time following the consummation of the HMI
Stock Purchase in accordance with Section 9.05(m) and prior to the
consummation of the HMI Merger the Borrower may directly and
indirectly own less than 100% of the outstanding capital stock of HMI,
so long as (x) all capital stock of HMI owned by the Borrower and its
Subsidiaries is directly held by IMH Acquisition Corp., which itself
must constitute a direct Wholly-Owned Subsidiary of the Borrower and
(y) the Borrower and its Subsidiaries do not reduce their equity
interests from
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<PAGE>
the amount acquired pursuant to the HMI Stock Purchase and, if same
subsequently occurs, any exercise of the HMI Option."
9. Section 8.15 of the Credit Agreement is hereby amended by inserting
the parenthetical "(other than CEOI and Fertilitext)" immediately subsequent to
the phrase "of its Subsidiaries" both times such phrase appears therein.
10. Section 8 of the Credit Agreement is hereby amended by adding the
following new Section 8.18 immediately after existing Section 8.17 thereof:
"8.18 MARGIN REGULATIONS; MARGIN STOCK; ETC. The Borrower shall
take all actions necessary so that the extensions of credit pursuant
to this Agreement are at all times in compliance with Regulation G and
Regulation U including, without limitation, ensuring that all such
extensions of credit are not "directly or indirectly secured" by
Margin Stock."
11. Section 9.01 of the Credit Agreement is hereby amended by (x)
inserting "(a)" immediately after the heading "Changes in Business." and before
the existing text appearing therein and (y) inserting the following new clause
at the end of the existing text appearing therein:
"(b) Each of CEOI and Fertilitext shall engage in no significant
business and shall at no time have assets with an aggregate value in
excess of $5,000.
(c) IMH Acquisition Corp. shall (x) engage in no business other
than, and (y) take no actions and incur no liabilities except related
to, (1) its ownership of the capital stock of HMI in accordance with
the terms hereof, (2) its entering into and consummating the HMI Stock
Purchase Agreement and the HMI Merger Agreement and its exercising its
right to purchase and hold common stock of HMI under the HMI Option,
in each case in accordance with the terms hereof and (3) other
activities incidental to those set forth in clauses (1) and (2)."
12. Section 9.04 of the Credit Agreement is hereby amended by (x) deleting
the word "and" at the end of clause (g) thereof, (y) relettering clause (h)
thereof as clause (i) and (z) inserting immediately prior to relettered clause
(i) thereof the following new clause:
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<PAGE>
"(h) Indebtedness of HMI and its Subsidiaries constituting HMI
Loans; and"
13. Section 9.05 of the Credit Agreement is hereby amended by (u) deleting
the amount "$3,500,000" in clause (a) thereof and inserting in lieu thereof
"$5,000,000," (v) deleting the word "three" in clause (a) thereof and inserting
in lieu thereof the word "five," (w) deleting the word "and" at the end of
clause (k) thereof, (x) inserting the phrase "and prior to the HMI Stock
Purchase Effective Date" immediately prior to the phrase ", make advances and
loans in the form of additional HMI Loans" appearing in clause (l) thereof, (y)
deleting the period at the end of clause (l) thereof and inserting in lieu
thereof the phrase "; and" and (z) inserting at the end thereof the following
additional clause:
"(m) the Borrower may consummate the HMI Stock Purchase so long
as (1) no Default or Event of Default is in existence at the time of
the consummation thereof or immediately after giving effect thereto,
(2) all representations and warranties contained herein and in the
other Credit Documents shall be true and correct in all material
respects with the same effect as though such representations and
warranties had been made on and as of the date of consummation of the
HMI Stock Purchase (both before and after giving affect thereto),
unless stated to relate to a specific earlier date, in which case such
representations and warranties shall be true and correct in all
material respects as of such earlier date, (3) on or prior to the HMI
Stock Purchase Effective Date, the HMI Settlement shall have been
amended to provide for the settlement of such actions for an aggregate
cash payment not to exceed $7.2 million upon consummation of the HMI
Merger and such shall otherwise be in form and substance satisfactory
to the Agent and the Required Banks, and such settlement shall have
been preliminarily approved by the United States District Court, (4)
all conditions precedent to the HMI Stock Purchase as set forth in the
HMI Stock Purchase Agreement shall have been satisfied and the
Borrower shall not have waived any condition precedent to the HMI
Stock Purchase set forth in the HMI Stock Purchase Agreement without
the consent of the Agent, (5) on or prior to the HMI Stock Purchase
Effective Date the HMI Merger Agreement shall be amended to reflect
the restrictions set forth in the first sentence of Section 13.20 on
the consummation of the HMI Merger and on the HMI Stock Purchase
Effective Date the Agent and the Required Banks shall be satisfied
with all of the terms and conditions of the HMI Merger Agreement, (6)
the aggregate consideration paid in connection with the HMI Stock
Purchase (excluding those items set forth in Section 1.01(i)
-5-
<PAGE>
of the HMI Stock Purchase Agreement) does not exceed an amount equal
to $9,000,000 less the aggregate amount theretofore advanced or loaned
by the Borrower to the HMI Borrowers in the form of additional HMI
Loans pursuant to Section 9.05(l), (7) neither the Borrower nor any of
its Subsidiaries (other than HMI and its Subsidiaries) is or becomes
liable for any Indebtedness or other obligations of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and
whether or not due) of HMI or any of its Subsidiaries and (8) the
entity which acquires and holds the capital stock of HMI immediately
(and in no event later than on the date of such consummation)
contributes all of such capital stock to IMH Acquisition Corp., all of
the capital stock of which shall be pledged pursuant to the Pledge
Agreement and the certificates, if any, representing such stock
together with stock powers duly executed in blank, shall have been
delivered to the Collateral Agent. Notwithstanding the foregoing, the
Borrower shall not exercise any of its right to purchase common stock
of HMI under the HMI Option except as set forth in Section 13.20."
14. Section 9.07 of the Credit Agreement is hereby amended by (x) deleting
the word "and" at the end of clause (iii) thereof and inserting in lieu thereof
a comma and (y) inserting the clause "and (v) the investments permitted pursuant
to Section 9.05(m) shall be permitted" at the end of the first sentence thereof.
15. Section 9.10 of the Credit Agreement is hereby amended by inserting at
the end thereof the following new proviso:
"; PROVIDED that, notwithstanding the foregoing, for the Test Period
ending January 31, 1997 (if the HMI Merger has not theretofore
occurred), the Consolidated Interest Coverage Ratio shall not be less
than 2.25:1."
16. Section 9.11 of the Credit Agreement is hereby amended by inserting at
the end thereof the following new proviso:
"; PROVIDED that, notwithstanding the foregoing, at any time prior to
the earlier of (x) the date of consummation of the HMI Merger and (y)
April 30, 1997, at no time shall the Leveragage Ratio exceed 4.25:1."
17. Section 9.12(a)(i) of the Credit Agreement is hereby amended by
inserting immediately following the phrase "Existing Indebtedness" appearing
therein the following new phrase:
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<PAGE>
", HMI Stock Purchase Agreement, HMI Merger Agreement or HMI
Registration Rights Agreement"
and (y) inserting at the end thereof the following new proviso:
", PROVIDED FURTHER that (x) the HMI Merger Agreement and the HMI
Stock Purchase Agreement shall be amended by the First HMI Merger
Agreement and Stock Purchase Agreement Amendment and (y) the HMI
Credit Agreement and the HMI Acknowledgement shall be modified by the
HMI Acknowledgement Amendment"
18. Section 9.15(a) of the Credit Agreement is hereby amended by adding
the following new sentence immediately at the end thereof:
"Notwithstanding anything to the contrary contained above, the
investments permitted by Sections 9.05(m) shall be permitted and,
prior to the consummation of the HMI Merger, the actions otherwise
specified above need not be taken by HMI."
19. The Credit Agreement is hereby amended by adding the following new
Section 9.17 after existing Section 9.16 thereof:
"9.17 MARGIN STOCK. At no time shall the Borrower or any of its
Subsidiaries own any Margin Stock, except that (i) prior to the
consummation of the HMI Merger, the capital stock of HMI may be
acquired pursuant to Section 9.05(m), and such capital stock may be
(and shall only be) held by IMH Acquisition Corp. even though same
constitutes Margin Stock and (ii) in addition to any Margin Stock as
described in preceding clause (i) the Borrower and its Subsidiaries
may from time to time own Margin Stock so long as the aggregate fair
market value thereof at no time exceeds $100,000. If the HMI Merger
is consummated (which shall require the consent of the Required
Banks), the Borrower shall take all action necessary so that the
capital stock of HMI, from and after the HMI Merger Effective Date, no
longer constitutes Margin Stock."
20. Section 10.03 of the Credit Agreement is hereby amended by inserting
the phrase ", 8.18" immediately prior to the phrase "or 9" appearing therein.
21. Section 10.04 of the Credit Agreement is hereby amended by inserting
immediately prior to the semicolon at the end thereof the following new proviso:
-7-
<PAGE>
"; PROVIDED FURTHER, that this Section 10.04 shall not apply to
Indebtedness of HMI or its Subsidiaries to the extent held by
HPII, any member of the HPII Group or any of their respective
Affiliates or the Borrower so long as the respective holder (if
other than the Borrower) has not taken any enforcement actions,
or exercised any remedies (including without limitation
acceleration) with respect thereto"
22. The definition of "Consolidated EBITDA" appearing in Section 11 of the
Credit Agreement is hereby amended by (x) inserting immediately prior to the
phrase "(w) the amount" the following new clause:
"(u) to the extent Consolidated EBITDA is being determined for any
period that includes all or any portion of fiscal year 1997, and to
the extent that Consolidated EBITDA (whether directly or through
reductions to Consolidated Net Income) has been reduced by any of the
occurrences described on Annex XII hereto, the amount of such
reductions (in no event to exceed the respective amount specified in
said Annex XII), (v) to the extent Consolidated EBITDA is being
determined for any period that includes all or a portion of the month
of December, 1996 or calendar year 1997, and to the extent that
Consolidated EBITDA (whether directly or through reductions to
Consolidated Net Income) for such period has been reduced by
relocation or other costs for a newly hired Chief Executive Officer of
the Borrower incurred during the month of December, 1996 or calendar
year 1997, the amount of such reductions (in no event to exceed
$150,000 for the month of December, 1996 and all of calendar year
1997),",
and (y) deleting the phrase "and (II)" appearing therein and inserting the
phrase ", (II) prior to the consummation of the HMI Merger," in lieu thereof.
23. The definition of "HMI Investment" appearing in Section 11 of the
Credit Agreement is hereby amended by deleting the phrase "and (l)" appearing at
the end of the second sentence thereof and inserting in lieu thereof the phrase
"(l) and (m)".
24. The definitions of "HMI Acknowledgement", "HMI Merger Agreement" and
"HMI Stock Purchase Agreement" appearing in Section 11 of the Credit Agreement
are hereby amended by inserting immediately prior to the period at the end
thereof the following new phrase:
-8-
<PAGE>
", as amended, modified, extended, renewed, replaced, restated or
supplemented in accordance with the terms hereof"
25. The definition of "Margin Stock" appearing in Section 11 of the Credit
Agreement is hereby amended by deleting the phrase "have the meaning provided in
Regulation U" appearing therein and by inserting in lieu thereof the phrase
"mean any 'Margin Stock' under, and as defined in, either Regulation G or
Regulation U."
26. The definition of "Subsidiary" appearing in Section 11 of the Credit
Agreement is hereby amended by inserting immediately prior to the period at the
end thereof the following new proviso:
"; PROVIDED that on and after the HMI Stock Purchase Effective Date
HMI and its Subsidiaries shall be considered Subsidiaries of the
Borrower for all purposes of this Agreement (except as otherwise
provided in Section 13.07(a)), except that, notwithstanding anything
to the contrary contained in this Agreement, prior to consummation of
the HMI Merger Effective Date only, (A) the provisions of Section 8.11
(although the capital stock of HMI (other than capital stock
constituting Margin Stock) owned by the Borrower and its Subsidiaries
other than HMI and its Subsidiaries shall be required to be pledged
pursuant to the Pledge Agreement) shall not apply to HMI or any of its
Subsidiaries, (B) neither HMI nor any of its Subsidiaries shall be
required to become a party to the Subsidiaries Guaranty, the Pledge
Agreement or the Security Agreement, (C) none of the capital stock of
any Subsidiary of HMI (except to the extent owned by the Borrower and
its Subsidiaries other than HMI and its Subsidiaries and not
constituting Margin Stock) shall be required to be pledged or
delivered to the Collateral Agent, (D) HMI and its Subsidiaries shall
not be considered Subsidiaries of the Borrower for the purposes of the
definition of Permitted Acquisition, (E) HMI and its Subsidiaries
shall not be considered Subsidiaries of the Borrower for the purposes
of the financial statements to be provided pursuant to Sections
8.01(a), (b) and (c), (F) HMI and its Subsidiaries shall not be
considered Subsidiaries of the Borrower for the purposes of Section
8.03(b), (G) HMI and its Subsidiaries shall not be considered
Subsidiaries of the Borrower for the purposes of determining
compliance with the first proviso of Section 9.05(a), (H) HMI and its
Subsidiaries shall not be considered Subsidiaries of the Borrower for
the purposes of Section 9.16 and (I) HMI and its Subsidiaries may (1)
transfer assets (other than accounts receivable), (2) make advances,
investments or
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<PAGE>
loans and (3) declare or pay a Dividend, in each case amongst
themselves."
27. Section 11 of the Credit Agreement is hereby further amended by
inserting in appropriate alphabetical order the following new definitions:
""Caremark Payables" shall mean the Subordinated Note, dated
March 31, 1995, issued by HMI Illinois, Inc. in favor of Caremark Inc.
in the principal amount of $3,000,000 and the account payable of HMI
in the face amount of $132,996.
"CEOI" shall mean Clinically Effective Outcomes, Inc., a Delaware
corporation.
"Fertilitext" shall mean HMI Fertilitext, Inc., a Delaware
corporation.
"First HMI Merger Agreement and Stock Purchase Agreement
Amendment" shall mean the amendment to the HMI Merger Agreement and
the HMI Stock Purchase Agreement, dated January 13, 1997, among the
Borrower, IMH Acquisition Corp. and HMI, all of the terms and
conditions of which shall be required to be satisfactory to the Agent
and the Required Banks in their sole and absolute discretion.
"HMI Acknowledgement Amendment" shall mean the amendment to the
HMI Acknowledgement, dated January 13, 1997, among the Borrower, the
HMI Borrowers and the HMI Guarantors, all of the terms and conditions
of which shall be required to be satisfactory to the Agent and the
Required Banks in their sole and absolute discretion.
"HMI Merger" shall mean the merger of IMH Acquisition Corp. with
and into HMI, with HMI surviving said merger, in all respects pursuant
to and in accordance with the HMI Merger Agreement and Section 13.20
hereof.
"HMI Option" shall mean the option of the Borrower to purchase 2%
of the common stock of HMI in all respects pursuant to and in
accordance with the HMI Stock Purchase Agreement and Section 13.20
hereof.
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<PAGE>
"HMI Settlement" shall have the meaning set forth in Section
8.14(a).
"HMI Stock Purchase" shall mean the purchase by the Borrower of
49% of the common stock of HMI in all respects pursuant to and in
accordance with the HMI Stock Purchase Agreement.
"HMI Stock Purchase Effective Date" shall mean the date on which
the HMI Stock Purchase is consummated in accordance with the terms of
this Agreement.
"Second Amendment Effective Date" shall mean the Second Amendment
Effective Date under, and as defined in, the Second Amendment, dated
as of January 13, 1997, to this Agreement."
28. Section 13.07(a) of the Credit Agreement is hereby amended by (x)
deleting the word "and" immediately preceding clause (iii) of the second proviso
thereto and by inserting in lieu thereof a comma and (y) inserting immediately
prior to the period at the end thereof the following new clause:
"and (iv) for all purposes of determining compliance with Sections
9.09, 9.10 and 9.11, HMI shall be treated for all periods (or portions
of periods occurring) prior to the consummation of the HMI Merger as
if same were not a Subsidiary of the Borrower and all financial
results of HMI and its Subsidiaries shall be excluded for purposes of
the relevant determinations pursuant to said Sections".
29. The Credit Agreement is hereby further amended by adding the following
new Section 13.19 and Section 13.20 immediately after existing Section 13.18
thereof:
"13.19 OVERRIDE AGREEMENT REGARDING SECURITY DOCUMENTS. It is
understood and agreed that, notwithstanding anything to the contrary
contained elsewhere and any Security Document, no Margin Stock shall
be pledged, or required to be pledged, pursuant to the terms of any
Security Document.
13.20 HMI MERGER. Notwithstanding anything to the contrary
contained herein or elsewhere, it is understood and agreed that the
Borrower shall not be permitted to consummate any of the transactions
(including, without limitation, the HMI Merger and/or any exercise of
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<PAGE>
the HMI Option) contemplated by the HMI Merger Agreement and/or the
HMI Option (other than the consummation of the HMI Stock Purchase in
accordance with the terms hereof) without the express written consent
of the Required Banks.
The parties hereto acknowledge and agree that (1) if any
transaction (including without limitation the HMI Merger and/or the
exercise of the right to purchase and hold the common stock of HMI
pursuant to the HMI Option) contemplated by the HMI Merger Agreement
and/or the HMI Option (other than the consummation of the HMI Stock
Purchase in accordance with the terms hereof) is consummated without
the written consent of the Required Banks as required by the
immediately preceding sentence, such event shall constitute an
immediate Event of Default pursuant to Section 10.03(a) of the Credit
Agreement and (2) the Required Banks may, in their sole discretion,
refuse to consent to the consummation of any of the transactions
(including without limitation the HMI Merger and/or the exercise of
the right to purchase and hold the common stock of HMI pursuant to the
HMI Option) contemplated by the HMI Merger Agreement and/or the HMI
Option (other than the consummation of the HMI Stock Purchase in
accordance with the terms hereof) or impose conditions on such
consent, including, without limitation, the contribution of additional
equity to the Borrower or modifications in the capital structure of
the Borrower. The parties hereto hereby agree that no Bank shall have
any liability whatsoever to any of the parties hereto, or any other
Person, as a result of any refusal (for any reason whatsoever) of one
or more Banks to grant their consent as is required above with respect
to the transactions described above."
30. At the time of the consummation of the HMI Stock Purchase, Annexes III
through X of the Credit Agreement are hereby amended by adding thereto the
information set forth in the corresponding Annexes III through X hereof,
containing in each case all such additional information as would have been
required had HMI and its Subsidiaries been Subsidiaries of the Borrower on the
Initial Borrowing Date. The parties hereto acknowledge and agree that from and
after the date of the consummation of the HMI Stock Purchase, all references in
the Credit Agreement to Annexes III through X or the information contained
therein shall be deemed references to Annexes III through X as modified hereby
as if such Annexes had been modified on the Initial Borrowing Date. The
Borrower represents and warrants that all information set forth in Annexes III
through X attached hereto is true and correct in all respects and does not omit
any information which would otherwise be required to disclose in said Annexes.
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<PAGE>
31. The Credit Agreement is hereby further amended by adding new Annex XII
thereto in the form attached hereto as Annex XII.
32. It is acknowledged and agreed that, notwithstanding anything to the
contrary contained in the Credit Agreement or any other Credit Document, (i) for
the purposes of making the representations and warranties contained in Sections
7.04, 7.10(c) and (d), 7.17 and 7.21 of the Credit Agreement only, the payment
of (x) the HMI Settlement in accordance with the terms of this Amendment, (y)
any complete settlement and discharge of all of the liability of HMI and its
Subsidiaries with respect to the New York State Medicaid audit referenced in
Section 3.6 of the Disclosure Schedule to the HMI Merger Agreement so long as
the aggregate payments made in connection therewith do not exceed $1,500,000
plus interest on such amount for the period from December 1, 1996 to the date of
such payment at a rate per annum equal to or less than 10.25%, and (z) any
complete and final settlement and discharge of all of the liability of HMI and
its Subsidiaries with respect to the audit by the Internal Revenue Service
referred to in clause (1) of Section 3.18 of the Disclosure Schedule to the HMI
Merger Agreement for aggregate consideration not to exceed $550,000, and (ii)
for the purposes of Section 8.16 of the Credit Agreement only, non-performance
by HMI and/or any of its Subsidiaries on accounts payable of the HMI Borrowers
or HMI Guarantors to any member of the HPII Group or any of their respective
Affiliates (including, without limitation, the Caremark Payables) or any
non-performance under the HMI Credit Agreement shall not be considered to result
in a Material Adverse Effect or to be reasonably expected to have a material
adverse effect on the rights or remedies of the Agent or the Banks or on the
ability of any Credit Party to perform its respective obligations to the Agent
or the Banks under the Credit Agreement or any other Credit Document to which it
is, or will be, a party.
II. MISCELLANEOUS PROVISIONS.
1. In order to induce the Banks to enter into this Amendment, the Borrower
hereby represents and warrants that:
(a) no Default or Event of Default exists as of the Second Amendment
Effective Date, both before and after giving effect to this Amendment; and
(b) all of the representations and warranties contained in the Credit
Agreement and the other Credit Documents are true and correct in all
material respects on the Second Amendment Effective Date both before and
after giving effect to this Amendment, with the same effect as though such
representations and warranties had been made on and as of the Second
Amendment Effective Date (it being understood that any representation or
warranty made as of a
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<PAGE>
specific date shall be true and correct in all material respects as of such
specific date).
2. This Amendment is limited as specified and shall not constitute a
modification, acceptance or waiver of any other provision of the Credit
Agreement or any other Credit Document. Without in any way limited the
generality of this Amendment, by executing this Amendment, the Banks neither
consent to the consummation of the HMI Merger Agreement and/or the exercise of
the right to purchase and hold the common stock of HMI pursuant to the HMI
Option nor waive any Default or Event of Default which may result from the
consummation of the merger and/or the exercise of the rights contemplated
therein.
3. This Amendment may be executed in any number of counterparts and by
the different parties hereto on separate counterparts, each of which
counterparts when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Borrower and the Agent.
4. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF
NEW YORK.
5. This Amendment shall become effective on the date (the "Second
Amendment Effective Date") when (x) each of the Borrower, each other Credit
Party and the Required Banks shall have signed a counterpart hereof (whether the
same or different counterparts) and shall have delivered (including by way of
facsimile transmission) the same to the Agent at its Notice Office and (y) the
HMI Stock Purchase Effective Date shall occur; PROVIDED that notwithstanding
anything to the contrary contained herein, unless the Second Amendment Effective
Date has occurred on or prior to January 15, 1997 this Amendment shall be of no
force and effect and the Credit Agreement shall not be modified hereby.
6. From and after the Second Effective Date, all references in the Credit
Agreement and each of the other Credit Documents to the Credit Agreement shall
be deemed to be references to the Credit Agreement as modified hereby.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Amendment as of the date first
above written.
TRANSWORLD HOME
HEALTHCARE, INC.,
as Borrower
By
----------------------------
Title:
BANKERS TRUST COMPANY,
Individually and as Agent
By
----------------------------
Title:
THE BANK OF NEW YORK (NJ)
By
----------------------------
Title:
<PAGE>
BANQUE PARIBAS
By
----------------------------
Title:
By
----------------------------
Title:
<PAGE>
EXHIBIT 3
TRANSWORLD HOME HEALTHCARE, INC.
11 Skyline Drive
Hawthorne, New York 10532
January 10, 1997
Health Management, Inc.
and Each of Its Subsidiaries
Appearing as Signatories 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 the letter agreement dated November 13, 1996
among Transworld Home HealthCare, Inc. and the Loan Parties, as amended by
letter agreements dated December 12, 1996 and December 23, 1996 (as amended, the
"Forbearance Agreement"). Capitalized terms used herein and not otherwise
defined shall have the meanings assigned to them in the Forbearance Agreement.
1. Section 2 of the Forbearance Agreement is hereby amended by
replacing the date "January 10, 1997" with "January 13, 1997".
Except as expressly amended hereby, each and every representation,
warranty, term, covenant and condition of the Forbearance Agreement, and all
obligations of the Loan
<PAGE>
Parties thereunder, shall remain unamended and in effect in accordance with
their respective terms.
Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.,
as New Lender
By: /s/ Vincent J. Caruso
------------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President and
Chief Administrative Officer
ACCEPTED AND AGREED:
HEALTH MANAGEMENT, INC.
By: /s/ W. James Nicol
---------------------------------------------
Name: W. James Nicol
Title: Chief Executive Officer and President
HOME CARE MANAGEMENT, INC.
HMI ILLINOIS, INC.
HMI PENNSYLVANIA, INC.
HEALTH REIMBURSEMENT CORPORATION
HMI RETAIL CORP., INC.
HMI PMA, INC.
HMI MARYLAND, INC.
By: /s/ W. James Nicol
---------------------------------------------
Name: W. James Nicol
Title: Secretary
<PAGE>
EXHIBIT 4
TRANSWORLD HOME HEALTHCARE, INC.
75 TERMINAL AVENUE
CLARK, NEW JERSEY 07066
November 27, 1996
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated November
13, 1996, among Transworld Home HealthCare, Inc., IMH Acquisition Corp., and
Health Management, Inc. (the "Merger Agreement") (terms defined in the Merger
Agreement shall have their defined meanings herein, unless otherwise defined
herein) and to the Stock Purchase Agreement, dated as of November 13, 1996
between Health Management, Inc. and Transworld Home HealthCare, Inc. (the "Stock
Purchase Agreement").
Notwithstanding the provisions of the Merger Agreement and the Stock
Purchase Agreement, the parties hereto agree that the Merger Agreement and the
Stock Purchase Agreement may be terminated by Transworld, at any time on or
prior to December 9, 1996, if Transworld, in its sole discretion, is not
satisfied with the disclosures made in the Deferred Schedules.
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 matter, 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
--------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso
--------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
Agreed to:
HEALTH MANAGEMENT, INC.
By /s/ Paul S. Jurewicz
-------------------------------
Name: Paul S. Jurewicz
Title: Chief Financial Officer
<PAGE>
EXHIBIT 5
TRANSWORLD HOME HEALTHCARE, INC.
75 TERMINAL AVENUE
CLARK, NEW JERSEY 07066
As of December 12, 1996
Ladies and Gentlemen:
Reference is made to the Agreement and Plan of Merger, dated November
13, 1996, as amended by a letter agreement, dated November 27, 1996, among
Transworld Home Healthcare, Inc. ("Transworld"), IMH Acquisition Corp., and
Health Management, Inc. (the "Merger Agreement") and to the Stock Purchase
Agreement, dated as of November 13, 1996, as amended by a letter agreement,
dated November 27, 1996, between Health Management, Inc. and Transworld Home
Healthcare, Inc. (the "Stock Purchase Agreement").
The parties hereto agree as follows:
1. Section 7.3(i) of the Merger Agreement is hereby amended by
changing the date "December 12, 1996" to December 19, 1996".
2. Section 8.1(c) of the Merger Agreement is hereby amended by
changing the date "December 16, 1996" to "December 23, 1996", with the parties
acknowledging that, unless such date is further extended by agreement of the
parties, the condition to Transworld's obligation to close the Stock Purchase
Agreement and the Merger Agreement set forth in Section 7.3(i) of the Merger
Agreement shall be deemed to have been waived by Transworld with respect to such
agreements if Transworld has not given notice of termination of such agreements
on or prior to December 23, 1996.
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. IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso By /s/ Vincent J. Caruso
-------------------------------- --------------------------------
Name: Vincent J. Caruso Name: Vincent J. Caruso
Title: Executive Vice President Title: Executive Vice President
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ Wm. James Nicol
-------------------------------
Name: Wm. James Nicol
Title: Chief Executive Officer
<PAGE>
EXHIBIT 6
TRANSWORLD HOME HEALTHCARE, INC.
75 TERMINAL AVENUE
CLARK, NEW JERSEY 07066
December 23, 1996
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 and
December 12, 1996, among Transworld Home HealthCare, Inc. ("Transworld"), IMH
Acquisition Corp., 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 and December
12, 1996, among Transworld and the Company (as amended, the "Stock Purchase
Agreement").
The parties hereto agree as follows:
1. Section 7.3(i) of the Merger Agreement is hereby amended by
changing the date "December 19, 1996" to "January 8, 1997."
2. Section 8.1(c) of the Merger Agreement is hereby amended by
changing the date "December 23, 1996" to "January 10, 1997," with the parties
acknowledging that, unless such date is further extended by agreement of the
parties, the condition to Transworld's obligation to close the Stock Purchase
Agreement and the Merger Agreement set forth in Section 7.3(i) of the Merger
Agreement shall be deemed to have been waived by Transworld with respect to such
agreements if Transworld has not given notice of termination of such agreements
on or prior to January 10, 1997.
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
<PAGE>
the enclosed copy of this letter to evidence our binding agreement.
Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.
By /s/ Vincent J. Caruso
--------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso
--------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ James R. Mieszala
---------------------------------
Name: James R. Mieszala
Title: Chief Operating Officer
<PAGE>
EXHIBIT 7
TRANSWORLD HOME HEALTHCARE, INC.
75 TERMINAL AVENUE
CLARK, NEW JERSEY 07066
January 10, 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 and December 23, 1996, among Transworld Home HealthCare, Inc.
("Transworld"), IMH Acquisition Corp., 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 and December 23, 1996, among Transworld and
the Company (as amended, the "Stock Purchase Agreement").
The parties hereto agree as follows:
1. Section 7.3(i) of the Merger Agreement is hereby amended by
changing the date "January 8, 1997" to "January 10, 1997."
2. Section 8.1(c) of the Merger Agreement is hereby amended by
changing the date "January 10, 1997" to "January 13, 1997," with the parties
acknowledging that, unless such date is further extended by agreement of the
parties, the condition to Transworld's obligation to close the Stock Purchase
Agreement and the Merger Agreement set forth in Section 7.3(i) of the Merger
Agreement shall be deemed to have been waived by Transworld with respect to such
agreements if Transworld has not given notice of termination of such agreements
on or prior to January 13, 1997.
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
<PAGE>
the enclosed copy of this letter to evidence our binding agreement.
Very truly yours,
TRANSWORLD HOME HEALTHCARE, INC.
By /s/ Vincent J. Caruso
------------------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso
------------------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President
and Chief Administrative Officer
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ W. James Nicol
---------------------------------
Name: W. James Nicol
Title: Chief Executive Officer
and President
<PAGE>
EXHIBIT 8
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."
<PAGE>
Health Management, Inc.
January 13, 1997
Page 2
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 HEALTH
MANAGEMENT, INC. SECURITIES LITIGATION, Master File No. 96-CV-889 (ADS), dated
December 19, 1996, shall have been finally approved by the United States
District Court and such Court shall have entered a judgment (including a bar
order) substantially in the form of Exhibit B to such Amended Stipulation and
all applicable proceedings for review, appeals, and rights of appeal of such
judgment (other than a proceeding or order, or any appeal or petition for a writ
of CERTIORARI, pertaining solely to any plan of allocation and/or application
for attorneys' fees, costs, or expenses) shall have been exhausted or all
applicable waiting periods during which any appeal or other request for review
of such judgment (other than a proceeding or order, or any appeal or petition
for a writ of CERTIORARI, pertaining solely to any plan of allocation and/or
application for attorneys' fees, costs, or expenses) may be made shall have
expired without any appeal having been filed."
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
<PAGE>
Health Management, Inc.
January 13, 1997
Page 3
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.
<PAGE>
Health Management, Inc.
January 13, 1997
Page 4
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
-------------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President and
Chief Administrative Officer
IMH ACQUISITION CORP.
By /s/ Vincent J. Caruso
-------------------------------------
Name: Vincent J. Caruso
Title: Executive Vice President and
Chief Administrative Officer
AGREED TO:
HEALTH MANAGEMENT, INC.
By /s/ Wm. James Nicol
----------------------------------
Name: Wm. James Nicol
Title: President and Chief
Executive Officer
