Exhibit 10.1
EXECUTION VERSION
THIS AMENDED AND RESTATED
TRANSACTION AND MONITORING FEE AGREEMENT (this “ Agreement ”) is dated as of
November 20, 2007, and is by and between ReAble Therapeutics, Inc.
(f/k/a, Encore Medical Corporation), a Delaware corporation which,
following the consummation of the Transactions (as defined in
Paragraph 3 of the Background, below), intends to change its
name to “DJO Incorporated” (the “ Company ”), and Blackstone
Management Partners V L.L.C., a Delaware limited liability company
(“ BMP
”).
BACKGROUND
1.
The Company and BMP are parties to that certain Transaction and
Monitoring Fee Agreement, dated as of November 3, 2006 (the “
Current Transaction and Monitoring
Fee Agreement ”), pursuant to which, among other
things, BMP has provided certain financial and structural analysis,
due diligence investigation, corporate strategy, and other
financial advisory services to the Company.
2.
ReAble Therapeutics Finance LLC, a Delaware limited liability
company and wholly-owned subsidiary of the Company (“
Merger Parent ”), and
Reaction Acquisition Merger Sub, Inc., a Delaware corporation and
wholly-owned subsidiary of Merger Parent (“ Merger Sub ”), and an entity
currently known as DJO Incorporated, a Delaware Corporation which,
following the consummation of the Transactions, intends to change
its name to “DJO Opco Holdings, Inc.” (“
DJO Opco Holdings ”),
are parties to that certain Agreement and Plan of Merger, dated as
of July 15, 2007 (the “ Merger Agreement ”), pursuant to
which at the “ Effective
Time ” (as defined in the Merger Agreement) Merger
Sub shall be merged with and into DJO Opco Holdings, and DJO Opco
Holdings shall thereafter be a wholly-owned subsidiary of the
Company (the “ Merger
”).
3.
BMP has expertise in the areas of finance, strategy, investment,
acquisitions and other matters relating to the Company, DJO Opco
Holdings, and their respective businesses, and has facilitated the
transactions referred to above and certain other related
transactions (collectively, the “ Transactions ”) through its
provision of financial and structural analysis, due diligence
investigations, negotiation assistance, corporate strategy and
other financial advisory services with all relevant parties to the
Transactions, including in connection with the financing of certain
of the Transactions as contemplated by the Merger
Agreement.
4.
The Company desires to continue to avail itself, for the term of
this Agreement, of BMP’s expertise and services as aforesaid,
which the Company believes will be beneficial to it, and BMP
desires to continue to make such expertise available and provide
such services to the Company on the terms, and subject to the
conditions set forth in this Agreement by amending and restating in
its entirety the Current Transaction and Monitoring Fee
Agreement.
In
consideration of the premises and agreements contained herein and
of other good and valuable consideration, the sufficiency of which
are hereby acknowledged, the parties agree as follows:
AGREEMENT
SECTION
1.
Transaction and M&A
Advisory Fees . In consideration of BMP undertaking
financial and structural analysis, due diligence investigations,
negotiation assistance, corporate strategy and other financial
advisory services necessary in order to enable the Transactions to
be consummated, the Company will pay BMP at the Effective Time (i)
a non-refundable and irrevocable transaction fee of $15,000,000,
and (ii) $600,000 in reimbursement for certain Out-of-Pocket
Expenses (as defined in Section 5 , below) incurred by BMP
in connection with its due diligence investigations in the
Transactions. In consideration of the merger and acquisition
advisory group of Blackstone Advisory Services, L.P.
(“ BAS ”), an
Affiliate (as defined in Section 3(a) ,
below) of BMP, rendering strategic and other advice and negotiation
assistance to the Company on behalf of BMP in connection with
identifying and evaluating certain potential transactions, the
Company will also pay to BAS, at the Effective Time, a
non-refundable and irrevocable advisory fee of
$3,000,000.
SECTION
2.
Appointment
. The Company hereby
engages BMP to render the Services (as defined in Section
3(a) , below) on the terms and subject to the conditions of
this Agreement.
SECTION 3.
Services .
(a)
BMP agrees that until the Termination Date (as defined in
Section 8 , below) or the earlier termination of its
obligations under this Section 3(a) pursuant to Section
4(f) hereof, it will render to the Company, by and through
itself and its Affiliates, and such of their respective, directors,
officers, employees, investment bankers, attorneys, accountants and
other advisors or representatives (such directors, officers,
employees, investment bankers, attorneys, accountants, other
advisors and representatives collectively, “ Representatives ”) monitoring,
advisory and consulting services in relation to the affairs of the
Company and its subsidiaries, including, without limitation, (i)
advice regarding the structure, distribution and timing of private
or public debt or equity offerings and advice regarding
relationships with the Company’s and its subsidiaries’
lenders and bankers, including in relation to the selection,
retention and supervision of independent auditors, outside legal
counsel, investment bankers or other financial advisors or
consultants, (ii) advice regarding the strategy of the Company and
its subsidiaries, (iii) advice regarding the structuring and
implementation of equity participation plans, employee benefit
plans and other incentive arrangements for certain key executives
of the Company, (iv) general advice regarding dispositions and/or
acquisitions and (v) such other advice directly related or
ancillary to the above financial advisory services as may be
reasonably requested by the Company (collectively, the “
Services ”).
However, BMP will have no obligation to provide any other services
to the Company absent an agreement between BMP and the Company
regarding the scope of such other services and the compensation
therefor. For the purposes of this Agreement, “
Affiliate ” when used
with respect to any party shall mean any Person who is an
“affiliate” of that party within the meaning of Rule
405 promulgated under the Securities Act of 1933, as amended;
provided , that the Company and its subsidiaries shall be
deemed not to be Affiliates of BMP and its Affiliates for the
purposes of this Agreement. For the purposes of this Agreement,
“ Person ”
shall mean any
individual, corporation (including not-for-profit), general or
limited partnership, limited liability company, joint venture,
estate, trust, association, organization, governmental entity or
other entity of any kind or nature.
(b)
It is expressly agreed that the Services to be rendered hereunder
will not include investment banking or other financial advisory
services which may be provided by BMP or its Affiliates or their
respective Representatives to the Company or any of its Affiliates,
in connection with any specific acquisition, divestiture,
disposition, merger, consolidation, restructuring, refinancing,
recapitalization, issuance of private or public debt or equity
securities (including, without limitation, an initial public
offering of equity securities), financing or similar transaction by
the Company or any of its subsidiaries. BMP may be entitled
to receive additional compensation for providing services of the
type specified in the preceding sentence by mutual agreement of the
Company or such subsidiary, on the one hand, and BMP or its
relevant Affiliates or their respective Representatives, on the
other hand. In the absence of an express agreement regarding
compensation for such services performed by BMP or its Affiliates,
or their respective Representatives in connection with any such
transaction specified in this Section 3(b) , and without
regard to whether any such services were performed, BMP shall be
entitled to receive upon consummation of:
(i)
any such acquisition, divestiture, disposition, merger,
consolidation, restructuring or recapitalization, a non-refundable
and irrevocable fee equal to (x) one percent (1%)
2
of
the aggregate enterprise value of the acquired, divested, merged,
consolidated, restructured or recapitalized entity (calculated, on
a consolidated basis for such entity, as the sum of (1) the market
value of its common equity (or the fair market value thereof if not
publicly traded), (2) the value of its preferred stock (at
liquidation value), (3) the book value of its minority interests
and (4) its aggregate long- and short-term debt, less its cash and
cash equivalents), or (y) if such transaction is structured as an
asset purchase or sale, one percent (1%) of the consideration paid
for or received in respect of the assets acquired or disposed
of;
(ii)
any such refinancing, a non-refundable and irrevocable fee equal to
one percent (1%) of the aggregate value of the securities subject
to such refinancing; and
(iii)
any such issuance, a non-refundable and irrevocable fee equal to
one percent (1%) of the aggregate value of the securities subject
to such issuance.
(c)
Without affecting the rights of BMP under Section 3(b)
hereof, if the Company or any of its subsidiaries determines that
it is advisable for the Company or such subsidiary to hire a
financial advisor, consultant, investment banker or any similar
advisor in connection with any acquisition, divestiture,
disposition, merger, consolidation, restructuring, refinancing,
recapitalization, issuance of private or public debt or equity
securities (including, without limitation, an initial public
offering of equity securities), financing or similar transaction,
it will notify BMP of such determination in writing. Promptly
thereafter, upon the request of BMP, the parties will negotiate in
good faith to agree upon appropriate services, compensation and
indemnification for the Company or such subsidiary to hire BMP or
its Affiliates or their respective Representatives for such
services. The Company and its subsidiaries may not hire any
Person, other than BMP or one of its Affiliates or their respective
Representatives, to perform any such services unless all of the
following conditions have been satisfied: (i) the parties are
unable to agree upon the terms of the engagement of BMP or any such
Affiliate or Representative to render such services after thirty
(30) days following receipt by BMP of such written notice; (ii)
such other Person has a reputation that is at least equal to the
reputation of BMP or any such Affiliate or Representative in
respect of such services; (iii) ten (10) business days have elapsed
after the Company or such subsidiary provides a written notice to
BMP of its intention to hire such other Person, which notice shall
identify such other Person and shall describe in reasonable detail
the nature of the services to be provided, the compensation to be
paid and the indemnification to be provided; (iv) the compensation
to be paid is not more than BMP or any such Affiliate or
Representative was willing to accept in the negotiations described
above; and (v) the indemnification to be provided is not more
favorable to the Company or the applicable subsidiary than the
indemnification that BMP or any such Affiliate or Representative
was willing to accept in the negotiations described
above.
SECTION
4. Monitoring
Fee .
(a)
In consideration of the Services being rendered by BMP, for the
term of this Agreement, the Company will pay, or will cause to be
paid, to BMP an annual non-refundable and irrevocable monitoring
fee (the “ Monitoring
Fee ”; the term “Monitoring Fee” as used
in this Agreement with respect to any annual period means all
amounts payable with respect to such annual period pursuant to
Sections 4(b) or (c) hereof, as applicable;
provided , that , notwithstanding anything to the
contrary contained in this Agreement, the minimum annual Monitoring
Fee payable to BMP beginning on January 1, 2008 and throughout the
term of this Agreement shall be $7,000,000).
(b)
The parties acknowledge that the Monitoring Fee for the year ending
December 31, 2007 was equal to $3,000,000 and was paid to BMP on
January 1, 2007.
3
(c)
The annual Monitoring Fee for fiscal year 2008 and each subsequent
year shall be equal the greater of $7,000,000 and two percent (2%)
of Consolidated EBITDA (as defined in Section 4(g) ,
below). The Company will pay, or cause to be paid, to BMP,
(i) $7,000,000 on January 1, 2008, and thereafter on January 1 of
each subsequent year and (ii) within five (5) business days
following the preparation of the Company’s consolidated
annual financial statements for each fiscal year, an amount equal
to the excess, if any, of two percent (2%) of Consolidated EBITDA
for the immediately preceding fiscal year over $7,000,000,
plus interest thereon from January 1 of the relevant year
through the date of payment of such amount at an annual rate of ten
percent (10%) computed and compounded daily.
(d)
In the event the Company or any of its subsidiaries enters into a
business combination transaction with another entity that is large
enough to constitute a “significant subsidiary” of the
Company under any of the relevant tests contained in Regulation S-X
as promulgated by the Securities and Exchange Commission, the
Company and BMP will mutually agree, following good faith
negotiations, on an appropriate increase in the minimum annual
Monitoring Fee as warranted by the increase in the Company’s
size. Such increase will be based on the percentage increase
in the Company’s Consolidated EBITDA determined on a pro
forma basis giving effect to such business combination
transaction.
(e)
To the extent the Company cannot pay, or cause to be paid, the
Monitoring Fee for any reason, including by reason of any
prohibition on such payment pursuant to any applicable law or the
terms of any debt financing of the Company or its subsidiaries, the
payment by the Company or any of its subsidiaries to BMP of the
accrued and payable Monitoring Fee will be payable immediately on
the earlier of (i) the first date on which the payment of such
deferred Monitoring Fee is no longer prohibited under any contract
applicable to the Company and the Company or its subsidiaries, as
applicable, is otherwise able to make such payment, or cause such
payment to be made, and (ii) total or partial liquidation,
dissolution or winding up of the Company. Notwithstanding
anything to the contrary herein, under any applicable law or under
any contract applicable to the Company or its subsidiaries, any
forbearance of collection of the Monitoring Fee by BMP shall not be
deemed to be a subordination of such payments to any other Person
or creditor of the Company or its subsidiaries. Any such
forbearance shall be at BMP’s sole option and discretion and
shall in no way impair BMP’s right to collect such
payments. Any installment of the Monitoring Fee not paid on
the scheduled due date will bear interest, payable in cash on each
scheduled due date, at an annual rate of ten percent (10%),
compounded quarterly, from the date due until paid; provided
, that with respect to the payment specified in Section
4(c)(ii) , such interest shall be in addition to, and not in
lieu of, the interest specified in Section 4(c)(ii)
.
(f)
(i) Notwithstanding anything to the contrary contained in this
Agreement, BMP may elect (in its sole discretion by the delivery of
written notice to the Company) at any time in connection with or in
anticipation of a change of control of the Company, a sale of all
or substantially all of the Company’s assets or an initial
public offering of common stock of the Company or its successor (or
at any time thereafter) to receive, in consideration of the
termination of the Services and for any remaining Monitoring Fees
payable by the Company under this Agreement and in addition to any
fees owing to BMP in connection with such transaction pursuant to
Section 3(b) hereof, a single lump sum non-refundable and
irrevocable cash payment (the “ Lump Sum Fee
” ) equal to the then present value (using a
discou
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