Exhibit 10.1
EXECUTION COPY
This TRANSACTION AND MANAGEMENT
FEE AGREEMENT (this “ Agreement ”) is
dated as of October 28, 2008 and is between Sky Merger Sub
Corporation, a Delaware corporation (together with its successors,
the “ Company ”), and Blackstone
Management Partners V L.L.C., a Delaware limited liability company
(“ BMP ”).
BACKGROUND
1. The Company has entered into an
Agreement and Plan of Merger, dated as of June 18, 2008, as it
may be amended, supplemented or modified (the “ Merger
Agreement ”), by among Sky Acquisition LLC, a
Delaware limited liability company (“ Parent
”), the Company, and Apria Healthcare Group Inc., a Delaware
corporation (“ Apria ”).
2. In accordance with the Merger
Agreement, the Company is merging with and into Apria (the “
Merger ”), with Apria surviving the Merger. As
a result, Apria shall succeed to and assume all the rights and
obligations of the Company in accordance with the Merger, including
the obligations set forth in this Agreement. References in this
Agreement to the Company encompass Apria after the
Merger.
3. BMP has expertise in the areas of
finance, strategy, investment, acquisitions and other matters
relating to the Company, Apria and their business and has
facilitated the Merger and certain other related transactions
(collectively, the “ Transactions ”)
through its provision of financial and structural analysis, due
diligence investigations, other advice and negotiation assistance
with all relevant parties to the Transactions. BMP has also
provided advice and negotiation assistance with relevant parties in
connection with the financing of the Transactions as contemplated
by the Merger Agreement.
4. The Company desires to avail
itself, for the term of this Agreement, of BMP’s expertise in
providing financial and structural analysis, due diligence
investigations, corporate strategy, other advice and negotiation
assistance, which the Company believes will be beneficial to it,
and BMP desires to provide the services to the Company as set forth
in this Agreement in consideration of the payment of the fees
described below.
5. The rendering by BMP of the
services described in this Agreement has been made and will be made
on the basis that the Company will pay, or cause to be paid, the
fees described below.
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 Management Fees . In consideration of BMP
undertaking financial and structural analysis, due diligence
investigations, corporate strategy and other advice and negotiation
assistance necessary in order to enable the Transactions to be
consummated, the Company will pay BMP at the closing of the Merger
(the “ Closing ” and the date of such
Closing, the “ Closing Date ”) a
non-refundable and irrevocable transaction fee of
$18,733,969.22.
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 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
officers, employees, representatives, agents and third parties as
BMP in its sole discretion may designate from time to time (“
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, (v) advice regarding the business of the
Company and its subsidiaries and (vi) such other advice
directly related or ancillary to the above financial advisory
services as may be reasonably requested by the Company
(collectively, the “ Services ”). BMP
will have no obligation to provide any other services to the
Company absent an agreement between BMP and the Company over the
scope of such other services and the payment therefor.
(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 any of its affiliates 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 affiliate, on the other hand. In the absence of an express
agreement regarding the provision by BMP or its affiliate of such
services and the compensation therefor in connection with any such
transaction specified in this Section 3(b), in lieu of being
engaged to provide such services on mutually agreeable terms 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) 1% of the aggregate enterprise value of the acquired,
divested, disposed of, 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, 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 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 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 one of its affiliates for such services. The Company
and its subsidiaries may not hire any person, other than BMP or one
of its affiliates 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 its
affiliate to render such services after 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 its
affiliate in respect of such services; (iii) ten 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 its
affiliate 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 its affiliate was willing to accept in
the negotiations described above.
SECTION 4. Management Fee
.
(a) In consideration of the Services
being rendered by BMP, the Company will pay, or will cause to be
paid, to BMP an annual non-refundable and irrevocable management
fee (the “ Management Fee ”; the term
“Management 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, except as set forth in
Section 4(b) below, the minimum annual Management Fee payable
to BMP shall be $7,000,000).
(b) The Management Fee for the year
ending December 31, 2008 shall be equal to $1,227,397.26,
which shall be paid, or caused to be paid, by the Company at the
Closing in respect of Services to be rendered from the Closing Date
to December 31, 2008. On the first business day of January in
each year, beginning in January 2009, the Company shall pay to BMP
the Management Fee in respect of the fiscal year then
beginning.
(c) The Management Fee for fiscal
year 2009 and each subsequent year shall be equal to the greater of
(x) $7,000,000 (adjusted as provided below) or (y) 2.0%
of Consolidated EBITDA (as defined in the Credit Agreement dated as
of the Closing Date by and among Parent, the Company, the other
borrowers from time to time party thereto, Bank of America, N.A.,
as Administrative Agent and Collateral Agent, the other agents
listed therein and the lenders from time to time party thereto) for
the immediately preceding fiscal year (the “ EBITDA
Amount ”). The EBITDA Amount for purposes of
determining the initial payment of the Management Fee will be based
on management’s then most recent estimate. Following the
availability of audited financial statements for the fiscal year
ending December 31, 2008 and each subsequent fiscal year, the
Company shall recalculate the EBITDA Amount and the Management Fee,
and based on such recalculation, (A) if the applicable
recalculated Management Fee is more than the Management Fee
previously paid by the Company to BMP in respect of the
then-current fiscal year, the Company shall pay to BMP the
difference between such amounts and (B) if the applicable
recalculated Management Fee is less than the Management Fee
previously paid by the Company to BMP in respect of the
then-current fiscal
year, then BMP shall pay to the Company the
difference between such recalculated Management Fee and the
Management Fee received from the Company in respect of such fiscal
year. Any payment required by the preceding sentence shall be paid
by the Company or BMP, as applicable, promptly following the
determination of the amount of such payment.
(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 Management 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 Management 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 Management Fee
will be deferred and will be payable immediately on the earlier of
(i) the first date on which the payment of such deferred
Management 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 Management Fee by BMP shall not be
deemed to be a subordination of such payments to any other person,
entity 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 Management Fee not paid on the scheduled due
date will bear interest, payable in cash on each scheduled due
date, at an annual rate of 10%, compounded quarterly, from the date
due until paid.
(f) 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 the equity
of the Company or its successor or any controlling person thereof
(or at any time thereafter) to receive, in consideration of
BMP’s role in facilitating the same and in settlement of the
termination of the Services, (i) any remaining accrued and
unpaid Management Fees payable by the Company under this Agreement
and (ii) 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 discount rat
