Exhibit 10.2
Apria Healthcare Group Inc.
26220 Enterprise Court
Lake Forest, CA 92630
November 7, 2005
Re: Accelerated Share Repurchase
Ladies and Gentlemen:
This letter (the “Letter
Agreement”) sets forth the agreement we have reached with
respect to a transaction between Citibank, N.A.
(“Citibank”), acting through Citigroup Global Markets
Inc. #147;CGMI”) as agent (collectively with Citibank,
“Citigroup”), and Apria Healthcare Group Inc. (the
“Company”) in relation to shares of the Company’s
common stock, par value $0.001 per share (the “Common
Stock”).
THE
COUNTERPARTY TO THE COMPANY IN THIS TRANSACTION IS CITIBANK, N.A.
WHICH IS NOT REGISTERED AS A BROKER-DEALER UNDER THE SECURITIES
EXCHANGE ACT OF 1934. CITIGROUP GLOBAL MARKETS INC. IS ACTING AS
AGENT FOR CITIBANK, N.A. IN CONNECTION WITH THIS
TRANSACTION.
I.
Definitions
As used in this Letter Agreement,
the following terms shall have the following meanings:
“Additional Make-Whole
Amount” has the meaning specified in Section
V(c)(ii).
“Citigroup” means
Citibank and/or CGMI.
“Delta” means, for any
record date, (a) the Number of Initial Shares, minus (b) the
product of (i) the Number of Initial Shares and (ii) a fraction,
the numerator of which is the number of Trading Days during the
period beginning with the Pricing Period Commencement Date, to but
excluding such record date, and the denominator of which is the
maximum number of Trading Days in the Pricing Period.
“Dividend Event
Termination” has the meaning specified in Section
VII(b).
“Disrupted Day” means a
Trading Day on which a Market Disruption Event occurs.
“Dividend Amount” means,
subject to adjustment in accordance with Section VIII, an amount
equal to the sum, for each ex-date for dividends on the Common
Stock that occurs during the Pricing Period, of the Expected
Dividend Amount multiplied by the Delta on the related record
date.
“Dividend Interest
Amount” means, for each Dividend Amount, interest on such
Dividend Amount for the period from and including relevant dividend
payment date to but excluding the first Settlement Day following
the Pricing Period at a per annum rate equal to LIBOR, determined
on an Actual/360 basis.
“Exchange Act” means the
Securities Exchange Act of 1934, as amended.
“Exchange” means the New
York Stock Exchange (NYSE) or any successor exchange.
“Expected Dividend
Amount” has the meaning specified in Section
VII(a).
“Initial Share Price”
has the meaning specified in Section II.
“LIBOR” means the rate
per annum for U.S. dollar LIBOR appearing on Telerate Page 3750 or
any replacement of that page, two London Banking Days prior to the
start of a relevant period; provided that if the rate cannot
be so determined, it shall be determined by linear interpolation if
the relevant period does not correspond exactly to a period for
which rates appear on Telerate Page 3750 or its
replacement.
“London Banking Day”
means any day on which commercial banks are open for general
business (including dealings in foreign exchange and foreign
currency deposits) in London.
“Loss” has the meaning
specified in Section X(a).
“Loss Notice” has the
meaning specified in Section X(a).
“Make-Whole Amount” has
the meaning specified in Section V(c)(ii).
“Market Disruption
Event” means any (i) suspension of or limitation imposed on
trading by any exchange or market on which the Common Stock is
listed for trading or (ii) event that disrupts or impairs (in the
reasonable business judgment of Citigroup) the ability of Citibank
or market participants in general to effect transaction in, or
obtain market values for, the shares of Common Stock or futures or
options contracts relating to the Common Stock.
“Number of Initial
Shares” has the meaning specified in Section II.
“Payment Shares” has the
meaning specified in Section V(a)(ii).
“Pricing Period” means
the period commencing on the Pricing Period Commencement Date and
ending on the Pricing Period Termination Date; provided that the
Pricing Period may be extended by Citibank upon the occurrence of a
Market Disruption Event.
“Pricing Period Commencement
Date” means November 8, 2005.
“Pricing Period Termination
Date” means the earlier of (a) the Scheduled Pricing Period
Termination Date, or (b) the Trading Day immediately preceding any
Trading Day on which Citibank shall notify the Company, prior to
the close of regular trading on the Exchange on such Trading Day,
of its intention to terminate the Pricing Period.
“Prospectus” has the
meaning specified in Section VI(a).
“Purchase Date” has the
meaning specified in Section II.
“Refund Shares” has the
meaning specified in Section V(a)(i).
“Registration Statement”
has the meaning specified in Section VI(a).
“Remaining Share Amount”
for any Trading Day equals (i) the Number of Initial Shares, minus
(ii) the cumulative number of shares of Common Stock that Citigroup
has repurchased to cover its short position in respect of this
transaction. For the avoidance of doubt, such shares shall be
considered repurchased by Citigroup as of their respective
Settlement Days.
“Rule 10b-18” has the
meaning specified in Section III.
“SEC” has the meaning
specified in Section VI(e)(iii).
“Scheduled Pricing Period
Termination Date” means April 7, 2006.
“Securities Act” means
the Securities Act of 1933, as amended.
“Settlement Amount”
means (i) the product of (x) the Number of Initial Shares and (y)
the Initial Share Price minus the Sub-VWAP Price, plus (ii) the sum
of all Dividend Amounts hereunder, plus (iii) the sum of all
Dividend Interest Amounts hereunder.
“Settlement Day” means
any day that is not a Saturday, a Sunday or a day on which banking
institutions or trust companies in the City of New York are
authorized or obligated by law or executive order to close. A
Settlement Day “corresponds” to a Trading Day if it is
the day for settlement of regular-way transactions entered into on
that Trading Day.
“Share Cap” means, as of
any date of determination, ten (10) times the Number of Initial
Shares minus the number of shares of Common Stock delivered by the
Company to Citigroup on or prior to such date hereunder (in each
case subject to adjustment pursuant to Section VIII).
“Sub-VWAP Price” means
the average of the VWAPs for all Trading Days in the Pricing Period
minus $0.42.
“Trading Day” means any
day (i) other than a Saturday, a Sunday or a Disrupted Day, and
(ii) on which the Exchange is open for trading during its regular
trading session, notwithstanding the Exchange closing prior to its
scheduled closing time.
“Valuation Fraction”
means a fraction, the numerator of which is one and the denominator
of which is the number of Trading Days in the Valuation
Period.
“Valuation Period” means
a period of up to 60 Trading Days, the actual number to be
determined in good faith by Citigroup in consultation with the
Company on the business day that the Company provides notice to
Citigroup that it intends to deliver or receive Common Stock in
settlement of this transaction. The Valuation Period shall (subject
to the occurrence of a Market Disruption Event) commence (i) on the
first Trading Day immediately following the final day of the
Pricing Period, (ii) in the case of an additional Valuation
Period as described in Section V(c)(ii), on the Trading Day
following the Trading Day the additional Payment Shares are
delivered to Citigroup; provided that if in the case of
clause (i) Citigroup determines that resale by it of Payment Shares
would constitute a distribution for purposes of Regulation M under
the Exchange Act (“Regulation M”), on the first Trading
Day immediately following the “restricted period” (as
defined under Regulation M) measuring such restricted period from
the final day of the Pricing Period; provided ,
further , this delay in commencement of the Valuation Period
shall not apply in the event that the Shares constitute
“excepted securities” as defined in Rule 101(c) of
Regulation M.
“Valuation Share Amount”
means, for any Trading Day, the quotient of (i) the Valuation
Fraction multiplied by the absolute value of the portion of the
Settlement Amount elected by the Company to be paid in shares of
Common Stock, divided by (ii) the closing price for the immediately
preceding Trading Day.
“VWAP” means, for any
Trading Day, the volume weighted average price per share of Common
Stock, as determined by Citibank, for all transactions in the
shares of Common Stock on the Exchange as of the end of regular
trading hours on such Trading Day as reported by Bloomberg, L.P
(“ Bloomberg ”) or (i) if such price is not
reported by Bloomberg, then as reported by another recognized
source selected by Citibank on such Trading Day or (ii) if the
shares of Common Stock cease to be listed on a national securities
exchange or included in a quotation system, then the current market
price per share of Common Stock on such Trading Day, as determined
by Citibank in a commercially reasonable manner, in each
case.
II.
Initial Shares
Citigroup will hedge this
transaction by entering into a short sale of 7,337,526 shares of
Common Stock (the “Number of Initial Shares”) at a
price of $23.83 per Initial Share (the “Initial Share
Price”) on November 7, 2005 (the “Purchase
Date”). Such hedge shall be effected in accordance with
Citigroup’s customary procedures.
III. Citigroup
Purchases and the Pricing Period
During the Pricing Period, Citigroup
will purchase shares of Common Stock to cover all or a portion of
such short sale. Citigroup intends to effect such purchases of
Common Stock in a manner that Citigroup believes in its reasonable
discretion is in compliance with all applicable securities laws.
Notwithstanding the foregoing, Citigroup shall not be required to
purchase any shares of Common Stock, or may purchase a number of
shares of Common Stock that is less than the Number of Initial
Shares. Citigroup intends to effect purchases of Common Stock
during the Pricing Period in a size that does not exceed, for any
Trading Day, the volume limitations for purchases of Common Stock
by the Company contained in Rule 10b-18 under the Exchange Act
(“Rule 10b-18”).
The Company is entering into this
Letter Agreement and each transaction hereunder in good faith and
not as part of a plan or scheme to evade the prohibitions of Rule
10b5- 1. It is the intent of the parties that each transaction
entered into under this Letter Agreement comply with the
requirements of Rule 10b5- 1(c)(l) and (2) and each transaction
entered into under this Letter Agreement shall be interpreted to
comply with the requirements of Rule 10b5-l(c). The Company agrees
that it will not seek to control or influence Citigroup to make
“purchases or sales” (within the meaning of Rule
10b5-1(c)(l)(i)(B)(3)) under any transaction entered into under
this Letter Agreement, including, without limitation,
Citigroup’s decision to enter into any hedging
transactions.
IV.
Company Purchases
The Company shall not purchase any
shares of Common Stock on the open market, or enter into any
accelerated share repurchase program, or any derivative share
repurchase transaction, or other similar transaction, during the
Pricing Period and thereafter until all payments or deliveries of
shares pursuant to Section V below have been made. During such
time, any purchases of Common Stock by the Company shall be made
through Citigroup, subject to such reasonable conditions as
Citigroup shall impose, and in compliance with Rule 10b-18 or
otherwise in a manner that the Company and Citigroup believe is in
compliance with applicable requirements.
V.
Pricing Adjustment and Settlement
(a)
After the expiration of the Pricing Period,
(i)
if the Settlement Amount is greater than zero, Citigroup shall make
a cash payment to the Company in an amount equal to the Settlement
Amount or, if the Company so elects pursuant to Section V(b) and
(c), in lieu of such full cash payment Citigroup shall (A) transfer
to the Company through its agent, for no additional consideration,
a number of shares of Common Stock equal to the portion of the
Settlement Amount elected by the Company to be paid in shares of
Common Stock divided by the weighted average price at which
Citigroup purchases shares of Common Stock during the Valuation
Period (the “Refund Shares”) and (B) make a cash
payment to the Company in an amount equal to the portion of the
Settlement Amount elected by the Company to be paid in cash, if
any, and
(ii)
if the Settlement Amount is less than zero, the Company shall make
a cash payment to Citigroup in an amount equal to the absolute
value of the Settlement Amount or, if the Company so elects
pursuant to Section V(b) and (c) and Section VI, in lieu of such
full cash payment the Company shall either (A) transfer to
Citibank through its agent, for no additional consideration, a
number of shares of Common Stock equal to the sum of the Valuation
Share Amounts for each of the Trading Days in the Valuation Period
(the “Payment Shares”); provided that in no event shall
the Company be required to deliver a number of shares of Common
Stock that exceeds the Share Cap or (B) (1) transfer to Citibank
through its agent, for no additional consideration, the Payment
Shares; provided that in no event shall the Company be required to
deliver a number of shares of Common Stock that exceeds the Share
Cap and (2) make a cash payment to Citibank in an amount equal to
the portion of the Settlement Amount elected by the Company to be
paid in cash, if any.
(b)
The Company shall notify Citigroup in writing of its election
(i) to receive the Settlement Amount as (A) Refund Shares or
(B) a combination of Refund Shares and cash, in either case in lieu
of receiving a full cash payment or (ii) to pay the absolute
value of the Settlement Amount by delivery of (A) Payment
Shares or (B) a combination of Payment Shares and cash, in
either case in lieu of making a full cash payment; such
notification to be made by the Company at least ten Trading Days
prior to the final Trading Day of the Pricing Period. The failure
to make such election and notify Citigroup in accordance with the
preceding sentence shall constitute an irrevocable election by the
Company to make or receive a cash payment as settlement. Cash
payments shall be made on the second Trading Day following the end
of the Pricing Period.
(c)
Delivery of Refund Shares or Payment Shares shall be made as
follows:
(i)
if Refund Shares are to be transferred to the Company, Citigroup
shall deliver the shares to the Company on the fourth Trading Day
following the last day of the Valuation Period; and
(ii)
if Payment Shares are to be transferred to Citigroup, the Company
shall deliver to Citigroup on each Settlement Day corresponding to
a Trading Day in the Valuation Period a number of Payment Shares
equal to the Valuation Share Amount for such Trading Day; provided
that, if Citigroup concludes, in its reasonable discretion, that a
transfer of Payment Shares on a Trading Day will, on such day,
cause Citigroup’s aggregate holding of the Common Stock to
exceed 4.9% of the outstanding shares of the Common Stock (the
“Stock Threshold”) then (i) the Company will defer the
transfer of any Payment Shares in excess of the Stock Threshold to
the next following Trading Day provided that such transfer would
not cause Citigroup to exceed the Stock Threshold. In the event the
procedures of the previous sentence apply, Citigroup may extend the
number of Trading Days in the Valuation Period. Citigroup may, but
shall not be obligated to, resell Payment Shares during the
Valuation Period. To the extent that Citigroup elects not to resell
Payment Shares during the Valuation Period, no adjustment shall be
made in the number or value of those Payment Shares or to the
Settlement Amount paid through such Payment Shares. In the event
that Citigroup chooses to resell the Payment Shares during the
Valuation Period, then, if the proceeds from the sale of the
Payment Shares (net of brokerage costs) exceed the absolute value
of the Settlement Amount elected by the Company to be paid in
Payment Shares (or if less than all of the Payment Shares are
resold, the applicable pro rata portion of such amount), Citigroup
shall refund in cash to the Company an amount equal to such excess
by the close of business on the third Trading Day following the
last day of the Valuation Period. In the event that the proceeds of
such sales (net of brokerage costs) are less than the absolute
value of the Settlement Amount elected by the Company to be paid in
Payment Shares (or if less than all of the Payment Shares are
resold, the applicable pro rata portion thereof), Citigroup shall
provide notice thereof to the Company and the Company shall, by the
close of business on the third Trading Day following the last day
of the applicable Valuation Period, at the Company’s option,
either (A) pay in cash an amount equal to such deficit (the
“Make-Whole Amount”) or (B) deliver to Citigroup a
number of additional Payment Shares equal to (x) the
Make-Whole Amount divided by (y) the closing price of the Common
Stock on the Exchange on the final day of the applicable Valuation
Period; provided , however , that in no event shall
the Company be required to deliver a number of shares of Common
Stock that exceeds the Share Cap.
Upon delivery of additional Payment
Shares, an additional Valuation Period shall apply to the shares so
delivered. To the extent that Citigroup elects not to resell the
additional Payment Shares during the additional Valuation Period,
then no further adjustment shall be made in the number or value of
those additional Payment Shares or to the Make-Whole Amount paid
through such additional Payment Shares. In the event that Citigroup
chooses to resell the additional Payment Shares delivered to
Citigroup in payment of the Make-Whole Amount during the additional
Valuation Period, then, if the proceeds from the sale of such
additional Payment Shares (net of brokerage costs) exceed the
Make-Whole Amount (or the applicable pro rata portion thereof),
Citigroup shall refund in cash to the Company an amount equal to
such excess by the close of business on the third Trading Day
following the last day of the additional Valuation Period. In the
event that the proceeds of all such sales (net of brokerage costs)
are less than the Make-Whole Amount (or the applicable pro rata
portion thereof), Citigroup shall provide notice thereof to the
Company and the Company shall, by the close of business on the
third Trading Day following the last day of the applicable
Valuation Period, at the Company’s option, either
(A) pay in cash an amount equal to such deficit (an
“Additional Make-Whole Amount”) or (B) deliver to
Citigroup a number of additional Payment Shares equal to
(x) the Additional Make-Whole Amount divided by (y) the
closing price of the Common Stock on the Exchange on the final day
of the applicable Valuation Period; provided ,
however , that in no event shall the Company be required to
deliver a number of shares of Common Stock that exceeds the then
applicable Share Cap. The provisions of this paragraph shall be
applied successively until the aggregate proceeds (net of brokerage
costs) received by Citigroup equal the Make-Whole Amount (or the
applicable pro rata portion thereof).
(d)
During any Valuation Period, Citigroup shall have the discretion to
control the sale of Payment Shares or the purchase of Refund
Shares, as the case may be, including without limitation the right
to control the time, manner, and volume of such sales or purchases.
Prior to the close of business in New York on any day in the
Valuation Period in which Payment Shares have been sold or Refund
Shares purchased, Citigroup will advise the Company, in a notice
sent to the Company by telecopier, of the number of shares sold or
purchased on such day and the prices obtained in such transactions.
The Company represents and warrants, as of each Trading Day in a
Valuation Period for which the Company has elected to receive
Refund Shares, that each of its filings under the Securities Act,
the Exchange Act or other applicable securities laws that are
required to be filed have been filed and that, as of the date of
this representation, there is no misstatement of material fact
contained therein or omission of a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the circumstances under which made.
VI.
Payment Shares
The following provisions are
applicable if the Company elects to deliver Payment Shares pursuant
to Sections V or X of this Letter Agreement:
(a)
The Company agrees to take all actions within its control,
including, without limitation, the procedures set forth in Annex A,
to make available to Citigroup and its affiliates an effective
registration statement under the Securities Act and one or more
prospectuses as necessary to allow Citigroup and its affiliates to
comply with the applicable prospectus delivery requirements (the
“Prospectus”) for the resale by Citigroup and its
affiliates of the shares of Common Stock delivered by the Company
hereunder (the “Registration Statement”), such
Registration Statement to be effective and Prospectus to be current
on each Trading Day in any Valuation Period and until all such
resales by Citigroup (or its affiliates) have been settled. It is
understood that the Registration Statement and Prospectus may cover
a number of shares of Common Stock equal to all shares to be
delivered by the Company hereunder. Citigroup shall provide, by a
reasonable time in advance, such information regarding Citigroup
and its affiliates as shall be required to be included in the
Prospectus. The Company shall pay the applicable registration fee
and all costs in connection with the preparation of the
Registration Statement and the Prospectus including, without
limitation, the cost of printing the Prospectus. In addition, the
Company agrees to take all actions set forth in Annex B and
otherwise to take such actions reasonably requested by Citigroup to
facilitate the disposition of the Payment Shares.
(b)
The Company represents, on each day described in subsection (a),
that each of its filings under the Securities Act, the Exchange Act
o
