EXHIBIT 99.1
[SSG CAPITAL ADVISORS, L.P. LETTERHEAD]
October 8, 2002
Judge Xxxxx X. Xxxxx
Chapter 11 Trustee of Coram Healthcare
Xxxxxxxx, Harrison, Xxxxx & Xxxxx, LLP
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, XX 00000-0000
Dear Judge Xxxxx:
This agreement ("Engagement Agreement") will serve as the contract between the
Chapter 11 Trustee ("Trustee") of Coram Healthcare Corporation ("Coram" and/or
the "Company") and SSG Capital Advisors, L.P. ("SSG") and Xxxxx Xxxxxx Xxxxxx &
Co. ("EMB") (collectively "Advisor") in connection with Advisor's provision of
investment banking and restructuring advisory services to the Trustee. Advisor
will provide investment-banking services to the Trustee, on an exclusive basis,
focusing on the sale of Coram's business ("Sale") or the restructuring of
Coram's balance sheet through a plan of reorganization ("Restructuring").
A. ADVISOR'S ROLE
(1) Advisor's Role as Investment Banker in the Sale of Coram's Business
o Advisor shall prepare an Offering Memorandum describing Coram,
its historical performance and its future prospects, including
existing contracts, marketing and sales, labor force and
management and anticipated financial results of the Company.
Unless otherwise agreed by the Trustee and the Advisor, the
Offering Memorandum will be given to potential buyers only with
the prior consent of the Trustee and after execution of
confidentiality agreements satisfactory to the Trustee. It is
understood that the Sale shall be of the assets or equity of the
Company under a plan of reorganization or through a Section 363
sale.
o Work with the Trustee and the Company to develop a list of
suitable potential buyers of Xxxxx'x business who will be
contacted on a discreet and confidential basis after approval by
the Trustee.
Judge Xxxxx X. Xxxxx
October 8, 2002
Page 2
o Coordinate the execution of confidentiality agreements by
potential buyers wishing to review the Offering Memorandum.
o Help the Trustee and the Company to coordinate site visits
for interested buyers, and work with the Trustee and the
management team to develop appropriate presentations for
such visits.
o Solicit competitive offers from potential buyers.
o Advise and assist the Trustee and the Company in
structuring the transaction and negotiating the transaction
agreements.
o Upon execution of a letter of intent or similar documents,
assist in negotiating the transaction and assist the
Trustee's attorneys, as necessary, through closing.
o Advise the Trustee, his attorneys and accountants, as
required, regarding documentation.
o Provide expert testimony in the Bankruptcy Court on
valuation or in support of such Sale; and
o On a best efforts basis, participate in closing the Sale
through either a Section 363 process or through a confirmed
Plan of Reorganization.
(2) Restructuring Services
Advisor shall assist the Trustee and his counsel in negotiating
with various stakeholders in the Company (the "Existing
Stakeholders") including, but not limited to, Xxxxxxx Xxxxx &
Co., Cerberus Capital Management, L.P. and Foothill Capital
Corporation, general unsecured creditors, represented by a
Creditors' Committee, and other creditors and shareholders,
represented by an Equity Holders Committee, in regard to the
possible restructuring of existing notes, claims and equity.
(3) Opinion Services
If requested in writing, Advisor will provide to the Trustee one
or more Opinion(s) as to the fairness of the terms of any
proposed Sale or Restructuring of Coram's business.
(4) Due Diligence
In connection with the Advisor's performance of the services
described above, the Trustee agrees to furnish or cause the
Company to furnish to Advisor such information as Advisor
reasonably believes appropriate to the execution of its
Engagement hereunder (all such information so furnished being the
"Information"). Management has represented to the
Judge Xxxxx X. Xxxxx
October 8, 2002
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Trustee that, to the best of its knowledge, all Information being
furnished by the Trustee or his agents will be certified as complete
and correct in all material respects by the Company, and that until
the expiration of Advisor's Engagement hereunder, the Trustee will
advise Advisor immediately of the occurrence of any event or any other
change known by the Trustee or his agents that would cause the
Information to cease to be complete and correct in all material
respects. The Trustee recognizes and confirms that in performing the
services described herein Advisor: (i) will use and rely primarily on
the Information and on information available from generally recognized
public sources without independently verifying any of the same; (ii)
will not assume responsibility for accurateness or completeness of the
Information and such other information; and (iii) will not make an
appraisal of any of the assets or liabilities of the Company.
B. ADVISOR'S FEES
Advisor's fees for acting as exclusive investment banker in connection with
the services outlined above will consist of:
(1) Monthly fees (the "Monthly Fees") of $100,000 for the first two (2)
months of the Engagement with the first Monthly Fee being payable upon
entry of the Court Order approving the Engagement and with subsequent
Monthly Fees payable every thirty (30) days thereafter. The Monthly
Fees for the third (3rd) and fourth (4th) months shall be $75,000 per
month and the Monthly Fees shall be $50,000 per month thereafter and
continuing throughout the Term and Renewal Period, as defined
hereinafter. The Monthly Fees will be credited back one hundred
percent (100%) against any Advisory Fee, Minimum Advisory Fee and
Restructuring Fee owed to Advisor under sections (2) and (3) below.
In no event shall any Monthly Fees in excess of the Minimum Advisory
Fee, Advisory Fee or Restructuring Fee, described below, be refundable
by Advisor to the Chapter 11 Estate of Coram.
(2) Upon the Closing of (a) a Sale or transfer of the equity of the
Company, other than to the existing noteholders, (b) a Sale of all, or
any portion of, the assets of the Company to any party, other than to
the existing noteholders, during the Term, the Renewal Period or the
Trailer Term, as such periods are defined in the Term Section below
(the "Applicable Fee Period"), Advisor shall be entitled to receive an
advisory fee ("Advisory Fee") payable in cash, in federal funds via
wire transfer or certified check, at, and as a condition of, closing
of such transaction (the "Transaction Closing") equal to the greater
of: (i) 1.00% of Total Consideration; or (ii) $1.0 million ("Minimum
Advisory Fee").
(3) In the event that the Existing Stakeholders agree to the
restructuring of their claims, which may include the sale of the stock
or assets of the Company to the existing noteholders, in a manner
which allows the Company to reorganize through a confirmed plan of
reorganization, Advisor will receive a restructuring fee (the
"Restructuring Fee") equal to $950,000 payable to Advisor at, and as a
condition of, closing of such Restructuring.
Judge Xxxxx X. Xxxxx
October 8, 2002
Page 4
(4) In the event the Trustee requests in writing one or more
Opinion(s) as to the fairness, from a financial point of view, of
any proposed Sale of Restructuring of the Company, or a valuation
of the Company, Advisor will be entitled to an Opinion Fee (the
"Opinion Fee") equal to $50,000 per Opinion earned and payable at
the delivery (the "Delivery Date") of the Opinion. The first
(1st) Opinion Fee will not be credited against the Advisory Fee
or Restructuring Fee. Any Opinion Fee earned thereafter will be
credited back one hundred percent (100%) against the Advisory Fee
or Restructuring Fee. No such Opinion Fee shall in any manner be
contingent upon the conclusions stated in such Opinion(s) or upon
the closing of any proposed Sale or the consummation of any
proposed Restructuring.
(6) In addition to the Fees outlined above, the Trustee shall
throughout the term of this Engagement reimburse Advisor, on a
monthly basis, for all reasonable out-of-pocket expenses incurred
by Advisor in connection with the conduct of its duties under
this Engagement Agreement.
C. DEFINITIONS
For the purpose of this agreement:
TOTAL CONSIDERATION shall mean the purchase price paid for the stock or
assets, or any portion of either, plus the assumption or payoff of
indebtedness, which includes secured, administrative, priority and/or
unsecured claims (trade or other) and the assumption of any other
obligations on-balance sheet, off-balance sheet, contingent,
non-contingent, liquidated and/or unliquidated as well as consideration
payable under consulting agreements and/or non-competition agreements and
for salaries and bonuses paid in excess of salaries and bonuses as of the
time of the Transaction Closing as well as the assignment of leases,
whether real property or personal, plus the value received or retained by
the Company on either sold, retained or liquidated work in process,
inventory, accounts receivable or any other tangible or intangible asset.
In the event that the consideration is paid in whole or in part in the
form of securities of the acquiring entity, the value of such securities,
for the purpose of calculating the Advisory Fee, shall be the market
value thereof as of the date of the purchase agreement. If such aggregate
consideration may be increased by contingent payments such as an
"earnout" or other monetary agreement in the transaction, the portion of
the Advisory Fee relating thereto shall be calculated and paid when and
as such contingent payments or other monetary amounts are received.
D. TERM OF ENGAGEMENT
This Engagement Agreement shall remain in force for a period ending the
earlier of six (6) months from the date of signing this Engagement
Agreement or, at the Trustee's option, at the Transaction Closing, or at
the Effective Date of the Plan. Absent a Transaction Closing or the
Effective Date of the Plan, the Term will automatically renew for
additional three (3) month periods (the "Renewal
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October 8, 2002
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Periods"), unless either the Trustee or Advisor serve the other party
written notice thirty (30) days prior to the end of the Term.
Expiration of the Engagement Agreement shall not affect Advisor's right
to an Advisory Fee or Restructuring Fee as calculated using the
formulas set forth above for any Transaction completed by the Trustee
or the Company for a period of six (6) months from the date of the end
of the Term and any Renewal Periods (the "Trailer Term").
E. LIABILITY
The following provisions regarding liability have been agreed to by the
Trustee and Advisor and are subject to Bankruptcy Court approval, after
review by the Office of the U.S. Trustee:
(1) Advisor shall not have any liability to the Bankruptcy Estate
or any other person in connection with the services performed
by Advisor pursuant to the Engagement Agreement (whether
direct or indirect, in contract or tort or otherwise) except
for any liability for losses, claims, damages or liabilities
that is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted
from the gross negligence or willful misconduct of Advisor.
(2) The provisions hereof shall survive any termination or
completion of the Engagement set forth in this Engagement
Agreement.
G. BANKRUPTCY PROCEEDING
This Engagement Agreement is subject to the approval of the United
States Bankruptcy Court, District of Delaware after notice, which may
be expedited, and an opportunity for a hearing. Advisor's retention
shall be under both Section 327(a) and Section 328(a) of the Bankruptcy
Code and shall be subject to review under Section 330(b) of the
Bankruptcy Code. Notwithstanding the foregoing, Advisor shall not be
required to maintain detailed time records.
H. MISCELLANEOUS
The Trustee agrees that Advisor has the right, following the closing of
a Transaction, to place advertisements in financial and other
newspapers and journals at its own expense describing its services
under this Engagement Agreement.
Judge Xxxxx X. Xxxxx
October 8, 2002
Page 6
Any amendment, modification or other changes to this Engagement Agreement must
be in writing and signed by both parties to be enforceable.
Please indicate your acceptance of the foregoing by executing and returning the
enclosed copy of this letter.
SSG CAPITAL ADVISORS, L.P.
By: Xxxxxx, XxXxxxxx, Xxxxxxx, Xxxxxx Securities Corporation,
General Partner
By: /s/ XXXX XXXXXX /s/ X. XXXXX XXXXXX
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Xxxx X. Xxxxxx X. Xxxxx Xxxxxx
President Managing Director
ACCEPTED:
XXXXX XXXXXX XXXXXX & CO.
By: /s/ XXXXXX X. XXXXXX /s/ XXXXXXX XXXXX
-------------------------------- ------------------------------
Xxxxxx X. Xxxxxx, III Xxxxxxx X. Xxxxx
Managing Director Managing Director
ACCEPTED:
JUDGE XXXXX X. XXXXX, CHAPTER 11 TRUSTEE
CORAM HEALTHCARE CORPORATION
By: /s/ XXXXX X. XXXXX October 9, 2002
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Judge Xxxxx X. Xxxxx Date
Chapter 11 Trustee
