AURORA DIAGNOSTICS, LLC AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT
Exhibit 10.18
Execution Version
AURORA DIAGNOSTICS, LLC
AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT
THIS AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT (this “Agreement”) is made as of June 12,
2009 (the “Effective Date”), by and among Summit Partners, L.P., a Delaware limited partnership
(“Summit”), KRG Capital Management, L.P., a Delaware limited partnership (“KRG”), and Aurora
Diagnostics, LLC, a Delaware limited liability company (the “Company”). Capitalized terms used
herein and not otherwise defmed herein shall have the meaning ascribed such terms in the Amended
and Restated Limited Liability Company Agreement of the Parent dated as of the Effective Date, as
amended (the “LLC Agreement”).
WHEREAS, this Agreement amends and restates that certain Management Services
Agreement dated June 2, 2006 between the Company and certain of the Existing Members in its
entirety (the “Prior Agreement”)
WHEREAS, the Company is a wholly owned subsidiary of Aurora Diagnostics
Holdings, LLC, a Delaware limited liability company (“Parent”);
WHEREAS, certain investment funds managed by Summit and KRG own, directly or
indirectly, Equity Securities of the Parent;
WHEREAS, the Company desires to receive, or continue to receive, financial and management advisory
services from Summit and KRG and obtain the benefit of Summit’s and KRG’s experience in business
and financial management generally and their knowledge of the Company and the Company’s financial
affairs in particular;
WHEREAS, in connection with their ownership of Equity Securities of the Parent, Summit and KRG are
willing to provide financial and management advisory services to the Company, and the compensation
arrangements set forth in this Agreement are designed to compensate Summit and KRG for such
services; and
WHEREAS, the execution and delivery of this Agreement is a condition to the
transactions contemplated by the Securities Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the respective
agreements hereinafter set forth and the mutual benefits to be derived herefrom, Summit, KRG and
the Company hereby agree as follows:
1. Engagement. The Company hereby engages Summit and KRG as general financial and management
advisors, and Summit and KRG hereby agree to provide certain financial and management advisory
services to the Company, all on the terms and subject to the conditions set forth below.
2. Services. Summit and KRG hereby agree during the term of this engagement to consult with and
advise the boards of managers of the Company and the Parent and the management of the Company and
the Parent in such manner and on such business and financial matters as may be reasonably requested
from time to time and as may be agreed to by Summit and KRG, including:
(i) corporate strategy; (ii) budgeting of future corporate investments; and (iii) acquisition and
divestiture strategies.
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3. Personnel. Summit and KRG shall provide and devote to the performance of this Agreement such of
its partners and employees as Summit and KRG, respectively, shall deem appropriate in their
discretion for the furnishing of the services to be provided hereunder.
4. Management Fee. Commencing on the Effective Date, the Company shall pay to Summit and KRG, in
the aggregate, an annual management fee (the “Management Fee”) equal to 1% of the net revenues of
the Company and its subsidiaries from operations on a consolidated basis as determined in
accordance with GAAP, consistently applied (“Revenues”). Each of Summit and KRG shall be entitled
to their Applicable Percentage (as defined below) of the Management Fee. The Company shall pay the
Management Fee in quarterly installments equal to 1% of Revenues for the immediately preceding
fiscal quarter (i.e., the three months ended March 31, June 30, September 30 and December 31) (the
end of each such preceding fiscal quarter is herein defined as a “Date of Determination” for
purposes of this Section 4). Each quarterly installment of the Management Fee shall be payable
within three business days following delivery of the quarterly consolidated financial statements of
Parent and its subsidiaries pursuant to the LLC Agreement. At the end of each fiscal year during
the term of this Agreement, following an audit of the Company’s financial statements for such
fiscal year: (x) in the event the Company paid Summit and KRG, in the aggregate, an amount less
than 1% of Revenues for such fiscal year (the “Audited Management Fee”), the Company shall promptly
pay to Summit and KRG the difference between the Audited Management Fee and the Management Fee
actually paid to Summit and KRG with respect to such fiscal year (the “Actual Management Fee”) in
accordance with the calculations set forth above; and (y) in the event the Actual Management Fee is
greater than the Audited Management Fee for such fiscal year, the Company shall receive a credit
against the immediately succeeding quarterly installment or installments, as applicable, under this
Agreement for the difference between the Actual Management Fee and the Audited Management Fee. For
the avoidance of doubt, Revenues shall not include proceeds from the sale or other disposition of
any subsidiary, division, line or segment or business (including the sale of assets outside the
ordinary course of business) of the Company or its subsidiaries. Summit shall remain entitled to
any management fee or expense reimbursement due to it under the Prior Agreement which remains
unpaid on the Effective Date and which amounts are computed consistent with this Agreement except
that Summit was entitled to 8 7.5% of such management fee. For purposes of this Agreement, the term
“Applicable Percentage” shall mean the quotient obtained by dividing (x) with respect to Summit,
the sum of the aggregate number of Class A-l Units plus the number of Class A Units, in each case,
held by Summit by the aggregate total number of Class A Units and Class A-I Units held by both
Summit and KRG on each Date of Determination and (y) with respect to KRG, the sum of the aggregate
number of Class A-I Units plus the number of Class A Units, in each case, held by KRG by the
aggregate total number of Class A Units and Class A-l Units held by both Summit and KRG on each
Date of Determination. On the Effective Date, Summit’s Applicable Percentage is 60% and KRG’s
Applicable Percentage is 40%. Notwithstanding the foregoing, in the event that the Applicable
Percentages change during any fiscal quarter, the portion of the Management Fee payable to each of
Summit and KRG (i) with respect to the portion of the fiscal quarter prior to such change, shall be
based on their respective Applicable Percentages prior to such change and (ii) with respect to the
portion of the fiscal quarter on or subsequent to such change, shall be based on their respective
Applicable Percentages giving effect to such change.
5. Transaction Bonus. Summit and KRG shall be entitled to a one-time transaction bonus in an
aggregate amount equal to $375,000 (the “Transaction Bonus”) payable upon consummation of a
Liquidity Event (as defined in the LLC Agreement). Each of Summit and KRG shall be entitled to
their Applicable Percentage of the Transaction Bonus as of the date of such Liquidity Event.
6. Expenses. The Company shall promptly reimburse Summit, KRG and their
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affiliates for such reasonable travel expenses and other reasonable out-of-pocket fees and expenses
as may be incurred by Summit, KRG and their affiliates in connection with the rendering of services
hereunder. In addition, and without duplication to any expense reimbursement provision of any other
agreement between the Company and one or both of Summit and KRG, the Company shall pay and hold
Summit, KRG and their affiliates harmless against liability for the payment of the out-of-pocket
expenses (including the fees and expenses of legal counsel or other advisors) arising in connection
with (i) the preparation, negotiation and execution of this Agreement (subject to the terms of the
Securities Purchase Agreement), (ii) any amendments or waivers (whether or not the same become
effective) under or in respect of this Agreement, and (iii) the interpretation, investigation and
enforcement of the rights granted under this Agreement.
7. Restrictions on Payments.
(a) Notwithstanding any provision herein to the contrary, so long as any Default (as such term is
defined in the Credit Agreement) exists and is continuing or would result from a payment of
management fees hereunder exists and is continuing or would result from a payment of management
fees hereunder, and, in either case, as a result, the Company is prohibited under the Credit
Agreement from making any management fee payments, Summit and KRG will defer receipt of the
Management Fee until such Default has been cured or waived or otherwise ceases to exist. “Credit
Agreement” means, collectively, that (i) certain First Lien Credit and Guaranty Agreement, dated as
of December 10, 2007, by and among the Company, Parent, the guarantors party thereto, the lenders
party thereto and Xxxxx Fargo Foothill, Inc., as administrative agent, as amended restated,
supplemented or otherwise modified from time to time pursuant to its terms and (ii) certain Second
Lien Credit and Guaranty Agreement, dated as of December 10, 2007, by and among the Company,
Parent, the guarantors party thereto, the lenders party thereto and Xxxxxxx Sachs, as
administrative agent, as amended restated, supplemented or otherwise modified from time to time
pursuant to its terms.
(b) Any Management Fees due and payable under this Agreement which are not paid as a result of the
limitations set forth in Section 7(a) above shall be accrued as an obligation of the Company and
shall be paid at the earliest date that the Company reasonably anticipates that the making of such
payment will not cause such violation, or that such violation will not cause material harm to the
Company. The foregoing provision is intended to comply with proposed guidance issued by the
Internal Revenue Service (the “IRS”) under Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), in order to avoid the acceleration of any tax, or imposition of any penalty,
under Code §409A with respect to the payment of fees pursuant to this Agreement. The parties hereto
agree to modify the foregoing provisions of this Section 7(b) to comply with any future guidance
issued under Code §409A to the extent necessary to avoid the acceleration of any tax, or imposition
of any penalty, under Code §409A with respect to the payment of fees pursuant to this Agreement.
8. Term. This Agreement shall replace the Prior Agreement in its entirety and be in effect for a term
commencing on the Effective Date and terminating on the earlier to occur of (i) the date that the
Summit Funds and KRG no longer own any Equity Securities of Parent and its subsidiaries and (ii) a
Liquidity Event or Public Offering. No termination of this Agreement shall affect the Company’s
obligations with respect to the fees, costs and expenses (including the Management Fee) incurred by
Summit or KRG in rendering services hereunder and not reimbursed or otherwise paid by the Company
as of the date of such termination, and the Company shall pay to Summit and KRG all such unpaid
fees, costs and expenses (including any unpaid Management Fees) prior to or in connection with any
such termination.
9. Liability. None of Summit KRG or any of their respective affiliates, partners,
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members, employees or agents shall be liable to the Parent, the Company or their subsidiaries or
affiliates for any loss, liability, damage or expense arising out of or in connection with the
performance of services contemplated by this Agreement, unless such loss, liability, damage or
expense shall be proven to result directly from such person’s willful misconduct as determined by a
court of competent jurisdiction in a final and non-appealable proceeding.
10. Indemnification. The Company agrees to indemnify and hold harmless Summit, KRG and their
partners, members, affiliates, officers, agents and employees against and from any and all losses,
liabilities, suits, claims, costs, damages and expenses (including attorneys’ fees and expenses)
arising from their performance hereunder (and under the Prior Agreement), except as a result of
such person’s willful misconduct as determined by a court of competent jurisdiction in a final and
non-appealable proceeding.
11. Independent Contractor. Summit and KRG shall perform services hereunder as an independent
contractor, retaining control over and responsibility for its own operations and personnel. None of
Summit, KRG or their respective directors, officers, partners, members or employees shall be
considered employees or agents of the Company or Parent as a result of this Agreement.
12. Notices. All notices, demands and other communications to be given or delivered under or by
reason of the provisions of this Agreement shall be in writing and shall be deemed to have been
given (i) when personally delivered or sent by telecopy (with hard copy to follow), (ii) one
business day following the day when deposited with a reputable and established overnight express
courier (charges prepaid), or (iii) five days following mailing by certified or registered mail,
postage prepaid and return receipt requested. Unless another address is specified in writing,
notices, demands and communications to the Company, KRG and Summit shall be sent to the addresses
indicated below (or at such other address as shall be given in writing by one party to the other):
If to Summit:
Summit Partners, L.P.
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
000 Xxxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxx LLP
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxx, P.C.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxx X. Xxxx, P.C.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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If to KRG:
KRG Capital Management, L.P.
0000 Xxxxxxxx Xx, Xxxxx Xxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxx
Xxxxxxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
0000 Xxxxxxxx Xx, Xxxxx Xxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxx
Xxxxxxxxxxx Xxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxxx LLP
One Xxxxx Center, Suite 1500
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
One Xxxxx Center, Suite 1500
0000 Xxxxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to the Company:
Aurora Diagnostics, LLC
00000 XXX Xxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
00000 XXX Xxxxxx Xxxxx
Xxxxx 000
Xxxx Xxxxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Bird LLP
Bank of America Plaza
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 28280-4000
Attention: Xxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Bank of America Plaza
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 28280-4000
Attention: Xxx Xxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
13. Entire Agreement Modification. This Agreement contains the complete and entire understanding
and agreement of Summit, KRG and the Company with respect to the subject matter hereof and
supersede all prior and contemporaneous understandings, conditions and agreements, oral or written,
express or implied, respecting the engagement of Summit and KRG in connection with the subject
matter hereof. The provisions of this Agreement may be amended, modified and/or waived only with
the prior written consent of the Company, Summit and XXX.
00. Waiver of Breach. The waiver by any party of a breach of any provision of this Agreement by any
other party shall not operate or be construed as a waiver of any subsequent breach of that
provision or any other provision hereof
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15. Assignment. None of Summit, KRG or the Company may assign its rights or obligations under this
Agreement without the express written consent of the other parties, except that Summit and KRG may
assign their respective rights and obligations to any of its affiliates.
16. Successors. This Agreement and all the obligations and benefits hereunder shall inure to the
successors and permitted assigns of the parties.
17. Counterparts. This Agreement may be executed and delivered by each party hereto in separate
counterparts (including by means of facsimile), each of which when so executed and delivered shall
be deemed an original and both of which taken together shall constitute one and the same agreement.
18. Choice of Law. This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of Delaware, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of Delaware.
* * * * * *
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IN WITNESS WHEREOF, the undersigned have caused this Amended and Restated Management Services
Agreement to be duly executed and delivered on the date and year first above written.
| AURORA DIAGNOSTICS, LLC |
||||
| By: | /s/ Xxxxx X. New | |||
| Name: | Xxxxx X. New | |||
| Title: | Chief Executive Officer | |||
| SUMMIT PARTNERS, L.P. |
||||
| By: | Summit Master Company, LLC | |||
| Its: | General Partner | |||
| By: | /s/ Xxxxxx X. Xxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxx | |||
| Title: | ||||
| KRG CAPITAL MANAGEMENT, L.P. |
||||
| By: | KRG Capital, LLC | |||
| Its | General Partner | |||
| By: | /s/ Xxxx X. Xxxx | |||
| Name: | Xxxx X. Xxxx | |||
| Title: | Managing Director | |||
Signature Page to Amended and Restated Management Services Agreement
