1
EXHIBIT 10.81
April 13, 1999
Xxxxxx X. Xxxxxxx
President & CEO
American HomePatient, Inc.
0000 Xxxxxxxx Xxx
Xxxxx 000
Xxxxxxxxx, XX 00000-0000
VIA FACSIMILE
Dear Xxxxxx:
This letter will confirm our conversation concerning the engagement of The
Recovery Group, Inc.'s ("TRG") services by American Home Patient (the
"Company").
You shall, by executing this letter of agreement, engage TRG for the purposes of
providing business advice and consultation to you regarding the Company's
current financial issues and the development of strategies appropriate to the
shareholders' interests. We will also work with you toward the implementation of
whatever strategies are most appropriate to achieve shareholders' interest. Our
focus will include, but not be limited to, the following areas:
- financial and operational analysis of the current and potential
profitability, ongoing cash requirements, profit center
contributions and break even levels;
- assistance to you in relationships and communications with the
Company's lenders and creditors;
- review and analysis of the Company's existing business plan and
turnaround strategy;
- review and assess the Company's existing 13-week cash flow
projection and weekly variance reporting for the purpose of
making recommendations regarding short term liquidating issues;
2
- analysis of your branch, product line, and joint venture
operating strategies and cost structures with the intent of
assessing potential for further rationalization of the business
model and improvement of operating leverage and cash flow;
- review and analysis of the Company's G&A;
- review and assessment of management's plans to improve current
asset performance, particularly with respect to intake
processing, billing, collection and denial recovery;
- development and analysis of alternative financing and/or debt
restructuring strategies;
- analysis of potential divestiture strategies with respect to
their potential effect on enterprise value and debt reduction;
- review and analysis of the Company's capital expenses;
- assistance to you in the development of "pulse" reporting
processes for management directors and lenders;
- review and assessment of the Company's 12-month financial
projections and business plan reflecting the decision made by
management concerning product lines, operating strategies, cost
structure, asset performance as well as other issues which may
impact EITDA and cash flow, and
- development of a detailed action plan for the implementation of
the business plan which is ultimately approved by management and
the Company's board.
In the most general sense, TRG will work with management on the development of
strategies and action plans which will have significant impact on enterprise
value and debt service coverage within time frames which will engender the
support of your board and lenders.
To the extent possible TRG will use source data and analyses developed by the
Company, or other professionals currently or previously employed by the Company
to accomplish our objectives. This, of course, will be coordinated with senior
management.
The one area specifically excluded from our work is analyses of the
achievability of the Company sales projections. We will depend largely on sales
and marketing information provided to us by the Company.
It is mutually understood and agreed that all source data required for the above
analysis will be made available to TRG from the books and records of the Company
or from whatever other sources which may be available to you. TRG will rely on
the accuracy, completeness and veracity of all
2
3
information provided by the Company. TRG in turn agrees that all information
made available to it by and about the Company, its business operations,
personnel and finances will be treated confidentially and no such information
which is not available to the public will be passed along to any persons not in
the employ of either the Company or TRG or used by TRG or any of its employees,
agents or representatives for any purpose other than the performance of TRG's
obligations hereunder. It is mutually understood that TRG is authorized to
respond to requests for information from and to otherwise discuss the Company's
financial affairs with its directors and principal lenders, with or without the
Company's presence.
TRG's professional fees for the above services will be at the rate of $75-330 an
hour depending on the staff member assigned to the project. From time to time,
our hourly rates change. Such changes will be implemented in your weekly
invoices following their effective date.
The Company will be billed for all out-of-pocket expenses reasonably incurred by
TRG in the performance of its obligations under this agreement. Such expenses
shall include travel, meals and lodging, delivery services, etc. In addition,
the Company will be billed an administrative fee of 4.5% of professional fees.
This fee covers variable administrative expenses (e.g. telephone, computer
services, copying, etc.).
All professional fees and expenses will be billed to you weekly and are payable
weekly. There will be a $25,000 retainer paid to TRG at the execution of this
contract. This retainer will be held by TRG and applied to TRG's final xxxx for
fees and expenses hereunder. The unused portion of the retainer, if any, will be
refunded to the Company promptly following the payment of TRG's final xxxx.
If during the course of this agreement, the Company asks TRG to seek and secure
new financing sources, restructure its existing debt, or find merger partners
and/or buyers for the Company's assets, each and every transaction will warrant
a success fee due to TRG of two-tenths of one percent (0.002%) of the value of
the transaction. These fees will be payable in cash at the closing of said
transaction and will be in addition to our hourly fee described above.
The Company agrees to fully indemnity and hold harmless TRG, its officers,
directors, agents and employees from any liabilities arising out of or related
to this engagement except those which are directly or indirectly attributable to
the willful misconduct or illegal acts of TRG or its officers, directors,
employees, agents or representatives.
If the foregoing accurately sets forth the understanding between us, please so
indicate by signing and returning the enclosed copy of this letter to me. By
virtue of my signature below, TRG is committed to providing its best efforts in
the areas discussed above.
However, you have the option to cancel this agreement at any time and for
whatever reason upon written or oral notice to TRG.
3
4
I very much appreciate the opportunity to present this agreement to you and look
forward to working with you on this assignment.
Very truly yours,
/s/ Xxxxxxx X. Xxxx Date: 4/13/99
-------------------------------------- --------------------
THE RECOVERY GROUP
By: Xxxxxxx X. Xxxx
Managing Director
Agreed and accepted:
/s/ Xxxxxx X. Xxxxxxx Date: 4/14/99
-------------------------------- -------------------------
American HomePatient, Inc.
By: Xxxxxx X. Xxxxxxx III
President, CEO
4
