Exhibit 10.3

 

EXECUTION VERSION

 

21st Century Oncology Holdings, Inc.

2270 Colonial Boulevard

Fort Myers, Florida

 

February 10, 2014

 

Kishore Dass, M.D.

102 Quayside Drive

Jupiter, FL 33477-4009

 

Ben Han, M.D.

255 Valencia Road

West Palm Beach, FL 33401

 

Rajiv Patel

2783 Pillsbury Way

Wellington, FL  33414-3500

 

Dear Sirs,

 

Reference is made to (i) that certain Securities Purchase Agreement dated as of
the date hereof (the “Purchase Agreement”), by and among 21C East Florida, LLC
(“Buyer”), Kishore Dass, M.D. (“Dass”), Ben Han, M.D. (“Han”), and Rajiv Patel
(“Patel”, and collectively with Dass and Han, the “Sellers”, and each a
“Seller”), SFRO Holdings, LLC, a Florida limited liability company (“SFRO”) and,
solely for purposes of Sections 1.3, 1.4 and 5.2(c) thereof, 21st Century
Oncology, Inc., a Delaware corporation and (ii) that certain Amended and
Restated Operating Agreement of SFRO dated as of the date hereof, by and among
SFRO, Buyer and the Sellers (the “SFRO Operating Agreement”).  Buyer is a
wholly-owned subsidiary of 21st Century Oncology Holdings, Inc. (“Parent”).

 

In consideration of the premises and the mutual promises contained in this
agreement (this “Agreement”) and for other for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, each of SFRO,
Parent and the Sellers hereby agree as follows:

 

1.                                      Growth Incentive Program.

 

(a)                                 In the event Parent or any of its
Subsidiaries acquires any Person(s) or business in the State of Florida prior to
the third (3rd) anniversary of the date of this Agreement and such acquisition
opportunity (x) had not been made known in writing to the board of directors or
executive officers of Parent before the date hereof by sources other than any
Seller and (y) is or was first identified to the board of directors and/or
executive officers of Parent by any of the Sellers (such acquisition, a
“Qualified Acquisition” and the Persons or business acquired thereby, a
“Qualified Acquisition Target”), then, subject to the terms of this Agreement,
Parent will allow the Sellers to contribute, in the aggregate, up to twenty
percent (20%) of the total amount of cash equity financing used to fund such
Qualified Acquisition (it being understood that the total amount of cash equity
financing used for such Qualified Acquisition shall be determined in good

 

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faith by Parent in its sole discretion) in exchange for equity interests in the
Qualified Acquisition Target or the applicable holding company thereof (such
contribution by Sellers, a “Qualified Seller Investment”, the equity interest
issued in exchange therefor, the “Qualified Seller Equity” and the entity
issuing the Qualified Seller Equity, the “Applicable Acquisition Co.”);
provided, that:

 

(i)                                     subject to clause (ii) below, any
Qualified Seller Investment shall be on the same terms and conditions as the
equity investment made by Parent or its Subsidiaries in connection with such
Qualified Acquisition, which terms and conditions shall be determined by Parent
in its sole discretion;

 

(ii)                                  any Qualified Seller Equity shall have
preemptive rights and tag-along rights and be subject to drag-along arrangements
and transfer restrictions, in each case, on terms and conditions substantially
similar to those applicable to the common units held by Sellers under the SFRO
Operating Agreement; and

 

(iii)                               upon the termination, for any reason, of a
Seller’s employment with SFRO and its Subsidiaries, the Applicable Acquisition
Co. shall have the right to redeem all of the Qualified Seller Equity held by
such Seller for an amount calculated based on the same formula for the
Redemption Payment (as defined below), except that for purpose of the
calculation contemplated by this clause (iii), the Redemption Valuation Date
shall be the last day of the last full calendar month ending prior to the
employment termination date.

 

(b)                                 The Qualified Seller Investment will be
allocated equally among the Sellers or in such other manner as the Sellers may
otherwise agree and reasonably acceptable to Parent (such acceptance not to be
unreasonably withheld, conditioned or delayed); provided, however, with respect
to any Qualified Acquisition, the right to participate in a Qualified Seller
Investment shall not be available to any Seller who, as of the closing date of
such Qualified Acquisition, is (1) no longer an employee of Buyer or its
Subsidiaries, (2) has notified Buyer or its Subsidiaries of his intention to
terminate his employment or (3) has been notified by Parent or Buyer that his
employment with Buyer and its Subsidiaries will be terminated.

 

(c)                                  On the third (3rd) anniversary of the
closing date of a Qualified Acquisition (the “Redemption Date”), Parent will or
will cause the Applicable Acquisition Co. (or one of its other Subsidiaries) to
redeem or purchase all of the Qualified Seller Equity held by the Sellers or
their Permitted Transferees (as such term is defined in the SFRO Operating
Agreement) for an amount in cash equal to the sum of (i) the Sellers’ Pro Rata
Share of the Aggregate Equity Value of the relevant Qualified Acquisition Target
as of the last day of the last full calendar month ending prior to the
Redemption Date (such date, the “Redemption Valuation Date”) and (ii) fifteen
percent (15%) of the Growth Value of the relevant Qualified Acquisition Target
as of the Redemption Valuation Date (such amount, the “Redemption Payment”). 
The Redemption Payment shall be allocated among the Sellers and their Permitted
Transferees on a pro rata basis based on the portion of Qualified Seller Equity
owned by each such Person.  For purpose of clarity, an illustration of the
Redemption Payment is set forth on Exhibit B to this Agreement.  All
valuation-related determinations for the purposes of calculating

 

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the Redemption Payment, including the determination of Adjusted EBITDA, will be
made by the board of directors or similar governing body of the Applicable
Acquisition Co. in good faith without regard to illiquidity, minority interest
or other similar discounts.  Parent and the Applicable Acquisition Subsidiary
(or such other Subsidiary of Parent) shall have the option to make the
Redemption Payment by delivery of cash or a promissory note on such terms and
conditions as Parent and Seller Representative may mutually agree, provided that
if requested by Seller Representative, Parent will use commercially reasonable
efforts to make the Redemption Payment in cash.  For the avoidance of doubt, in
the event Parent or the appropriate Subsidiary of Parent exercises its
drag-along right with respect to the Qualified Seller Equity in connection with
a sale of a Qualified Acquisition Target (either alone or together with other
assets of Parent) prior to the Redemption Date, the terms of this
Section 1(c) shall have no bearing on the consideration payable in respect of
the Qualified Seller Equity in such sale and, upon completion of such sale, the
Sellers shall cease to have any right with respect to the Qualified Seller
Equity in respect of such Qualified Acquisition Target under this Section 1(c).

 

(d)                                 In the event a Qualified Acquisition Target
is located within the Territory (as such term is defined in the Purchase
Agreement), in lieu of operating the Qualified Acquisition Target within an
entity where the only business of such entity is the Qualified Acquisition
Target, Parent may (but is not obligated to) operate the Qualified Acquisition
Target within an entity that operates other businesses.  In such case, all
valuation-related determinations for the purpose of calculating the Redemption
Price, including the determination of Adjusted EBITDA, shall be based solely on
the financial performance of the business constituting the Qualified Acquisition
Target on a business unit basis (in other words, the financial performance of
other businesses operated within the same entity shall be excluded from such
determinations), taking into account appropriate allocations of revenues,
expenses, overhead or other relevant items to the business constituting the
Qualified Acquisition Target as the board of directors or similar governing body
of the Applicable Acquisition Co. may determine in good faith.

 

2.                                      Exchange Right.

 

(a)                                 During the period commencing on the closing
date of an initial Public Offering of Parent’s equity securities and ending on
the third (3rd) anniversary of such closing date, each Seller may, in his sole
discretion, by written notice to Parent and SFRO (the “Exchange Notice”),
irrevocably elect to exchange all (but not a portion) of the Common Units (as
such term is defined in the SFRO Operating Agreement) in SFRO held by such
Sellers for a number of equity securities of Parent of the type offered in such
initial Public Offering (such equity securities, the “Parent Shares”), which
number shall equal to the number of Common Units held by such Seller multiplied
by the Applicable Exchange Ratio (an “Exchange”); provided, that if requested by
the sole or managing underwriter on Parent’s initial Public Offering or any
other Public Offering, then, as a condition to the Exchange, each Seller shall
enter into a lockup agreement on terms and conditions substantially similar to
those then applicable to Parent’s other significant shareholders.  Any Exchange
shall take effect on the tenth (10th) day after the date of Seller’s notice to
Parent or, if such day is not a business day, the

 

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next following business day (the date of the exchange, the “Exchange Date”). 
All valuation-related determinations for the purposes of calculating the
Applicable Exchange Ratio, including the determination of Adjusted EBITDA, will
be made by the Board of Directors of Parent in good faith.

 

(b)                                 Notwithstanding anything to the contrary in
this Agreement, in the event any Seller delivers the Exchange Notice prior to
the final determination of the Earnout Adjusted EBITDA pursuant to Section 1.4
of the Purchase Agreement, 14.3% of all of the Common Units held by such Seller
shall be withheld (the “Holdback Units”) and not exchanged for Parent Shares. 
Upon the final determination of the Earnout Adjusted EBITDA pursuant to
Section 1.4 of the Purchase Agreement:

 

(i)                                     If the equity adjustments contemplated
by Section 1.4(g) of the Purchase Agreement are effected, the Holdback Units
held by any Seller shall be deemed transferred to Buyer (it being understood
that no consideration shall be payable by Buyer in connection with such
transfer), which transfer shall be deemed effective as of the effective date of
the equity adjustment as contemplated by Section 1.4(g) of the Purchase
Agreement; and

 

(ii)                                  if no equity adjustment is effected
pursuant to Section 1.4(g) of the Purchase Agreement, the Holdback Units shall
be exchanged for Parent Shares, with the Exchange Date being the tenth (10) day
following the date on which the Earnout Adjusted EBITDA is finally determined
pursuant to Section 1.4 of the Purchase Agreement, and based on an Applicable
Exchange Ratio as of such Exchange Date.

 

3.                                      Miscellaneous.

 

(a)                                 Fees and Expenses.  Each party hereto shall
be responsible for all fees and expenses incurred by it in connection with the
transactions contemplated by this Agreement.

 

(b)                                 Successors and Assigns.  This Agreement and
all covenants and agreements contained herein and rights, interests or
obligations hereunder, by or on behalf of any of the parties hereto, shall bind
and inure to the benefit of the respective successors and permitted assigns of
the parties hereto.  No Seller may assign this Agreement without the prior
written consent of Parent, and none of SFRO or Parent may assign this Agreement
without the prior consent of the Sellers; provided, however, that Parent may
assign this Agreement and its rights and obligations hereunder without the prior
written consent of Sellers to any purchaser of Parent (whether by merger,
consolidation, sale of stock, sale of assets or otherwise).

 

(c)                                  Governing Law. All issues and questions
concerning the construction, validity, enforcement and interpretation of this
Agreement and the exhibits hereto shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to any
choice of law or conflict of law rules or provisions (whether of the State of
New York or any other jurisdiction) that would cause the application of the laws
of any jurisdiction other than the State of

 

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New York.  In furtherance of the foregoing, the internal law of the State of New
York shall control the interpretation and construction of this Agreement (and
all exhibits hereto), even though under that jurisdiction’s choice of law or
conflict of law analysis, the substantive law of some other jurisdiction would
ordinarily apply.

 

(d)                                 WAIVER OF JURY TRIAL.  TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH PARTY HERETO HEREBY
WAIVES AND COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE) ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE OR
ACTION, CLAIM, CAUSE OF ACTION OR SUIT (IN CONTRACT, TORT OR OTHERWISE) INQUIRY,
PROCEEDING OR INVESTIGATION ARISING OUT OF OR BASED UPON THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE TRANSACTIONS CONTEMPLATED HEREBY, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING.  EACH PARTY HERETO ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY
THE OTHER PARTIES HERETO THAT THIS SECTION 4(d) CONSTITUTES A MATERIAL
INDUCEMENT UPON WHICH THEY ARE RELYING AND WILL RELY IN ENTERING INTO THIS
AGREEMENT.  ANY PARTY HERETO MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION 4(d) WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF EACH SUCH
PARTY TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

 

(e)                                  Jurisdiction.  Each of the parties hereto
submits to the jurisdiction of any state or federal court sitting in New York,
New York, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding may
be heard and determined in any such court and hereby expressly submits to the
personal jurisdiction and venue of such court for the purposes hereof and
expressly waives any claim of improper venue and any claim that such courts are
an inconvenient forum.  Each of the parties hereby irrevocably consent to the
service of process of any of the aforementioned courts in any such suit, action
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to its address set forth in Section 4(e).

 

(f)                                   Defined Terms.  Capitalized terms used in
this Agreement but not otherwise defined herein shall have the respective
meanings assigned to them on Exhibit A hereto.

 

(g)                                  Entire Agreement.  This Agreement contains
the entire agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and understandings,
whether written or oral, relating to such subject matter in any way, including
the letter of intent dated November 26, 2013, by and between Radiation Therapy
Services, Inc. and the Sellers.

 

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(h)                                 No Third Party Beneficiaries.  This
Agreement is for the sole benefit of the parties hereto and their successors and
permitted assigns and nothing herein expressed or implied shall give or be
construed to give any Person, other than the parties hereto and such successors
and permitted assigns, any legal or equitable rights hereunder.

 

(i)                                     Notices.  All notices, demands or 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 when
delivered personally to the recipient or when sent by facsimile followed by
delivery by reputable overnight courier service, three business days after being
sent to recipient by US First Class mail (postage prepaid), or one business day
after being sent to the recipient by reputable overnight courier service
(charges prepaid).  Such notices, demands and other communications shall be sent
to Parent, SFRO and Sellers at the addresses indicated below or to such other
address or to the attention of such other Person as the recipient party has
specified by prior written notice to the sending party.  All notices, demands
and other communications hereunder may be given by any other means (including
telecopy or electronic mail), but shall not be deemed to have been duly given
unless and until it is actually received by the intended recipient.

 

If to SFRO or Parent:

 

21st Century Oncology

1010 Northern Boulevard - Suite 314

Great Neck, NY 11021

Attn:  Bryan J. Carey

Norton L. Travis

Facsimile:  (516) 301 5778

Email: bcarey@rtsx.com

ntravis@rtsx.com

 

with a copy to (which shall not constitute notice):

 

Kirkland & Ellis LLP

601 Lexington Avenue

New York, NY 10022

Attn:  Michael Movsovich, P.C.

Yi (Claire) Sheng

Facsimile:  (212) 446 4900

Email:  mmovsovich@kirkland.com

             claire.sheng@kirkland.com

 

If to Sellers:

 

c/o Ravi Patel

2783 Pillsbury Way

Wellington, Florida 33414

Fax:  (630) 214-9881

Email:  ravipatel_us@me.com

 

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with a copy to (which shall not constitute notice to Sellers):

 

McDermott Will & Emery LLP

227 West Monroe Street

Chicago, IL 60606-5096

Attn:  Daniel Gottlieb

Facsimile: (312) 277-3984

 

(j)                                    No Strict Construction.  The parties
hereto have participated jointly in the negotiation and drafting of this
Agreement.  In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the parties
hereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party hereto by virtue of the authorship of any of the
provisions of this Agreement.

 

(k)                                 Counterparts.  This Agreement may be
executed in two or more counterparts (including by means of telecopied,
facsimile or .pdf signature pages), each of which will be deemed an original but
all of which will constitute but one instrument.

 

(l)                                     Descriptive Headings; Interpretation. 
The headings and captions used in this Agreement and the table of contents to
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.

 

[Remainder of page intentionally left blank]

 

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Very truly yours,

 

 

 

SFRO HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Rajiv Patel

 

Name: Rajiv Patel

 

Title: Managing Director

 

 

 

21ST CENTURY ONCOLOGY HOLDINGS, INC.

 

 

 

 

 

By:

/s/ Bryan J. Carey

 

Name: Bryan J. Carey

 

Title: Vice Chairman and CFO

 

 

Accepted and agreed to as of

the date first written above:

 

/s/ Kishore Dass, M.D.

 

Kishore Dass, M.D.

 

 

 

/s/ Ben Han, M.D.

 

Ben Han, M.D.

 

 

 

/s/ Rajiv Patel

 

Rajiv Patel

 

 

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Exhibit A

Defined Terms

 

1.              “Adjusted EBITDA” of any Person shall mean, with respect to any
calculation period, the consolidated net income after non-controlling interest,
but before interest, taxes, depreciation and amortization (as determined in
accordance with GAAP) of such Person, provided:

 

(a)         there shall be excluded therefrom (i) any extraordinary, unusual or
nonrecurring gains (or losses), costs charges or expenses (including, without
limitation, onetime specialist bonuses, asset sales, severance, relocation,
transition and other restructuring costs and litigation settlements or losses
and non-compete payments), (ii) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period), (iii) any gains or losses and all fees and expenses or charges relating
thereto attributable to the early extinguishment of Indebtedness, (iv) the
effect of any non-cash items resulting from any amortization, write-up,
write-down or write-off of assets (including intangible assets, goodwill and
deferred financing costs in connection with any future acquisition, disposition,
merger, consolidation or similar transaction or any other non-cash impairment
charges resulting from the application of SFAS Nos. 141, 142 or 144  or other
accounting pronouncements relating to purchase accounting), and (v) any non-cash
compensation charges, including any such charges arising from stock options,
restricted stock grants or other equity incentive programs; and

 

(b)         there shall be given pro forma effect to (i) adjustments to reflect
normalized rent expense from any actions actually implemented by said Person
prior to the end of the relevant calculation period and are supportable and
quantifiable by the underlying accounting records of such Person and
(ii) adjustments to reflect the full year effect of any recent acquisitions made
by said Person (such adjustments to exclude any projected growth from increases
in treatment volumes or cases, but to include any reduction in costs and related
adjustments (including, without limitation, the elimination or normalization of
physician and shareholder compensation, rental and equipment expense) that were
(A) directly attributable to such acquisition calculated on a basis that is
consistent with Regulation S-X under the Securities Act  as in effect on the
date of this Agreement, (B) were actually implemented by the acquired Person
prior to the acquisition by Parent that are supportable and quantifiable by the
underlying accounting records of such Person or (C) relate to the business of
the acquired Person and Parent reasonably determines are probable based upon
specifically identifiable actions to be taken within six months of the date of
the acquisition). Notwithstanding the foregoing, pro forma adjustments in
respect of any acquisition for which the actual Adjusted EBITDA of such
acquisition cannot be determined due to the absence of reliable financial
statements, an adjustment equal to the Adjusted EBITDA for such acquired Person
for the relevant period preceding the date of such acquisition, as estimated in
good faith by the chief financial officer of Parent, shall be permitted..

 

2.              “Aggregate Equity Value” of a Qualified Acquisition Target or
SFRO, as applicable, shall mean, with respect to any determination date, (x) the
aggregate Adjusted EBITDA of such Qualified Acquisition Target or SFRO, as
applicable, for the trailing twelve (12)-month period ending on such
determination date, multiplied by (y) the Applicable

 

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Valuation Multiple as of such determination date, minus (z) the aggregate amount
of outstanding Indebtedness attributable to such Qualified Acquisition Target or
SFRO, as applicable, as of such determination date.

 

3.              “Applicable Exchange Ratio” shall mean the ratio derived by
dividing (A) the equity value for each Common Unit of SFRO subject to the
Exchange calculated based on the Aggregate Equity Value of SFRO as of the last
day of the last full calendar month ending prior to the Exchange Date, by
(B) the VWAP of Parent Shares on the applicable stock exchange for the ten
(10) consecutive trading days immediately prior to the Exchange Date.

 

4.              “Applicable Valuation Multiple” shall mean, as of a specified
determination date, the ratio derived by dividing (A) the Enterprise Value of
Parent as of such determination date by (B) the aggregate Adjusted EBITDA of
Parent for the trailing twelve (12)-month period ending on the last day of the
last full calendar month immediately prior to such determination date.

 

5.              “Cash and Cash Equivalents” shall mean the cash on hand, cash in
current accounts, cash in short term deposit or similar accounts, money orders,
certified checks, checks and drafts received from third parties and not yet
deposited and cleared, and cash equivalents (including negotiable or other
readily marketable securities and short term investments).

 

6.              “Enterprise Value” shall mean, with respect to a particular
determination date, (A) if Parent’s equity securities are traded on the New York
Stock Exchange, Inc. or any other national securities exchange, an amount equal
to (1) the product of (x) the VWAP of Parent’s equity securities on applicable
securities exchange on the last ten (10) consecutive trading days immediately
preceding such determination date and (y) the total number of shares of such
equity securities outstanding on a fully diluted basis (excluding options,
warrants or similar securities with an exercise price equal to or in excess of
the VWAP referred to in clause (x)) as of such determination date, minus (2) the
aggregate exercise price for options, warrants and other similar securities of
Parent (excluding options, warrants or similar securities with an exercise price
equal to or in excess of the VWAP referred to in clause (1)(x)), plus (3) the
aggregate amount of Indebtedness of Parent outstanding as of such determination
date, and minus (4) the aggregate amount of Cash and Cash Equivalents of Parent
outstanding as of such determination date, or (B) if Parent’s equity securities
are not traded on any national securities exchange, as the Board of Directors of
Parent may determine in good faith.

 

7.              “GAAP” means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States.

 

8.              “Growth Value” of any Qualified Acquisition Target shall mean
(A) the portion of the Aggregate Equity Value of such Qualified Acquisition
Target as of the Redemption Valuation Date that is attributable to the equity
securities purchased by Parent and/or its Subsidiaries and the Sellers on the
closing date of such Qualified Acquisition, minus (B) the aggregate amount of
equity investment by Parent and/or its Subsidiaries and the Sellers in such
Qualified Acquisition.  For the avoidance of doubt, the Growth Value of a

 

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Qualified Acquisition Target shall be zero if the amount determined pursuant to
clause (A) is equal to or less than the aggregate equity investment referred to
in clause (B).

 

9.              “Indebtedness” as of a particular date shall mean, without
duplication, (A) any obligations under any indebtedness for borrowed money
(including all obligations for principal, interest premiums, penalties, fees,
expenses, breakage costs and bank overdrafts thereunder), (B) any indebtedness
evidenced by any note, bond, debenture or other debt security, (C) any
obligations under capitalized leases or with respect to which a Person is
liable, contingently or otherwise, as obligor, guarantor or otherwise, or with
respect to which obligations a Person assures a creditor against loss, (D) all
obligations for the deferred and unpaid purchase price of property or services
(other than trade payables and accrued expenses incurred in the ordinary course
of business consistent with past practice), and (E) all Liabilities with respect
to hedging, swaps, collars, caps or similar arrangements.

 

10.       “Person” means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.

 

11.       “Public Offering” means an underwritten sale to the public of Parent’s
equity securities pursuant to an effective registration statement filed with the
Securities and Exchange Commission (the “SEC”) on Form S-1 (or any successor
form adopted by the SEC) and after which Parent’s equity securities are listed
on the New York Stock Exchange, The NASDAQ Stock Market or any other national
securities exchange; provided that a Public Offering shall not include any
issuance of Parent’s equity securities in any merger or other business
combination, and shall not include any registration of the issuance of Parent’s
equity securities to existing securityholders or employees of Parent or its
subsidiaries on Form S-4 or Form S-8 (or any successor form adopted by the SEC).

 

12.       “Sellers’ Pro Rata Share” as of a specified date, shall mean the
percentage derived by dividing (x) the aggregate amount of Qualified Seller
Equity then held by the Sellers by (y) the total amount of outstanding equity
securities of the Applicable Acquisition Co.

 

13.       “VWAP” shall mean volume weighted average price.

 

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Exhibit B

Illustrative Calculation of Redemption Payment

 

For illustrative purposes, assuming Parent has acquired a Qualified Acquisition
Target for a purchase price of $50,000,000, which was funded with $25,000,000 of
cash equity financing and $25,000,000 of debt financing.  The Sellers
contributed $5,000,000 of equity financing.  Upon closing of such Qualified
Acquisition, Parent owned 80 common units in the Applicable Acquisition Co. and
Sellers collectively owned 20 common units in the Applicable Acquisition Co.
(the 20 common units owned by Sellers, the “Qualified Seller Equity”).

 

Assuming further that the Adjusted EBITDA of the Qualified Acquisition Target as
of the Redemption Valuation Date was $17,000,000, the Applicable Valuation
Multiple as of the Redemption Valuation Date was 6x, and the Qualified
Acquisition Target had an aggregate of $30,000,000 of Indebtedness as of the
Redemption Valuation Date.  Accordingly:

 

Aggregate Equity Value of the Qualified Acquisition Target = $17,000,000 x 6 -
$30,000,000 = $72,000,000

 

Assuming further that on the Redemption Valuation Date, the 100 common units
purchased by Parent and the Sellers on the closing date of the Qualified
Acquisition represented 80% of the outstanding equity securities of the
Applicable Acquisition Co., and the Qualified Seller Equity represented 16% of
the outstanding equity securities of the Applicable Acquisition Co.

 

Growth Value = $72,000,000 x 80% - $25,000,000 = $32,600,000

 

Redemption Payment = ($72,000,000 x 16%) + ($32,600,000 x 15%) = $11,520,000 +
$4,890,000 = $16,410,000.

 

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