AMENDMENT NO. 1 TO SENIOR MANAGEMENT AGREEMENT
EXHIBIT 10.21
AMENDMENT NO. 1 TO
SENIOR MANAGEMENT AGREEMENT
SENIOR MANAGEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO SENIOR MANAGEMENT AGREEMENT (this “Amendment”), dated as of August 24,
2011 is made by and among Capella Holdings, Inc., a Delaware corporation (the “Company”),
Capella Healthcare, Inc., a Delaware corporation (“Employer”), Xxxxxxx Xxxxxxxx
(“Executive”), and GTCR Fund VIII, L.P., a Delaware limited partnership (the “Majority
Holder”).
RECITALS
WHEREAS, the Company, Employer and Executive entered into a Senior Management Agreement, dated
as of May 26, 2009 (the “Senior Management Agreement”), pursuant to which Executive
acquired 600,000 shares of the Company’s Common Stock (the “Executive Securities”) through
indebtedness in the principal amount of $1,590,000 (the “Executive Note”);
WHEREAS, in order to induce Executive to enter into the Agreement and to retain his services,
the Company agreed to provide an amount of deferred compensation to Executive that would be applied
to the purchase of the Executive Securities, conditioned on the Executive continuing employment
with the Employer through May 26, 2014, and this benefit was applied to reduce amounts payable
under the Executive Note;
WHEREAS, the Company and Executive have entered into a Redemption Agreement, dated August 24,
2011, by which the Company has redeemed 120,000 shares of the Executive Securities from Executive
for a purchase price of $456,000 (the “Redemption”), which value shall be applied to the
repayment of the amount due on the Executive Note; and
WHEREAS, the Company, Employer, Executive and the Majority Holder desire to amend the Senior
Management Agreement as set forth herein pursuant to Section 11(k) of the Senior Management
Agreement to (i) revise the terms of the Executive’s acquisition of the Executive Securities, (ii)
provide for the early repayment of the Executive Note, and (iii) continue the Executive’s
obligations under the deferred compensation arrangement in a manner that does not result in the
acceleration of Executive’s rights thereunder;
NOW, THEREFORE, in consideration of the foregoing recitals, which shall constitute a part of
this Amendment, and the mutual promises contained in this Amendment, and intending to be legally
bound thereby, the parties agree as follows:
1. The terms for Executive’s purchase of the Executive Securities described in Section 1 of
the Senior Management Agreement are hereby modified as follows:
(a) Executive will deliver cash to the Company in the amount of $448,785.33, which,
together with the Redemption, represents repayment of principal due on the Executive Note in
the amount of $766,632 and all interest due on the principal balance.
(b) In exchange for the satisfaction of the obligations of Executive under the
Executive Note in the amount of $823,368, Executive will continue to provide services
under the Senior Management Agreement and will be subject to the obligations described in
Section 2 below.
(c) In consideration of the benefits to the Company under subsections (a) and (b) above
and the Executive’s obligations described in Section 2 below, the Executive Note
shall be considered fully repaid and Executive shall have no further obligation to the
Company under the Executive Note.
2. The parties acknowledge that, in the event Executive does not continue employment with
Employer or a Subsidiary, Employer and the Company will suffer significant damages. Accordingly, in
order to make the Employer and the Company whole, Executive will pay to the Company the amounts
described in subsection (a) below in the event that Executive’s employment is terminated, unless
such employment is terminated by Employer without Cause or as a result of Disability or death or
Executive resigns for Good Reason.
(a) Any amounts payable by Executive will be determined in accordance with the date of
termination of employment, as specified below.
(i) $823,368 in the event of termination prior to May 26, 2012.
(ii) $548,912 in the event of termination on or after May 26, 2012 but prior to
May 26, 2013.
(iii) $274,456 in the event of termination on or after May 26, 2013 but prior
to May 26, 2014.
(iv) No payment is required in the event of termination on or after May 26,
2014.
(b) In lieu of collecting damages due from Executive under this Section, the Company
may reduce the purchase price of the Repurchase Option provided in Section 3 of the Senior
Management Agreement by the amount payable in Section 2(a) above.
(c) Notwithstanding the foregoing, upon the consummation of a Sale of the Company or a
Public Offering, this Section 2 will no longer be effective and Executive will no
longer be subject to the potential damage payments described in Section 2(a).
3. Section 2(b) of the Senior Management Agreement is superseded by the following:
(a) 120,000 shares of the Executive Securities shall be treated as Vested Common Stock,
as provided under the terms of the Senior Management Agreement.
(b) 360,000 shares of the Executive Securities shall continue to be Unvested Common
Stock. These shares shall become Vested Common Stock in accordance with the following
schedule, if as of each such date Executive is employed by the Company or any of its
Subsidiaries:
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| Shares of Common Stock Vested | ||
May 26, 2012
|
120,000 shares | |
May 26, 2013
|
Additional 120,000 shares | |
May 26, 2014
|
Additional 120,000 shares |
4. The parties acknowledge that the lapse of the obligations described in Section 2 of
this Amendment constitute nonqualified deferred compensation within the meaning of section 409A of
the Internal Revenue Code and, accordingly, Executive hereby consents to any required tax
withholdings on such amounts at the time that Executive recognizes such income.
5. The defined terms in the Senior Management Agreement have the same meaning for purposes of
this amendment, except where expressly provided otherwise.
6. All other provisions of the Senior Management Agreement that are not expressly modified by
this amendment shall remain in full force and effect.
[Execution page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this amendment to the Senior Management
Agreement on this the 24th day of August, 2011 but to be effective May 31, 2011.
| CAPELLA HOLDINGS, INC. |
||||
| By: | ||||
| Name: | Xxxxxx X. Xxxxxxxxxx | |||
| Its: | Chief Executive Officer | |||
| CAPELLA HEALTHCARE, INC. |
||||
| By: | ||||
| Name: | Xxxxxx X. Xxxxxxxxxx | |||
| Its: | Chief Executive Officer | |||
| XXXXXXX XXXXXXXX |
||||
| Agreed and Accepted by: GTCR FUND VIII, L.P., as Majority Holder |
||||
| By: | GTCR Partners VIII, L.P. | |||
| Its: General Partner | ||||
| By: | GTCR Xxxxxx Xxxxxx XX, L.L.C. | |||
| Its: General Partner | ||||
| By: | ||||
| Name: | ||||
| Its: | ||||
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