AMENDMENT NO. 1 TO SENIOR MANAGEMENT AGREEMENT
EXHIBIT 10.19
AMENDMENT NO. 1 TO
SENIOR MANAGEMENT AGREEMENT
SENIOR MANAGEMENT AGREEMENT
THIS AMENDMENT NO. 1 TO SENIOR MANAGEMENT AGREEMENT (this “Amendment”), dated as of
May 12, 2006, is made by and among Capella Holdings, Inc., a Delaware corporation (the
“Company”), Capella Healthcare, Inc., a Delaware corporation (“Employer”), and
Xxxxxx Xxxxxx Xxxxxx (“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 October 17, 2005 (the “Senior Management Agreement”);
WHEREAS, the Company desires to sell to Executive and Executive desires to purchase from the
Company, 157,950 additional shares of Common Stock; 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;
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. On the date hereof, Executive will purchase, and the Company will sell, 157,950 shares of
Common Stock (the “Additional Shares”) at a price of $0.50 per share. The Company will
deliver to Executive a copy of the certificate(s) representing the Additional Shares, and Executive
will deliver to the Company a cashier’s or certified check or wire transfer of immediately
available funds in an aggregate amount equal to $78,975.00 as payment for the Additional Shares.
For purposes of clarification, the Additional Shares shall be deemed Executive Securities.
2. Within 30 days after the purchase of the Additional Shares hereunder, Executive will make
an effective election with the Internal
Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations
promulgated thereunder in the form of Exhibit A attached hereto.
3. In connection with the purchase and sale of the Additional Shares, Executive represents and
warrants to the Company that:
(a) The Additional Shares to be acquired by Executive pursuant to this Amendment will be
acquired for Executive’s own account and not with a view to, or intention of, distribution thereof
in violation of the Securities Act, or any applicable state securities laws, and the Additional
Shares will not be disposed of in contravention of the Securities Act or any applicable state
securities laws.
(b) Executive is an executive officer of the Company and Employer, is sophisticated in
financial matters and is able to evaluate the risks and benefits of the investment in the
Additional Shares.
(c) Executive is an “accredited investor” within the meaning of Securities and Exchange
Commission Rule 501 of Regulation D.
(d) Executive is able to bear the economic risk of her investment in the Additional Shares for
an indefinite period of time because the Additional Shares have not been registered under the
Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(e) Executive has had an opportunity to ask questions and receive answers concerning the terms
and conditions of the offering of Additional Shares and has had full access to such other
information concerning the Company as she has requested.
(f) This Amendment constitutes the legal, valid and binding obligation of Executive,
enforceable in accordance with its terms, and the execution, delivery and performance of this
Amendment by Executive does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.
(g) Executive is neither party to, nor bound by, any other employment agreement, consulting
agreement, noncompete agreement, non-solicitation agreement or confidentiality agreement other than
the Senior Management Agreement.
(h) Executive is a resident of the State of Tennessee.
4. The Additional Shares have been granted hereunder in connection with and as a part of the
compensation and incentive arrangements between the Company and Executive and the issuance of the
Additional Shares hereunder is intended to qualify for an Exemption. In the
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event that any provision of this Agreement would cause the Additional Shares hereunder to not qualify for the
Exemption, Executive agrees that the Agreement shall be deemed automatically amended to the extent
necessary to cause the Additional Shares to qualify for the Exemption.
5. Concurrently with the execution of this Amendment, Executive shall execute in blank ten
stock transfer powers in the form of Exhibit B attached hereto (the “Additional Shares
Stock Powers”) with respect to the Additional Shares and shall deliver such Additional Shares
Stock Powers to the Company. The Additional Shares Stock Powers shall authorize the Company to
assign, transfer and deliver the Additional Shares to the appropriate acquiror thereof pursuant to
Section 3 of the Senior Management Agreement or Section 4 of the Stockholders Agreement and under
no other circumstances.
6. Amendment to Section 3(b). Section 3(b) of the Senior Management Agreement is
hereby deleted in its entirety and replaced with the following provision:
“In the event of a Separation, (i) the purchase price for each
share of Unvested Common Stock will be the lesser of (A)
Executive’s Original Cost for such share, and (B) the Fair Market
Value of such share as of the date of the Repurchase Notice (as
defined in Section 3(c) below) delivered pursuant to this
Section 3, and (ii) the purchase price for each share of
Vested Stock will be the Fair Market Value of such share as of the
date of the Repurchase Notice delivered pursuant to this
Section 3; provided, however, that if Executive’s
employment is terminated with Cause, the purchase price for each
share of Vested Common Stock will be the lesser of (A) Executive’s
Original Cost for such share and (B) the Fair Market Value of such
share as of the date of the Repurchase Notice.”
7. Amendment to Section 3(c). The first sentence of Section 3(c) of the Senior
Management Agreement is hereby deleted in its entirety and replaced with the following sentence:
“In the event of a Separation, the Company (with the approval of
the Board) may elect to purchase all or any portion of the
Unvested Common Stock and/or the Vested Common Stock by delivering
written notice (the “Repurchase Notice”) to the
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holder or holders of such Executive Securities on or prior to the date which
is twelve months and one day after the Separation;
provided that the Company may not deliver the Repurchase
Notice with respect to any shares of Vested Common Stock earlier
than six months and one day after the date such shares became
Vested Common Stock.”
8. Notwithstanding the provisions of Section 5(a) of the Senior Management Agreement, the
certificates representing the Additional Shares will bear a legend in substantially the following
form:
“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED AS OF MAY 12, 2006, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM
REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS
SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN THE COMPANY AND
AN EXECUTIVE OF THE COMPANY AND OTHER PARTIES, DATED AS OF OCTOBER
17, 2005, AS AMENDED. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY
THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE OF BUSINESS
WITHOUT CHARGE.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO
REQUESTS, A FULL STATEMENT OF ALL OF THE POWERS, DESIGNATIONS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS OF EACH CLASS OF STOCK OR SERIES THEREON AUTHORIZED TO BE
ISSUED BY THE COMPANY AND THE
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QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS.”
9. Ratification. All other paragraphs, provisions, and clauses in the Senior
Management Agreement not so modified remain in full force and effect as originally written.
10. Defined Terms. Certain capitalized terms not defined herein shall have the
meanings given to such terms in the Senior Management Agreement.
11. Counterparts. This Amendment may be executed in one or more counterparts, each of
which is an original, but all of which together constitute one and the same instrument. Any
counterpart may be executed by facsimile signature and such facsimile signature shall be deemed an
original.
12. Governing Law; Binding Agreement. All questions concerning the construction,
validity, enforcement and interpretation of this Amendment shall be governed by the internal law 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 jurisdictions) that would cause the application
of the laws of any, jurisdictions other than the State of Delaware.
* * * *
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IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year
first above written.
| CAPELLA HOLDINGS, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxxxxx | |||||
| Name: | ||||||
| Its: | Chief Executive Officer | |||||
| CAPELLA HEALTHCARE, INC. | ||||||
| By: | /s/ Xxxxxx X. Xxxxxxxxxx | |||||
| Name: | ||||||
| Its: | Chief Executive Officer | |||||
| /s/ Xxxxxx Xxxxxx Xxxxxx | ||||||
| Xxxxxx Xxxxxx Xxxxxx | ||||||
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: |
/s/ Xxxxxx X. Xxxxx | |||
Name: |
Xxxxxx X. Xxxxx | |||
Its:
|
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Exhibit A
May 12, 2006
ELECTION TO INCLUDE SECURITIES IN GROSS
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
INCOME PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE
The undersigned purchased shares of Common Stock (the “Shares”), of Capella Holdings,
Inc., a Delaware corporation (the “Company”) on May 12, 2006 (the “Closing Date”).
Under certain circumstances, the Company has the right to repurchase certain of the Shares at cost
from the undersigned (or from the holder of the Shares, if different from the undersigned) should
the undersigned cease to be employed by the Company and its subsidiaries or upon certain other
events. Hence, the Shares are subject to a substantial risk of forfeiture and are non-transferable.
The undersigned desires to make an election to have the Shares taxed under the provision of Code
§83(b) at the time she purchased the Shares.
Therefore, pursuant to Code §83(b) and Treasury Regulation §1.83-2 promulgated thereunder, the
undersigned hereby makes an election, with respect to the Shares (described below), to report as
taxable income for calendar year 2006 the excess (if any) of the Shares’ fair market value on May
12, 2006 over the purchase price thereof.
The following information is supplied in accordance with Treasury Regulation §1.83-2(e):
1. The name, address and social security number of the undersigned:
Xxxxxx Xxxxxx Xxxxxx
0000 Xxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
SSN:
0000 Xxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
SSN:
2. A description of the property with respect to which the election is being made: 157,950
shares of Common Stock of the Company.
3. The date on which the property was transferred May 12, 2006. The taxable year for which
such election is made; calendar year 2006.
4. The restrictions to which the Shares are subject are set forth in a Senior Management
Agreement, dated October 17, 2005, between the Company, a subsidiary of the Company, and the
undersigned, as amended (the “Senior Management Agreement”). A copy of the Senior
Management Agreement is available upon request in general, under the Senior Management Agreement, all of
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the Shares are subject to a five-year vesting schedule, with 20% of such Shares becoming vested on each
anniversary of the Initial Vesting Date (as defined in the Senior Management Agreement) if the
undersigned remains employed as of such date. The Company has an option to repurchase any unvested
Shares upon a termination of the undersigned’s employment prior to vesting, with a purchase price
equal to the undersigned’s original cost for the Shares or, if less, the fair market value of the
unvested Shares.
5. The fair market value on May 12, 2006 of the property with respect to which the election is
being made, determined without regard to any lapse restrictions: $0.50 per share of Common Stock.
6. The amount paid for such property: $0.50 per share of Common Stock.
* * * * *
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A copy of this election has been furnished to the Secretary of the Company pursuant to
Treasury Regulations §1.83-2(e)(7). A copy of this election will be submitted with the 2006 federal
income tax return of the undersigned pursuant to Treasury Regulation §1.83-2(c).
Dated: May 12, 2006
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Exhibit B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Xxxxxx Xxxxxx Xxxxxx (“Executive”) does hereby sell, assign and
transfer unto _________________, a ________________, _______________ shares of _____________ of
Capella Holdings, Inc., a Delaware corporation (the “Company”), standing in the
undersigned’s name on the books of the Company represented by Stock Certificate Nos.
_________________ herewith and does hereby irrevocably constitute and appoint each principal of
GTCR Xxxxxx Xxxxxx, L.L.C. or GTCR Xxxxxx Xxxxxx XX, L.L.C. (acting alone or with one or more other
such principals) as attorney to transfer the said securities on the books of the Company with full
power of substitution in the premises.
This Assignment Separate from Certificate may be used only for purposes of or in connection
with transfers made in connection with Section 3 of that certain Senior Management Agreement among
the Company, Capella Healthcare, Inc., a Delaware corporation, and Executive, dated as of October
17, 2005, as amended from time to time pursuant to its terms, or Section 4 of that certain
Stockholders Agreement, among the Company, Executive and certain stockholders of the Company, dated
as of May 4, 2005, as amended from time to time pursuant to its terms.
Dated: |
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