EXHIBIT 10.31
SECOND AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS SECOND AMENDMENT to Employment Agreement (this "Second Amendment") is
dated as of April 15, 2005 by and between Team Health, Inc., a Tennessee
corporation (the "Company"), H. Xxxx Xxxxxxxxxx, M.D. (the "Employee") and, for
the limited purposes described herein, Team Health Holdings, L.L.C., a Delaware
limited liability company ("Holdings"). This Second Amendment amends the
Employment Agreement dated as of March 11, 1999, as amended by that First
Amendment to Employment Agreement dated as of October 1, 2002, (the "Employment
Agreement") between the Company and the Employee. Capitalized terms used but not
defined herein shall have the meanings assigned to such terms in the Employment
Agreement.
WHEREAS, the Employee is currently the Chief Executive Officer of
the Company;
WHEREAS, the Employee and the Company hereby desire to amend the
Employment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Amendment to Section 6.5; Severance Compensation. Effective
from and after the date of this Second Amendment, Section 6.5 of the Employment
Agreement is deleted and amended and restated in its entirety as follows:
6.5 Severance Compensation.
(a) If this Agreement is terminated (i) as a result of the
Company's failure to renew this Agreement as provided in Section 1
above, (ii) by the Company without Cause (as provided in Section 6.4
above), (iii) because of Employee's resignation with Good Reason (as
defined below) or (iv) because of Employee's death or disability,
(a) Employee will receive Employee's base salary and benefits under
this Agreement (at the Company's expense) for two years following
the date of termination and (b) to the extent EBITDA targets under
Exhibit A are met during the Measuring Period in which the
termination occurs, Employee will receive a pro rata bonus based on
the number of days Employee was employed during the Measuring
Period. Notwithstanding anything herein to the contrary, in no event
shall Employee be entitled to additional compensation for the
economic value of any benefits provided by, or expenses paid by, the
Company pursuant to this Agreement, including unused vacation or
sick leave.
(b) In addition to the compensation described in Section
6.5(a) above, the parties agree that: (x) in the event Employee
resigns his employment for Good Reason pursuant to this Section 6.5,
then,
(i) no later than thirty (30) days after the date of such
resignation, Employee may deliver a notice (the "Liquidity Notice")
to the Company and to Holdings directing Holdings to exercise its
Repurchase Option as to the number of Executive Units designated by
Employee, in Employee's sole discretion, in the Liquidity Notice,
but not to exceed 50% of all Executive Units (Repurchase Option and
Executive Units each being as defined in the Management Unit
Purchase Agreement, dated as of March 12, 1999 (the "Management
Equity Agreement"), by and between Holdings and the Employee) and
Holdings shall repurchase such Executive Units, for cash, within
thirty (30) days of such notice from Employee and (ii) no later than
thirty (30) days after the second anniversary of the date of such
resignation, Employee may deliver a second Liquidity Notice to the
Company and to Holdings directing Holdings to exercise its
Repurchase Option as to the remaining Executive Units and Holdings
shall repurchase such Executive Units, for cash, within thirty (30)
days of such notice from Employee; and (y) in the event the Company
terminates this Agreement without Cause pursuant to Section 6.4,
then, no later than thirty (30) days after the date of such
termination, Employee may deliver a Liquidity Notice to the Company
and to Holdings directing Holdings to exercise its Repurchase Option
as to all Executive Units and Holdings shall repurchase such
Executive Units, for cash, within thirty (30) days of such notice
from Employee. In conjunction with its obligations under this
Section 6.5(b), the Company shall maintain a Xxxxxxxxxx Reserve
Amount (as defined below) to be used in the repurchase of Employee's
Executive Units as provided in this Section 6.5(b). Further, the
Company shall, subject to applicable withholding taxes, distribute
to the Employee his entire Account Balance under the Team Health,
Inc. Equity Deferred Compensation Plan as of the date of Employee's
termination; provided that Holdings' and the Company's obligations
under this Section 6.5(b) are conditioned on Holdings and/or the
Company being permitted to do so in compliance with all agreements
to which either or both the Company and Holdings are a party to that
relate to indebtedness for borrowed money, including without
limitation, the Company's senior credit agreement and its senior
subordinated note indenture; provided further that if either
Holdings or the Company is not permitted to perform any of its
obligations stated in this Section 6.5(b) by virtue of any such
agreements, Holdings and/or the Company shall perform each of their
respective obligations under this Section 6.5(b) to the extent
permitted, and shall thereafter perform all obligations (or such
portion thereof as permitted), on the first date that such
agreements will permit performance, and Holdings and/or the Company
shall use their best efforts to be permitted to so perform,
including but not limited to, using efforts similar to those used by
Holdings and/or the Company in the past (e.g., seeking waivers, if
necessary). Notwithstanding the foregoing, at all times until the
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last to occur of (x) the expiration of any right of Employee to
deliver any Liquidity Notice and (y) the Company's full performance
of its obligations under any Liquidity Notices theretofore delivered
to the Company, the Company will not:
(i) declare or pay any dividends, purchase, redeem, retire,
defease or otherwise acquire for value any equity securities
or any of its capital stock or any warrants, rights or options
to acquire such equity securities or capital stock, now or
hereafter outstanding, return any capital to its stockholders
as such, make any distribution of assets, capital stock,
warrants, rights, options, obligations or securities to its
stockholders as such or permit any of its subsidiaries to
purchase, redeem, retire, defease or otherwise acquire for
value any equity securities or any capital stock of the
Company or any warrants, rights or options to acquire such
equity securities or capital stock,
(ii) enter into or amend any agreement, including without
limitation the Company's senior credit agreement (or enter
into any restatement or refinancing thereto), or
(iii) take any other action or fail to take any other action
for the purpose of making it impossible for Holdings or the
Company to perform its obligations stated in this Section
6.5(b),
to the extent that after doing so, the available reserve for
permitted repurchases of equity securities from current or former
employees of the Company under the Company's senior credit
agreement, would be less than the Xxxxxxxxxx Reserve Amount. The
"Xxxxxxxxxx Reserve Amount" shall be $10,000,000 minus the amount of
cash paid from time to time after the date hereof to Employee
himself in respect of his equity securities of the Company, (whether
as a result of dividends, redemptions, this Section 6.5(b), or
otherwise). If at any time the fair market value of Employee's
Executive Units exceeds the Xxxxxxxxxx Reserve Amount, at the
request of Employee, the Company will discuss and consider raising
the Xxxxxxxxxx Reserve Amount accordingly; provided that the Company
shall be under no obligation to do so. The purchase price for the
Executive Units shall be determined in accordance with the
provisions of the Management Equity Agreement. If Employee delivers
a Liquidity Notice as provided in this Section 6.5(b), to the extent
that the terms of this Second Amendment are inconsistent with the
terms of the Management Equity Agreement, this Second Amendment
shall control. Employee's rights under this Section 6.5(b) shall
terminate immediately prior to any IPO (as defined in the Management
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'
Equity Agreement).
(c) For purposes of this Section 6.5, "Good Reason" shall be defined
to mean (i) the assignment to Employee of duties that represent a
Substantial Adverse Alteration in the nature or status of his
responsibilities, (ii) the hiring of any person to act as a Chief
Operating Officer and/or President of the Company without Employee's
consent or the creation or alteration of the reporting relationship
of the Chief Operating Officer and/or President of the Company
without Employee's consent, (iii) any reduction in his annual base
salary or his bonus computation formula, (iv) the required
relocation to a place of business more than 50 miles away from
Employee's current place of business, (v) any material breach by the
Company of this Agreement or any other agreement with, or obligation
to or for the benefit of, Employee, including but not limited to any
stock option or benefit plan, or a breach of the Team Health
Holdings, L.L.C. Securityholders Agreement or the Team Health, Inc.
Stockholders Agreement, (vi) a "Sale of the Company" occurs, or
(vii) the failure of Company to obtain the assumption in writing of
its obligations to perform this Agreement by any successor to all or
substantially all of the assets of Company within fifteen (15) days
after a merger, consolidation, sale or similar transaction.
(d) For purposes of Section 6.5(c)(i) above, a "Substantial Adverse
Alteration" of Employee's status or responsibilities shall include,
but not be limited to, (a) any change in Employee's authority
whereby Employee does not report directly to the Board of Directors
of the Company or (b) if any other employee or person is given
authority by the Board of Directors whereby such person is senior to
or otherwise entitled to exercise authority over Employee, or
Employee reports to such person, or (c) in the event the Company
causes Employee to cease to be a director, President or Chief
Executive Officer of the Company without Employee's consent.
(e) For purposes of Section 6.5(c)(vi) above, a "Sale of the
Company" means (A) the sale of the Company or Holdings to an
independent third party or group of independent third parties
pursuant to which such party or parties acquire (i) equity
securities of the Company or Holdings possessing the voting power
under normal circumstances to elect a majority of the Company's
Board of Directors or Holdings' Board of Managers (whether by
merger, consolidation, sale or transfer of the Company's or
Holdings' equity securities) or (ii) more than 50% of the Company's
or Holdings' assets determined on a consolidated basis, or (B) at
any time prior to the Company's or Holdings' initial public
offering, Employee and other individuals designated by Cornerstone
Equity Investors IV, L.P., Madison Dearborn Capital Partners II,
L.P., Healthcare
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Equity Partners, L.P. and Healthcare Equity Q.P. Partners, L.P.
cease for any reason to collectively constitute at least a majority
of the Board of Directors of the Company and the Board of Managers
of Holdings.
(f) Notwithstanding the above, Company shall notify Employee not
less than 90 days prior to any proposed Sale of the Company event.
Employee shall then notify Company on or before the Sale of the
Company if Employee wishes to terminate this Agreement. Failure of
Employee to so notify Company shall operate as a waiver of
Employee's right to terminate this Agreement based upon that
respective Sale of the Company event. If Company fails to give the
required notice to Employee prior to the Sale of the Company event,
Employee shall have 90 days after the Sale of the Company event in
which to terminate this Agreement for Good Reason.
(g) The parties further agree that Employee's severance compensation
under this Section 6.5 shall be reduced by the amount of insurance
proceeds received by Employee from any insurance policy purchased by
Company pursuant to Section 9 below or purchased by Company to
specifically insure the severance compensation obligation under this
Section 6.5.
2. Death. If Employee dies before the date on which all amounts
owing to the Employee hereunder are paid in full, the Company and Holdings, as
the case may be, shall pay to the Trustees of The H. Xxxx Xxxxxxxxxx Trust dated
June 16, 2000 (or such other recipient as designated from time to time by
Employee in writing) such remaining amounts when and as such amounts were
otherwise payable to Employee.
3. Representations and Warranties. Each party represents and
warrants to the other party that this Second Amendment has been duly authorized,
executed and delivered by such party and constitutes the valid and binding
obligation of such party, enforceable in accordance with its terms. Without
limiting the generality of the foregoing, the Company and Holdings represent and
warrant that this Second Amendment has been duly authorized by their respective
Compensation Committees and will be duly ratified by their board of directors or
board of managers, as the case may be.
4. Effect of Termination. Any termination of the Employee's
employment with the Company shall automatically be deemed to be a simultaneous
resignation of all other positions and titles the Employee holds with the
Company, Holdings or any of their affiliates, whether as an officer, director,
fiduciary, administrator or otherwise.
5. Continuing Effect. Except as expressly amended or modified
hereby, the Employment Agreement and the Management Equity Agreement will and do
remain in full force and effect in accordance with their respective terms.
6. Counterparts. This Second Amendment may be executed in two or
more
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counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Second
Amendment to Employment Agreement on the day and year first above written.
TEAM HEALTH, INC.
By: _______________________________
Its: ______________________________
___________________________________
H. XXXX XXXXXXXXXX, M.D.
FOR PURPOSES OF SECTIONS 1, 2, 3 AND 5 ABOVE:
TEAM HEALTH HOLDINGS, L.L.C.
By: _______________________________
Its: ______________________________
