Exhibit 10.23
EXECUTION COPY
HOLDINGS PLEDGE AGREEMENT
HOLDINGS PLEDGE AGREEMENT ("Pledge Agreement") dated March 23, 2004 by
and between TEAM HEALTH HOLDINGS, L.L.C., a Delaware limited liability company,
having an office at the address set forth on the signature page hereof (the
"Pledgor") and BANK OF AMERICA, N.A., as administrative agent (in such capacity,
together with its successors in such capacity, the "Administrative Agent") for
the Lenders from time to time party to the Credit Agreement described below.
PRELIMINARY STATEMENTS
(1) Team Health, Inc., a Tennessee corporation, having an office
at 1900 Winston Road, Suite 300, Knoxville, Tennessee 31919 (the "Borrower"),
has entered into a Credit Agreement, dated as of even date herewith (as it may
hereafter be amended, restated, supplemented, extended or otherwise modified
from time to time, the "Credit Agreement"; capitalized terms used and not
otherwise defined herein have the meanings ascribed to them in the Credit
Agreement), among the Lenders party thereto, the Guarantors party thereto, and
Bank of America, N.A., as Administrative Agent, L/C Issuer and Swing Line
Lender.
(2) As of the date hereof, the Pledgor is the owner of 9,289,273
shares of the Borrower's common Capital Stock, no par value (the "Pledged
Stock"), which is 92.7 % of the issued and outstanding shares of Capital Stock
of the Borrower.
(3) Pursuant to Article IV of the Credit Agreement, the Pledgor
has guaranteed, on a limited basis, to the Lenders and the Administrative Agent
the full payment and performance by the Borrower of all of the Borrower's
Obligations under the Credit Agreement and the other Loan Documents (such
guaranty by Pledgor, as it may hereafter be amended, restated, supplemented or
otherwise modified from time to time, the "Holdings Guaranty").
(4) It is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue (or participate in) Letters of Credit under the Credit Agreement that
the Pledgor shall have executed and delivered this Pledge Agreement to the
Administrative Agent for the ratable benefit of the Lenders.
NOW THEREFORE, in consideration of the premises and in order to induce
the Lenders to make their respective Loans and to issue (or participate in)
Letters of Credit under the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent, for the benefit of the Administrative Agent and the
ratable benefit of the Lenders, as follows:
1. Certain Definitions:
(a) The term "Pledged Stock" as used herein shall mean
and include the shares of Common Stock of the Borrower referred to in
Preliminary Statement (2) above, and, also, any shares, stock
certificates, options or rights issued by the Borrower as an
addition to, in substitution of, or in exchange for any such shares,
and any and all proceeds thereof, now or hereafter owned or acquired by
the Pledgor.
(b) The term "Secured Obligations" as used herein shall
mean all of the Obligations, now existing or hereafter arising pursuant
to the Loan Documents and owing from any Loan Party to any Lender or
the Administrative Agent, whether primary, secondary, direct,
contingent, or joint and several, including, without limitation, all
liabilities arising under Swap Contracts permitted under Section
8.02(c)(v) of the Credit Agreement and/or Treasury Management
Agreements between any Loan Party and any Lender or any Affiliate of a
Lender and all obligations and liabilities incurred in connection with
collecting and enforcing the foregoing.
(c) The term "Lenders" as used herein shall include any
Affiliate of any Lender which has entered into a Swap Contract
permitted under Section 8.02(c)(v) of the Credit Agreement and/or a
Treasury Management Agreement with any Loan Party.
2. (a) As collateral security for the due payment and performance
of the Secured Obligations, the Pledgor hereby pledges, assigns, hypothecates,
delivers and sets over to the Administrative Agent, on behalf of the Lenders, as
collateral security, all the Pledged Stock, and hereby grants to the
Administrative Agent, on behalf of the Lenders, a first security interest in all
the Pledged Stock and in any and all proceeds thereof and substitutions
therefor.
(b) If the Pledgor shall become entitled to receive or
shall receive any stock certificate (including, without limitation, any
certificate representing a stock dividend or a distribution in
connection with any reclassification, increase or reduction of
capital), option or rights, whether as an addition to, in substitution
of, or in exchange for any shares of the Pledged Stock, or otherwise,
the Pledgor shall accept any such instruments as the agent for the
Administrative Agent, shall hold them in trust for the Administrative
Agent, and shall deliver them forthwith to the Administrative Agent in
the exact form received, with the Pledgor's endorsement when necessary
and/or appropriate stock powers duly executed in blank, to be held by
the Administrative Agent, subject to the terms hereof, as further
collateral security for the Secured Obligations.
(c) Any or all shares of the Pledged Stock held by the
Administrative Agent hereunder may, at the option of the Administrative
Agent or its nominee be registered in the name of the Administrative
Agent or nominee. The Administrative Agent or its nominee may, upon
prior written notice to the Pledgor, after the occurrence and during
the continuation of any Event of Default, exercise all voting and
corporate rights at any meeting of the shareholders of the Borrower
including, without limitation, the right to amend the by-laws, to
remove the directors, with or without cause, and to nominate and elect
successor directors, and exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options
pertaining to any shares of the Pledged Stock as if it were the
absolute owner thereof, including, without limitation, the right to
receive dividends payable thereon, and the right to exchange, at its
discretion, any and all of the Pledged Stock upon the merger,
consolidation, reorganization, recapitalization or other readjustment
of any corporation issuing any of such shares or
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upon the exercise by any such issuer of any right, privilege or option
pertaining to any shares of the Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms
and conditions as it may determine, all without liability except to
account for property actually received by it, but the Administrative
Agent shall have no duty to exercise any of the aforesaid rights,
privileges or options and shall not be responsible for any failure to
do so or delay in so doing.
(d) Upon prior written notice to the Pledgor, in the
event of the occurrence and continuation of any Event of Default, the
Administrative Agent shall have the right to require that all cash
dividends payable with respect to any part of the Pledged Stock be paid
to the Administrative Agent to be held by the Administrative Agent as
additional security hereunder until applied to the Secured Obligations.
(e) In the event of the occurrence and continuation of
any Event of Default, the Administrative Agent without demand of
performance or other demand, advertisement or notice of any kind
(except the notice specified below of time and place of public or
private sale) to or upon the Pledgor or any other Person (all and each
of which demands, advertisements and/or notices are, to the extent
permitted by law, hereby expressly waived), may forthwith collect,
receive, appropriate and realize upon the Pledged Stock, or any part
thereof, and/or may forthwith sell, assign, give an option or options
to purchase, contract to sell or otherwise dispose of and deliver the
Pledged Stock, or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange, broker's board or at any of the
Administrative Agent's offices or elsewhere at such prices and on such
terms (including, without limitation, a requirement that any purchaser
of all or any part of the Pledged Stock shall be required to purchase
the shares constituting the Pledged Stock for investment and without
any intention to make a distribution thereof) as it may deem best, for
cash or on credit or for future delivery without assumption of any
credit risk, with the right to the Administrative Agent or any
purchaser upon any such sale or sales, whether public or private, to
purchase the whole or any part of the Pledged Stock so sold, free of
any right or equity of redemption in the Pledgor, which right or equity
is hereby expressly waived and released.
(f) The proceeds of any collection, recovery, receipt,
appropriation, realization or sale as aforesaid, shall be applied as
follows:
(i) First, to the costs and expenses of every
kind incurred in connection therewith or incidental to the
care, safekeeping or otherwise of any and all of the Pledged
Stock or in any way relating to the rights of the
Administrative Agent hereunder, including reasonable
attorneys' fees and legal expenses;
(ii) Second, to the satisfaction of the Secured
Obligations in accordance with Section 9.03 of the Credit
Agreement;
(iii) Third, to the payment of any other amounts
required by applicable law; and
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(iv) Fourth, to the Pledgor to the extent of the
surplus proceeds, if any.
(g) The Administrative Agent need not give more than five
(5) Business Days' notice to the Pledgor of the time and place of any
public sale or of the time after which a private sale may take place
and such notice shall be deemed to be reasonable notification of such
matters.
(h) The Pledgor hereby grants to the Administrative Agent
full power, without notice to the Pledgor, and without in any way
affecting the obligations of the Pledgor hereunder, to deal in any
manner with the Borrower or the Secured Obligations or the collateral
(other than the Pledged Stock, as to which the other provisions of this
Pledge Agreement shall govern) securing any of the Secured Obligations
(hereinafter called the "Collateral") and the Pledgor hereby
irrevocably waives to the fullest extent permitted by applicable law
any defenses it may now or hereafter have in any way relating to, any
or all of the following: (i) any lack of validity or enforceability of
any Loan Document or any agreement or instrument relating thereto; (ii)
any change in the time, manner or place of payment of, or in any other
term of, all or any of the Secured Obligations or any other obligations
of any other Loan Party under the Loan Documents, or any amendment or
waiver of or any consent to departure from any Loan Document,
including, without limitation, any increase in the Secured Obligations
resulting from the extension of additional credit to the Borrower or
any of its Subsidiaries or otherwise; (iii) any taking, exchange,
release or non-perfection of any Collateral, or any taking, release or
amendment or waiver of or consent to departure from any other guaranty,
for all or any of the Secured Obligations; (iv) any manner of
application of Collateral, or proceeds thereof, to all or any of the
Secured Obligations, or any manner of sale or other disposition of any
Collateral for all or any of the Secured Obligations or any other
obligations of any other Loan Party under the Loan Documents or any
other assets of the Borrower or any of its Subsidiaries; (v) any
change, restructuring or termination of the corporate structure or
existence of the Borrower or any of its Subsidiaries; (vi) any failure
of the Administrative Agent or any Lender to disclose to the Borrower
or the Pledgor any information relating to the financial condition,
operations, properties or prospects of any other Loan Party now or in
the future known to the Administrative Agent or any Lender (the Pledgor
waiving any duty on the part of the Administrative Agent or the Lenders
to disclose such information); or (vii) any other circumstance
(including, without limitation, any statute of limitations) or any
existence of or reliance on any representation by the Administrative
Agent or any Lender that might otherwise constitute a defense available
to, or a discharge of, the Borrower, the Pledgor or any other guarantor
or surety (other than payment). The Pledgor hereby waives presentment,
demand for payment, protest and notice of dishonor or nonpayment of or
with respect to the Secured Obligations. The obligations of the Pledgor
under this Pledge Agreement are independent of the Secured Obligations
of the Borrower or of any other obligations of any Loan Party or
pledgor under the Loan Documents, and a separate action or actions may
be brought and prosecuted against the Pledgor to enforce this Pledge
Agreement, without joining the Borrower, any Loan Party or any other
pledgor under the Loan Documents. The Administrative Agent may enforce
its rights and remedies under this Pledge Agreement
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without being obligated to resort first to the Borrower or the
Collateral or to any other security or to any other remedy or remedies
and may pursue all or any of its remedies at one or at different times.
(i) In the event that the proceeds of any collection,
recovery, receipt, appropriation, realization, or sale as aforesaid are
insufficient to pay all amounts to which the Administrative Agent is
legally entitled, the Pledgor will not be liable for any deficiency.
3. The Pledgor represents and warrants that:
(a) The Pledged Stock is owned directly and beneficially
and of record by the Pledgor, has been duly authorized and validly
issued and is fully paid and non-assessable;
(b) All of the shares of the Pledged Stock are owned by
the Pledgor free and clear of any pledge, mortgage, hypothecation,
lien, charge, encumbrance or any security interest in such shares or
the proceeds thereof, except for the security interest granted to the
Administrative Agent hereunder, Permitted Liens and unperfected Liens
under Section 8.01(g) of the Credit Agreement; and
(c) Upon delivery of the Pledged Stock to the
Administrative Agent for the benefit of the Lenders, this Pledge
Agreement creates and grants a valid first lien on and perfected
security interest in the shares of the Pledged Stock and the proceeds
thereof, subject to no prior security interest, lien, charge or
encumbrance or to any agreement purporting to grant to any third party
a security interest in the property or assets of the Pledgor that would
include the Pledged Stock.
4. (a) Except as expressly permitted by the Credit
Agreement, the Pledgor hereby covenants that so long as this Pledge Agreement
shall be in effect, in whole or in part, the Pledgor will not:
(i) sell, convey or otherwise dispose of any
shares of the Pledged Stock or any interest therein, nor will
the Pledgor create, incur or permit to exist any pledge,
mortgage, lien, charge, encumbrance or any security interest
whatsoever with respect to any of the Pledged Stock or the
proceeds thereof other than that created hereby, except for
the security interest granted to the Administrative Agent
hereunder, Permitted Liens and unperfected Liens under Section
8.01(g) of the Credit Agreement unless any such sale,
conveyance or disposition is subject to this Pledge Agreement;
or
(ii) consent to or approve the issuance of any
additional shares of any class of the issuer of the Pledged
Stock.
(b) The Pledgor warrants and will defend the
Administrative Agent's right, title, special property and security
interest in and to the Pledged Stock against the claims of any Person.
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5. The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of all or a part of the Pledged Stock, and may be
compelled to resort to one or more private sales to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. The Pledgor acknowledges that any such private
sales may be at places and on terms less favorable to the seller than if sold at
public sales and agrees that such private sales shall be deemed to have been
made in a commercially reasonable manner, and that the Administrative Agent has
no obligation to delay sale of any such securities for the period of lime
necessary to permit the issuer of such securities to register such securities
for public sale under the Securities Act of 1933.
6. The Pledgor shall at any time and from time to time upon the
written request of the Administrative Agent execute and deliver such further
documents and do such further acts and things as the Administrative Agent may
reasonably request in order to effect the purposes of this Pledge Agreement,
including, without limitation, delivering to the Administrative Agent on the
date hereof or at any time hereafter irrevocable proxies in respect of the
Pledged Stock in the form of Exhibit A hereto.
7. (a) Beyond the exercise of reasonable care to assure the
safe custody of the Pledged Stock while held hereunder, the Administrative Agent
shall have no duty or liability to preserve rights pertaining thereto, and shall
be relieved of all responsibility for the Pledged Stock upon surrendering it to
the Pledgor or in accordance with the Pledgor's instructions.
(b) No course of dealing between the Pledgor and the
Administrative Agent, nor any failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, any right, power
or privilege hereunder or under any of the Loan Documents shall operate
as a waiver thereof nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege.
(c) The rights and remedies herein provided are
cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law including, without limitation, the rights and
remedies of a secured party under the Uniform Commercial Code.
(d) The provisions of this Pledge Agreement are
severable, and if any clause or provision shall be held invalid or
unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect only such clause or
provision, or part thereof, in such jurisdiction and shall not in any
manner affect such clause or provision in any other jurisdiction, or
any other clause or provision in this Pledge Agreement in any
jurisdiction,
8. All notices and other communications pursuant to this Pledge
Agreement shall be in writing, either by letter (delivered by hand or commercial
messenger service or sent by
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registered or certified mail, return receipt requested) or telegram or telecopy,
addressed as follows:
(a) If to the Pledgor:
Team Health Holdings, L.L.C.
do Madison Dearborn Partners
Three Bank One Plaza
Suite 3800
Chicago, Illinois 60602
Attention: Nick Alexos
Telephone No.: (312) 895-1260
Facsimile No.: (312) 895-1256
with copies to:
Cornerstone Equity Investors
717 Fifth Avenue
Suite 1100
New York, New York 10022
Attention: Dana O'Brien
Telephone No.: (212) 753-0901
Facsimile No.: (212) 826-6798
and
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Sanford Perl; Andrew Kaufman
Telephone No.: (312) 861-2291
Facsimile No.: (312) 861-2200
(b) if to the Administrative Agent:
Bank of America, N.A.
CA5-701-05-19
1455 Market Street
San Francisco, CA 94103
Attention: Aamir Saleem
Telephone No.: (415 ) 436-2769
Facsimile No.: (415) 503-5089
9. Any notice or other communication hereunder shall be deemed to
have been given on the day on which it is telecopied to such party at its
telecopier number specified above or delivered by hand or such commercial
messenger service to such party at its address specified
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above, or, if sent by mail, on the third Business Day after the day deposited in
the mail, postage prepaid, or in the case of telegraphic notice, when delivered
to the telegraph company, addressed as aforesaid. Any party hereto may change
the Person, address or telecopier number to whom or which notices are to be
given hereunder, by notice duly given hereunder; provided, however, that any
such notice shall be deemed to have been given hereunder only when actually
received by the party to which it is addressed.
10. This Pledge Agreement shall be binding upon the Pledgor and
its successors and assigns and shall inure to the benefit of the Administrative
Agent and its successors for the benefit of the Administrative Agent and the
ratable benefit of the Lenders, and their respective successors and assigns.
11. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, ANY CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE. LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO ITS RULES PERTAINING TO CONFLICTS OF LAWS (OTHER THAN GENERAL
OBLIGATIONS LAW SECTION 5-1401).
12. The Pledgor's obligations under this Pledge Agreement are
limited to the Pledgor's interest in the Pledged Stock, and notwithstanding any
other provision herein contained, the Administrative Agent shall have no remedy
against the Pledgor other than to realize upon the security interest in, pledge
of and assignment of the Pledged Stock provided for herein.
13. Upon the latest of (i) the indefeasible payment in full in
cash of the Secured Obligations (other than contingent indemnification
obligations) and the termination of the Commitments under the Credit Agreement,
(ii) the expiration, termination or cancellation of all of the Letters of Credit
and (iii) the Maturity Date, the pledge by the Pledgor hereby shall terminate
and all rights to the Pledged Stock shall revert to the Pledgor. Upon any such
termination, the Administrative Agent will, at the Pledgor's expense, execute
and deliver to the Pledger such documents as the Pledgor shall reasonably
request to evidence such termination.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to be
duly executed and delivered by its respective officer thereunto duly authorized
as of the date first above written.
TEAM HEALTH HOLDINGS, L.L.C.
By: /s/ Robert Abramowski
---------------------
Name: Robert Abramowski
Title: Executive Vice President
Address: c/o Madison Dearborn Partners
Three Bank One Plaza
Suite 3800
Chicago, Illinois 60602
BANK OF AMERICA, N.A.
as Administrative Agent
By: /s/ Aamir Saleem
----------------
Name: Aamir Saleem
Title: Vice President
Address: Bank of America, N.A.
CA5-701-05-19
1455 Market Street
San Francisco, CA 94103
Attention: Aamir Saleem
SIGNATURE PAGE TO
HOLDINGS PLEDGE AGREEMENT
TEAM HEALTH, INC.
MARCH 2004
EXHIBIT A
TO
PLEDGE AGREEMENT
IRREVOCABLE PROXY
KNOW ALL MEN BY THESE PRESENTS that, the undersigned does hereby make,
constitute and appoint BANK OF AMERICA, as Administrative Agent (the
"Administrative Agent"), and each of the Administrative Agent's officers and
employees, its true and lawful attorneys, for it and in its name, place and
stead, to act as its proxy in respect of the shares of Capital Stock (including
Common Stock and Preferred Stock) of TEAM HEALTH, INC., a Tennessee corporation
(hereinafter referred to as the "Corporation"), that the undersigned now or
hereafter may own or hold, including, without limitation, the right, on its
behalf to demand the call by any proper officer of the Corporation pursuant to
the provisions of its Certificate of Incorporation or By-Laws and as permitted
by law of a meeting of its shareholders and at any such meeting of shareholders,
annual, general or special, to vote for the transaction of any and all business
that may come before such meeting, or at any adjournment thereof, including,
without limitation, the right to vote for the sale of all or any part of the
assets of the Corporation and/or the liquidation and dissolution of the
Corporation; giving and granting to its said attorneys full power and authority
to do and perform each and every act and thing whether necessary or desirable to
be done in and about the premises, as fully as it might or could do if
personally present with full power of substitution, appointment and revocation,
hereby ratifying and confirming all that its said attorneys shall do or cause to
be done by virtue hereof.
This Proxy is given to the Administrative Agent and to its officers and
employees in consideration of the credit to be extended to the Corporation by
the Lenders described in a certain Pledge Agreement of even, date herewith
between the undersigned and the Administrative Agent (pursuant to which the
undersigned pledged the shares of Capital Stock referred to above to the
Administrative Agent as pledgee) and in order to carry out the covenant of the
undersigned contained in such Pledge Agreement, and this Proxy shall not be
revocable or revoked by the undersigned, shall be binding upon the undersigned
and its successors and assigns until the payment in full of all of the Secured
Obligations (as defined in the aforesaid Pledge Agreement, but other than
contingent indemnification obligations) and may be exercised only after the
occurrence and during the continuation of an Event of Default under the Credit
Agreement (as such terms are defined in the aforesaid Pledge Agreement).
IN WITNESS WHEREOF, the undersigned has executed this Irrevocable Proxy
this ___ day of March, 2004.
TEAM HEALTH HOLDINGS, L.L.C.
By: ________________________________________
Name: H. Lynn Massingale, M.D.
Title: President and Chief Executive Officer