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EXHIBIT 9.2
TEAM HEALTH HOLDINGS, L.L.C
SECURITYHOLDERS AGREEMENT
THIS SECURITYHOLDERS AGREEMENT (this "Agreement") is made as of March
12, 1999, by and among Team Health Holdings, L.L.C., a Delaware limited
liability company (the "Company"), each of the persons listed on Schedule A
attached hereto and certain other securityholders of the Company who are from
time to time party hereto (collectively the "Securityholders" and individually
as a "Securityholder"). Each Securityholder and the Company are referred to
individually as a "Party" and collectively as the "Parties." Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to such
terms in Section 6 hereof.
WHEREAS, the Company and the Securityholders desire to enter into this
Agreement for the purposes, among others, of (i) establishing the composition of
the Company's board of managers (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Securityholder Shares may be transferred.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereby agree as follows:
SECTION 1. BOARD OF MANAGERS.
(a) From and after the date hereof and until the provisions of this
Section 1 cease to be effective, each Securityholder shall vote all of his or
its Securityholder Shares and any other voting securities of the Company over
which such Securityholder has voting control and shall take all other necessary
or desirable actions within his or its control (whether in his or its capacity
as a securityholder, manager, member of a board committee or officer of the
Company or otherwise, and including, without limitation, attendance at meetings
in person or by proxy for purposes of obtaining a quorum and execution of
written consents in lieu of meetings), and the Company shall take all necessary
and desirable actions within its control (including, without limitation, calling
special board and securityholder meetings), in order to cause:
(i) the authorized number of managers on the Board to be the
amount necessary to allow for the designations provided for pursuant to
Section 1(a)(ii) below;
(ii) the following persons to be elected to the Board (each a
"Manager"):
(A) as long as MDCP is a beneficial owner of
Securityholder Shares (directly or indirectly), then up to two
representatives designated by MDCP from time to time (the
"MDCP Managers"), with Timothy P. Sullivan and Nicholas W.
Alexos serving as the initial MDCP Managers;
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(B) as long as Cornerstone is a beneficial owner of
Securityholder Shares (directly or indirectly), then up to two
representatives designated by Cornerstone from time to time
(the "Cornerstone Managers"), with Dana O'Brien and Tyler
Wolfram serving as the initial Cornerstone Managers;
(C) as long as HEP is a beneficial owner of
Securityholder Shares (directly or indirectly), then one
representative designated by HEP from time to time (the "HEP
Manager"), with Kenneth O'Keefe serving as the initial HEP
Manager;
(D) the Company's Chief Executive Officer (the
"Management Manager"), with Lynn Massingale, MD serving as the
initial Management Manager; and
(E) one representative nominated by the Sponsors
(determined on the basis of a vote of a majority of the Common
Securityholder Shares held by such Persons), as long as such
representative is acceptable to the Management Investors
(determined on the basis of a vote of a majority of the Common
Securityholder Shares held by such Persons) (the "Outside
Manager"); provided that no such Outside Manager shall be a
member of the Company's or any Sponsor's management or an
employee or officer of the Company or its Subsidiaries or any
Sponsor; provided further that if such Persons are unable to
agree on an Outside Manager, such position shall remain vacant
until such Persons can so agree;
(iii) the composition of the board of directors, managers or
similar governing body of each of the Company's subsidiaries (a "Sub
Board") shall be as determined the Board, except that for purposes of
this Agreement, the board of directors of Team Health, Inc. ("Team
Health") shall not be deemed to be a "Sub Board," and the composition
of Team Health's board of directors shall be governed by that certain
Stockholders Agreement, dated March __, 1999, by and among Team Health,
the Company, Pacific Physicians Services, Inc. and certain other
stockholders of Team Health a party thereto, as amended from time to
time.
(iv) the removal from the Board or a Sub Board (with or
without cause) of any Manager shall be only upon the written request of
the person or persons originally entitled to designate such Manager
pursuant to Section 1(a)(ii) above; provided that if any manager
elected pursuant to subsection (ii)(D) above ceases to be the specified
officer of the Company, he shall be removed as a manager promptly after
such officership position ceases and his replacement will be
substituted therefor; and
(vi) in the event that any representative designated hereunder
for any reason ceases to serve as a member of the Board or a Sub Board
during his term of office, the resulting vacancy on the Board or the
Sub Board shall be filled by a representative designated by the person
or persons originally entitled to designate such Manager pursuant to
Section 1(a)(ii) above.
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(b) The Board will use reasonable efforts to hold at least four
meetings of the Board during every fiscal year, at least one of which should be
held in each 120-day period during the Company's fiscal year. The Company shall
pay all out-of-pocket expenses incurred by each Manager in connection with
attending regular and special meetings of the Board or any Sub Board. So long as
any Manager designated hereunder serves on the Board and for at least three
years thereafter, the Company shall use its best efforts to obtain and to
maintain managers and officers indemnity insurance coverage at a commercially
reasonable price satisfactory to the holders of a majority of the Common
Securityholder Shares and the Company's operating agreement shall provide for
indemnification and exculpation of Managers to the fullest extent permitted
under applicable law.
(c) If any party fails to designate a representative to fill a
managership pursuant to the terms of this Section 1, the election of a person to
such managership shall be accomplished in accordance with the Company's
operating agreement and applicable law.
SECTION 2. RESTRICTIONS ON TRANSFER OF SECURITYHOLDER SHARES.
(a) Retention of Executive Security. No Management Investor shall sell,
transfer, assign, pledge or otherwise dispose of (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in any Securityholder Shares (a "Transfer"), except (i) to the
Company, (ii) pursuant to the provisions of Sections 2(b), 2(d) or 3 below, or
(iii) pursuant to a Public Sale.
(b) Participation Rights. At least 40 days prior to Transfer of any
Securityholder Shares by any Securityholder which, together with its Affiliates
and Permitted Transferees, holds at least 10% of the Company's Common
Securityholder Shares as of immediately prior to such Transfer (a "Significant
Securityholder") (other than pursuant to (i) a Public Sale or (ii) a Transfer
under Section 2(d) or Section 3), the transferring Significant Securityholder
will deliver a written notice (the "Sale Notice") to the Company and the other
Securityholders (the "Other Securityholders"), specifying in reasonable detail
the identity of the prospective transferee(s), the Securityholder Shares to be
sold and the terms and conditions of the Transfer. In the event that the Other
Securityholders hold securities of the class of Securityholder Shares to be
transferred, they may elect to participate in the contemplated Transfer by
delivering written notice to the transferring Significant Securityholder within
15 days after delivery of the Sale Notice.
If any Other Securityholders have elected to participate in such
Transfer ("Participating Securityholders"), the transferring Significant
Securityholder and each Participating Securityholder will be entitled to sell in
the contemplated Transfer, at the same price and on the same terms, a number of
Securityholder Shares of such class equal to the product of (i) the quotient
determined by dividing the number of Securityholder Shares of such class held by
such Person by the aggregate number of Securityholder Shares of such class owned
by the transferring Significant Securityholder and all Participating
Securityholders and (ii) the number of Securityholder Shares of such class to be
sold in the contemplated Transfer; provided that for purposes of the foregoing,
(A) Securityholder Shares which have not vested (and will not vest as a result
of such transaction) or are subject to repurchase by the Company for less than
fair market value shall not be considered to be
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Securityholder Shares and (B) all Securityholder Shares held by any Permitted
Transferee of any Other Securityholder shall be deemed held by such Other
Securityholder himself or itself; provided further that if the Significant
Securityholder intends to Transfer a strip of two or more classes of
Securityholder Shares and any Other Securityholder (including his or its
Permitted Transferees) holds all such classes of Securityholder Shares, such
Other Securityholder may only participate in such Transfer if such Other
Securityholder participates with respect to all such classes of Securityholder
Shares. The transferring Significant Securityholder shall use its best efforts
to obtain the agreement of the prospective transferee(s) to the participation of
the Participating Securityholders in any contemplated Transfer, and the
transferring Significant Securityholder shall not Transfer any of its
Securityholder Shares to the prospective transferee(s) unless (1) the
prospective transferee(s) agrees to allow the participation of the Participating
Securityholders or (2) the transferring Significant Securityholder agrees to
purchase the number of such class of Securityholder Shares from any
Participating Securityholders which the Participating Securityholders would have
been entitled to sell pursuant to this Section 2(b). Each Securityholder
involved in any transaction pursuant to this Section 2(b) shall be required to
bear its pro rata share (based upon the number of securities sold or the number
of securities to be acquired pursuant to options or other rights) of the
expenses incurred by the Securityholders in connection with such transaction to
the extent such costs are incurred for the benefit of all such Securityholders
and are not otherwise paid by the Company or the acquiring party and each
Securityholder shall be obligated to join on a pro rata basis (based on the
number of securities sold or the number of securities to be acquired pursuant to
options or other rights) in any representations, warranties, indemnification
provisions or other obligations (including without limitation any escrow
arrangements) that the Significant Securityholder agrees to provide in
connection with such transaction (other than any such obligations that relate
specifically to a particular Securityholder such as indemnification with respect
to representations and warranties given by a Securityholder regarding such
Securityholder's title to and ownership of Securityholder Shares).
(c) First Refusal Rights. At least 40 days prior to any Transfer of
Securityholder Shares by any Securityholder which, together with its Affiliates
and Permitted Transferees, holds less than 10% of the Company's Common
Securityholders Shares as of immediately prior to such Transfer (other than
pursuant to (i) a Public Sale, (ii) a Transfer to the Company, or (iii) a
Transfer under Section 2(b), Section 2(d) or Section 3), the Securityholder
making such Transfer (the "Minority Transferor") shall deliver a written notice
(the "Transfer Notice") to the Company and each Significant Securityholder that
it desires to Transfer Securityholder Shares of such class, specifying in
reasonable detail the identity of the prospective transferee(s), the number to
be transferred and the terms and conditions of the Transfer, including the
proposed price per Securityholder Share of such class (which price shall be
payable solely in cash at the closing of the transaction or in installments over
time). The Company may elect to purchase all or any portion of the
Securityholder Shares to be transferred, upon the same terms and conditions as
those set forth in the Transfer Notice, by delivering a written notice of such
election to the Minority Transferor within 15 days after the Transfer Notice has
been given to the Company. If for any reason the Company does not elect to
purchase all of the Securityholder Shares to be transferred, the Significant
Securityholder(s) shall be entitled to purchase the Securityholder Shares which
the Company has not elected to purchase (the "Available Shares"), upon the same
terms and conditions as those set forth in the Transfer Notice, by giving
written notice of such election to the Minority Transferor within
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30 days after the Transfer Notice has been given to the Significant
Securityholder(s). If more than one Significant Securityholder elects to
purchase the Available Shares, the Available Shares will be allocated among such
electing securityholders pro rata according to the number of Common
Securityholder Shares owned by each such electing securityholder. The closing of
the purchase of any Securityholder Shares pursuant to this Section 2(c) shall
take place within 60 days after the date on which the parties to such purchase
have been finally determined pursuant to this Section 2(c) which, in any event,
shall be within 95 days after the Transfer Notice was delivered to the Company
and the Significant Securityholders. Notwithstanding the foregoing, if the
Company and the Significant Securityholder(s) do not elect to purchase,
collectively, all of the Securityholder Shares of a class specified in the
Transfer Notice, then the Minority Transferor may transfer all of the
Securityholder Shares of such class specified in the Transfer Notice to the
transferee(s) identified in the Transfer Notice for (i) a price no less than the
price specified in the Transfer Notice and (ii) other terms no more favorable to
the transferee(s) thereof than specified in the Transfer Notice, during the
90-day period immediately following the date on which the Transfer Notice has
been given to the Company and the Significant Securityholder(s). Any
Securityholder Shares not transferred within such 90-day period will be subject
to the provisions of this Section 2(c) upon subsequent transfer.
(d) Permitted Transfers. The restrictions contained in this Section 2
shall not apply with respect to any Transfer of Securityholder Shares by any
Securityholder:
(i) in the case of a Securityholder who is an individual,
pursuant to applicable laws of descent and distribution, or among such
individual's Family Group;
(ii) in the case of a Securityholder which is an entity, among
such entity's Affiliates; and
(iii) in the case of the Sponsors, up to ten percent of each
class of Securityholder Shares held by each of the Sponsors on the date
hereof, to employees of, consultants to and advisors to (or any entity
formed for their benefit) the Sponsors, the Company or any of its
Affiliates;
provided that the restrictions contained in this Section 2 shall continue to be
applicable to the Securityholder Shares after any of the foregoing Transfers;
and provided further that prior to or in connection with such Transfer, the
transferee of such Securityholder Shares shall have executed a Transfer Notice
in the form attached hereto as Exhibit A pursuant to which such transferee
agrees to be bound by the provisions of this Agreement and the Registration
Agreement affecting the Securityholder Shares so Transferred. Notwithstanding
the foregoing, no Party shall avoid the provisions of this Agreement by making
one or more Transfers to one or more Permitted Transferees and then disposing of
all or any portion of such Party's interest in any such Permitted Transferee,
or, in the case of an entity Securityholder, by permitting a Transfer of any
ownership interests in such entity Securityholder. All transferees permitted
under this Section 2(d) are collectively referred to herein as "Permitted
Transferees." Each Permitted Transferee shall be deemed a Securityholder for
purposes of this Agreement.
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(e) Other Agreements. Notwithstanding anything herein to the contrary,
the rights of any Securityholder to Transfer any Securityholder Shares pursuant
to the terms of this Agreement shall be subject to all such other limitations
and restrictions, if any, to which such Securityholder or such Securityholder
Shares are subject.
(f) Termination of Restrictions. The restrictions set forth in this
Section 2 shall continue with respect to each Securityholder Share until the
earlier of (i) the transfer of such Securityholder Share in a Public Sale, or
(ii) the consummation of a Sale of the Company or a Public Offering.
SECTION 3. SALE OF COMPANY; REORGANIZATION PRIOR TO PUBLIC OFFERING.
(a) Approved Sale. Subject to Section 3(c) below, if the Company's
Board of Managers recommends or approves and the holders of a majority of the
Common Securityholder Shares (the "Majority Holders") approve a Sale of the
Company (an "Approved Sale"), each Securityholder agrees to vote for, consent to
and raise no objections against the Approved Sale. If the Approved Sale is
structured as a (i) merger or consolidation, each Securityholder shall waive any
dissenters' rights, appraisal rights or similar rights in connection with such
merger or consolidation or (ii) sale of security, each Securityholder shall
agree to sell all of its Securityholder Shares on the terms and conditions
approved by the Majority Holders. Each Securityholder shall take all necessary
or desirable actions in connection with the consummation of the Approved Sale as
reasonably requested by the Majority Holders and/or the Company.
(b) Reorganization Prior to Public Offering.
(i) Subject to Section 3(c) below, if the Company's Board of
Managers recommends or approves and the Majority Holders approve a
reorganization of the Company in connection with a proposed initial
Public Offering by the Company or Team Health (the "Approved
Reorganization"), each Securityholder agrees to vote for, consent to
and raise no objections against the Approved Reorganization. If the
Approved Reorganization is structured as a (i) merger or consolidation,
each Securityholder shall waive any dissenters' rights, appraisal
rights or similar rights in connection with such merger or
consolidation or (ii) sale of securities, each Securityholder shall
agree to sell all of its Securityholders Shares on the terms and
conditions approved by the Majority Holders. Each Securityholder shall
take all necessary or desirable actions in connection with the
consummation of the Approved Reorganization as reasonably requested by
the Majority Holders and/or the Company.
(ii) As soon as practicable following the initial Public
Offering of Team Health, the Company will (i) distribute the Common
Stock of Team Health to the holders of Common Units, pro rata based on
Common Units held and (ii) distribute the Preferred Stock of Team
Health to the holders of Preferred Units, pro rata based on Preferred
Units held; provided that the Company shall not be required to make
such distribution if the Company reasonably believes that such
distribution could (A) adversely affect the accounting treatment of the
Team Health recapitalization or (B) have an adverse tax effect on the
Company or any of the Securityholders.
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(c) Obligations of Securityholders. In connection with an Approved Sale
or Approved Reorganization: (i) upon the consummation of the Approved Sale or
Approved Reorganization, all of the holders of each class of Securityholder
Shares shall receive the same form and amount of consideration per share of
Securityholder Shares as the other holders of such class, or if any holders of a
class of Securityholder Shares are given an option as to the form and amount of
consideration to be received, all holders of such class shall be given the same
option; and (ii) all holders of then currently exercisable rights to acquire
Securityholder Shares shall be given reasonable prior notice of such Approved
Sale or Approved Reorganization and a reasonable opportunity, at such holder's
election and except as otherwise provided for in any related stock option
agreement, to either (A) exercise such rights prior to the consummation of the
Approved Sale or Approved Reorganization and participate in such sale as holders
of Securityholder Shares or (B) upon the consummation of the Approved Sale or
Approved Reorganization, receive in exchange for such rights consideration equal
to the amount determined by multiplying (1) the same amount of consideration per
share of a class of Securityholder Shares received by holders of such class of
Securityholder Shares in connection with the Approved Sale less the exercise
price per share of such class of Securityholder Shares of such rights to acquire
such class of Securityholder Shares by (2) the number of securities of such
class of Securityholder Shares represented by such rights.
(d) Purchaser Representative. If any transaction undertaken pursuant to
this Section 3 involves entering into any negotiation or transaction for which
Rule 506 under the Securities Act (or any similar rule then in effect)
promulgated by the Securities and Exchange Commission may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), those Securityholders involved in such transaction who
are not "accredited investors" (as such term is defined in Rule 501 under the
Securities Act) (the "Unaccredited Securityholders") shall, at the request of
the Company or the Majority Holders, appoint one "purchaser representative" (as
such term is defined in Rule 501 under the Securities Act (or any similar rule
then in effect)) for all such Unaccredited Securityholders reasonably acceptable
to the Company. The Company shall first propose a purchaser representative to
the Unaccredited Securityholders. If holders of a majority of the Common
Securityholders Shares held by the Unaccredited Securityholders do not approve
the purchaser representative designated by the Company, such holders shall
appoint one purchaser representative to represent all Unaccredited
Securityholders, subject to the approval of the Company (which approval shall
not be unreasonably withheld). The Company shall be responsible for the fees of
the purchaser representative so appointed.
(e) Transaction Costs and Indemnity. Each Securityholder involved in
any transaction pursuant to this Section 3 shall be required to bear its pro
rata share (based upon the number of securities sold or the number of securities
to be acquired pursuant to options or other rights) of the expenses incurred by
the Securityholders in connection with such transaction to the extent such costs
are incurred for the benefit of all such Securityholders and are not otherwise
paid by the Company or the acquiring party and each Securityholder shall be
obligated to join on a pro rata basis (based on the number of securities sold or
the number of securities to be acquired pursuant to options or other rights) in
any representations, warranties, indemnification provisions or other obligations
(including without limitation any escrow arrangements) that the Majority Holders
agree
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to provide in connection with such transaction (other than any such obligations
that relate specifically to a particular Securityholder such as indemnification
with respect to representations and warranties given by a Securityholder
regarding such Securityholder's title to and ownership of Securityholder
Shares); provided that no Securityholder shall be obligated in connection with
such transaction to agree to indemnify or hold harmless the transferees with
respect to an amount in excess of the net after-tax consideration received by
such Securityholder in connection with such transaction. Costs incurred by any
such Securityholder on its own behalf shall not be considered costs of the
transaction hereunder.
SECTION 4. PREEMPTIVE RIGHTS.
(a) If the Company authorizes the issuance or sale of any equity
securities of the Company or any securities containing options or rights to
acquire any equity securities of the Company to any Sponsor (the "New
Securities"), the Company shall first offer to sell to each Securityholder who
at the time is a holder of Securityholder Shares, at the same price and on the
same terms, a portion of the total number of such New Securities equal to the
quotient of (i) the number of Common Securityholder Shares held by such Person
and its Permitted Transferees divided by (ii) the total number of Common
Securityholder Shares.
(b) In order to exercise its purchase rights pursuant to this Section,
a Securityholder must within ten business days after receipt of written notice
from the Company (the "Issuance Notice") describing in reasonable detail the New
Securities being offered, the purchase price thereof, the payment terms and such
Securityholder's percentage allotment, deliver a written notice to the Company
describing its election to purchase all or any portion of its pro rata share
determined pursuant to the immediately preceding paragraph.
(c) If a Securityholder purchases all or any portion of any New
Securities offered pursuant to this Section, such Securityholder shall be
required to concurrently purchase an equal proportion of each other class of
debt or equity securities of the Company or any of its Subsidiaries which are
issued contemporaneously in conjunction with such New Securities, if any, so
long as the Issuance Notice described all such classes of securities being
offered.
(d) During the 90 days after the expiration of the offering periods
described above, the Company shall be entitled to sell any New Securities which
the Securityholders have not elected to purchase, on terms and conditions no
more favorable to the Sponsors than those offered to the Securityholders. At the
Company's election, the Company may consummate the sale of any New Securities
(and related debt or other equity securities) contemplated hereunder to any
Securityholder pursuant to this Section 4 at any time after receipt of the
notices contemplated by paragraph (b) above, including concurrently with the
sale of such New Securities to parties other than the Securityholders. Any New
Securities offered or sold by the Company to the Sponsors after such 180-day
period must be reoffered to the Securityholders pursuant to the terms of this
paragraph.
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SECTION 5. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) Restricted Securities Legend. The Securityholder Shares have not
been registered under the Securities Act and, therefore, in addition to the
other restrictions on Transfer contained in this Agreement, cannot be sold
unless subsequently registered under the Securities Act or an exemption from
such registration is then available. In the event the Securityholders Shares are
in certificated form, each certificate evidencing Securityholder Shares and each
certificate issued in exchange for or upon the Transfer of any Securityholder
Shares shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED
ON ___________, AND 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 SPECIFIED IN THE SECURITYHOLDERS AGREEMENT, DATED AS OF MARCH
12, 1999 (THE "SECURITYHOLDERS AGREEMENT"), AS AMENDED AND MODIFIED
FROM TIME TO TIME, AMONG THE ISSUER (THE "COMPANY"), AND CERTAIN
INVESTORS, AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF
SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT
TO ANY TRANSFER. A COPY OF THE SECURITYHOLDERS AGREEMENT SHALL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND
WITHOUT CHARGE."
In the event the Securityholder Shares are in certificated form, the Company
shall imprint such legend on certificates evidencing Securityholder Shares. The
legend set forth above shall be removed from the certificates evidencing any
securities of the Company which cease to be Securityholder Shares in accordance
with the definition thereof.
(b) Opinion of Counsel. No holder of Securityholder Shares may Transfer
any Securityholder Shares (except (i) pursuant to an effective registration
statement under the Securities Act, (ii) to a wholly-owned Affiliate or (iii) as
part of a Public Sale) without first delivering to the Company (unless waived by
the Board of Managers) an opinion of counsel (reasonably acceptable in form and
substance to the Board of Managers) that neither registration nor qualification
under the Securities Act and applicable state securities laws is required in
connection with such Transfer. The conditions to Transfer set forth in this
Section 5(b) are in addition to any other restrictions on Transfer contained in
this Agreement.
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(c) Actions By Transferee. Prior to Transferring any Securityholder
Shares (other than pursuant to a Public Sale), the Transferring holder of
Securityholder Shares shall cause the prospective transferee to be bound by this
Agreement and to execute and deliver to the Company and the other holders of
Securityholder Shares counterparts to this Agreement.
(d) Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Securityholder Shares in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Securityholder Shares as the
owner of such securities for any purpose.
SECTION 6. DEFINITIONS.
"Affiliate" of any particular Person means any other Person
controlling, controlled by or under common control with such particular Person,
where "control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person whether through the ownership of
voting securities, contract or otherwise, and if such Person is a partnership,
"Affiliate" shall also mean each general partner and limited partner of such
Person.
"Common Securityholder Shares" means Securityholder Shares which are
(i) Common Units (as defined in the LLC Agreement), (ii) warrants, options or
other rights to subscribe for or to acquire, directly or indirectly, Common
Units, whether or not then exercisable or convertible, and (iii) security or
other securities which are convertible into or exchangeable for, directly or
indirectly, Common Units, whether or not then convertible or exchangeable. As to
any particular Common Securityholder Shares, such securities shall cease to be
Common Securityholder Shares when they have been disposed of in a Public Sale or
repurchased by the Company or any Subsidiary. References in this Agreement to a
majority of, or a certain percentage of, the Common Securityholder Shares, shall
be deemed to be references to a majority of the Common Security represented by
the Common Securityholder Shares or a certain percentage of the Common Security
represented by the Common Securityholder Shares, calculated on a fully-diluted
basis, as applicable.
"Cornerstone" means Cornerstone Equity Investors IV, L.P. and each of
its Affiliates.
"Family Group" means a, with respect to any Securityholder, such
Securityholder's spouse, siblings, parents and descendants (whether natural or
adopted), any trust, corporation, partnership or limited liability company
solely for the benefit of such Securityholder and/or such Securityholder's
spouse, siblings, parents, and/or descendants (whether natural or adopted) (and
the beneficiaries of such trusts upon their dissolution), and such
Securityholder's heirs, devises or estate upon such Securityholder's death.
"HEP" means Healthcare Equity Partners, L.P., Healthcare Equity Q.P.
Partners, L.P. and each of their Affiliates.
"Independent Third Party" means any Person who, immediately prior to
the contemplated transaction, does not own in excess of 15% of the Common
Securityholder Shares (a "15% Owner"), who is not an Affiliate of any such 15%
Owner and who is not the spouse or
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descendent (by birth or adoption) of any such 15% Owner or a trust for the
benefit of any such 15% Owner and/or such other Persons.
"LLC Agreement" means that certain Amended and Restated Limited
Liability Company Agreement of the Company, dated as of the date hereof, by and
among the Company's members, as amended, modified and/or supplemented from time
to time.
"Management Investors" means any person who, at the time of his
acquisition of Securityholder Shares, was an employee of the Company or any of
its Subsidiaries or received such security in contemplation of becoming an
employee of the Company or any of its Subsidiaries.
"MDCP" means Madison Dearborn Capital Partners II, L.P. and each of its
Affiliates.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint security company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Offering" means the sale in an underwritten public offering
registered under the Securities Act of securities of any class of the Common
Security.
"Public Sale" means any sale of Securityholder Shares to the public
pursuant to an offering registered under the Securities Act or to the public
through a broker, dealer or market maker pursuant to the provisions of Rule 144
under the Securities Act.
"Registration Agreement" means that certain Registration Agreement,
dated as of the date hereof, by and among the Company and its members, as
amended, modified and/or supplemented from time to time.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital security of the Company possessing the voting
power under normal circumstances (e.g., without giving effect to the provisions
of Section 1 of this Agreement) to elect a majority of the Company's Board of
Managers (whether by merger, consolidation, sale or transfer of the Company's
capital security) or (ii) more than 50% of the Company's assets determined on a
consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Sponsors" means MDCP, Cornerstone and HEP.
"Securityholder Shares" means (i) any capital security of the Company
purchased or otherwise acquired by any Securityholder, (ii) any warrants,
options or other rights to subscribe for or to acquire, directly or indirectly,
any capital security of the Company, purchased or otherwise acquired by any
Securityholder, whether or not then exercisable or convertible, and (iii) any
security or other securities which are convertible into or exchangeable for,
directly or indirectly, any capital security of the Company, purchased or
otherwise acquired by any Securityholder, whether or not then
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12
convertible or exchangeable, (iv) any securities or rights issued or issuable
directly or indirectly with respect to the securities and rights referred to in
clauses (i), (ii) and (iii) above by way of security dividend or security split
or in connection with a combination of securities, recapitalization, merger,
consolidation or other reorganization. As to any particular Securityholder
Shares, such securities shall cease to be Securityholder Shares when they have
been disposed of in a Public Sale or repurchased by the Company or any
Subsidiary.
"Subsidiary" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares of
security entitled (without regard to the occurrence of any contingency) to vote
in the election of managers, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the limited liability company, partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a limited liability company, partnership, association or
other business entity if such Person or Persons shall be allocated a majority of
limited liability company, partnership, association or other business entity
gains or losses or shall be or control the managing manager or general partner
of such limited liability company, partnership, association or other business
entity.
"Transfer" means any sale, transfer, assignment, pledge or other
disposition (whether with or without consideration and whether voluntarily or
involuntarily or by operation of law).
SECTION 7. MISCELLANEOUS.
(a) No Inconsistent Agreements. The Company will not hereafter enter
into any agreement with respect to the Company's securities which is
inconsistent with or violates the rights granted to the holders of
Securityholder Shares in this Agreement.
(b) Additional Securityholders. In connection with the issuance of any
additional equity securities of the Company to any Person, the Company may
permit such Person to become a party to this Agreement and succeed to all of the
rights and obligations of a "Securityholder" under this Agreement by obtaining
the consent of the holders of a majority of the Common Securityholder Shares and
an executed counterpart signature page to this Agreement, and, upon such
execution, such Person shall for all purposes be a "Securityholder" party to
this Agreement.
(c) Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment, or waiver of any provision of this Agreement will be
effective against the Company or the holders of Securityholder Shares, unless
such modification, amendment, or waiver is approved in writing by the Company
and the holders of at least a majority of the Common Securityholder Shares;
provided, however, that in the event that such amendment or waiver would
materially and adversely affect a holder or group of holders of Securityholder
Shares in a manner substantially different than any other holders of
Securityholder Shares, then such amendment or
- 12 -
13
waiver will require the consent of such holder of Securityholder Shares or a
majority of the Securityholder Shares held by such group of holders materially
and adversely affected. Notwithstanding the foregoing, if an amendment or
modification of this Agreement serves merely to add a party hereto, then such
amendment or modification will be effective against the Company, and the holders
of Securityholder Shares if such amendment or modification is approved in
writing by the Company, the holders of at least a majority of the Common
Securityholder Shares, and such new party hereto. The failure of any party to
enforce any of the provisions of this Agreement will in no way be construed as a
waiver of such provisions and will not affect the right of such party thereafter
to enforce each and every provision of this Agreement in accordance with its
terms.
(d) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal, or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed, and enforced in such jurisdiction as if such invalid,
illegal, or unenforceable provision had never been contained herein.
(e) Entire Agreement. Except as otherwise expressly set forth herein,
this Agreement, those documents expressly referred to herein, and the other
documents of even date herewith embody the complete agreement and understanding
among the parties and supersede and preempt any prior understandings,
agreements, or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.
(f) Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the holders of Securityholder Shares (or any portion thereof) as
such shall be for the benefit of, and enforceable by, any subsequent holder of
any Securityholder Shares (or of such portion thereof).
(g) Counterparts. This Agreement may be executed in separate
counterparts each of which will be an original and all of which taken together
shall constitute one and the same agreement.
(h) Remedies. Any Person having rights under any provision of this
Agreement shall be entitled to enforce their rights under this Agreement
specifically to recover damages by reason of any breach of any provision of this
Agreement and to exercise all other rights existing in their favor. The parties
hereto agree and acknowledge that money damages may not be an adequate remedy
for any breach of the provisions of this Agreement and that any Securityholder
may in its sole discretion apply to any court of competent jurisdiction for
specific performance and/or injunctive relief (without posting a bond or other
security) in order to enforce or prevent any violation of the provisions of this
Agreement.
- 13 -
14
(i) Notices. All notices, demands, and other communications given or
delivered under this Agreement shall be in writing and shall be deemed to have
been given, (i) when received if given in person, (ii) on the date of electronic
confirmation of receipt if sent by telex, facsimile or other wire transmission,
(iii) three days after being deposited in the U.S. mail, certified or registered
mail, postage prepaid, or (iv) one day after being deposited with a reputable
overnight courier. Notices, demands, and communications shall, unless another
address is specified in writing, be sent to (i) the Company at the address or
telecopy number indicated below, (ii) the Securityholders at the address
specified on the attached Schedule A and (iii) any subsequent holder of
Securityholder Shares subject to this Agreement at such address as is indicated
in the Company's records:
The Company: with a copy to:
Team Health Holdings, L.L.C. Kirkland & Ellis
c/o Madison Dearborn Capital Partners II, L.P. 200 East Randolph
Three First National Plaza, Suite 3800 Chicago, Illinois 60601
Chicago, Illinois 60602 Attention: Sanford E. Perl, Esq.
Attention: Timothy Sullivan Fax No. (312) 861-2200
Fax No. (312) 895-1001
(j) Governing Law. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights and obligations
of the Company and its security holders. All other issues and questions
concerning the construction, validity, enforcement, and interpretation of this
Agreement and the exhibits and schedules 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 New York.
(k) No Strict Construction. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction shall be applied against any
party.
(l) Board Approval. Whenever this Agreement calls for or refers to the
consent or approval of any matter by any holder of Securityholder Shares, such
consent or approval shall be deemed given by such holder if each of such
holder's designees on the Company's board of managers (the "Board") has, in his
capacity as a manager of the Company, given his consent or approval with respect
to such matter at a duly convened meeting of the Board or pursuant to an
effective unanimous written consent of the Board, unless, with respect to any
given matter, such holder notifies the Company in writing that the consent or
approval at the Board level by such holder's designees on the Board does not
constitute the consent or approval by such holder itself.
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15
(m) Business Days. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company chief-executive office is located, the time
period shall automatically be extended to the business day immediately following
such Saturday, Sunday or legal holiday.
(n) Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience only and do not constitute a part of this
Agreement.
SECTION 8. TERMINATION. This Agreement shall continue in effect until
the consummation of a Sale of the Company, after which time this Agreement shall
terminate automatically and shall have no further force and effect; provided
that the restrictions set forth in Section 2 and Section 3(b) shall terminate
earlier upon the consummation of a Public Offering by the Company.
* * * *
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16
IN WITNESS WHEREOF, the Parties have executed this Securityholders
Agreement as of the date and year first above written.
TEAM HEALTH HOLDINGS, L.L.C.
By: ______________________________
Its: _____________________________
MADISON DEARBORN CAPITAL PARTNERS II, L.P.
By: Madison Dearborn Partners II, L.P.
Its: General Partner
By: Madison Dearborn Partners, Inc.
Its: General Partner
By: ___________________________
Its: __________________________
CORNERSTONE EQUITY INVESTORS IV, L.P.
By: Cornerstone Equity Investors IV LLC
Its: General Partner
By: _______________________________
Its: ______________________________
HEALTHCARE EQUITY PARTNERS, L.P.
By: Beecken, Petty & Company, L.L.C.
Its: General Partner
By: _______________________________
Its: ______________________________
17
[CONTINUATION OF SIGNATURE PAGES TO SECURITYHOLDERS AGREEMENT]
HEALTHCARE EQUITY Q.P. PARTNERS, L.P.
By: Beecken, Petty & Company, L.L.C.
Its: General Partner
By: _______________________________
Its: ______________________________
TEAM HEALTH, INC. EQUITY
DEFERRED COMPENSATION PLAN TRUST
By: The Trust Company of Knoxville, as Trustee
By: _______________________________
Its: ______________________________
18
[CONTINUATION OF SIGNATURE PAGES TO SECURITYHOLDERS AGREEMENT]
/s/ H. Lynn Massingale
__________________________________________
H. LYNN MASSINGALE, M.D.
/s/ Michael L. Hatcher
__________________________________________
MICHAEL L. HATCHER
/s/ Jeffrey Bettinger
__________________________________________
JEFFREY BETTINGER, M.D.
/s/ David P. Jones
__________________________________________
DAVID P. JONES
/s/ Stephen D. Sherlin
__________________________________________
STEPHEN D. SHERLIN
/s/ Neil J. Principe
__________________________________________
NEIL J. PRINCIPE, M.D.
/s/ Richard Gillespie
__________________________________________
RICHARD GILLESPIE, M.D.
/s/ James E. George
__________________________________________
JAMES E. GEORGE, M.D.
/s/ Randal L. Dabbs
__________________________________________
RANDAL L. DABBS, M.D.
/s/ Monty C. Scott
__________________________________________
MONTY C. SCOTT
19
[CONTINUATION OF SIGNATURE PAGES TO SECURITYHOLDERS AGREEMENT]
/s/ Randall S. Aguiar
__________________________________________
RANDALL S. AGUIAR
/s/ John Craig
__________________________________________
JOHN CRAIG
/s/ William R. Machuga
__________________________________________
WILLIAM R. MACHUGA
/s/ Mary Pastick
__________________________________________
MARY PASTICK
/s/ Michael J. Weiner
__________________________________________
MICHAEL J. WEINER
/s/ James V. Hillman
__________________________________________
JAMES V. HILLMAN, M.D.
/s/ Mark E. Jergens
__________________________________________
MARK E. JERGENS
/s/ Gerard LaSalle
__________________________________________
GERARD LASALLE, M.D.
/s/ James J. Rybak
__________________________________________
JAMES J. RYBAK, M.D.
/s/ John R. Staley
__________________________________________
JOHN R. STALEY, M.D.
20
SCHEDULE A
NAME AND NOTICE ADDRESS
Madison Dearborn Capital Partners II, L.P.
Three First National Plaza, Suite 3800
Chicago, IL 60602
Attention: Timothy Sullivan
Cornerstone Equity Investors IV, L.P.
717 Fifth Avenue, Suite 1100
New York, NY 10022
Attention: Dana J. O'Brien
Healthcare Equity Partners, L.P.
901 Warrenville Road, Suite 205
Lisle, IL 60532
Attention: Kenneth O'Keefe
Healthcare Equity Q.P. Partners, L.P.
901 Warrenville Road, Suite 205
Lisle, IL 60532
Attention: Kenneth O'Keefe
Team Health, Inc. Equity
Deferred Compensation Plan Trust
c/o The Trust Company of Knoxville, as Trustee
One Centre Square
620 Market Street Suite 300
Knoxville, TN 31902
Attention: James Shelby
H. Lynn Massingale, M.D.
22000 Beals Chapel Road
Lenoir City, TN 37772
Michael L. Hatcher
1041 Hayslope Drive
Knoxville, TN 37919
Jeffrey Bettinger, M.D.
5925 SW 114 Terrace
Miami, FL 33156
David D. Jones
1291 Kensington Drive
Knoxville, TN 37922
Stephen D. Sherlin
8219 Glenrothes Blvd.
Knoxville, TN 37909
Neil J. Principe, M.D.
5 Isla Bahia Terrace
Ft. Lauderdale, FL 33316
21
Richard Gillespie, M.D.
1855 Happy Valley Road
Santa Rosa, CA 95409
Randal L. Dabbs, M.D.
1871 Cherokee Bluff Drive
Knoxville, TN 37920
Monty C. Scott
1828 Scenic Valley Lane
Knoxville, TN 37922
Randall S. Aguiar
4911 NW 65th Avenue
Lauderhill, FL 33319
John Craig
12226 Brighton Court
Knoxville, TN 37922
William R. Machuga
12116 East Ashton Court
Knoxville, TN 37922
Mary Pastick
9077 Boca Gardens Cr S
Boca Raton, FL 33496
Michael J. Weiner
12922 NW 20th Street
Pembroke Pines, FL 33028
James V. Hillman, M.D.
34 Ladoga Avenue
Tampa, FL 33606
Mark E. Jergens
4122 University Boulevard
Houston, TX 77005
Gerard LaSalle, M.D.
PO Box 916
Vashon Island, WA 98070
James J. Rybak, M.D.
3878 N. Valley Road
Fairview Park, OH 44126
John R. Staley, M.D.
1865 Stonebrook Drive
Knoxville, TN 37923
THG Investment, L.L.C.
c/o James E. George, M.D.
532 Cooper Street
Woodbury, NJ 08096
22
EXHIBIT A
FORM OF TRANSFER NOTICE AND JOINDER AGREEMENT
This notice is being delivered to Team Health Holdings, L.L.C., a
Delaware limited liability company (the "Company"), pursuant to Section 2(d) of
the Securityholders Agreement, dated as of March __, 1999 (as amended from time
to time, the "Securityholders Agreement"), among the Company, the
Securityholders and certain other securityholders of the Company who are from
time to time party thereto. Capitalized terms used herein and not defined shall
have the meanings assigned to such terms in the Securityholders Agreement.
The undersigned, being a Permitted Transferee under the Securityholders
Agreement, hereby notifies the Company that [name of Securityholder] has
transferred to the undersigned ______ Securityholder Shares (_____ Common Units
and _____ Preferred Units). In connection with such transfer, the undersigned
hereby becomes a party to the Securityholders Agreement and Registration
Agreement and agrees to be bound by the provisions of such Securityholders
Agreement and Registration Agreement affecting such Securityholder Shares.
Any notice provided for in the Securityholders Agreement or
Registration Agreement should be delivered to the undersigned at the address set
forth below:
______________________________
______________________________
Telephone: ___________________
Facsimile: ___________________
Date: _______________
_________________________
[Permitted Transferee]