exv10w23






EXHIBIT 10.23




AMENDMENT NO. 1 TO

SENIOR MANAGEMENT AGREEMENT




     THIS AMENDMENT NO. 1 TO SENIOR MANAGEMENT AGREEMENT (this “Amendment”), dated as of
May 12, 2006, is made by and among Capella Holdings, Inc., a Delaware corporation (the
“Company”), Capella Healthcare, Inc., a Delaware corporation (“Employer”), and
Howard T. Wall, III (“Executive”), and GTCR Fund VIII, L.P., a Delaware limited partnership
(the “Majority Holder”).



RECITALS




     WHEREAS, the Company, Employer and Executive entered into a Senior Management Agreement, dated
as of November 7, 2005 (the “Senior Management Agreement”);



     WHEREAS, the Company desires to sell to Executive and Executive desires to purchase from the
Company, 157,950 additional shares of Common Stock; and



     WHEREAS, the Company, Employer, Executive and the Majority Holder desire to amend the Senior
Management Agreement as set forth herein pursuant to Section 11(k) of the Senior Management
Agreement;



     NOW, THEREFORE, in consideration of the foregoing recitals, which shall constitute a part of
this Amendment, and the mutual promises contained in this Amendment, and intending to be legally
bound thereby, the parties agree as follows:



     1. On the date hereof, Executive will purchase, and the Company will sell, 157,950 shares of
Common Stock (the “Additional Shares”) at a price of $0.50 per share. The Company will
deliver to Executive a copy of the certificate(s) representing the Additional Shares, and Executive
will deliver to the Company as payment for the Additional Shares a promissory note in the form of
Exhibit A attached hereto (the “Additional Shares Executive Note”) in an aggregate
principal amount equal to $78,975.00. For purposes of clarification, the Additional Shares shall
be deemed Executive Securities.



     2. Within 30 days after the purchase of the Additional Shares hereunder, Executive will make
an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue
Code and the regulations promulgated thereunder in the form of Exhibit B attached hereto.



     3. In connection with the purchase and sale of the Additional Shares, Executive represents and
warrants to the Company that:



          (a) The Additional Shares to be acquired by Executive pursuant to this Amendment will be
acquired for Executive’s own account and not with a view to, or intention of, distribution thereof
in violation of the Securities Act, or any applicable state securities laws, and



 









 




the Additional Shares will not be disposed of in contravention of the Securities Act or any
applicable state securities laws.




          (b) Executive is an executive officer of the Company and Employer, is sophisticated in
financial matters and is able to evaluate the risks and benefits of the investment in the
Additional Shares.



          (c) Executive is an “accredited investor” within the meaning of Securities and Exchange
Commission Rule 501 of Regulation D.



          (d) Executive is able to bear the economic risk of her investment in the Additional Shares for
an indefinite period of time because the Additional Shares have not been registered under the
Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities
Act or an exemption from such registration is available.



          (e) Executive has had an opportunity to ask questions and receive answers concerning the terms
and conditions of the offering of Additional Shares and has had full access to such other
information concerning the Company as she has requested.



          (f) This Amendment constitutes the legal, valid and binding obligation of Executive,
enforceable in accordance with its terms, and the execution, delivery and performance of this
Amendment by Executive does not and will not conflict with, violate or cause a breach of any
agreement, contract or instrument to which Executive is a party or any judgment, order or decree to
which Executive is subject.



          (g) Executive is neither party to, nor bound by, any other employment agreement, consulting
agreement, noncompete agreement, non-solicitation agreement or confidentiality agreement, except
for the Senior Management Agreement and that certain Executive Severance Agreement between
Executive and Province Healthcare Company, dated as of October 18, 1999 (the “Severance
Agreement”). The Severance Agreement has not been amended. Without limiting the foregoing,
Executive’s duties to the Company and its Subsidiaries will not conflict with or breach the terms
of the Severance Agreement.



          (h) Executive is a resident of the State of Tennessee.



     4. The Additional Shares have been granted hereunder in connection with and as a part of the
compensation and incentive arrangements between the Company and Executive and the issuance of the
Additional Shares hereunder is intended to qualify for an Exemption. In the event that any
provision of this Agreement would cause the Additional Shares hereunder to not qualify for the
Exemption, Executive agrees that the Agreement shall be deemed automatically amended to the extent
necessary to cause the Additional Shares to qualify for the Exemption.



     5. Concurrently with the execution of this Amendment, Executive shall execute in blank ten
stock transfer powers in the form of Exhibit C attached hereto (the “Additional Shares
Stock Powers”) with respect to the Additional Shares and shall deliver such Additional Shares
Stock Powers to the Company. The Additional Shares Stock Powers shall authorize the Company to
assign, transfer and deliver the Additional Shares to the appropriate acquiror thereof



2









 




pursuant to Section 3 of the Senior Management Agreement or Section 4 of the Stockholders
Agreement and under no other circumstances.




     6. Amendment to Section 3(b). Section 3(b) of the Senior Management Agreement is
hereby deleted in its entirety and replaced with the following provision:




“In the event of a Separation, (i) the purchase price for each share of
Unvested Common Stock will be the lesser of (A) Executive’s Original Cost
for such share, and (B) the Fair Market Value of such share as of the date
of the Repurchase Notice (as defined in 
Section 3(c) below)
delivered pursuant to this Section 3, and (ii) the purchase price
for each share of Vested Stock will be the Fair Market Value of such share
as of the date of the Repurchase Notice delivered pursuant to this
Section 3; provided, however, that if Executive’s employment
is terminated with Cause, the purchase price for each share of Vested Common
Stock will be the lesser of (A) Executive’s Original Cost for such share and
(B) the Fair Market Value of such share as of the date of the Repurchase
Notice.”



     7. Amendment to Section 3(c). The first sentence of Section 3(c) of the Senior
Management Agreement is hereby deleted in its entirety and replaced with the following sentence:




“In the event of a Separation, the Company (with the approval of the Board)
may elect to purchase all or any portion of the Unvested Common Stock and/or
the Vested Common Stock by delivering written notice (the “Repurchase
Notice”) to the holder or holders of such Executive Securities on or
prior to the date which is twelve months and one day after the Separation;
provided that the Company may not deliver the Repurchase Notice with
respect to any shares of Vested Common Stock earlier than six months and one
day after the date such shares became Vested Common Stock.”



     8. Notwithstanding the provisions of Section 5(a) of the Senior Management Agreement, the
certificates representing the Additional Shares will bear a legend in substantially the following
form:




“THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF
MAY 12, 2006, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE “ACT”), AND MAY NOT BE SOLD OR TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION
FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE
OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT



3









 






AGREEMENT BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY AND OTHER
PARTIES, DATED AS OF NOVEMBER 7, 2005, AS AMENDED. A COPY OF SUCH AGREEMENT
MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE OF
BUSINESS WITHOUT CHARGE.




THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS,
A FULL STATEMENT OF ALL OF THE POWERS, DESIGNATIONS, PREFERENCES AND
RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF
STOCK OR SERIES THEREON AUTHORIZED TO BE ISSUED BY THE COMPANY AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND/OR
RIGHTS.”



     9. Ratification. All other paragraphs, provisions, and clauses in the Senior
Management Agreement not so modified remain in full force and effect as originally written.



     10. Defined Terms. Certain capitalized terms not defined herein shall have the
meanings given to such terms in the Senior Management Agreement.



     11. Counterparts. This Amendment may be executed in one or more counterparts, each of
which is an original, but all of which together constitute one and the same instrument. Any
counterpart may be executed by facsimile signature and such facsimile signature shall be deemed an
original.



     12. Governing Law; Binding Agreement. All questions concerning the construction,
validity, enforcement and interpretation of this Amendment shall be governed by the internal law of
the State of Delaware without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of Delaware or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of Delaware.



*      *      *      *








4









 








     IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year
first above written.



	 	 	 	 	 
	 	CAPELLA HOLDINGS, INC.

 	 
	 	By:  	/s/ Daniel S. Slipkovich 	 
	 	 	Name:  	Daniel S. Slipkovich 	 
	 	 	Its:    Chief Executive Officer 	 
	 
	 	CAPELLA HOLDINGS, INC.

 	 
	 	By:  	/s/ Daniel S. Slipkovich 	 
	 	 	Name:  	Daniel S. Slipkovich 	 
	 	 	Its:    Chief Executive Officer 	 
	 
	 	 	 
	 	  	/s/ Howard T. Wall, III
 	 
	 	 	Howard T. Wall, III 	 
	 	 	 	 





	 	 	 	 	 
	 	Agreed and Accepted by:



GTCR FUND VIII, L.P., as Majority Holder

 	 
	 	By:  	GTCR Partners VIII, L.P.
 	 
	 	 	Its:    General Partner 	 
	 	 	 
	 	By:  	          GTCR Golder Rauner II, L.L.C.
 	 
	 	 	Its:    General Partner 	 
	 	 	 	 
	 	By:  	/s/ Joseph P. Nolan
 	 
	 	 	Name:  	Joseph P. Nolan 	 
	 	 	Its: 	    Principal 	 
	 



Signature Page to Amendment No.1 to Senior Management Agreement



 








 





Exhibit A




Form of Additional Shares Executive Note




PROMISSORY NOTE



			
	$78,975.00
	 	May 12, 2006






     For value received, Howard T. Wall, III (“Executive”) promises to pay to the order of
Capella Holdings, Inc., a Delaware corporation (the “Company”), at its principal offices or
at such other place as designated in writing by the holder hereof, the aggregate principal amount
of $78,975.00. This Note is a full recourse note and was issued pursuant to and is subject to the
terms of the Senior Management Agreement, dated as of November 7, 2005, by and between the Company
and Executive, as amended (the “Senior Management Agreement”). Certain terms used herein
and not otherwise defined shall have the meanings given to such terms in the Senior Management
Agreement.



     Subject to the terms of this Note, on the date that is the third anniversary of the Employment
Date, Executive shall pay the entire principal amount of this Note then outstanding to the holder
of this Note, together with all accrued and unpaid interest on the principal amount of this Note.
Executive shall prepay the entire outstanding principal amount of this Note and all accrued and
unpaid interest thereon upon the earlier of (i) the effective date of Executive’s termination for
any reason unless Executive’s employment is terminated by the Company without Cause, (ii) an
initial Public Offering or (iii) the sale or transfer of the Executive Securities purchased with
this Note. In addition, the payment of the principal amount and accrued interest and the other
amounts owing under this Note is subject to certain offset rights under the Senior Management
Agreement.



     Interest shall accrue on the outstanding principal amount of this Note at a rate equal to the
prime rate at date of issuance plus one percent (1%) per annum and shall be payable at such time as
the principal of this Note becomes due and payable.



     In the event the Executive fails to pay any amounts due hereunder when due, Executive shall
pay to the holder hereof, in addition to such amounts due all costs of collection, including
reasonable attorneys’ fees.



     Executive, or her successors and assigns, hereby waives diligence, presentment, protest and
demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees
that this Note, or any payment hereunder, may be extended from time to time and that the holder
hereof may accept security for this Note or release security for this Note, all without in any way
affecting the liability of Executive hereunder.



     This Note shall be governed by the internal laws, not the laws of conflicts, of the State of
Delaware.



	 	 	 	 	 
	 	 	 
	 	  	

 	 
	 	 	Howard T. Wall, III 	 
	 	 	 	 



 









 






	 	 	 	 	 



Exhibit B




May 12, 2006




ELECTION TO INCLUDE SECURITIES IN GROSS

INCOME PURSUANT TO SECTION 83(b) OF THE

INTERNAL REVENUE CODE





     The undersigned purchased shares of Common Stock (the “Shares”), of Capella Holdings,
Inc., a Delaware corporation (the “Company”) on May 12, 2006 (the “Closing Date”).
Under certain circumstances, the Company has the right to repurchase certain of the Shares at cost
from the undersigned (or from the holder of the Shares, if different from the undersigned) should
the undersigned cease to be employed by the Company and its subsidiaries or upon certain other
events. Hence, the Shares are subject to a substantial risk of forfeiture and are
non-transferable. The undersigned desires to make an election to have the Shares taxed under the
provision of Code §83(b) at the time she purchased the Shares.



     Therefore, pursuant to Code §83(b) and Treasury Regulation §1.83-2 promulgated thereunder, the
undersigned hereby makes an election, with respect to the Shares (described below), to report as
taxable income for calendar year 2006 the excess (if any) of the Shares’ fair market value on May
12, 2006 over the purchase price thereof.



     The following information is supplied in accordance with Treasury Regulation § 1.83-2(e):



     1. The name, address and social security number of the undersigned:


Howard T. Wall, III

1760 Old Hillsboro Road

Franklin, Tennessee 37069

SSN: ###-##-####




     2. A description of the property with respect to which the election is being made: 157,950
shares of Common Stock of the Company.



     3. The date on which the property was transferred May 12, 2006. The taxable year for which
such election is made: calendar year 2006.



     4. The restrictions to which the Shares are subject are set forth in a Senior Management
Agreement, dated November 7, 2005, between the Company, a subsidiary of the Company, and the
undersigned, as amended (the “Senior Management Agreement”). A copy of the Senior
Management Agreement is available upon request. In general, under the Senior Management Agreement,
all of the Shares are subject to a five-year vesting schedule, with 20% of such Shares becoming
vested on each anniversary of the Initial Vesting Date (as defined in the Senior Management
Agreement) if the undersigned remains employed as of such date. The Company has an option to
repurchase any unvested Shares upon a termination of the undersigned’s employment prior to vesting,
with a purchase price equal to the undersigned’s original cost for the Shares or, if less, the fair
market value of the unvested Shares.



 









 





     5. The fair market value on May 12, 2006 of the property with respect to which the election is
being made, determined without regard to any lapse restrictions: $0.50 per share of Common Stock.



     6. The amount paid for such property: $0.50 per share of Common Stock.



*      *      *      *      *







 









 








     A copy of this election has been furnished to the Secretary of the Company pursuant to
Treasury Regulations §1.83-2(e)(7). A copy of this election will be submitted with the 2006
federal income tax return of the undersigned pursuant to Treasury Regulation § 1.83-2(c).


Dated: May 12, 2006




	 	 	 	 	 
	 	 	 
	 	  	
 	 
	 	 	Howard T. Wall, III 	 
	 	 	 	 



 









 






	 	 	 	 	 



Exhibit C




ASSIGNMENT SEPARATE FROM CERTIFICATE





     FOR VALUE RECEIVED, Howard T. Wall, III (“Executive”) does hereby sell, assign and
transfer unto__________ , a __________,__________ shares of __________ of Capella Holdings, Inc., a Delaware corporation (the
“Company”), standing in the undersigned’s name on the books of the Company represented by
Stock Certificate Nos. _____________ herewith and does hereby irrevocably constitute and appoint
each principal of GTCR Golder Rauner, L.L.C. or GTCR Golder Rauner II, L.L.C. (acting alone or with
one or more other such principals) as attorney to transfer the said securities on the books of the
Company with full power of substitution in the premises.



     This Assignment Separate from Certificate may be used only for purposes of or in connection
with transfers made in connection with Section 3 of that certain Senior Management Agreement among
the Company, Capella Healthcare, Inc., a Delaware corporation, and Executive, dated as of November
7, 2005, as amended from time to time pursuant to its terms, or Section 4 of that certain
Stockholders Agreement, among the Company, Executive and certain stockholders of the Company, dated
as of May 4, 2005, as amended from time to time pursuant to its terms.



	 	 	 	 	 	 	 

	Dated:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Howard T. Wall, III