EXHIBIT 10.8
EMPLOYMENT AGREEMENT
AGREEMENT made as of June 1, 1998, by and between Vanguard Health Systems,
Inc., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxx, Xx. (the
"Executive").
WHEREAS, the Executive currently serves as Chairman of the Board,
President and Chief Executive Officer of the Company;
WHEREAS, the Company desires to secure for itself the continuing services
of the Executive from and after the date hereof and the Executive desires to
render such services, in each case pursuant to the terms and conditions hereof;
WHEREAS, the Company's Board of Directors (the "Board"; provided, that if
a Compensation Committee of the Board of Directors shall have been duly
appointed, the term "Board" as used herein shall mean either of such Committee
or the full Board of Directors) has approved and authorized the Company's entry
into this Agreement with the Executive; and
WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions of the employment relationship of the Executive with the
Company.
NOW, THEREFORE, the parties agree as follows:
1. Employment. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, upon the terms and subject to the
conditions set forth herein.
2. Term. This Agreement is for the three-year period (the "Term")
commencing on June 1, 1998 (the "Effective Date") and terminating on the third
anniversary of the Effective Date, or upon the Executive's earlier death,
disability or other termination of employment pursuant to Section 10; provided,
however, that at the end of each day during the Extension Period (as defined
below) the Term shall automatically be extended for one additional day; and
provided, further, that commencing on the fifth anniversary of the Effective
Date and on each anniversary thereafter the Term shall automatically be
extended for one additional year unless, not later than 90 days prior to any
such anniversary, either party hereto shall have notified the other party
hereto that such extension shall not take effect. For purposes of this Section
2, the "Extension Period" shall be the period beginning on the Effective Date
and ending on the earlier of (i) the Date of Termination (as defined below) and
(ii) the day preceding the second anniversary of the Effective Date.
3. Position. During the Term, the Executive shall serve as Chairman of the
Board, President and Chief Executive Officer of the Company or in such other
senior executive position in the Company as the Executive should approve.
4. Duties and Reporting Relationship. During the Term, the Executive
shall, on a full time basis, use his skills and render services to the best of
his ability in supervising and conducting the operations of the Company.
5. Place of Performance. The Executive shall perform his duties and
conduct his business at the principal executive offices of the Company, except
for required travel on the Company's business.
6. Salary and Annual Bonus.
(a) Base Salary. The Executive's base salary hereunder shall be $900,000
per year, payable semi-monthly. The Board shall review such base salary at
least annually and make such adjustment from time to time as it may deem
advisable, but the base salary shall not at any time be less than $900,000 per
year. Notwithstanding the foregoing, since the Company has no operations on
June 1, 1998 other than the operations of Maryvale Medical Center, a 213-bed
acute care hospital located in Phoenix, Arizona, until the first day of the
month subsequent to the day on which the Executive gives to the Company the
Salary Increase Notice (as hereinafter defined), the Executive voluntarily
agrees that the Executive's base salary shall be $450,000 per year. The term
"Salary Increase Notice" shall mean a notice sent by the Executive to the
Company requesting that the Executive's base salary be restored hereunder to
$900,000 per year.
(b) Annual Bonus. The Board (or if there is a compensation committee of
the Board, the compensation committee) shall provide the Executive with an
annual bonus plan providing the Executive with an opportunity to earn annual
bonus compensation and shall cause the Company to pay to him any earned annual
bonus in addition to his base salary.
7. Vacation, Holidays and Sick Leave. During the Term, the Executive shall
be entitled to paid vacation, paid holidays and sick leave in accordance with
the Company's standard policies for its senior executive officers.
8. Business Expenses. The Executive will be reimbursed for all ordinary
and necessary business expenses incurred by him in connection with his
employment upon timely submission by the Executive of receipts and other
documentation as required by the Internal Revenue Code and in conformance with
the Company's normal procedures.
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9. Pension and Welfare Benefits. During the Term, the Executive shall be
eligible to participate fully in all health benefits, insurance programs,
pension and retirement plans and other employee benefit and compensation
arrangements available to senior officers of the Company generally.
10. Termination of Employment.
(a) General. The Executive's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances.
(b) Death or Disability.
(i) The Executive's employment hereunder shall automatically
terminate upon the death of the Executive.
(ii) If, as a result of the Executive's incapacity due to physical or
mental illness, the Executive shall have been absent from his duties with
the Company for any six (6) months (whether or not consecutive) during any
twelve (12) month period, the Company may terminate the Executive's
employment hereunder for any such incapacity (a "Disability").
(c) Cause. The Company may terminate the Executive's employment hereunder
for Cause. For purposes of this Agreement, "Cause" shall mean (i) the willful
failure or refusal by the Executive to perform his duties hereunder (other than
any such failure resulting from the Executive's incapacity due to physical or
mental illness), which has not ceased within ten (10) days after a written
demand for substantial performance is delivered to the Executive by the
Company, which demand identifies the manner in which the Company believes that
the Executive has not performed such duties, (ii) the willful engaging by the
Executive in misconduct which is materially injurious to the Company,
monetarily or otherwise (including, but not limited to, conduct described in
Section 14) or (iii) the conviction of the Executive of, or the entering of a
plea of nolo contendere by the Executive with respect to, a felony.
Notwithstanding the foregoing, the Executive's employment hereunder shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board (after written notice to the Executive and a
reasonable opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive should be terminated for Cause.
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(d) Termination by the Executive. The Executive shall be entitled to
terminate his employment hereunder (A) for Good Reason or (B) for any other
reason. For purposes of this Agreement, "Good Reason" shall mean, (i) without
the Executive's express written consent, any failure by the Company to comply
with any material provision of this Agreement, which failure has not been cured
within ten (10) days after notice of such noncompliance has been given by the
Executive to the Company or (ii) the occurrence (without the Executive's
express written consent), following a Change in Control during the term of this
Agreement, of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:
(i) any change in the Executive's title, authorities,
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, represents an adverse change from his
status, title, position or responsibilities (including reporting
responsibilities) which were in effect immediately prior to the Change in
Control or from his status, title, position or responsibilities (including
reporting responsibilities) which were in effect following a Change in
Control pursuant to the Executive's consent to accept any such change; the
assignment to him of any duties or work responsibilities which, in his
reasonable judgment, are inconsistent with such status, title, position or
work responsibilities; or any removal of the Executive from, or failure to
reappoint or reelect him to any of such positions, except if any such
changes are because of Disability, retirement, death or Cause;
(ii) a reduction by the Company in the Executive's annual base salary
as in effect on the date hereof or as the same may be increased from time
to time except for across-the-board salary reductions similarly affecting
all senior executives of the Company and all senior executives of any
Person (as defined in Section 10(h)(i) below) in control of the Company;
provided in no event shall any such reduction reduce the Executive's base
salary below $900,000;
(iii) the relocation of the Executive's office at which he is to
perform his duties, to a location more than thirty (30) miles from the
location at which the Executive performed his duties prior to the Change
in Control, except for required travel on the Company's business to an
extent substantially consistent with his business travel obligations prior
to the Change in Control;
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(iv) if the Executive had been based at the Company's principal
executive offices immediately prior to the Change in Control, the
relocation of the Company's principal executive offices to a location more
than 30 miles from the location of such offices immediately prior to the
Change in Control;
(v) the failure by the Company, without the Executive's consent, to
pay to the Executive any portion of the Executive's current compensation,
or to pay to the Executive any portion of an installment of deferred
compensation under any deferred compensation program of the Company,
within seven (7) days of the date such compensation is due;
(vi) the failure by the Company to continue in effect any stock-
based and/or cash annual or long-term incentive compensation plan in which
the Executive participates immediately prior to the Change in Control,
unless the Executive participates after the Change in Control in other
comparable plans generally available to senior executives of the Company
and senior executives of any Person in control of the Company;
(vii) the failure by the Company to continue to provide the Executive
with benefits substantially similar in value to the Executive in the
aggregate to those enjoyed by the Executive under any of the Company's
pension, life insurance, medical, health and accident, or disability plans
in which the Executive was participating immediately prior to the Change
in Control, unless the Executive participates after the Change in Control
in other comparable benefit plans generally available to senior executives
of the Company and senior executives of any Person in control of the
Company;
(viii) the adverse and substantial alteration of the nature and
quality of the office space within which the Executive performed his
duties prior to a Change in Control as well as in the secretarial and
administrative support provided to the Executive, provided, however, that
a reasonable alteration of the secretarial or administrative support
provided to the Executive as a result of reasonable measures implemented
by the Company to effectuate a cost-reduction or consolidation program
shall not constitute Good Reason hereunder; or
(ix) any purported termination of the Executive's employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Section 10(f) below; for purposes of this Agreement, no
such purported termination shall be effective.
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The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.
(e) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company or terminate his employment for other than Good
Reason during the Term, the Executive shall give sixty (60) days written notice
to the Company, setting forth the reasons and specifying the date as of which
his resignation is to become effective.
(f) Notice of Termination. Any purported termination of the Executive's
employment by the Company or by the Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 18.
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(g) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated because of death, the date of the
Executive's death, (ii) if the Executive's employment is terminated for
Disability, the date Notice of Termination is given, or (iii) if the
Executive's employment is terminated pursuant to Subsection (c), (d) or (e)
hereof or for any other reason (other than death or Disability), the date
specified in the Notice of Termination (which, in the case of a termination for
Good Reason shall not be less than fifteen (15) nor more than sixty (60) days
from the date such Notice of Termination is given, and in the case of a
termination for any other reason shall not be less than thirty (30) days (sixty
(60) days in the case of a termination under Subsection (e) hereof) from the
date such Notice of Termination is given); provided, that in the case of a
termination for Cause, nothing herein shall prevent the Company from
immediately terminating the Executive's employment, so long as the Company
continues to meet all of its responsibilities hereunder with respect to payment
of salary, benefits and other obligations during the minimum notice period
described in this Subsection (g) (and for purposes of measuring such
obligations, the Date of Termination shall be deemed to be the end of such
minimum notice period).
(h) Change in Control. For purposes of this Agreement, a Change in Control
of the Company shall have occurred if
(i) any "Person" (as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934 (the "Exchange Act") as modified and used in Sections
13(d) and 14(d) of the Exchange Act (other than (1) the Company
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or any of its subsidiaries, (2) any trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of its
subsidiaries, (3) an underwriter temporarily holding securities pursuant
to an offering of such securities, (4) any corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of the Company's common stock, or (5) any
Person that is a stockholder of the Company on the date hereof)), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 50% of the combined voting power of the Company's
then outstanding voting securities;
(ii) during any period of not more than two consecutive years, not
including any period prior to the date of this Agreement, individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an
agreement with the Company to effect a transaction described in clause
(i), (iii), or (iv) of this Section 10(h)) whose election by the Board or
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than both
(A)(1) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving or parent entity) 50% or more of the
combined voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such merger or
consolidation or (2) a merger or consolidation in which no person acquires
50% or more of the combined voting power of the Company's then outstanding
securities; and (B) immediately after the consummation of such merger or
consolidation described in clause (A)(1) or (A)(2) above (and for at least
180 days thereafter) neither the Company's Chief Operating Officer nor its
Chief Financial Officer change from the people occupying such positions
immediately prior to such merger or consolidation except as a result of
their death or Disability and neither of such officers shall have changed
prior to such merger or consolidation at the direction of a Person who has
entered into an
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agreement with the Company the consummation of which will constitute a
Change in Control of the Company; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by
the Company of all or substantially all of the Company's assets (or any
transaction having a similar effect).
(i) Resignation as Member of Board. If the Executive's employment by the
Company is terminated for any reason, the Executive hereby agrees that he shall
simultaneously submit his resignation as a member of the Board in writing on or
before the Date of Termination if the Executive is a member of the Board at
such time. If the Executive fails to submit such required resignation in
writing, the provisions of this Subsection 10(i) may be deemed by the Company
to constitute the Executive's written resignation as a member of the Board
effective as of the Date of Termination.
11. Compensation During Disability, Death or Upon Termination.
(a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his full salary
at the rate then in effect for such period until his employment is terminated
pursuant to Section 10(b)(ii) hereof, provided that payments so made to the
Executive during the Disability Period shall be reduced by the sum of the
amounts, if any, payable to the Executive with respect to such period under
disability benefit plans of the Company or under the Social Security disability
insurance program, and which amounts were not previously applied to reduce any
such payment.
(b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any amounts due to the Executive under
Section 6 through the date of such termination and (ii) all such amounts that
would have become due to the Executive under Section 6 had the Executive's
employment hereunder continued until the last day of the calendar year in which
such termination of employment occurred, in each case in accordance with
Section 13(b), if applicable.
(c) If the Executive's employment shall be terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, and the Company shall have no
further obligations to the Executive under this Agreement.
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(d) If (A) following a Change in Control the Company shall terminate the
Executive's employment in breach of this Agreement, or (B) following a Change
in Control the Executive shall terminate his employment for Good Reason, then
(i) the Company shall pay the Executive (x) his full salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, (y) a pro rata portion of his current year annual
bonus pursuant to Section 6(b) and (z) all other unpaid amounts, if any,
to which the Executive is entitled as of the Date of Termination under any
compensation plan or program of the Company, at the time such payments are
due;
(ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive an aggregate amount equal to the
product of (A) the sum of (1) the Executive's annual salary rate in effect
as of the Date of Termination and (2) the average of the annual bonuses
actually paid to the Executive by the Company with respect to the two
fiscal years which immediately precede the year of the Term in which the
Date of Termination occurs; provided if there was a bonus or bonuses paid
to the Executive with respect only to one fiscal year which immediately
precedes the year of the Term in which the Date of Termination occurs,
then such single year's bonus or bonuses shall be utilized in the
calculation pursuant to this clause (2) and (B) the number three (3);
(iii) the Company shall (x) continue coverage for the Executive under
the Company's life insurance, medical, health, disability and similar
welfare benefit plans (or, if continued coverage is barred under such
plans, the Company shall provide to the Executive substantially similar
benefits) for a period equal to the greater of (A) the remainder of the
Term and (B) 18 months, and (y) provide the benefits which the Executive
would have been entitled to receive pursuant to any supplemental
retirement plan maintained by the Company had his employment continued at
the rate of compensation specified herein for a period equal to the
greater of (A) the remainder of the Term and (B) 18 months. Benefits
otherwise receivable by the Executive pursuant to clause (x) of this
Subsection 11(d)(iii) shall be reduced to the extent comparable benefits
are actually received by the Executive from a subsequent employer during
the period during which the Company is required to provide such benefits,
and the Executive shall report any such benefits actually received by him
to the Company; and
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(iv) the payments provided for in this Section 11(d) (other than
Section 11(d)(iii)) shall be made not later than the fifth day following
the Date of Termination, provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in Section 15
hereof, cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good
faith by the Company, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of
the Code (as defined in Section 15)) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after the
Date of Termination. In the event that the amount of the estimated
payments exceeds the amount determined by the Company within six (6)
months after payment to have been due, such excess shall constitute a loan
by the Company to the Executive, payable no later than the thirtieth
(30th) business day after demand by the Company (together with interest at
the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Section 11(d), the Company shall provide the
Executive with a written statement setting forth the manner in which such
payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received
from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
(e) If (A) prior to any Change in Control the Company shall terminate the
Executive's employment in breach of this Agreement or (B) prior to any Change
in Control the Executive shall terminate his employment for Good Reason, then
(i) the Company shall pay the Executive (x) his full salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given, (y) a pro rata portion of his current year annual
bonus pursuant to Section 6(b) and (z) any all other unpaid amounts, if
any, to which the Executive is entitled as of the Date of Termination
under any compensation plan or program of the Company, at the time such
payments are due;
(ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay as
liquidated damages to the Executive an aggregate amount equal to the
product of (A) the sum of (1) the Executive's annual salary rate in effect
as of the Date of Termination and (2) the average of the annual bonuses
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actually paid to the Executive by the Company with respect to the two
fiscal years which immediately precede the year of the Term in which the
Date of Termination occurs; provided if there was a bonus or bonuses paid
to the Executive with respect only to one fiscal year which immediately
precedes the year of the Term in which the Date of Termination occurs,
then such single year's bonus or bonuses shall be utilized in the
calculation pursuant to this clause (2) and (B) the lesser of (x) the
number three (3) and (y) the greater of (aa) the number of years
(including partial years) remaining in the Term and (bb) the number two
(2); such amount to be paid in substantially equal monthly installments
during the period commencing with the month immediately following the
month in which the Date of Termination occurs and ending with the month
corresponding to the end of the Term hereunder; and
(iii) the Company shall, at its cost (provided that Executive shall
continue to be responsible to pay the standard employee portion of such
cost), (x) continue coverage for the Executive under the Company's life
insurance, medical, health, disability and similar welfare benefit plans
(or, if continued coverage is barred under such plans, the Company shall
provide to the Executive substantially similar benefits) for a period
equal to the greater of (A) the remainder of the Term and (B) 18 months,
and (y) provide the benefits which the Executive would have been entitled
to receive pursuant to any supplemental retirement plan maintained by the
Company had his employment continued at the rate of compensation specified
herein for a period equal to the greater of (A) the remainder of the Term
and (B) 18 months. Benefits otherwise receivable by the Executive pursuant
to clause (x) of this Subsection 11(e)(iii) shall be reduced to the extent
comparable benefits are actually received by the Executive from a
subsequent employer during the period during which the Company is required
to provide such benefits, and the Executive shall report any such benefits
actually received by him to the Company.
(f) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 11 by seeking other employment or
otherwise, and, except as provided in Sections 11(d) and 11(e) hereof, the
amount of any payment or benefit provided for in this Section 11 shall (i) not
be reduced by any compensation earned by the Executive as the result of
employment by another employer or by retirement benefits and (ii) be the sole
amount due to the Executive from the Company upon such termination of
employment, the Executive hereby waiving any claim for other compensation or
related damages (whether consequential, punitive or other) as a result of such
termination.
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12. Representations.
(a) The Company represents and warrants that this Agreement has been
authorized by all necessary corporate action of the Company and is a valid and
binding agreement of the Company enforceable against it in accordance with its
terms.
(b) The Executive represents and warrants that he is not a party to any
agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement.
13. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
(b) This Agreement is a personal contract and the rights and interests of
the Executive hereunder may not be sold, transferred, assigned, pledged,
encumbered, or hypothecated by him, except as otherwise expressly permitted by
the provisions of this Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable
to him hereunder had the Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to his devisee, legatee or other designee or, if there is no such
designee, to his estate.
14. Confidentiality and Non-Competition Covenants.
(a) The Executive covenants and agrees that he will not at any time during
and after the end of the Term, directly or indirectly, use for his own account,
or disclose to any person, firm or corporation, other than authorized officers,
directors and employees of the Company or its subsidiaries, Confidential
Information (as hereinafter defined) of the Company. As used herein,
"Confidential Information" of the Company means information of any kind, nature
or description which is disclosed to or otherwise known to the Executive as a
direct or indirect consequence of his association with the Company, which
information is not generally known to the public or in the businesses in which
the Company is engaged or which information relates to specific investment
opportunities within the scope of the Company's business which were considered
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by the Executive or the Company during the term of this Agreement. During the
Term and for a period of two years following the termination of the Executive's
employment, the Executive shall not induce any employee of the Company or its
subsidiaries to terminate his or her employment by the Company or its
subsidiaries in order to obtain employment by any person, firm or corporation
affiliated with the Executive.
(b) The Executive covenants and agrees that during the Term and for a
period of two (2) years following the termination of the Executive's
employment, the Executive shall not, directly or indirectly, own any interest
in, operate, join, control, or participate as a partner, director, principal,
officer, or agent of, enter into the employment of, act as a consultant to, or
perform any services for any entity which is a hospital system or is in the
hospital or hospital management business. Notwithstanding anything herein to
the contrary, (1) the foregoing provisions of this Section 14(b) shall not
prevent the Executive from (x) acquiring securities representing not more than
5% of the outstanding voting securities of any publicly held corporation or (y)
working as an accountant or an attorney for a law or accounting firm and (2)
the foregoing provisions of this Section 14(b) shall not be applicable to a
termination of the Executive's employment (i) by the Company or (ii) by the
Executive for Good Reason.
15. Prohibition on Parachute Payments.
(a) Notwithstanding any other provisions of this Agreement (except the
provisions of Section 15(c)) below, in the event that any payment or benefit
received or to be received by the Executive in connection with a Change in
Control of the Company or the termination of the Executive's employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) (all such
payments and benefits, including, without limitation, base salary and bonus
payments, being hereinafter called "Total Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any Person making such
payment or providing such benefit as a result of section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then, to the extent necessary to
make such portion of the Total Payments deductible (and after taking into
account any reduction in the Total Payments provided by reason of section 280G
of the Code in such other plan, arrangement or agreement), (A) the cash portion
of the Total Payments shall first be reduced (if necessary, to zero), and (B)
all other non-cash payments by the Company to the Executive shall next be
reduced (if necessary, to zero). For purposes of this limitation (i) no portion
of the Total Payments the receipt or enjoyment of which the Executive shall
have effectively waived in writing prior to the Date of Termination shall be
taken into account, (ii)
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no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code, including by
reason of section 280G(b)(4)(A) of the Code, (iii) such payments shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance
as deductions, in the opinion of the tax counsel referred to in clause (ii);
and (iv) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of
the Code.
(b) If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding that, notwithstanding the good faith of
the Executive and the Company in applying the terms of this Section 15, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments"
not being deductible by reason of section 280G of the Code; and (ii) interest
on the amount set forth in clause (i) of this sentence at the rate provided in
section 1274(b)(2)(B) of the Code from the date of the Executive's receipt of
such excess until the date of such payment.
(c) The provisions of Sections 15(a) and 15(b) shall be effective and
shall be applied only on and after June 1, 2000. Prior to June 1, 2000, the
provisions of Sections 15(a) and 15(b) shall be of no force or effect.
16. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether
oral or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, he does not rely and
has not relied upon any representation or statement not set forth herein made
by the Company with regard to the subject matter, bases or effect of this
Agreement or otherwise.
17. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is
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agreed to in writing, signed by the Executive and by a duly authorized officer
of the Company. No waiver by any party hereto of any breach by another party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same time, any prior time or any subsequent time.
18. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such
other address as such party may subsequently give notice of hereunder in
writing:
To Executive at: Xxxxxxx X. Xxxxxx, Xx.
00 Xxxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx 00000
To the Company at: Vanguard Health Systems, Inc.
00 Xxxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: General Counsel
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Capital Partners III, Inc.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
Telecopy: (000) 000-0000
Any notice delivered personally or by courier under this Section 18 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.
19. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and
15
unenforceable, shall not be affected thereby, and each provision hereof shall
be validated and shall be enforced to the fullest extent permitted by law.
20. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
21. Governing Law; Attorney's Fees.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee, without regard to its conflicts of laws
principles.
(b) The prevailing party in any dispute arising out of this Agreement
shall be entitled to be paid its reasonable attorney's fees incurred in
connection with such dispute from the other party to such dispute.
22. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.
23. Withholdings. All payments to the Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
tax laws.
24. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
VANGUARD HEALTH SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------
Xxxxxx X. Xxxxxxx
Executive Vice President
THE EXECUTIVE
/s/ Xxxxxxx X. Xxxxxx, Xx.
------------------------------
Xxxxxxx X. Xxxxxx, Xx.
17
AMENDMENT NO. 1
TO
EMPLOYMENT AGREEMENT
This Amendment No. 1 ( this "Amendment') dated as of May 31, 2001, is made
by and between Vanguard Health Systems, Inc., a Delaware corporation (the
"Company"), and Xxxxxxx X. Xxxxxx, Xx. (the "Executive").
WHEREAS, the Company and the Executive executed a certain Employment
Agreement (the "EA") dated as of June 1, 1998, to secure the services of the
Executive as its Chairman of the Board, President and Chief Executive Officer;
and
WHEREAS, the Company and the Executive wish the Executive to relinquish
his position as President, but retain his other current positions with the
Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree that the EA is
amended as follows:
1. Defined Terms. Except for those terms defined above, the definitions of
capitalized terms used in this Amendment are as provided in the EA.
2. Amendment to Section 3. Section 3 of the EA entitled "Position" is
hereby deleted and replaced with the following new Section 3:
" 3. Position. During the Term, the Executive shall serve as Chairman
of the Board and Chief Executive Officer of the Company or in such
other senior executive position in the Company as the Executive
should approve."
3. Ratification. All other provisions of the EA remain unchanged and are
hereby ratified by the Company and the Executive.
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
by its duly authorized officer and the Executive has executed this Amendment,
each as of the day and year first set forth above.
VANGUARD HEALTH SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
----------------------------
Xxxxxx X. Xxxxxxx
Executive Vice President
EXECUTIVE
By: /s/ Xxxxxxx X. Xxxxxx, Xx.
----------------------------
Xxxxxxx X. Xxxxxx, Xx.
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