EXHIBIT 10.34
[FORM OF LIQUIDITY EVENT OPTION UNDER 2004 STOCK INCENTIVE PLAN]
VANGUARD HEALTH SYSTEMS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
(LIQUIDITY EVENT OPTION)
THIS AGREEMENT (the "Agreement"), is made effective as of the _____
day of _____, 200_, (hereinafter called the "Date of Grant"), between Vanguard
Health Systems, Inc., a Delaware corporation (hereinafter called the "Company"),
and _______ (hereinafter called the "Participant"):
R E C I T A L S:
WHEREAS, the Company has adopted the Vanguard Health Systems, Inc.
2004 Stock Incentive Plan (the "Plan"), which Plan is incorporated herein by
reference and made a part of this Agreement. Capitalized terms not otherwise
defined herein shall have the same meanings as in the Plan; and
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its shareholders to grant the option provided for
herein (the "Option") to the Participant pursuant to the Plan and the terms set
forth herein.
NOW THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties agree as follows:
1. Grant of the Option. The Company hereby grants to the Participant
the right and option (the "Option") to purchase, on the terms and conditions
hereinafter set forth, all or any part of an aggregate of ____ Shares, subject
to adjustment as set forth in the Plan. The purchase price of the Shares subject
to the Option shall be $______ per Share (the "Option Price"). The Option is
intended to be a non-qualified stock option, and is not intended to be treated
as an option that complies with Section 422 of the Internal Revenue Code of
1986, as amended.
2. Vesting.
(a) Subject to the Participant's continued Employment with the
Company, the Option shall vest and become exercisable with respect to one
hundred percent (100%) of the Shares initially covered by the Option on the
eighth anniversary of the Date of Grant.
At any time, the portion of the Option which has become vested and
exercisable as described above (or pursuant to Section 2(c) below) is
hereinafter referred to as the "Vested Portion."
(b) If the Participant's Employment with the Company is terminated
for any reason, the Option shall, to the extent not then vested, be canceled by
the Company without
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consideration and the Vested Portion of the Option shall remain exercisable for
the period set forth in Section 3(a).
(c) Notwithstanding any other provisions of this Agreement to the
contrary, in the event of a Liquidity Event the Option shall, to the extent not
then vested and not previously canceled, immediately become fully vested and
exercisable.
For purposes of this Section 2(c), the following definitions shall
apply:
"Family Group" with respect to any natural person, means (i) the
spouse, issue, parents, grandparents, grandchildren, aunts, uncles, nieces and
nephews (in each case, whether natural or adopted) of such natural person, and
(ii) any trust established solely for the exclusive benefit of such natural
person or any of the Persons referred to in the foregoing clause (i).
"Law" means any statute, law, regulation, ordinance, rule,
injunction, order, decree, governmental approval, directive, requirement, or
other governmental restriction or any similar form of decision of, or
determination by, or any interpretation or administration of any of the
foregoing by, any nation or government, any state or other political subdivision
thereof, and any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government.
"Liquidity Event" shall mean the completion of (i) a Transfer by
Blackstone of Securities to a Person other than a Permitted Transferee of
Blackstone for consideration consisting of cash or Liquid Securities, (ii) a
recapitalization of, or payment of a dividend or distribution by, the Holdings
LLC or its Subsidiaries, (iii) a complete liquidation, dissolution or winding up
of Holdings LLC and the Company, or (iv) a distribution-in-kind by Blackstone of
Securities to its partners, members or shareholders in accordance with the terms
of the applicable Blackstone partnership agreement or other organizational
document, which, after giving effect to such transaction together with all other
previously completed transactions of a type described in clause (i), (ii), (iii)
or (iv), results in the receipt by Blackstone of consideration having a fair
market value (measured at the time of receipt) in excess of $2,500 per Security
in respect of at least 25% of the Securities held by Blackstone immediately
following the Closing Date (for the avoidance of doubt, if any transaction
affects more than 25% of such Securities, the consideration will be applied pro
rata to all such affected Securities); provided that with respect to any
distribution-in-kind under clause (iv), for purposes of this definition
Blackstone shall be deemed to have received consideration with respect to such
distribution-in-kind in an amount equal to the fair market value (measured as of
the time of such distribution-in-kind) of the Securities so distributed.
"Liquid Securities" means common stock of any corporation that (i)
has been registered under the Securities Act of 1933, as amended (ii) is capable
of being immediately sold (without the exercise of any registration rights) by
the recipient thereof on a national securities exchange or quotation system in
accordance with applicable Law immediately upon consummation of the transaction
in which such recipient received such common stock, and (iii) represents less
than 10% of the total outstanding common stock of such corporation (other than
common stock held by Affiliates of such corporation).
"Permitted Transferee" shall mean (A) any of its Affiliates, (B) if
such entity is a member of Blackstone, any other member of Blackstone, (C) any
general or limited partner of
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such entity or any other member of Blackstone (if any), (D) any managing
director, general partner, director, limited partner, officer or employee of
such entity or any other member of Blackstone (if any), or any member of a
Family Group of any of the foregoing Persons described in this clause (D), or
(E) any trust the beneficiaries of which, or any corporation, limited liability
company or partnership the stockholders, member or general or limited partners
of which, include only such entity, Persons described in the foregoing clauses
(A), (B), (C), or (D), or member of a Family Group of such Person.
"Transfer" shall mean, with respect to any security, directly or
indirectly, to sell contract to sell, give, assign, hypothecate, pledge,
encumber, grant a security interest in, offer, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, lend, or otherwise transfer or dispose of any economic,
voting or other rights in or to such security. When used as a noun, "Transfer"
shall have such correlative meaning as the context may require.
3. Exercise of Option.
(a) Period of Exercise. Subject to the provisions of the Plan and
this Agreement, the Participant may exercise all or any part of the Vested
Portion of the Option at any time prior to the earliest to occur of:
(i) the tenth anniversary of the Date of Grant;
(ii) one year following the date of the Participant's termination of
Employment due to death or "Disability"; and
(iii) 90 days following the date of the Participant's termination of
Employment for any reason other than due to the Participant's death or
Disability; provided, however, if Section 3(b)(ii) of this Agreement would
otherwise preclude the exercise of the Option following the termination of
Employment, the first day of the 90 day period under this Section
3(a)(iii) shall commence on the first day of the completion of any
registration or qualification of the Option or Shares in accordance with
Section 3(b)(ii) of this Agreement.
For purposes of this Agreement:
"Disability" shall mean "disability" as defined in any employment
agreement then in effect between the Participant and the Company or if not
defined therein or if there shall be no such agreement, as defined in the
Company's long-term disability plan as in effect from time to time, or if there
shall be no plan or if not defined therein, the Participant's becoming
physically or mentally incapacitated and consequent inability for a period of
six (6) months in any twelve (12) consecutive month period to perform his duties
to the Company.
(b) Method of Exercise.
(i) Subject to Section 3(a), the Vested Portion of the Option may be
exercised by delivering to the Company at its principal office written
notice of intent to so exercise; provided that, the Option may be
exercised with respect to whole Shares only. Such
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notice shall specify the number of Shares for which the Option is being
exercised and shall be accompanied by payment in full of the Option Price.
The payment of the Option Price may be made at the election of the
Participant (i) in cash or its equivalent (e.g., by check), (ii) to the
extent permitted by the Committee, in Shares having a Fair Market Value
equal to the aggregate Option Price for the Shares being purchased and
satisfying such other requirements as may be imposed by the Committee;
provided, that such Shares have been held by the Participant for no less
than six months (or such other period as established from time to time by
the Committee in order to avoid adverse accounting treatment applying
generally accepted accounting principles), (iii) partly in cash and, to
the extent permitted by the Committee, partly in such Shares or (iv) if
there is a public market for the Shares at such time, through the delivery
of irrevocable instructions to a broker to sell Shares obtained upon the
exercise of the Option and to deliver promptly to the Company an amount
out of the proceeds of such Sale equal to the aggregate option price for
the Shares being purchased. No Participant shall have any rights to
dividends or other rights of a stockholder with respect to Shares subject
to an Option until the Participant has given written notice of exercise of
the Option, paid in full for such Shares and, if applicable, has satisfied
any other conditions imposed by the Committee pursuant to the Plan.
(ii) Notwithstanding any other provision of the Plan or this
Agreement to the contrary, the Option may not be exercised prior to the
completion of any registration or qualification of the Option or the
Shares under applicable state and federal securities or other laws, or
under any ruling or regulation of any governmental body or national
securities exchange that the Committee shall in its sole discretion
determine to be necessary or advisable.
(iii) Upon the Company's determination that the Option has been
validly exercised as to any of the Shares, the Company shall issue
certificates in the Participant's name for such Shares. However, the
Company shall not be liable to the Participant for damages relating to any
delays in issuing the certificates to him, any loss of the certificates,
or any mistakes or errors in the issuance of the certificates or in the
certificates themselves.
(iv) In the event of the Participant's death, the Vested Portion of
the Option shall remain exercisable by the Participant's executor or
administrator, or the person or persons to whom the Participant's rights
under this Agreement shall pass by will or by the laws of descent and
distribution as the case may be, to the extent set forth in Section 3(a).
Any heir or legatee of the Participant shall take rights herein granted
subject to the terms and conditions hereof.
(v) As a condition to exercising the Option, the Participant shall
become a party to the Stockholders Agreement.
4. No Right to Continued Employment. The granting of the Option
evidenced hereby and this Agreement shall impose no obligation on the Company or
any Affiliate to continue the Employment of the Participant and shall not lessen
or affect the Company's or its Affiliate's right to terminate the Employment of
such Participant.
5. Legend on Certificates. The certificates representing the Shares
purchased by exercise of the Option shall be subject to such stop transfer
orders and other restrictions as the
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Committee may deem advisable under the Plan or the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock exchange upon
which such Shares are listed, and any applicable Federal or state laws, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
6. Transferability. The Option may not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the
Participant otherwise than by will or by the laws of descent and distribution,
and any such purported assignment, alienation, pledge, attachment, sale,
transfer or encumbrance shall be void and unenforceable against the Company or
any Affiliate; provided that the designation of a beneficiary shall not
constitute an assignment, alienation, pledge, attachment, sale, transfer or
encumbrance. No such permitted transfer of the Option to heirs or legatees of
the Participant shall be effective to bind the Company unless the Committee
shall have been furnished with written notice thereof and a copy of such
evidence as the Committee may deem necessary to establish the validity of the
transfer and the acceptance by the transferee or transferees of the terms and
conditions hereof. During the Participant's lifetime, the Option is exercisable
only by the Participant.
7. Withholding. The Participant may be required to pay to the
Company or any Affiliate and the Company shall have the right and is hereby
authorized to withhold from any payment due or transfer made under the Option or
under the Plan or from any compensation or other amount owing to a Participant
the amount (in cash, Shares, other securities, other Awards or other property)
of any applicable withholding taxes in respect of the Option, its exercise or
any payment or transfer under or with respect to the Option or the Plan and to
take such other action as may be necessary in the opinion of the Committee to
satisfy all obligations for the payment of such withholding taxes.
8. Securities Laws. Upon the acquisition of any Shares pursuant to
the exercise of the Option, the Participant will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
9. Notices. Any notice necessary under this Agreement shall be
addressed to the Company in care of its Secretary at the principal executive
office of the Company and to the Participant at the address appearing in the
personnel records of the Company for the Participant or to either party at such
other address as either party hereto may hereafter designate in writing to the
other. Any such notice shall be deemed effective upon receipt thereof by the
addressee.
10. Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS
OF LAWS.
11. Option Subject to Plan and Stockholders Agreement. By entering
into this Agreement the Participant agrees and acknowledges that the Participant
has received and read a copy of the Plan and the Stockholders Agreement. The
Option is subject to the Plan and the Stockholders Agreement. The terms and
provisions of the Plan and the Stockholders Agreement as it may be amended from
time to time are hereby incorporated herein by reference. In the event of a
conflict between any term or provision contained herein and a term or provision
of the Plan or the Stockholders Agreement, the applicable terms and provisions
of the Plan or the
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Stockholders Agreement, as applicable will govern and prevail. In the event of a
conflict between any term or provision of the Plan and any term or provision of
the Stockholders Agreement, the applicable terms and provisions of the
Stockholders Agreement will govern and prevail.
12. Signature in Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
VANGUARD HEALTH SYSTEMS, INC.
By: __________________________________
Agreed and acknowledged as
of the date first above written:
___________________________________
