EXECUTIVE SEVERANCE AND RESTRICTIVE COVENANT AGREEMENT
Exhibit 10.37
This AMENDED AND RESTATED EXECUTIVE SEVERANCE AND RESTRICTIVE COVENANT AGREEMENT (“Agreement”)
is made as of this 11th day of December, 2008, by and between LifePoint CSGP, LLC, a Delaware
limited liability company with its principal place of business at 000 Xxxxxx Xxxxx, Xxxxx 000,
Xxxxxxxxx, Xxxxxxxxx (the “Company”), and Xxxxxxx X. Xxxxxxxxx III, a resident of Nashville,
Tennessee (“Executive”).
RECITALS:
WHEREAS, Executive has been an employee of the Company and/or its subsidiaries and affiliates
since 1999, serving most recently as the Executive Vice President, General Counsel and Secretary of
LifePoint Hospitals, Inc. (“LifePoint”), the parent corporation of the Company;
WHEREAS, effective June 26, 2006, Executive was promoted and appointed to serve as the Chief
Executive Officer and President of LifePoint;
WHEREAS, in connection with Executive’s employment by the Company and his services as the
Chief Executive Officer and President of the Company and LifePoint (and such other appointments as
he may hold with their respective subsidiaries and affiliates), the Company and Executive have,
pursuant to the Executive Severance and Restrictive Covenant Agreement, made as of December 11,
2006 (the “Prior Agreement”), set forth, among other things, the terms of Executive’s severance
benefits and certain related matters in the event Executive’s employment is terminated,; and
WHEREAS, the Executive and the Company desire to amend and restate the Prior Agreement as of
the date hereof.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the mutual promises and covenants set forth below
and other good and valuable consideration, receipt of which is hereby acknowledged, the Company and
Executive do hereby agree as follows:
1. General.
(a) Offices and Duties. Executive is employed by the Company and has been appointed
to serve as the Chief Executive Officer and President of LifePoint (and to serve in similar
capacities with certain of their respective subsidiaries and affiliates). As such, Executive shall
have such duties and responsibilities as may be delineated in the bylaws and/or other constituent
documents of the Company and LifePoint (and in the bylaws and/or other constituent documents of any
of their respective applicable subsidiaries or affiliates) and as are directed by the Board of
Directors of LifePoint (the “Board of Directors”), and Executive shall report directly to the Board
of Directors.
(b) Compensation and Benefits. The Board of Directors (or such committee thereof as
shall have the responsibility for and authority to set the compensation of Lifepoint’s and its
subsidiaries’ and affiliates’ executive officers and key employees) shall from time to time
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set Executive’s compensation, including his base salary (“Base Salary”) and bonus compensation
(“Bonus Compensation”), and other benefits (including participation in the Company’s equity
incentive plans and qualified plans (collectively, the “Plans”)). The Base Salary and Bonus
Compensation shall be retroactive to June 26, 2006, the date Executive was appointed to serve as
Chief Executive Officer and President.
(c) At-Will Employment. Executive recognizes and accepts that, notwithstanding
anything in this Agreement to the contrary, (i) Executive is employed by the Company (and by any of
its subsidiaries and affiliates) on an “at-will” basis, (ii) this Agreement does not guarantee or
otherwise provide for employment and that, at any time and for any reason, Executive may resign or
the Company may terminate Executive’s employment with the Company (and with any of its subsidiaries
and affiliates), and (iii) neither the Company nor any of its subsidiaries and affiliates shall, in
any case, be responsible for any severance pay, termination pay, severance obligations, damages or
any other additional payments or obligations whatsoever arising from the termination of his
employment, above and beyond those specifically provided for or referred to in this Agreement or
otherwise provided by law. The parties further acknowledge and agree that there shall be no
duplication between any payments or other benefits due Executive hereunder and any payments or
benefits paid or to be paid to Executive under any other plan, program, agreement or arrangement.
(d) Execution of Release Upon Termination. The execution, delivery and non-revocation
of the Release of Claims attached hereto as Exhibit A (the “Release”) shall be a condition to the
Company’s obligations to make the payments described in Section 3 hereof to Executive following the
termination of his employment. The Release is deliverable by the Executive no later than thirty
days after the date of termination of the Executive’s employment.
2. Term of Agreement. This Agreement shall continue indefinitely until Executive
terminates his employment with the Company and/or its subsidiaries and affiliates or the Company
terminates Executive’s employment with the Company and/or its subsidiaries and affiliates,
provided that the provisions of Sections 3 and 4 shall survive any termination of this
Agreement.
3. Termination of Employment.
(a) Termination for Cause.
(i) If Executive’s employment is terminated by the Company for Cause, as defined in
Section 3(a)(ii) below, Executive shall receive his Base Salary through the date of such
termination and any earned but unpaid Bonus Compensation for any prior fiscal year, but he
shall not be eligible to receive Base Salary or to participate in any Plans after the date
of such termination except as otherwise required by law and except for the right to receive
benefits which have become vested under any Plans in accordance with the terms of such
Plans. In addition, Executive shall not be eligible to receive any Bonus Compensation for
the Company’s fiscal year during which the date of termination occurs or any later year.
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(ii) Termination for “Cause” shall mean termination of Executive’s employment with the
Company and its subsidiaries and affiliates by the Board of Directors because of (a)
Executive’s material breach of the terms of this Agreement or repeated failure to perform
his duties in a manner reasonably consistent with the criteria established or directions
given by the Board of Directors; provided, however, that the termination
pursuant to this clause shall be preceded by a written notice providing a reasonable
opportunity for Executive to correct his conduct, if the conduct in question can be
corrected, (b) any action by Executive constituting fraud, self-dealing, embezzlement, or
dishonesty in the course of his employment hereunder, or (c) the conviction of Executive of
a crime involving moral turpitude or any felony.
(iii) The termination of Executive’s employment shall not be deemed to be for Cause
unless and until there shall have been delivered to Executive a copy of a resolution duly
adopted by the affirmative vote of not less than two-thirds of the entire membership of the
Board at a meeting of the Board called and held for such purpose (after reasonable notice is
provided to Executive and Executive is given an opportunity, together with counsel, to be
heard before the Board), finding that, in the good faith opinion of such Board, Executive is
guilty of the conduct described in any of the subsections set forth in Section 3(a)(ii)
above.
(iv) The date of termination of employment by the Company under this Section 3(a) shall
be the date specified in a written notice of termination (which date shall be no earlier
than the date of furnishing such notice), or if no such date is specified therein, the date
of receipt by Executive of such written notice of termination.
(b) Termination Without Cause.
(i) If Executive’s employment is terminated by the Company without Cause, Executive
shall receive his Base Salary through the date of such termination and any earned but unpaid
Bonus Compensation for any prior fiscal year, and shall further be entitled to receive, as
severance, his then current Base Salary for a period of 24 months following the date of
termination of his employment plus an amount equal to two (2) times Executive’s bonus earned
for the prior fiscal year which bonus amount shall be paid in equal amounts, ratably, over
the 24-month period following the date of termination of his employment (each such
installment to be treated as a separate payment as defined under Treasury Regulation Section
1.409A-2(b)(2) promulgated under Section 409A of the Internal Revenue Code 1986, as
amended). The Company further agrees to provide Executive with insurance coverage (e.g.,
medical, dental and life) commensurate with the coverage provided to Executive immediately
prior to the date of termination for a period of 24 months following the date of
termination. Other than as set forth in the preceding sentences, Executive shall not be
eligible to participate in any Plans after the date of termination except as otherwise
required by law and except for the right to receive benefits which have vested under any
Plan in accordance with the terms of such Plan, and Executive shall not be eligible to
receive any Bonus Compensation for the Company’s fiscal year during which the date of
termination occurs or any later year.
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(ii) The date of termination of employment by the Company under this Section 3(b) shall
be the date specified in a written notice of termination to Executive (which date shall be
no earlier than the date of furnishing such notice) or, if no such date is specified
therein, the date on which such notice is given to Executive.
(iii) Severance payments under this Section 3(b) shall be made in accordance with the
Company’s then current payroll practice commencing on the next payroll date following the
date of expiration of the revocation period provided for in the Release.
(iv) If the Executive is a “specified employee” (as determined under the Company’s
policy for identifying specified employees) on the date of his “separation from service”
(within the meaning of Section 409A of the Code) and if any portion of the amounts payable
under this Section 3(b) would be considered “deferred compensation” under Section 409A of
the Code, all such payments (other than payments that satisfy the short-term deferral rule,
as defined in Treasury Regulation Section 1.409A-1(b)(4), or that are treated as separation
pay under Treasury Regulation Section 1.409A-1(b)(9)(iii) or Section 1.049A-1(b)(9)(v))
shall not commence to be paid on any date prior to the first business day after the date
that is six months following the Executive’s termination of employment. The first payment
that can be made shall include the cumulative amount of any amounts that could not be paid
during such six-month period. In addition, interest will accrue at the 10-year T-xxxx rate
(as in effect as of the first business day of the calendar year in which the termination of
employment occurs) on all payments that would have been paid to the Executive had this delay
provision not applied to the Executive and shall be paid with the first payment after such
six-month period. Notwithstanding the foregoing, payments delayed pursuant to this
six-month delay requirement shall commence earlier in the event of the Executive’s death
prior to the end of the six-month period.
(c) Termination Upon Death or Disability.
(i) Upon Executive’s termination of employment as a result of Executive’s death or
Disability (as defined in Section 3(c)(ii) below), he shall receive (or in the case of
death, his estate shall receive) his Base Salary through the date of such termination and
any earned but unpaid Bonus Compensation for any prior year, but he shall have no right to
receive any Base Salary continuation or other severance benefits; provided that in
the event of Disability, Executive shall be entitled to receive payments under any long-term
disability insurance polices maintained by the Company for Executive’s benefit. Executive
shall not be eligible to participate in any Plans after such termination except as otherwise
required by law and except for the right to receive benefits which have vested under any
Plan, and Executive shall not be eligible to receive any Bonus Compensation for the
Company’s fiscal year during which the date of termination occurs or any later year.
(ii) Termination upon “Disability” shall mean termination of Executive’s employment as
the result of his inability to perform the essential functions of
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Executive’s position with the Company and its subsidiaries and affiliates as the result
of illness or injury for a period of six (6) consecutive months.
(d) Termination by Executive. If Executive resigns or otherwise terminates his
employment (including as a result of retirement) with the Company other than upon his death or
Disability (as defined above), he shall receive his Base Salary through the date of such
termination and any earned but unpaid Bonus Compensation for any prior fiscal year, but he shall
have no right to receive any Base Salary continuation or other severance benefits. Executive shall
not be eligible to participate in any Plans after such termination except as otherwise required by
law and except for the right to receive benefits which have vested under any Plan and Executive
shall not be eligible to receive any Bonus Compensation for the Company’s fiscal year during which
the date of termination occurs or any later year.
(e) Termination Following a Change In Control. Notwithstanding the foregoing Sections
3(a) through (d), in the event of a Change In Control (as defined in the LifePoint Hospitals, Inc.
Change In Control Severance Plan, as Amended and Restated May 9, 2006) (the “CIC Plan”),
Executive’s eligibility to receive benefits, the determination of what benefits are available to
Executive, all payments of such benefits, and all other rights or claims Executive may have
following a Change In Control shall be governed exclusively by the provisions of the CIC Plan in
effect as of the date of this Agreement.
(f) Retirement Defined. Executive acknowledges and agrees that for the purpose of any
pre-existing, current or future Plans, “retirement” shall be deemed to mean only a voluntary
separation by Executive of his employment relationship with the Company, and that any awards made
by the Company to Executive under such Plans following the date hereof shall, unless otherwise
determined by the Board of Directors (or such committee thereof as shall have the responsibility
for and authority to set the compensation of LifePoint’s and its subsidiaries’ and affiliates’
executive officers and key employees), specifically incorporate such provision.
(g) Withholding Tax. The Company shall be entitled to deduct or withhold from any
payment due Executive hereunder all federal, state and local taxes which the Company is required by
law to deduct or withhold therefrom.
(h) Termination Defined. Notwithstanding anything to the contrary in this Agreement,
any reference to “termination” of the Executive’s employment for any reason shall refer to a
termination of employment which constitutes a “separation from service” within the meaning of
Section 409A of the Code.
4. Restrictive Covenants.
(a) Noncompetition. Executive will not, during the term of his employment with the
Company and any of its subsidiaries or affiliates and for 24 months thereafter (the “Restricted
Period”), without the express written consent of the Company, in any capacity (including, but not
limited to, as an owner, member, partner, shareholder, consultant, advisor, financier, agent,
employee, officer, director, manager or otherwise), directly or indirectly, engage in either (i)
the Business (as defined in Section 4(i) hereinbelow), anywhere within the United States, (ii) the
business of developing and/or operating surgery centers or other
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diagnostic/imaging centers primarily in non-urban areas (e.g., within a twenty-five (25) mile
radius of any location where the Company or any of its subsidiaries or affiliates, as of the date
of termination, owns, leases, manages or otherwise maintains an operating facility), (iii) any
business involved primarily in the physician recruitment business that may, as a part of its
operation, be engaged in the recruitment of physicians away from facilities owned or operated by
the Company or any of its subsidiaries or affiliates (excluding recruitment activities that are
conducted by means of general solicitation, such as by way of newspapers or the Internet, that is
not targeted to recruit physicians away from a facility that is owned or operated by the Company),
or (iv) any business that would be in competition with any business operation or venture that was
documented as part of the Company’s strategic plan at the time of Executive’s termination with
implementation of such business operation expected to commence within twelve (12) months after such
termination; provided, however, nothing herein shall prohibit Executive’s ownership
of stock in any publicly held company listed on a national securities exchange or whose shares of
stock are regularly traded in the over-the-counter market as long as such holding at no time
exceeds two percent (2%) of the total outstanding stock of such company; and provided
further, Executive shall be entitled to serve on the board of directors of Psychiatric
Solutions, Inc.; and provided further, that nothing herein shall prohibit
Executive, during the 24 months following termination of his employment with the Company, from
providing consulting services to any person or entity if and only if such services relate
exclusively to corporate governance issues affecting such person or entity.
(b) Nonsolicitation. Executive will not, during the Restricted Period, in any
capacity (including, but not limited to, as an owner, member, partner, shareholder, consultant,
advisor, financier, agent, employee, officer, director, manager or otherwise), whether directly,
indirectly or through affiliates, for his own account or for the benefit of any other person or
entity, including without limitation, a person or entity in (i) the Business, or (ii) any business
in competition with Company or any of its subsidiaries or affiliates during the Restricted Period,
solicit, divert or induce any of the employees or consultants of the Company or any of its
subsidiaries or affiliates to leave or to work for Executive or any person or entity with which
Executive is connected.
(c) Confidentiality. Except pursuant to and consistent with his responsibilities as
Chief Executive Officer and President, Executive will not, at any time after the date hereof,
whether directly, indirectly or through affiliates, disclose, communicate or divulge to any person
or entity, or use for the benefit of any person or entity, any secret, confidential or proprietary
knowledge or information with respect to the Company or its subsidiaries and affiliates or the
conduct or details of the business (including, without limitation, the Business) conducted by any
of them, including, but not limited to, the identity of patients or customers (including
third-party payers of any kind or nature) and suppliers; arrangements with patients or customers
and suppliers; specifications relating to patients or customers, suppliers and services; technical
data, know-how and processes; records and compilations of information; computer software; marketing
methods and strategies; pricing; and financial condition and results (collectively, the
“Confidential Information”).
(d) Nondisparagement. Neither the Company nor Executive will, at any time after the
date hereof, whether directly, indirectly or through affiliates, publish or communicate any
derogatory statements or opinions about the other (and with respect to the Company,
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including but not limited to, disparaging or derogatory statements or opinions about LifePoint
or any of the Company’s other subsidiaries or affiliates or any of the Company’s, LifePoint’s or
their respective subsidiaries’ or affiliates’ management, directors or services) to any third
party, or otherwise facilitate or propagate such statements or opinions being made by any third
party; provided that it shall not be a breach of this section for either party to testify
truthfully in any judicial or administrative proceeding or to make statements or allegations in
legal filings that are based on reasonable belief and are not made in bad faith.
(e) Cooperation. Executive will at any and all times after the date hereof cooperate
with the Company and its subsidiaries and affiliates in all reasonable respects with regard to any
regulatory and litigation matters relating to Executive’s employment or areas of responsibility at
the Company or any of its subsidiaries or affiliates.
(f) Noncontravention. Executive agrees that at no time will he take any action,
directly or indirectly, to circumvent his respective obligations under, or to deprive the Company
or any of its subsidiaries or affiliates of any right granted by, any provision of this Agreement.
Without limiting the generality of the foregoing, Executive shall not in any way assist or enable
any person or entity to take any action that Executive is prohibited from taking himself pursuant
to this Agreement.
(g) Breach. Executive and the Company agree that any breach by either party of the
covenants and agreements contained in this Section 4 may result in irreparable injury to the other
(including, with respect to the Company, its subsidiaries and affiliates) for which money damages
may not adequately compensate the injured party and, therefore, in the event of any such breach,
Executive or the Company, as the case may be, shall be entitled (in addition to any other rights
and remedies which it may have at law or in equity) to seek to have an injunction issued by any
competent court of equity enjoining and restraining Executive or the Company, as the case may be,
and any other person or entity involved therein from continuing such breach. Executive further
acknowledges and agrees that in the event of Executive’s breach of any covenant or agreement
contained in this Section 4, the Company shall have no further obligation to make any payments then
due to him under Section 3 of this Agreement.
(h) Severability. If any portion of the covenants and agreements contained in this
Section 4, or the application thereof, is construed to be invalid or unenforceable, then the other
portions of such covenant(s) or agreement(s) or the application thereof shall not be affected and
shall be given full force and effect without regard to the invalid or unenforceable portions. If
any covenant or agreement in this Section 4 is held to be unenforceable because of the area
covered, the duration thereof, or the scope thereof, then the court making such determination shall
have the power to reduce the area and/or duration and/or limit the scope thereof, and the covenant
or agreement shall then be enforceable in its reduced form.
(i) Definition. The term, “Business,” as used in this Agreement, means a business
that is primarily engaged in the non-urban acute care hospital business (either as an existing or
start-up business).
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5. Miscellaneous.
(a) Waiver of Breach; Severability. The waiver by either party of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent breach by the other
party. In the event any portion of this Agreement is deemed illegal, unenforceable or void by a
court of competent jurisdiction, this Agreement shall continue in full force and effect without
said portion unless the absence of such materially alters the rights and obligations of the parties
to this Agreement.
(b) Assignment. The rights and obligations of the Company under this Agreement shall
inure to the benefit of and shall be binding upon the successors and assigns of the Company. This
Agreement is personal to Executive, and he may not assign any of his rights or delegate any of his
duties or obligations under this Agreement except that Executive’s rights hereunder shall inure to
the benefit of, and be binding upon, his beneficiaries, heirs or personal representative.
(c) Notices. Any notice required or desired to be given under this Agreement shall be
in writing and shall be delivered personally, transmitted by facsimile or mailed by registered
mail, return receipt requested, or delivered by overnight courier service and shall be deemed to
have been given and received on the date of its delivery or transmission, if delivered or sent by
facsimile, and on the third (3rd) full business day following the date of mailing, if mailed, to
each of the parties thereto at the following respective addresses as may be specified in any notice
delivered or mailed as above provided:
If to Executive:
Xxxxxxx X. Xxxxxxxxx III
0000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
0000 Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to the Company, to:
LifePoint Hospitals, Inc.
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx
Attention: Chairman of the Board
Facsimile: (000) 000-0000
000 Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxxx
Attention: Chairman of the Board
Facsimile: (000) 000-0000
(d) Entire Agreement. This instrument, and the instruments referred to herein,
contains the entire agreement of the parties for matters dealt with in this Agreement. It may not
be changed orally but only by an agreement in writing signed by the party against whom enforcement
of any waiver, change, modification, extension or discharge is sought.
(e) Choice of Law; Arbitration. This Agreement shall be governed and interpreted
under the laws of the State of Tennessee. Except with respect to the parties’ right to obtain
injunctive relief or seek specific performance in connection with breaches of Section 4
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herein, the parties agree that any dispute arising out of this Agreement, which they cannot in
good faith resolve, shall be submitted to binding arbitration in accordance with the rules of the
American Arbitration Association governing commercial arbitration. Such arbitration shall be
conducted in the Nashville, Tennessee metropolitan area. The losing party in any such arbitration
proceeding shall pay the costs of arbitration including the arbitrator’s fees, but each party will
pay their own legal fees.
(f) Headings. The sections, subjects and headings in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this Agreement.
(g) Gender, Etc. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or plural, and any other
gender, masculine, feminine or neuter, as the context indicates is appropriate.
(h) Counterparts. This Agreement may be executed in counterparts, all of which will
be considered one and the same agreement.
(i) Section 409A of the Code. The provisions of this Agreement and any payments made
herein are intended to comply with, and should be interpreted consistent with, the requirements of
Section 409A of the Code. The time or schedule of payments to which the Executive is entitled
under this Agreement may be accelerated at any time that this Agreement fails to meet the
requirements of Section 409A of the Code and any such payment will be limited to the amount
required to be included in the Executive’s income as a result of the failure to comply with Section
409A of the Code.
[signature page to follow]
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IN WITNESS WHEREOF, the parties have executed and delivered this Agreement, intending to be
legally bound hereby, as of the date first above written.
| EXECUTIVE: |
||||
| /s/ Xxxxxxx X Xxxxxxxxx III | ||||
| Xxxxxxx X. Xxxxxxxxx III | ||||
| THE COMPANY: LifePoint CSGP, LLC |
||||
| By: | /s/ Xxxx X. Xxxxxxx | |||
| Xxxx X. Xxxxxxx | ||||
| Executive Vice President | ||||
Signature Page to Executive Severance and Restrictive Covenant Agreement
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