STOCK OPTION GRANT AGREEMENT (Non-Qualified Stock Options)
EXHIBIT 10.4
STOCK OPTION GRANT AGREEMENT
(Non-Qualified Stock Options)
(Non-Qualified Stock Options)
THIS AGREEMENT, is made as of this 11th day of October 2010 between IASIS
Healthcare Corporation (the “Company”) and Xxxx Xxxxx (the “Participant”).
WHEREAS, the Company has adopted and maintains the IASIS Healthcare Corporation 2004 Stock
Option Plan (the “Plan”) to promote the interests of the Company and its Affiliates and
stockholders by providing the Company’s key employees and others with an appropriate incentive to
encourage them to continue in the employ of and provide services to the Company or its Affiliates
and to improve the growth and profitability of the Company;
WHEREAS, the Plan provides for the Grant to Participants in the Plan of Non-Qualified Stock
Options to purchase shares of Common Stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set
forth, the parties hereto hereby agree as follows:
1. Grant of Options. Pursuant to, and subject to, the terms and conditions set forth
herein and in the Plan, the Company hereby grants to the Participant a NON-QUALIFIED STOCK OPTION
(the “Option”) with respect to 62,000 shares of Common Stock of the Company. Sixty percent
(60%) of the Option (representing an Option to purchase 37,200 shares) will be a time-based Option
(the “Time Vesting Option”) having the terms set forth in this Agreement. Forty percent
(40%) of the Option (representing an Option to purchase 24,800 shares) will be a performance-based
Option (the “Performance Vesting Option”) having the terms set forth in this Agreement.
2. Grant Date. The Grant Date of Option hereby granted is October 11, 2010.
3. Incorporation of Plan. All terms, conditions and restrictions of the Plan are
incorporated herein and made part hereof as if stated herein. If there is any conflict between the
terms and conditions of the Plan and this Agreement, the terms and conditions of this Agreement
shall govern. All capitalized terms used and not defined herein shall have the meaning given to
such terms in the Plan.
4. Exercise Price. The exercise price of each share underlying the Option hereby
granted is $45.66.
5. Vesting Date.
(a) The Option shall vest and become exercisable as follows:
| 1. | Time Vesting Option. Except as provided
below, twenty percent (20%) of the shares underlying the Time Vesting
Option shall vest and become exercisable on each of the first five
anniversaries of April 23, 2010, provided that Participant is still
employed by the Company on each such anniversary. |
| 2. | Performance Vesting Option. Except as
provided below, twenty percent (20%) of the shares underlying the
Performance Vesting Option shall vest and become exercisable on each of
the first five anniversaries of the Grant Date (each, an “Eligible
Vesting Date”) if, on the last day of the Company’s most recent
fiscal quarter ending on or prior to such Eligible Vesting Date, the
value of a share of the Company’s Common Stock has increased by at
least twelve percent (12%) (the “Vesting Hurdle”) over
the value of a share of the Company’s Common Stock at the beginning of
such twelve-month period, provided the Participant is still employed by
the Company on each such Eligible Vesting Date. The value of the
Common Stock and whether the Vesting Hurdle has been achieved shall be
determined by the Board of Directors of the Company (the
“Board”) acting reasonably and in good faith, without discount
for minority interest or lack of liquidity, and by taking into account
any external valuation of the Company or its Common Stock. |
| a. | If any portion of the Performance
Vesting Option does not vest on the Eligible Vesting Date on
which it initially becomes eligible to vest in accordance with
the vesting provisions in this sub-section (2) because the
Vesting Hurdle was not achieved for the relevant twelve-month
period (any such twelve-month period, the “Below-Target
Year”), then such portion (the “Catch-Up Tranche”)
shall remain outstanding (subject to exceptions as provided in
Section 6 below) and shall be eligible to vest pursuant to (i)
and (ii) below, provided the Participant is employed by the
Company on the last day of the applicable Catch-up Year (as
defined below) or date of a Liquidity Event: |
| i. | If on the last
day of either of the next two succeeding twelve-month
periods (the “Catch-Up Years”), the value of the
Company’s Common Stock increases by twelve percent (12%)
compounded annually, over the value of a share of Common
Stock at the beginning of the Below-Target Year, then
such Catch-Up Tranche will vest as of the last day of
the Catch-Up Year, provided the Participant is still
employed by the Company on such day. |
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| ii. | If any Liquidity
Event results in the Original Holders realizing an MoM
equal to or in excess of the MoM Target, then any
unvested Performance Vesting Option shall immediately
vest and become exercisable as of the date of the
Liquidity Event,
provided the Participant is still employed by the
Company on such date. |
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| iii. | For purposes of
the foregoing, “Liquidity Event” shall mean any
transaction or series of transactions occurring after
the Grant Date that results or resulted in the receipt
of cash by the Original Holders for or in respect of any
of their shares of capital stock of the Company or any
securities into which such shares were converted or
exchanged; “MoM” shall mean a number, determined on each
Liquidity Event, equal to all cash received directly or
indirectly by the Original Holders in connection with
the Liquidity Event, plus all cash received on any prior
Liquidity Event; the “MoM Target,” for any Liquidity
Event occurring on or prior to the fifth anniversary of
the Grant Date, shall equal $1,405,975,914 (as may be
adjusted for additional capital investments in the
future), and for any Liquidity Event on or after the
fifth anniversary of the Grant Date, shall equal
$1,405,975,914 (as may be adjusted for additional
capital investments in the future), increased by an
additional fifteen percent (15%) per annum for each
portion or full one-year period following the fifth
anniversary of the Grant Date, compounded annually; and
“Original Holders” shall mean TPG Partners IV, L.P. and
the other parties to the operating agreement of IASIS
Investment LLC as of the date of the Employment
Agreement dated September 30, 2010 (the “Employment
Agreement”) and their affiliates. |
(c) In the event of a termination of Employment (as the following termination events are
defined in the Employment Agreement) on account of the Participant’s death or Disability, by the
Company without Cause or by the Participant for Good Reason, (i) the portion of the Time Vesting
Option that is scheduled to vest and become exercisable on the next succeeding Vesting Date (if
any) following the Date of Termination, shall immediately vest and become exercisable, and any
other portion of the Time Vesting Option that is not yet vested and exercisable shall immediately
expire and (ii) the Board shall determine the value of a share of Common Stock as of the Date of
Termination and to the extent the Vesting Hurdle for that year and a Catch-Up Year, if applicable,
has been achieved, that portion of the Performance Vesting Option shall immediately vest and become
exercisable, and any other portion of the Performance Vesting Option that is not yet vested and
exercisable shall immediately expire.
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(d) Notwithstanding anything to the contrary herein, in the event the Participant’s employment
is terminated by the Company without Cause within two (2) years after a Change in Control, (i) any
portion of the Time-Vesting Option that is not vested and
exercisable and that has not expired shall immediately vest and become exercisable as of the
date of the Change in Control and (ii) for any portion of the Performance Vesting Option that is
not vested and exercisable shall vest or not based on whether the threshold amount of cash realized
by the Original Holders as provided in Section 2(a)(ii) of this Agreement, as applicable, and any
portion of the Performance Vesting Option that is not yet vested and exercisable shall immediately
expire, provided however, in the event the Original Holders receive property other than cash
proceeds in connection with such Change in Control, the Performance Option shall remain outstanding
and continue to be subject to the terms of this Agreement and the Plan.
For purposes of this Agreement, a “Change in Control” shall mean any transactions or series of
related transactions pursuant to which any Person (as defined in Section 13(d)(3) or 14(d)(2) of
the Securities and Exchange Act of 1934, as amended from time to time (the “Exchange Act”)) (other
than TPG Partners IV, LP and the other parties to the operating agreement of IASIS Investment LLC,
a Delaware limited liability company, on the date of this Agreement or their respective affiliates)
or “group” of Persons (as defined in Section 13(d) of the Exchange Act), (other than a group
including and controlled by TPG Partners IV, LP and the other parties to the operating agreement of
IASIS Investment LLC, a Delaware limited liability company, on the date of this Agreement or their
respective affiliates), in the aggregate, directly or indirectly, acquires beneficially or of
record, (i) equity of a Designated Person, as hereinafter defined, possessing the voting power to
elect a majority of the Designated Person’s governing body (whether by merger, consolidation,
reorganization, combination, sale or transfer of equity, stockholder or voting agreement, proxy,
power of attorney or otherwise) or (ii) all or substantially all of a Designated Person’s assets.
For purposes of this Agreement, “Designated Person” shall mean IASIS Investment LLC and the
Company. Notwithstanding the foregoing, in no event will a Change in Control occur as a result of
the initial public offering of the Company’s shares of common stock or any secondary offering to
the public.
6. Expiration Date; Net Exercise. Subject to the provisions of the Plan, the Option
or any portion thereof which has not become exercisable pursuant to Section 5 of this Agreement
(taking into account any acceleration of exercisability as provided therein) shall expire on the
earlier of (i) the date the Participant’s Employment is terminated for any reason or (ii) the tenth
anniversary of the Grant Date. Subject to the provisions of the Plan, with respect to any Option
or any portion thereof which has become exercisable, the Option (or portion thereof) shall expire
on the earlier of: (i) one year after the Date of Termination of the Participant’s Employment on
account of death or Disability, by the Participant for Good Reason or by the Company without Cause
or as a result of the Company’s failure to extend the Term, (ii) the commencement of business on
the date the Participant’s Employment is, or is deemed to have been, terminated for Cause; (iii) 90
days after the date the Participant’s Employment is terminated by the Participant without Good
Reason or as a result of the non-renewal of the Term by the Participant; or (iv) the tenth
anniversary of the Grant Date. During the one-year period described in clause (i) above, the
Participant shall be permitted to exercise the Option on a net basis (e.g., by satisfying the
exercise price and withholding tax obligations by having withheld a number of Option shares that
have a fair market value equal to such obligations).
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7. Construction of Agreement. Any provision of this Agreement (or portion thereof)
which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that
jurisdiction and subject to this section, be ineffective to the extent of such invalidity,
illegality or
unenforceability, without affecting in any way the remaining provisions thereof in such
jurisdiction or rendering that or any other provisions of this Agreement invalid, illegal, or
unenforceable in any other jurisdiction. If any covenant should be deemed invalid, illegal or
unenforceable because its scope is considered excessive, such covenant shall be modified so that
the scope of the covenant is reduced only to the minimum extent necessary to render the modified
covenant valid, legal and enforceable. No waiver of any provision or violation of this Agreement
by the Company shall be implied by the Company’s forbearance or failure to take action.
8. Delays or Omissions. No delay or omission to exercise any right, power or remedy
accruing to any party hereto upon any breach or default of any party under this Agreement, shall
impair any such right, power or remedy of such party nor shall it be construed to be a waiver of
any such breach or default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party or any provisions or conditions of this
Agreement, shall be in writing and shall be effective only to the extent specifically set forth in
such writing.
9. Limitation on Transfer. During the lifetime of the Participant, the Option shall
be exercisable only by the Participant. The Option shall not be assignable or transferable other
than by will or by the laws of descent and distribution. All shares of Common Stock obtained
pursuant to the Option granted herein shall not be transferred except as provided in the Plan and,
where applicable, the Management Stockholders’ Agreement.
10. Integration. This Agreement, and the other documents referred to herein or
delivered pursuant hereto which form a part hereof contain the entire understanding of the parties
with respect to its subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to the subject matter hereof
other than those expressly set forth herein and in the Plan. This Agreement, including without
limitation the Plan, supersedes all prior agreements and understandings between the parties with
respect to its subject matter.
11. Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the same instrument.
12. Governing Law. This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Delaware (United States of America) without regard to the
provisions governing conflict of laws.
13. Participant Acknowledgment. The Participant hereby acknowledges receipt of a copy
of the Plan. The Participant hereby acknowledges that all decisions, determinations and
interpretations of the Board in respect of the Plan, this Agreement and the Option shall be final
and conclusive. The Participant further acknowledges that, prior to the existence of a Public
Market, no exercise of the Option or any portion thereof shall be effective unless and until the
Participant has executed the Management Stockholders’ Agreement and the Participant hereby
agrees to be bound thereby.
* * * * *
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its duly
authorized officer and said Participant has hereunto signed this Agreement on his own behalf,
thereby representing that he has carefully read and understands this Agreement, the Plan and the
Management Stockholders’ Agreement as of the day and year first written above.
| IASIS HEALTHCARE CORPORATION |
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| By: | /s/ Xxxxx X. Xxxxx | |||
| Name: | Xxxxx X. Xxxxx | |||
| Title: | Chief Executive Officer | |||
| /s/ Xxxx Xxxxx | ||||
| Xxxx Xxxxx | ||||
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