SEVERANCE AGREEMENT
THIS AGREEMENT is made as of November 1, 1993, by and between HCA-Hospital
Corporation of America, a Delaware corporation (the "Company"), and the
Subsidiary (as hereinafter defined) which employs the Employee, and
___________________________ (the "Employee").
WHEREAS, the Board of Directors of the company (the "Board") desires to
foster the continuous employment of the Employee and has determined that
appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of the Employee to his duties from distractions which
could arise in the event of a threatened Change in Control of the Company:
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Company and the Employee agree as follows:
1. TERM OF AGREEMENT. This Agreement shall commence as of the date
hereof and shall continue in effect until December 31, 1994; provided, however,
that if a Change in Control (as hereinafter defined) occurs during the term of
this Agreement, the term of this Agreement shall automatically be extended for a
period of thirty-six (36) months after the end of the month in which the Change
in Control occurs. Furthermore, if the Employee's employment with the Company
shall be terminated prior to a Change in Control, this Agreement shall
automatically expire.
2. TERMINATION BENEFITS.
(a) If, following a Change in Control, and during the term of this
Agreement (including any extensions of such term as provided in Section
hereof), the Employee's employment with the Company shall be terminated,
the Employee shall be entitled to the following compensation and benefits
(in addition to any non-severance compensation and benefits provided for
under any of the Company's employee benefit plans, policies and practices
or under the terms of any other contracts, but in lieu of any severance pay
under any Company employee benefit plan, policy and practice or under the
terms of any other contract including any employment contract):
1) If the Employee's employment with the company shall be
terminated, (A) by reason of the Employee's Disability or Retirement,
(B) by reason of the Employee's death or (C) by the Employee other
than for Good Reason, the Company shall pay the Employee his full base
salary through the Date of Termination at the greater of the rate in
effect at the time the Change in Control occurred or when the Notice
of Termination was given (or the Date of Termination in the case of
the Employee's death), plus any bonuses or incentive compensation
which pursuant to the terms of any compensation or benefit plan have
been earned as of the Date of Termination.
2) If the Employee's employment with the Company shall be
terminated for Cause, the Company shall pay the Employee his full base
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 Employee under this Agreement.
3) If the Employee's employment with the Company shall be
terminated, (A) by the Company other than for Cause or Disability, or
(B) by the Employee for Good Reason, then the following provisions
shall apply:
(i) The Company shall, within five (5) days after the
Date of Termination, pay the Employee (1) his full salary through
the Date of Termination at the greater of the rate in effect at
the time the Change in Control occurred or when the Notice of
Termination was given, plus (2) any bonuses or incentive
compensation which pursuant to the terms of any compensation or
benefit plan have been earned but which have not yet been paid
plus (3) as long as the Company, as a whole, is then performing,
as evidenced by its most recently available monthly operating
results, at a level not less than 90% of its budgeted level, an
amount equal to the target amount the Employee could have earned
under the Company's annual incentive plan with respect to the
fiscal year of the Company in which the Date of Termination
occurs multiplied by a fraction, the numerator of which is the
number of full months the Employee was employed by the Company
during the fiscal year of the Company in which the Date of
Termination occurs and the denominator of which is 12;
(ii) The Company shall, within five (5) days after the
Date of Termination, pay the Employee a lump sum (together with
the amounts payable pursuant to clause (iii) below, the
"Severance Payments") in an amount equal to the product of (A)
one times (B) the sum of (1) an amount equal to the Employee's
Annual Base Salary at the rate in effect on October 2, 1993 and
(2) the target amount the Employee could have earned under the
Company's annual incentive plan with respect to the fiscal year
of the Company ending December 31, 1993.
(iii) The Company shall maintain in full force and effect
for the benefit of the Employee and the Employee's dependents and
beneficiaries, at the Company's expense (less the amount such
individual would have paid for such coverage had him employment
not terminated) until the earlier of (A) the expiration of 18
months following the date of Termination or (B) the effective
date of the Employee's employment on a substantially full-time
basis by a new employer (whether as an employee, consultant or
independent contractor), all medical insurance,
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under plans and programs in which the Employee and/or the
Employee's dependents and beneficiaries participated immediately
prior to the Date of Termination, provided that continued
participation is possible under the general terms and provisions
of such plans and programs. If participation in any such plan or
program is barred, the Company shall arrange at its own expense
(less the amount such individual would have paid for such
coverage had his employment not terminated) to provide the
Employee with benefits substantially similar to those which he
was entitled to receive under such plans and programs.
(iv) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or
to be received by the Employee in connection with a Change in
Control or the termination of the Employee'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 of the Company or any
person affiliated with the Company or such person) (all such
payments and benefits, including the Severance Payments, being
hereinafter called "Total Payments") would not be deductible (in
whole or in part), by the Company, an affiliate or 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 eliminate the
disallowance of the deduction under Section 280G of the Code with
respect to such portion of the Total Payments (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) the Severance Payments shall be reduced
(if necessary, to zero). For purposes of this limitation (w) no
portion of the Total Payments the receipt or enjoyment of which
the Employee shall have effectively waived in writing prior to
the Date of Termination shall be taken into account, (x) 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 acceptable to the Employee 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), (y) the Severance Payments shall be
reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (w) or (x) in their
entirety constitute reasonable compensation for services actually
rendered, within the meaning of Section 280G(B)(4)(B) of the
Code, or are not otherwise subject to disallowance as deductions
under Section 280G of the Code, in the opinion of the tax counsel
referred to in clause (x), and (z) 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)
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of the Code. 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 Employee
and the Company in applying the terms of this Section
2(a)(3)(iv), the aggregate "parachute payments" paid to or for
the Employee'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 Employee shall have
an obligation to pay the Company upon demand an amount equal to
the excess of the aggregate "parachute payments" paid to or for
the Employee's benefit over the aggregate "parachute payments"
that could have been paid to or for the Employee's benefit
without any portion of such "parachute payments" not being
deductible by reason of Section 280G of the Code.
(b) The Employee shall not be required to mitigate the amount of any
payment or benefit provided for in Paragraph 2(a) by seeking other
employment or otherwise; nor shall the amount of any payment or benefit
provided for in Paragraph 2(a) be reduced by any compensation earned by the
Employee as a result of employment or otherwise. The amount of any payment
or benefit provided for in Section 2 shall be in lieu of any compensation
or benefits for severance pay due the Employee under any other written
agreement entered into between the Company and the Employee. Payment to
the Employee pursuant to this Agreement shall constitute the entire
obligation of the Company and the Subsidiary for severance pay and full
settlement of any claim for severance pay under law or in equity that the
Employee might otherwise assert against the Company and any Subsidiary or
any of their employees, officers or directors on account of the Employee's
termination.
(c) For purposes of this Agreement the following definitions shall
apply:
1) "Change in Control" shall mean any of the following events:
(i) An acquisition (other than directly from the Company)
of any voting securities of the Company (the "Voting Securities")
by any "Person" (as the term Person is used for purposes of
Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act")) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of twenty percent (20%) or more
of the combined voting power of the ten outstanding Voting
Securities; provided, however, that in determining whether a
Change in Control has occurred, Voting Securities which are
acquired in a "Non-Control Acquisition" (as hereinafter defined)
shall not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition
by (i) an employee benefit plan (or a trust forming a part
thereof) maintained by (A) the Company or (B) any corporation or
other Person of which a majority of
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its voting power or its equity securities or equity interest is
owned directly or indirectly by the Company (a "Subsidiary") or
(ii) the Company or any Subsidiary.
(ii) The individuals who, as of the date hereof, are
members of the Board (the "Incumbent Board"), cease for any
reason to constitute at least two-thirds of the Board; provided,
however, that if the election, or nomination for election by the
Company's stockholders, of any new director was approved by a
vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Agreement, be considered as
a member of the Incumbent Board; provided, further, however, that
no individual shall be considered a member of the Incumbent Board
if (1) such individual initially assumed office as a result of
either an actual or threatened "Election Contest" (as described
in Rule 14a-11 promulgated under the 1934 Act) or other actual or
threatened solicitation of proxies or consents by or on behalf of
a Person other than the Board (a "Proxy Contest") including by
reason of any agreement intended to avoid or settle any Election
Contest or Proxy Contest or (2) such individual was designated by
a Person who has entered into an agreement with the Company to
effect a transaction in clause (i) or (iii) of this Section
2(c)(1); or
(iii) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization
involving the Company, unless
(A) The stockholders of the Company, immediately
before such merger, consolidation or reorganization,
own directly or indirectly immediately following such
merger, consolidation or reorganization, at least
seventy-five percent (75%) of the combined voting power
of the outstanding Voting Securities of the corporation
resulting from such merger or consolidation or
reorganization or its parent corporation (the
"surviving Corporation") in substantially the same
proportion as their ownership of the Voting Securities
immediately before such merger, consolidation or
reorganization;
(B) The individuals who were members of the
Incumbent Board immediately prior to the execution of
the agreement providing for such merger, consolidation
or reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving
Corporation; and
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(C) No Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust
forming a part thereof) maintained by the Company, the
Surviving Corporation of any subsidiary, or any Person
who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of twenty
percent (20%) or more of the then outstanding Voting
Securities has Beneficial Ownership of twenty percent
(20%) or more of the combined voting power of the
Surviving Corporation's then outstanding Voting
Securities.
(2) A complete liquidation or dissolution of the
Company; or
(3) an agreement for the sale or other disposition of
all or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Not withstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting Securities
as a result of the acquisition of Voting Securities by the Company which, by
reducing the number of Voting Securities outstanding, increases the proportional
number of shares Beneficially Owned by the Subject person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after such
share acquisition by the Company, the Subject Person becomes the Beneficial
Owner of any additional Voting Securities which increases the percentage of the
ten outstanding Voting Securities Beneficially Owned by the Subject Person,
then a Change in Control shall occur.
2) "Disability" shall mean a physical or mental illness which
impairs the Employee's ability to substantially perform his duties as
an Employee and as a result of which the Employee shall have been
absent from his duties with the Company on a full-time basis for six
(6) consecutive months.
3) "Retirement" shall mean the voluntary termination of the
Employee's employment after having attained age sixty-five (65) or
such other age as shall have been fixed in any qualified retirement
arrangement established by the Company with the Employee's consent.
4) A termination for "Cause" is a termination (i) by reason of
the conviction of the Employee, by a court of competent jurisdiction
and following the exhaustion of all possible appeals, of a criminal
act classified as a felony or involving moral turpitude or (ii)
pursuant to a determination by no less than a majority of the persons
designated by the Company prior to Change in Control
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to serve as members of the board of directors of the ultimate parent
company following a merger, consolidation or reorganization involving
the Company and still serving the ultimate parent company as a member
of the board of directors, that the Employee either (x) intentionally
failed substantially to perform his reasonably assigned duties with
the Company (other than a failure resulting from the Employee's
incapacity due to physical or mental illness or from the Employee's
assignment of duties that would constitute "Good Reason" as
hereinafter defined) or (y) intentionally acted in a fraudulent and
unethical manner in the course of performing his duties. No act, nor
failure to act on the Employee's part, shall be considered
"intentional" unless the Employee has acted, or failed to act, with a
lack of good faith and with a lack of reasonable belief that the
Employee's action or failure to act was in the best interest of the
Company
5) "Good Reason" shall mean the occurrence after a Change in
Control of any of the following events without the Employee's express
written consent:
(i) any change in the Employee's title, authorities
responsibilities (including reporting responsibilities) which, in
the Employee's reasonable judgement, 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 Employee'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 Employee 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 (or the failure by the
Company to pay any portion of) the Employee's Annual Base Salary
as in effect on the date hereof or as the same may be increased
from time to time;
(iii) the relocation of the Employee's office at which he
is to perform his duties, to a location more that (30) miles from
the location at which the Employee 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) the adverse and substantial alteration of the nature
and quality of the office space within which the Employee
performed his duties prior to a Change in Control as well as in
the secretarial and administrative support provided to the
Employee, provided however that a reasonable alteration of the
secretarial or administrative support provided to the Employee as
a result of reasonable measures implemented by the Company to
effectuate a cost-reduction or consolidation program shall not
constitute Good Reason hereunder;
(v) the failure by the Company to provide (until the
expiration of two (2) years after the occurrence of a Change in
Control) to the Employee compensation and benefits (including,
without limitation, incentive, bonus and other compensation plans
and any vacation, medical, hospitalization, life insurance,
dental or disability benefit plan), or cash compensation in lieu
thereof, which are, in the aggregate, no less favorable than
those provided by the Company to the Employee immediately prior
to the occurrence of the Change in Control;
(vi) any material breach by the Company of any provision
of this Agreement;
(vii) the failure of the Company to obtain a satisfactory
agreement from any successor or assign of the Company to assume
and agree to perform this Agreement, as contemplated in Section 3
hereof; or
(viii) any purported termination of the Employee's
employment which is not effected pursuant to a Notice of
Termination substantially satisfying the requirements of
Paragraph 2(c)(6) below; and for purposes of this Agreement, no
such purported termination shall be effective. The Employee's
right to terminate his employment for Good Reason shall not be
affected by his incapacity due to physical or mental illness.
Continuation of employment by the Employee shall not constitute consent to,
or a waiver of rights with respect to, any circumstances constituting "Good
Reason" hereunder provided, however, that the Employee's continued employment
after the expiration of sixty (60) days from any action which would constitute
Good Reason under paragraph (i) above shall constitute a waiver of rights with
respect to such action constituting Good Reason hereunder.
6) "Notice of Termination" shall mean a notice which shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Employee's employment. Any purported termination by
the Company or by the Employee shall be communicated by written Notice of
Termination to the other party hereto in accordance with Section 5 hereof.
For
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purposes of this Agreement, no such purported termination shall be
effective without such Notice of Termination.
7) "Date of Termination" shall mean:
(i) if the Employee's employment is terminated for
Disability, thirty (30) days after Notice of Termination is given
(provided that the Employee shall not have returned to the
performance of his duties with the Company on a full-time basis
during such thirty (30) day period);
(ii) if the Employee's employment is terminated on account
of his death, the date of his death; and
(iii) if the Employee's employment is terminated for any
other reason, the date specified in the Notice of Termination
(which in the case of a termination pursuant to Paragraph 2(c)(4)
above shall not be less than thirty (30) days, and in the case of
a termination pursuant to Paragraph 2(c)(5) above shall not be
more than sixty (60) days, after the date such Notice of
Termination is given); provided that if within thirty (30) days
after any Notice of Termination is given the party receiving such
Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall
be the date on which the dispute is finally determined either by
mutual written agreement of the parties, or by the final
judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal
having been taken).
8) "Annual Base Salary" shall mean that yearly compensation
rate established from time to time by the Company as an employee's
regular compensation for the next succeeding twelve (12) month period,
payable to an employee by the Company's payroll checks on a periodic
basis.
3. SUCCESSORS; BINDING AGREEMENT.
(a) The Company will require any successor or assign (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 the Company would be required to perform it if no such succession or
assignment had taken place. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor or assign to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise. For convenience only, and not as an
acknowledgement that the Company employs the Employee, "Company" is used in this
Agreement to identify either the Company, the
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Company and one or more of its Subsidiaries or the Subsidiary which employs the
Employee, as the context shall require.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Employee's personal and legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Employee should
die while any amounts would still be payable to him hereunder if he had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to the Employee's devisee,
legatee or other designee and if there is no such devisee, legatee or designee,
to the Employees's estate.
4. FEES AND EXPENSES. Following a Change in Control, the Company shall
pay all reasonable legal fees and related expenses (including the reasonable
costs of experts, evidence and counsel), when and as incurred by the Employee,
as a result of (a) contesting or disputing any termination of employment of the
Employee whether or not such contest or dispute is resolved in the Employee's
favor but if only such contest or dispute is pursued by the Employee in good
faith or (b) the Employee seeking to obtain or enforce any right or benefit
provided by this Agreement or by any other plan or arrangement maintained by the
Company under which the Employee is or may be entitled to receive benefits (but
only if the Employee acts in good faith in seeking to obtain or enforce such
right or benefit) or (c) any tax audit or proceeding to the extent attributable
to the application of Section 4999 of the Code to any payment or benefit
hereunder.
5. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when personally delivered or sent by certified
mail, return receipt requested, postage prepaid, addressed to the respective
addresses last given by each party to the other, provided that all notices to
the Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith. All notices and
communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.
6. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such modification, waiver or discharge is agreed to in
writing and signed by the Employee and such officer of the Company as may be
specifically designated by the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreement or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement. The obligations of the Company under Section 2 shall survive the
expiration of the term of this Agreement.
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7. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of Tennessee without giving effect to the
conflicts of laws principles thereof. Any action brought by any party to this
Agreement shall be brought and maintained in a court of competent jurisdiction
in Davidson County in the State of Tennessee and the parties hereto hereby
consent to the jurisdiction of such courts.
8. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, understandings
and arrangements, oral or written between the parties hereto with respect to the
subject matter hereof.
10. COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
11. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company (except for any
severance or termination policies, plans, programs or practices) and for which
the Employee may qualify, nor shall anything herein limit or reduce such rights
as the Employee may have under any other agreements with the Company (except for
any severance or termination agreement). Amounts which are vested benefits or
which the Employee is otherwise entitled to receive under any plan or program of
the Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
HCA-HOSPITAL CORPORATION OF AMERICA
By:
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Thomas F. Frist, Jr.
Chairman of the Board,
President and Chief Executive
Officer
HOSPITAL CORPORATION OF AMERICA
By:
------------------------------------
Philip R. Patton
Senior Vice President, Human
Resources
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Employee:
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