EXHIBIT 10.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") dated as of ____________,
1999 (the "Effective Date"), between Columbia/HCA Healthcare Corporation, a
Delaware corporation ("Columbia/HCA") and Scott Mercy (the "Executive").
W I T N E S S E T H:
WHEREAS, Columbia/HCA has organized its operations into five business
groups, one of which is known as the America operating group (the "America
Group"); and
WHEREAS, the Board of Directors of Columbia/HCA has determined that it
is in the best interests of Columbia/HCA and its stockholders (i) to form a new,
indirectly owned subsidiary of Columbia/HCA, LifePoint Hospitals, Inc.
("LifePoint"), to which the assets and liabilities of the America Group will be
transferred, and (ii) to subsequently distribute all of the outstanding shares
of LifePoint's common stock acquired and held by Columbia/HCA to the holders of
Columbia/HCA's common stock on a pro-rata basis (the "Spin-Off"); and
WHEREAS, the Columbia/HCA desires to secure the services of the
Executive as the Chairman and Chief Executive Officer, America Group prior to
the date of the consummation of the Spin-Off (the "Spin-Off Date") and as the
Chairman of the Board of Directors, a member of such Board and Chief Executive
Officer of LifePoint on and after the Spin-Off Date on the terms and conditions
set forth herein; and
WHEREAS, the Executive is willing to serve Columbia/HCA as the
Chairman and Chief Executive Officer, America Group and to serve LifePoint as
the Chairman of its Board of Directors, as a member of such Board and as its
Chief Executive Officer on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereby
covenant and agree as follows:
1. Terms and Conditions of Employment
(a) Employment. Columbia/HCA hereby agrees to employ the Executive
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and to cause LifePoint to assume this contract (including all of Columbia/HCA's
obligations hereunder) pursuant to Section 8(b) hereof, and the Executive hereby
agrees to remain in the employ of the Columbia/HCA and, pursuant to Section 8(b)
hereof, LifePoint on and subject to the terms and conditions of this Agreement.
(b) Positions, Duties and Responsibilities. At all times prior to
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the Spin-Off Date, the Executive shall serve as, and with the title, office, and
authority of, Chairman and Chief Executive Officer, America Group, reporting
directly to the President of Columbia/HCA. On and after the Spin-Off Date, the
Executive at all time shall serve as, and with the title, office, and authority
of, the Chief Executive Officer of LifePoint, reporting directly to the Board of
Directors of LifePoint (the "Board") as well as serving as a member of the Board
and as the Chairman of the Board. Columbia/HCA and LifePoint shall take all
action required to cause Executive to be elected no later than the Spin-Off Date
to the Board of Directors of LifePoint, to be elected as the only Chairman of
the Board of Directors of LifePoint and to be elected as its
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only Chief Executive Officer, and LifePoint shall use its best efforts to take
such action as may be required thereafter to maintain the Executive's status as
such.
(c) Full-Time Employment. The Executive agrees to devote
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substantially all of his professional working time and attention to the benefit
of the America Group before the Spin-Off Date and to LifePoint thereafter under
the terms of this Agreement; provided, however, that nothing in this Agreement
is intended nor shall be construed as limiting or restricting the Executive's
right to engage in any activity that is unrelated to his position specified in
paragraph (b) above, including, without limitation, managing private, passive
investments, engaging in church, community, and civic activities and other
activities approved by the Board, and serving as a director or a member of an
advisory committee of any corporation or other entity on which the Executive is
serving as of the Effective Date or any other corporation or entity that is not
in competition with the America Group before its Spin-Off Date or with LifePoint
thereafter, provided that such activities do not impinge in any material way
upon the requirement that the Executive devote substantially all of his
professional working time and attention to the Company and perform the duties of
his position specified in paragraph (b) above.
2. Compensation
In consideration of the services rendered by the Executive during
the Agreement Term (as defined below), Columbia/HCA shall, before the Spin-Off
Date, and LifePoint shall (except as otherwise provided in item (iii) of
paragraph (b) below), after the Spin-Off Date, pay or provide the Executive with
the compensation and benefits set forth below.
(a) Salary. The Executive shall be paid a base salary (his "Base
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Salary") equal to $400,000 per annum, payable in monthly installments, prior to
the Spin-Off Date and $300,000
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per annum, payable in monthly installments, on and after the Spin-Off Date. His
Base Salary shall be reviewed not less than once each calendar year by the
Compensation Committee of the Board of Directors of Columbia/HCA before the
Spin-Off Date and by the Compensation Committee of the LifePoint Board of
Directors thereafter and may be increased, but not decreased, in such
Compensation Committee's sole and absolute discretion.
(b) Guaranteed Bonus. The Executive shall receive (i) a guaranteed
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bonus as promptly as practicable after the execution of this agreement equal to
$66,849.00, which is 50% of his Base Salary in effect of the last day of the
calendar year, prorated based on the 122 calendar days in his partial year of
employment from September 1, 1998 to December 31, 1998; (ii) a guaranteed bonus
as promptly as practicable after the close of 1999 (provided the Executive is
employed by Columbia/HCA or LifePoint on December 31, 1999) equal to the 50% of
his Base Salary in effect on December 31, 1999; and (iii) a guaranteed bonus of
$450,000, payable within 90 days after the Spin-Off Date by Columbia/HCA
(provided the Executive is employed by Columbia/HCA or LifePoint on the Spin-Off
Date).
(c) Annual Bonus. Effective for calendar year 2000, and continuing
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for each subsequent calendar year ending during the Agreement Term, the
Executive shall be entitled to receive a bonus (an "Annual Bonus") based on the
extent to which LifePoint achieves or exceeds its target performance goals for
the relevant calendar year (the "Annual Targets"). Such Annual Bonus for any
calendar year shall equal 50% of his Base Salary (as in effect on the last day
of such year) if LifePoint shall achieve but not exceed the applicable Annual
Targets and shall exceed 50% of such Base Salary if LifePoint shall exceed the
applicable Annual Targets, but in no event shall such Annual Bonus exceed 100%
of such Base Salary. The establishment of Annual Targets for each calendar year,
the adjustment to be made in the Annual Bonus in the
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event of attainment of specified percentages of such Annual Targets, and the
method for determining the achievement of such Annual Targets shall be
established by the Compensation Committee of the LifePoint Board of Directors in
consultation with the Executive prior to the commencement of the calendar year
in question.
(d) Benefits. The Executive as of any date shall be entitled to
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participate in the benefit plans offered at such time at a level which is no
less than commensurate with the benefit level offered generally to other senior
executives at such time.
3. Stock Purchase Rights
Columbia/HCA shall take all actions necessary to cause LifePoint to
adopt an executive stock purchase plan under which the Executive will be given
the stock purchase and loan rights described herein.
(a) The Executive shall be given the right to purchase, at the Per
Share Value (as defined below) on the date elected by the Executive during the
period which starts on the Spin-Off Date and ends on the twenty-first trading
day for LifePoint common stock (the "Stock Purchase Date"), a number of whole
shares of LifePoint common stock (the "Common Stock"), which number shall be
determined by dividing $3,000,000 by such Per Share Value and rounding down to
the next whole share but which number shall not exceed 315,789 shares (the
number thus determined being hereinafter referred to as the "Share Cap"), and
the Executive may exercise such right to purchase whole shares of Common Stock
for all or any part of the number of whole shares of Common Stock in the Share
Cap. The Executive shall notify LifePoint in writing that he will exercise such
stock purchase right on or before the Stock Purchase Date and, if he elects to
exercise such right, the number of shares of such Common Stock at such Per Share
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Value which (up to the Share Cap) he will purchase, which shares will be
referred to in this Agreement as the "Stock Purchase Shares." The aggregate
purchase price of such Common Stock which the Executive elects to purchase
(based on such Per Share Value) will be referred to in this Agreement as the
"Purchase Price." LifePoint shall register such Common Stock under the
applicable securities laws as promptly as practicable after the Spin-Off Date,
so that no restrictions relating to the absence of such a registration apply.
(b) LifePoint, as of the Stock Purchase Date, shall extend a full
recourse loan (the "Stock Purchase Loan") to the Executive in an amount equal to
the Purchase Price, contingent upon the Executive's executing such promissory
note and pledge documents relating to the security described below as the
Compensation Committee of the Board shall reasonably require. Except as provided
below, the Stock Purchase Loan shall be payable in full on the earliest of (i)
the fifth anniversary of the Stock Purchase Date, (ii) the termination of the
Executive's employment with LifePoint for any reason and (iii) the Executive's
bankruptcy (the "Repayment Date"). Within 120 days after the Repayment Date, the
Executive (or his representatives or estate, as the case may be) shall be
required to pay LifePoint an amount equal to the remaining balance of the Stock
Purchase Loan plus accrued interest from the Stock Purchase Date to the
Repayment Date, determined using an interest rate equal to the applicable
federal rate in effect under section 1274(d) of the Internal Revenue Code of
1986, as amended (the "Code"), as of Stock Purchase Date, compounded semi-
annually (the "Accrued Interest").
(c) In the event the Executive voluntarily terminates his
employment (other than for Good Reason, as defined below) or his employment is
terminated for Cause (as defined in Section 5(c) hereof) prior to the earlier of
the third anniversary of the Stock Purchase Date or a
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Change in Control (as defined below), in addition to any amounts due in
repayment of the remaining balance of the Stock Purchase Loan and Accrued
Interest, the Executive shall pay LifePoint an amount equal to the additional
interest, if any, that would have been payable in respect of the Stock Purchase
Loan, if the regular interest rate on such loan had been the prime rate, as
reported in the Two Star Edition of The Wall Street Journal on the Stock
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Purchase Date (and interest thereon at such rate to the actual date of payment).
(d) The Stock Purchase Loan shall be secured by the Stock Purchase
Shares. At the time the Executive purchases the Stock Purchase Shares hereunder,
a certificate representing the Stock Purchase Shares shall be registered in the
name of the Executive. Such certificate shall be held by LifePoint, or any
custodian appointed by LifePoint, for the benefit of the Executive subject to
the terms and conditions hereof and shall bear a legend setting forth the
restrictions imposed thereon hereunder, in such form as LifePoint in its
reasonable discretion may determine. The Executive shall have all rights of a
stockholder with respect to such Stock Purchase Shares, including the right to
receive dividends and the right to vote such Stock Purchase Shares, except that
the Executive shall not be entitled to delivery of the stock certificate and
none of the Stock Purchase Shares may be sold, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of (except by will or the
applicable laws of descent and distribution) until the later of (i) full
repayment of the Stock Purchase Loan and Accrued Interest (and any additional
amount due under paragraph (c) above, to the extent provided therein) and (ii)
the earliest of (1) the third anniversary of the Stock Purchase Date, (2) the
Executive's termination of employment or bankruptcy and (3) a Change in Control,
except that, notwithstanding the foregoing limitations under (i) and (ii), the
stock may be sold to pay the Stock Purchase Loan and Accrued Interest (and any
additional amount due under paragraph (c) above, to the extent
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provided therein) at maturity or may be sold to the extent described in
paragraph (e) below. Any Common Stock and any other securities of LifePoint and
any other property (except cash dividends) distributed with respect to the Stock
Purchase Shares shall be subject to the same restrictions, terms and conditions
as such Stock Purchase Shares.
(e) The following rules shall apply concerning prepayment of the
Stock Purchase Loan:
(i) Any cash dividends received on the Stock Purchase Shares prior
to payment of the full amount due on the Stock Purchase Loan (including
Accrued Interest), net of assumed federal, state and local income taxes (as
reasonably determined by the Executive based upon the highest marginal tax
rates then applicable under income tax laws to which the Executive is
subject), must be used by the Executive to prepay the loan, with any such
prepayment to be applied first to Accrued Interest and then to principal.
(ii) The Stock Purchase Loan may be prepaid in whole or in part at
any time, with any prepayment to be applied first to Accrued Interest, on
and after the earlier of (1) the second anniversary of the Stock Purchase
Date and (2) the date of a Change in Control, and the number of Stock
Purchase Shares that may be sold to make any such prepayments shall include
the number required to make any such prepayments plus the number required
for the Executive to pay his transaction costs to effect such sale and all
his taxes incurred with respect to such sale (with the amount of such taxes
to be as reasonably determined by the Executive based upon the highest
marginal tax rates then applicable under income tax laws to which the
Executive is subject).
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(f) For purposes of this Agreement, the following definitions
shall apply:
(i) "Per Share Value" of the Common Stock shall mean the closing
price of a share of the Common Stock as reported for the Stock Purchase
Date in the Two Star Edition of The Wall Street Journal.
(ii) "Change in Control" shall mean any of the following events
following the Spin-Off Date:
(a) An acquisition (other than directly from LifePoint) of any
voting securities of LifePoint (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 then
outstanding Voting Securities; provided, however, that in determining
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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)
LifePoint or (B) any corporation or other Person of which a majority
of its voting power or its equity securities or equity interest is
owned directly or indirectly by LifePoint (a "Subsidiary") or (ii)
LifePoint or any Subsidiary.
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(b) The individuals who, as of the Spin-Off Date, 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
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nomination for election by LifePoint'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 LifePoint to effect a
transaction described in clause (a) or (c) of this Section 3(f)(ii); or
(c) The consummation, after approval by stockholders of LifePoint,
of:
(1) merger, consolidation or reorganization involving LifePoint unless
(a) The stockholders of LifePoint, 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
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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
(c) No Person (other than LifePoint, any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by LifePoint,
the Surviving Corporation or 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 Corporations then outstanding Voting
Securities.
(2) A complete liquidation or dissolution of LifePoint; or
(3) An agreement for the sale or other disposition of all or
substantially all of the assets of LifePoint to any Person (other than a
transfer to a Subsidiary).
Notwithstanding 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 LifePoint which, by
reducing the number of Voting
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Securities outstanding, increased the proportional number of shares Beneficially
Owned by the Subject Person; provided, however, if a Change in Control would
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occur (but for the operation of this sentence) as a result of the acquisition of
Voting Securities by LifePoint, and after such share acquisition by LifePoint,
the Subject Person becomes the Beneficial Owner of any additional Voting
Securities which increases the percentage of the then outstanding Voting
Securities Beneficially Owned by the Subject Person, then a Change in Control
shall occur.
(iii) "Good Reason" shall mean: (1) the assignment to the Executive
of any duties inconsistent with the Executive's position (including the loss of
any of his titles or position as Chairman of the Board, a member of the Board
and Chief Executive Officer, and any other status, offices, titles or reporting
relationships), authority, duties or responsibilities as contemplated by Section
1 hereof, any adverse change in the Executive's reporting responsibilities, or
any action by Columbia/HCA or LifePoint that results in a diminution in such
position, authority, duties or responsibilities, but excluding for these
purposes an isolated and insubstantial action not taken in bad faith and which
is remedied by Columbia/HCA or LifePoint promptly after receipt of notice
thereof given by the Executive, (2) any diminution in Executive's total
compensation in violation of Section 2 or diminution in Executive's stock
purchase rights in violation of this Section 3, (3) the relocation, without the
consent of the Executive, of Columbia/HCA's (prior to the Spin-Off Date) or
LifePoint's (after the Spin-Off Date) principal executive offices or the offices
of the Executive to a location more than 40 miles from Nashville, Tennessee, (4)
a termination of Executive's employment for any reason (other than his death)
within
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twelve months after a Change in Control, or (5) any breach under Section
8 of this Agreement.
4. Term and Termination of Employment
(a) Term. The term of this Agreement shall commence on the Effective
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Date and shall end on the fifth anniversary of the Effective Date (the
"Agreement Term"); provided, however, that the Agreement Term shall be
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automatically extended for an additional year on the fourth anniversary of the
Effective Date and on each succeeding anniversary of the Effective Date, unless
written notice of non-extension is provided by LifePoint or the Executive to the
other party at least 90 days prior to the applicable anniversary.
(b) Termination of Employment. Nothing in this Agreement shall be
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construed to prevent the Executive from voluntarily terminating his employment
with Columbia/HCA or LifePoint at any time or to prevent Columbia/HCA before the
Spin-Off Date or LifePoint thereafter from terminating the Executive's
employment at any time. Upon such termination, the provisions of Section 5 shall
apply.
5. Compensation Upon Termination of Employment
If the Executive's employment with Columbia/HCA or LifePoint is
terminated during the Agreement Term, the Executive shall be entitled to the
following in full satisfaction of his rights under this Agreement,
notwithstanding anything elsewhere in this Agreement:
(a) Failure of Spin-Off to Occur. If the Spin-Off is not
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consummated prior to December 31, 1999 and the Executive voluntarily terminates
his employment prior to July 1,
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2000 (and prior to the Spin-Off Date), the Company (as defined below) shall pay
the Executive, and provide him with, the following:
(i) His earned but unpaid Base Salary through the date of
termination, any earned but unpaid bonus under Section 2(b) or Section 2(c)
for the calendar year that ended prior to the date of termination and
amounts due to the Executive from the Company as of the date of
termination, all of which amounts shall be paid in a lump sum no later than
fifteen (15) days after the date the Executive's employment terminates, and
any payments, rights and benefits due as of the date of termination under
the terms of all employee benefit plans and programs (in which he was a
participant) in accordance with the terms of such plans and programs
(collectively the "Accrued Rights").
(ii) Continued monthly payments for 36 months at an annual rate of
100% of his Base Salary in effect on the date his employment terminates.
(iii) 50% of his Base Salary (in effect on the date he terminates)
for the remainder of the calendar year in which his termination occurs (the
"Termination Year") and for the next following two calendar years, all of
which amounts shall be paid in a lump sum no later than fifteen (15) days
after the date the Executive's employment terminates.
(iv) A lump sum equal to the cost of medical and/or dental
insurance continuation under COBRA for a period of eighteen (18) months,
less the amount that the Executive would have been required to pay for such
coverage, had his employment not terminated (based on the Company's COBRA
premiums at the time the Executive's employment terminates (the "Insurance
Coverage")).
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(b) Involuntary Termination Without Cause or Termination for Good
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Reason. In the event the Executive's employment is terminated by the Company
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other than for Cause, death, or Disability, or is terminated by the Executive
for Good Reason, the Company shall pay the Executive, and provide him with, the
following:
(i) His Accrued Rights.
(ii) Continued monthly payments at an annual rate of 100% of the
Base Salary from the date of such termination until the second anniversary
of such termination or, if earlier, the end of the then current Agreement
Term (the "Cut-Off Date").
(iii) 50% of Base Salary (based on his Base Salary at the time of
his termination) for each calendar year or fraction of a calendar year in
the period from the first day of the calendar year in which such
termination occurs through the Cut-Off Date, with the amount payable
hereunder for the calendar year in which the Cut-Off Date occurs to be
prorated (based on calendar days), all of which amounts shall be paid in a
lump sum no later than fifteen (15) days after the date the Executive's
employment terminates.
(iv) His Insurance Coverage.
(c) Voluntary Termination; Termination for Cause. In the event
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the Executive voluntarily terminates his employment hereunder (other than a
voluntary termination under Section 5(a) hereof) or is terminated by the Company
for Cause, the Company shall pay the Executive, and provide him with, any
Accrued Rights. If such termination shall be voluntary and not for Cause, any
vested options covering shares of Common Stock held by the Executive at the time
of such termination shall remain exercisable in accordance with their terms for
three months
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following such termination (but not beyond their expiration date). If such
termination shall be for Cause, all such vested options shall remain exercisable
in accordance with their terms for thirty days following such termination (but
not beyond their expiration date).
For purposes of this Agreement, "Cause" shall mean:
(i) The conviction of the Executive of a felony under the laws of
the United States or any state thereof, whether or not appeal is taken, as
determined by the Board of Directors (as defined below) in good faith.
(ii) The conviction of the Executive for a violation of criminal
law involving the Company and its business that materially damages the
Company as determined by the Board of Directors in good faith.
(iii) The willful misconduct of the Executive, or the willful or
continued failure by the Executive (except in the case of a Disability as
provided in Section 5(d) hereof) to substantially perform his duties
hereunder, in either case which has a material adverse effect on the
Company as determined by the Board of Directors in good faith.
(iv) The willful fraud or material dishonesty of the Executive in
connection with his performance of his duties to the Company and involving
the finances of the Company as determined by the Board of Directors in good
faith.
(v) Executive's repeated use of alcohol in a manner which in the
opinion of the Board of Directors materially impairs the ability of the
Executive to effectively perform the Executive's duties and obligations
under this Agreement, or the illegal use,
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possession, or sale of, or impaired performance due to the illegal use of,
controlled substances.
(vi) a violation of the Company's policies on sexual or other
illegal harassment of a Company employee by the Executive as determined by
the Board of Directors in good faith.
In no event, however, shall the Executive's employment be considered to have
been terminated for "Cause" under this Agreement unless and until the Executive
receives written notice from the Board of Directors stating in detail the acts
or omissions constituting Cause and the Executive has the opportunity to cure to
the Board of Directors' satisfaction any such acts or omissions, in the case of
(iii), (v) or (vi) above, within 30 days of the Executive's receipt of such
notice. The foregoing shall not limit the right of the Board of Directors to
suspend the Executive from his day-to-day responsibilities with the Board of
Directors pending the completion of such notice and cure procedures.
(d) Disability; Death. In the event the Executive's employment is
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terminated by reason of the Executive's death, or the Board of Directors
determines in good faith that the Executive is Disabled, the Company shall pay,
and provide the Executive (or his legal representative) with, the following:
(i) His Accrued Rights.
(ii) Continued monthly payments at an annual rate of 100% of his
then Base Salary from the date of such termination until the Cut-Off Date.
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(iii) 50% of his Base Salary (based in each case on the Base Salary
at the time of his termination) for each calendar year or fraction of a
calendar year in the period from the first day of the calendar year in
which such termination occurs through the Cut-Off Date, with the amount
payable hereunder for the calendar year in which the Cut-Off Date occurs to
be prorated (based on calendar days) and with the amount payable hereunder
for any calendar year to be payable as promptly as practicable after the
close of such calendar year.
(iv) His Insurance Coverage (if he is Disabled).
(v) A benefit equal to the excess of the amount required to be
repaid under Section 3 hereof, if any, upon the death or Disability of the
Executive over the product of the number of Stock Purchase Shares times the
Per Share Value of the Common Stock on the date of the Executive's
termination of employment by reason of Disability.
Any options covering shares of Common Stock held by the Executive at
the time of such termination shall become fully vested and exercisable as of the
date of such termination and shall remain exercisable in accordance with their
terms for one year following such termination (but not beyond their expiration
date). For purposes of this Agreement, "Disability" shall mean the inability of
the Executive, after reasonable accommodation, to perform the duties required
hereunder for a period equal to or in excess of the waiting period under the
Company's long term disability insurance policy, as determined in good faith by
the Board of Directors.
(e) Termination after Agreement Term. If the Executive's
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employment with the Company is terminated upon or following the close of the
Agreement Term, he shall be entitled
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to the following in full satisfaction of his rights under this Agreement,
notwithstanding anything elsewhere in this Agreement:
(i) His Accrued Rights.
(ii) If his employment terminates in the calendar year in which the
Agreement Term ends and is not for Cause, 50% of his Base Salary prorated
(based on calendar days) for the portion of such calendar year prior to the
close of the Agreement Term (based on the Base Salary on the last day of
the Agreement Term), all of which amounts shall be paid in a lump sum no
later than fifteen (15) days after the date his employment terminates.
Any vested options covering shares of Common Stock held by the
Executive at the time of such termination of employment shall remain exercisable
in accordance with their terms for three months following such termination,
except that such period shall be one year in the case of death or Disability
(but in no event beyond their expiration date).
(f) For purposes of this Agreement, the term "Company" shall mean
Columbia/HCA before LifePoint assumes this Agreement under Section 8 hereof and
shall mean LifePoint after such assumption, and the term "Board of Directors"
shall mean the Board of Directors of the Company.
(g) If there is a determination that the payments and other
benefits called for under this Agreement, in combination with any other payments
or benefits to or for the benefit of the Executive from Columbia/HCA, LifePoint
or any predecessor or successor organization, will result in the Executive's
being subject to an excise tax under Section 4999 of the Code and/or if
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such an excise tax is assessed against the Executive as a result of such
payments or other benefits, Columbia/HCA or, after LifePoint assumes this
Agreement, LifePoint (the "Payor") shall make a Gross Up Payment (as defined in
this Section 5(g)) to or on behalf of the Executive as and when such
determination(s) and assessment(s), as appropriate, are made, provided the
Executive takes such action as the Payor reasonably requests under the
circumstances to mitigate or challenge, or to mitigate and challenge, such tax
and the Payor complies with its obligations described below in this Section
5(g).
A "Gross Up Payment" means a payment to or on behalf of the
Executive which shall be sufficient to pay (i) any such excise tax in full, (ii)
any federal, state and local income tax and social security and other employment
tax on the payment made to pay the Executive's excise tax as well as any
additional excise tax on such payment and (iii) any interest or penalties
assessed by the Internal Revenue Service on the Executive if such interest or
penalties are attributable to the Payor's failure to comply with its obligations
under this Section 5(g) or applicable law. Any determination under this Section
5(g) by the Payor or the Payors accountants shall be made in accordance with
Section 280G of the Code and any applicable related regulations (whether
proposed, temporary or final) and any related Internal Revenue Service rulings
and any related case law and, if the Payor reasonably requests that the
Executive take action to mitigate or challenge, or to mitigate and challenge,
any such tax or assessment and the Executive complies with such request, the
Payor shall provide Executive with such information and such expert advice and
assistance from the Payor's accountants, lawyers and other advisors as he may
reasonably request and shall pay for all expenses incurred in effecting such
compliance and any related fines, penalties, interest and other assessments.
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6. Tax Withholding
All compensation payable pursuant to this Agreement shall be
subject to reduction by all applicable withholding, social security and other
federal, state and local taxes and deductions.
7. Restrictive Covenants
(a) Confidentiality/Trade Secrets. The Executive acknowledges that
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his position with the Company will be one of the highest trust and confidence,
both by reason of his position and by reason of his access to and contact with
the trade secrets and confidential and proprietary business information of the
Company and all of its Affiliates (which term as used in this Agreement shall
include, any person, corporation, partnership, general partner or other entity
that directly, or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with the Company), both during the term
of this Agreement and thereafter. The Executive covenants and agrees as follows:
(i) Protection. That he shall at all times use his best efforts and
exercise diligence to protect and safeguard the trade secrets and
confidential and proprietary information of the Company and its Affiliates,
including, without limitation, the identity of their patients or customers
(including third-party payers of any kind or nature) and suppliers, their
arrangements with their patients or customers and suppliers, and their
technical data, records, compilations of information, processes, computer
software, and specifications relating to their patients or customers,
suppliers, products and services.
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(ii) Nondisclosure. That he shall not at any time disclose any of
such trade secrets and confidential and proprietary information, except as
Executive reasonably decides may be required in the course of his
employment with the Company under Section 1 hereof or as may be required by
law.
(iii) Nonusage. That he shall not at any time use directly or
indirectly, for his own benefit or for the benefit of another, any of such
trade secrets and confidential and proprietary information.
The covenants contained in this Section 7(a) shall not be
applicable to any information which is in the public domain, other than as a
result of action by the Executive in violation of this Section 7(a), or which
was obtained from sources other than the Company or its Affiliates who are not
under a duty of nondisclosure. All files, records, documents, drawings,
specifications, computer software, memoranda, notes, or other documents relating
to the business of the Company and its Affiliates, whether prepared by the
Executive or otherwise coming into his possession, shall be the exclusive
property of the Company and its Affiliates and shall be delivered to the Company
or its Affiliates as appropriate, and not retained by the Executive, upon
termination of his employment for any reason whatsoever.
(b) Non-Competition. The Executive covenants and agrees that, so
---------------
long as he is employed by the Company, and for a period of two years following
his termination of employment for Good Reason or his voluntary termination under
Section 5(c), the Executive shall not, without the prior written consent of the
Company, directly or indirectly, as an employee, company, agent, principal,
proprietor, partner, ten percent (10% or more) stockholder,
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consultant, director, or corporate officer, engage in any business that is in
competition with the hospitals owned by the Company at the time of termination.
(c) Modification. If the scope of any of the restrictions contained
------------
in this Section 7 is too broad to permit enforcement of such restrictions to
their full extent, then such restrictions shall be enforced to the maximum
extent permitted by law, and the Executive hereby consents and agrees that such
scope may be modified accordingly in any proceeding brought to enforce such
restrictions.
(d) Remedies for Breach of Restrictive Covenants. The covenants set
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forth in this Section 7 shall continue to be binding upon the Executive
notwithstanding the termination of his employment with the Company for any
reason whatsoever. Such covenants shall be deemed and construed as separate
agreements independent of any other provision of this Agreement. The existence
of any claim or cause of action by the Executive against the Company or any of
its Affiliates, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Company or any of its Affiliates
of any or all of such covenants. It is expressly agreed that the remedy at law
for the breach of any such covenant is inadequate and that temporary and
permanent injunctive relief shall be available to prevent the breach or any
threatened breach thereof, without the necessity of proof of actual damages and
without the necessity of posting a bond, cash or otherwise.
8. Successors
(a) This Agreement shall be binding upon and shall inure to the
benefit of Columbia/HCA, its successors and assigns and any person, firm,
corporation or other entity which succeeds to all or substantially all of the
business, assets or property of Columbia/HCA
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before the Spin-Off Date, and this Agreement shall be binding upon and shall
inure to the benefit of LifePoint on and after the Spin-Off Date in accordance
with Section 8(b). Any successor to Columbia/HCA shall be treated the same as
Columbia/HCA under this Agreement, and any successor to LifePoint shall be
treated the same as LifePoint under this Agreement. Columbia/HCA or, after the
Spin-Off Date, LifePoint will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business, assets or property of such company, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that such
company would be required to perform it if no such succession had taken place.
(b) Columbia/HCA shall ensure that as of the Spin-Off Date,
LifePoint assumes all of Columbia/HCA's rights and obligations under, and
becomes bound by, this Agreement. Such assumption shall not be treated as a
termination of employment by the Executive with Columbia/HCA under this
Agreement, and Columbia/HCA after such assumption by LifePoint shall have no
rights or obligations under this Agreement; provided, however, that Columbia/HCA
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shall continue to be included as the "Company" for purposes of the restrictive
covenants of Section 7 as to (i) trade secrets and confidential and proprietary
business information the knowledge of which was acquired by the Executive up to
and including the Spin-Off Date, and (ii) non-competition, for a period of two
years following the Executive's termination of employment from Columbia/HCA as
of the Spin-Off Date.
(c) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die
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while any amounts are due and payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid to the legal representatives of the
Executive's estate.
9. Notices
Any notice, demand, or communication required, permitted or
desired to be given hereunder must be in writing to be effective, and shall be
deemed effectively given when personally delivered or mailed by prepaid
certified mail, return receipt requested, addressed as follows:
if to the Executive:
if to Columbia/HCA Healthcare Corporation:
if to LifePoint:
10. Governing Law
This Agreement has been executed and delivered and shall be
interpreted, construed, and enforced in accordance with the laws of the State of
Tennessee.
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11. Entire Agreement
This Agreement shall constitute the entire agreement of the
parties hereto and may not be amended except in writing signed by all of the
parties hereto. No oral statements or prior written materials not specifically
incorporated herein shall be of any force or effect.
12. Severability
In the event any provision of this Agreement is held to be
unenforceable or void for any reason, the remainder of this Agreement shall be
unaffected and shall remain in full force and effect in accordance with its
terms.
13. No Assignment by Executive; Binding Effect
The Executive shall not assign this Agreement to any other
party or parties without the prior written consent of Columbia/HCA or, after the
Spin-Off Date, LifePoint. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assigns.
14. Headings
The headings used herein are for convenience only and do not
limit the contents of this Agreement.
15. Counterparts
This Agreement may be executed in counterparts, each of which
will deemed to be an original, but all of which together will constitute one in
the same Agreement.
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IN WITNESS WHEREOF, Columbia/HCA and the Executive have executed this
Agreement as of the date first above written.
SCOTT MERCY
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COLUMBIA/HCA HEALTHCARE CORPORATION
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By:
Title:
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