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Exhibit
10.18(a)
CHANGE IN CONTROL
SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL
SEVERANCE AGREEMENT (this “ Agreement ”)
is made and entered into as of December 15, 2006, by and
between Triad Hospitals, Inc., a Delaware corporation, and William
Huston (the “ Executive ”).
WITNESSETH:
WHEREAS, the Executive is a
senior executive of the Company (as hereinafter defined) and is
expected to make major contributions to the profitability, growth
and financial strength of the Company;
WHEREAS, the Company
recognizes that, as is the case of most companies, the possibility
of a Change in Control (as hereinafter defined) exists;
WHEREAS, the Company desires
to assure itself of both present and future continuity of
management and desires to establish certain minimum severance
benefits for certain of its senior executives, including the
Executive, applicable in the event of a Change in Control;
and
WHEREAS, the Company desires
to provide additional inducement for the Executive to remain in the
ongoing employ of the Company, particularly in the event of a
threat or the occurrence of a Change in Control of the
Company;
NOW, THEREFORE, the Company
and the Executive agree as follows:
1. Certain Defined
Terms : In addition to terms defined elsewhere herein, the
following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) “ Base
Pay ” means the Executive’s gross annual salary
as may be determined from time to time by the Company, whether
acting through its Board of Directors (the “
Board ”) or a committee thereof, its President
and CEO or otherwise, including deferrals of salary pursuant to
Sections 125, 402(a)(3), 402(h), 403(b) or 457(b) of the Code,
deferrals of salary to the Triad Hospitals, Inc. Management Stock
Purchase Plan, deferrals of salary to the Triad Hospitals, Inc.
Deferred Compensation Plan and elective deferrals of salary by the
Executive under any other deferred compensation plan maintained by
the Company or any affiliate thereof.
(b) “ Change in
Control ” shall mean:
(i) The acquisition by any
Person of beneficial ownership of Outstanding Company Voting
Securities (including any such acquisition of beneficial ownership
deemed to have occurred pursuant to Rule 13d-5 under the Exchange
Act) if, immediately thereafter, such Person is the beneficial
owner of 25% or more of either (a) the then Outstanding
Company Common Stock or (b) the then Outstanding Company
Voting Securities, unless such acquisition is made
(A) directly from the Company in a transaction approved by a
majority of the
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members of the Incumbent
Board, (B) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company, or (C) by a parent corporation
resulting from a Business Combination if, following such Business
Combination, the conditions specified in clauses (a), (b) and
(c) of subsection (iii) of this Section 1(b) are
satisfied;
(ii) Individuals who, as of
the date hereof, constitute the Board (the “ Incumbent
Board ”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company’s stockholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, except that any
such individual shall not be considered a member of the Incumbent
Board if his or her initial assumption of office occurs as a result
of either an actual or threatened election contest (as such term is
used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the
Board;
(iii) Approval by the
stockholders of the Company of a Business Combination (or if there
is no such approval by stockholders, consummation of such Business
Combination) unless, immediately following such Business
Combination, (a) more than 50% of, respectively, the then
outstanding shares of common stock of the parent corporation
resulting from such Business Combination and the total combined
voting power of the then outstanding voting securities of such
parent corporation entitled to vote generally in the election of
directors will be (or is) then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination in
substantially the same proportions as their ownership immediately
prior to such Business Combination of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be, (b) no Person (other than any employee benefit plan
(or related trust) of the Company or any parent corporation
resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more, respectively, of the then
outstanding shares of common stock of the parent corporation
resulting from such Business Combination or the combined voting
power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(c) at least a majority of the members of the board of
directors of the parent corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement providing for, or action of the
Board authorizing, such Business Combination; or
(iv) Approval by the
stockholders of the Company of (a) a complete liquidation or
dissolution of the Company or (b) a Major Asset Disposition
(or if
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there is no such approval by
stockholders, consummation of such Major Asset Disposition) unless,
immediately following such Major Asset Disposition, (A) all or
substantially all of the individuals and entities that were
beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such
Major Asset Disposition beneficially own immediately after the
transaction, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock, the
combined voting power of the then outstanding voting securities,
and the total value of all the then outstanding stock of the
Company (if it continues to exist) and of the Acquiring Entity, in
substantially the same proportions as their ownership immediately
prior to such Major Asset Disposition of the Outstanding Company
Common Stock and the Outstanding Company Voting Securities, as the
case may be; (B) no Person, other than any employee benefit
plan (or related trust) of the Company or such entity, beneficially
owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock and the combined voting
power of the then outstanding voting securities of the Company (if
it continues to exist) and of the Acquiring Entity and (C) at
least a majority of the members of the board of directors (or
comparable governing body) of the Company (if it continues to
exist) and of the Acquiring Entity were members of the Incumbent
Board at the time of the execution of the initial agreement
providing for, or action of the Board authorizing, such Major Asset
Disposition.
For purposes of the foregoing
definition:
(1) “ Acquiring
Entity ” means the entity that acquires the largest
portion of the assets sold or otherwise disposed of in a Major
Asset Disposition (or the entity, if any, that owns a majority of
the outstanding voting stock of such acquiring entity entitled to
vote generally in the election of directors or members of a
comparable governing body);
(2) the terms “
beneficial owner ”, “ beneficially
ownership ” and “ beneficially own ”
are used as defined for purposes of Rule 13d-3 under the Exchange
Act;
(3) the term “
Business Combination ” means (x) a merger or
consolidation involving the Company or its stock or (y) an
acquisition by the Company, directly or through one or more
subsidiaries, of another entity or its stock or assets;
(4) the term “
group ” is used as it is defined for purposes of
Section 13 of the Exchange Act and Rule 13d-5
thereunder;
(5) the term “ Major
Asset Disposition ” means the sale or other disposition
in one transaction or a series of related transactions (other than
to an entity, 50% of more of the total voting power of which is
owned, directly or indirectly, by the Company) of 50% or more of
all of the assets of the Company
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and its subsidiaries on a
consolidated basis; and any specified percentage or portion of the
assets of the Company shall be based on the total gross fair market
value, as determined by a majority of the members of the Incumbent
Board without regard to any associated liabilities;
(6) the term “
Outstanding Company Common Stock ” means the
outstanding shares of Common Stock, par value $0.01 per share, of
the Company;
(7) the term “
Outstanding Company Voting Securities ” means
outstanding voting securities of the Company entitled to vote
generally in the election of directors; and any specified
percentage or portion of the Outstanding Company Voting Securities
(or of other voting stock or voting securities) shall be determined
based on the total combined voting power of such
securities;
(8) the term “
parent corporation resulting from a Business Combination
” means the Company if its stock is not acquired or converted
in the Business Combination and otherwise means the entity which as
a result of such Business Combination owns the Company or all or
substantially all of the Company’s assets, either directly or
through one or more subsidiaries; and
(9) the term “
Person ” means an individual, entity or
group;
(c) “
Code” means the Internal Revenue Code of 1986,
as amended.
(d) “
Company” means Triad Hospitals, Inc., a
Delaware corporation, and, as the context may require, its direct
and indirect wholly owned subsidiaries and affiliates.
(e) “
Disability ” means (i) the
Executive’s inability to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment that can be expected to result in death or to last for a
continuous period of not less than 12 months, (ii) for a
reason specified in clause (i), the Executive is receiving income
replacement benefits for a period of not less than three months
under a Company accident or health plan, (iii) a determination
by the Social Security Administration that the Executive is totally
disabled or (iv) a determination that the Executive is
eligible for disability benefits under a long-term disability plan
of the Company, but only if such plan bases disability eligibility
on criteria that comply with clauses (i), (ii) or
(iii) above.
(f) “ Exchange
Act ” means the Securities Exchange Act of 1934, as
amended.
(g) “ Incentive
Pay ” means the aggregate annual bonus, incentive
bonus or other payments of cash compensation, in addition to Base
Pay, made or authorized or contemplated to be made in regard to
services rendered by the Executive in any fiscal year pursuant to
any bonus, incentive compensation, profit-sharing, performance,
discretionary pay or similar agreement, policy, plan, program or
arrangement (whether or not funded) of the Company or any successor
thereto, including deferrals of the foregoing pursuant to Sections
125, 402(a)(3), 402(h), 403(b) or 457(b) of the Code, deferrals to
the
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Triad Hospitals, Inc.
Management Stock Purchase Plan, deferrals to the Triad Hospitals,
Inc. Deferred Compensation Plan and elective deferrals by the
Executive under any other deferred compensation plan maintained by
the Company or any affiliate thereof.
(h) “ Severance
Period ” means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing
until the earliest of (i) the first anniversary of the
occurrence of the Change in Control, or (ii) the
Executive’s death or Disability.
(i) “
Term ” means the period commencing as of the
date first set forth above and expiring as of the later of
(i) the close of business on December 15, 2008, or
(ii) the expiration of the Severance Period; provided,
however, that (A) commencing on December 15, 2007 and
each December 15 thereafter until the occurrence of a Change
in Control, the Term of this Agreement will automatically be
extended for an additional year unless, not later than
September 15 immediately preceding each such December 15,
the Company or the Executive shall have given written notice that
it or the Executive, as the case may be, does not wish to have the
Term extended and (B) subject to the last sentence of
Section 7, if, prior to a Change in Control, the Executive
ceases for any reason to be an employee of the Company, thereupon
without further action the Term shall be deemed to have expired and
this Agreement will immediately, without further action, terminate
and be void and of no further force or effect.
(j) “ Termination
Date ” means, if notice of termination is provided,
the date of actual receipt of such notice of termination (or if
later, the date specified therein), and in all other cases, the
actual date on which the Executive’s employment
terminates.
2. Termination Following a
Change in Control : (a) In the event of the occurrence of
a Change in Control, the Executive’s employment may be
terminated by the Company during the Severance Period. If, during
the Severance Period, the Executive’s employment is
terminated by the Company, other than as a result of the
Executive’s death or Disability, or the Company gives written
notice of such termination to the Executive, the Executive will be
entitled to the compensation and benefits provided by
Section 3 hereof.
(b) In the event of the
occurrence of a Change in Control, the Executive may terminate his
or her employment with the Company during the Severance Period,
with the right to the compensation and benefits as provided in
Section 3, upon the occurrence of one or more of the following
events (regardless of whether any other reason for such termination
exists or has occurred, including without limitation, other
employment):
(i) Failure to elect or
reelect or otherwise to maintain the Executive in the office(s) of
the Company which the Executive held immediately prior to a Change
in Control;
(ii)(A) A material adverse
change in the nature or scope of the authorities, powers,
functions, responsibilities or duties attached to the position(s)
which the Executive held immediately prior to the Change in Control
(including, without limitation, a change in offices, titles, scope
of the business or other
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activities for which the
Executive was responsible, or upstream or downstream reporting
relationships), (B) a reduction in the aggregate amount of the
Executive’s Base Pay or Incentive Pay as in effect for the
Executive immediately prior to the occurrence of a Change in
Control or such higher amount of Base Pay or Incentive Pay as may
thereafter be determined by the Company, whether acting through the
Board or a committee thereof, its President and CEO or otherwise,
or (C) the termination, elimination or denial of the
Executive’s rights to employee benefits or any material
reduction in the scope or value thereof (in the case of any such
reduction, with scope and value considered in the aggregate), any
of which is not remedied by the Company within ten
(10) calendar days after receipt by the Company of written
notice from the Executive of such change, reduction, termination,
elimination, denial or reduction, as the case may be;
(iii) A change in business
circumstances occurs following a Change in Control, including,
without limitation, a change in the scope of the business or other
activities for which the Executive was responsible immediately
prior to the Change in Control or a change in the Executive’s
upstream or downstream reporting responsibilities, which change in
business circumstances renders the Executive substantially unable
to carry out, materially hinders Executive’s performance of,
or causes Executive to suffer a material reduction in, any of the
authorities, powers, functions, responsibilities or duties attached
to the position(s) held by the Executive immediately prior to the
Change in Control, which situation is not remedied within ten
(10) calendar days after receipt by the Company of written
notice from the Executive of such situation;
(iv) The liquidation,
dissolution, merger, consolidation or reorganization of the Company
or transfer of all or substantially all of its business and/or
assets, unless the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which all
or substantially all of its business and/or assets have been
transferred (directly or by operation of law) assumed all duties
and obligations of the Company under this Agreement pursuant to
Section 9(a);
(v) The Company relocates its
principal executive offices, or requires the Executive to have his
or her principal location of work changed, to any location which is
in excess of 25 miles from the location thereof immediately prior
to the Change in Control, or requires the Executive to travel away
from the Company’s principal executive offices in the course
of discharging his or her responsibilities or duties hereunder at
least twenty percent (20%) more (in terms of aggregate days in
any calendar year or in any calendar quarter when annualized for
purposes of comparison to any prior year) than was required of
Executive in any of the three full years immediately prior to the
Change in Control without, in either case, his or her prior written
consent; or
(vi) Without limiting the
generality or effect of the foregoing, any material breach of this
Agreement by the Company or any successor thereto.
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(c) A termination by the
Company pursuant to Section 2(a) or by the Executive pursuant
to Section 2(b) will not affect any rights which the Executive
may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing employee benefits, which
rights shall be governed by the terms thereof.
3. Severance Compensation
and Benefits : (a) If, following the occurrence of a
Change in Control and during the Severance Period, (i) the
Company terminates the Executive’s employment (other than as
a result of the Executive’s death or Disability), or the
Company gives the Executive notice of such termination, in either
case pursuant to Section 2(a), or (ii) the Executive
terminates his or her employment pursuant to Section 2(b), the
Company shall:
(i) pay to the Executive, a
lump sum payment (the “ Severance Payment
”), within ten (10) calendar days of the Termination
Date (unless payment of all or any portion of the following is
required on some later date in order to comply with
Section 409A of the Code, in which case payment shall be made
on the first business day after the date that is six months after
the Date of Termination), in an amount equal to:
1 any unpaid Base Pay through
the Termination Date;
2 three times the sum of
(a) Base Pay (the aggregate amount and the components of which
shall be determined based on the highest rate in effect for any
period prior to the Termination Date), plus (b) Incentive Pay
in an amount equal to the higher of (X) the highest annual
amount of Incentive Pay paid to or earned by the Executive with
respect to any fiscal year during the three fiscal years
immediately preceding the fiscal year in which the Change in
Control occurs, and (Y) 100% of the Incentive Pay amount that
would be payable, assuming that both the Company and the Executive
satisfy 100% (but not in excess of 100%) of the performance
objective(s) specified in or pursuant to the applicable agreement,
policy, plan, program or arrangement and communicated to the
Executive (as the Executive’s “Target Incentive
Award,” “Base Bonus Percentage” or their
successors) by the Company, whether or not attained as of such
Termination Date, to the Executive for the fiscal year in which the
Change in Control occurs;
3 payment in respect of any
accrued but unused paid time off or sick pay, and payment in
respect of any business expenses incurred but not reimbursed prior
to the Termination Date;
4 any other compensation or
benefits which may be owed or provided to or in respect of the
Executive in accordance with the terms and provisions of any plans
or programs of the Company; and
5 a pro rata portion of the
Incentive Pay amount that would be payable, assuming that both the
Company and the Executive satisfy 100% (but not in excess of 100%)
of the performance objective(s) specified in or pursuant to the
applicable agreement, policy, plan, program or arrangement
and
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communicated to the Executive
(as the Executive’s “Target Incentive Award,”
“Base Bonus Percentage” or their successors) by the
Company, whether or not attained as of the Termination Date, to the
Executive for the fiscal year in which the Termination Date occurs,
calculated by dividing such amount by a twelve and multiplying the
quotient by the number of full or partial months of employment
completed prior to the Termination Date;
provided, however ,
the Company shall not be obligated to make the Severance Payment
unless and until the Executive signs a release substantially in the
form of Exhibit A hereto.
(ii)(A) for thirty-six
(36) months following the Termination Date (the “
Continuation Period ”), arrange at its sole
expense, to provide the Executive with health and welfare benefits
(other than long-term disability insurance benefits) that are
substantially similar to the better of (when considered in the
aggregate) (X) those health and welfare benefits (other than
long-term disability insurance benefits) that the Executive was
receiving or entitled to receive immediately prior to the Change in
Control, or (Y) those health and welfare benefits (other than
long-term disability insurance benefits) that the Executive was
receiving or entitled to receive immediately prior to the
Termination Date, and (B) such Continuation Period will be
conside
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