AMENDED AND RESTATED EMPLOYMENT
AGREEMENT
Jack O. Bovender, Jr.
This AMENDED AND
RESTATED EMPLOYMENT AGREEMENT (the “ Agreement
”) dated October 27, 2008 is entered into by and between
HCA Inc. (“ HCA ” or the “ Company
”) and Jack O. Bovender, Jr. (the “ Executive
”).
In connection with
the merger pursuant to that certain Agreement and Plan of Merger by
and among HCA, Hercules Holding II, LLC and Hercules Acquisition
Corporation, dated July 24, 2006 (the “ Merger
Agreement ”, and such transaction being the “
Merger ”), the Company entered into an employment
agreement with Executive (the “ Original Agreement
”) embodying the terms of his employment, effective as of the
consummation of the Merger (the “ Closing ”) on
November 17, 2006 (the “ Closing Date ”);
and
In connection with
the retirement of Executive as the Chief Executive Officer of HCA
effective December 31, 2008 (the “ Effective Date
”) and continued employment as the executive Chairman of HCA,
HCA and Executive desire to amend and restate the Original
Agreement in its entirety as set forth in this Agreement, such
amendment and restatement to be effective as of the Effective Date
(except as otherwise provided herein).
In consideration
of the promises and mutual covenants herein and for other good and
valuable consideration, the parties agree as follows:
1. Term
of Employment; Effectiveness . Executive shall continue to be
employed by HCA Management Services, L.P., an affiliate of HCA, on
the terms and subject to the conditions set forth in this Agreement
for a period beginning on the Effective Date and ending on
December 15, 2009 (the “ Employment Term
”).
a.
During the Employment Term, Executive shall serve as the executive
Chairman of HCA. In such position, Executive shall have such
duties, authority and responsibility as shall be required by and
otherwise attendant to the office of executive Chairman and such
other duties, authority and responsibility as shall be determined
from time to time by the Board of Directors of HCA (the “
Board ”). Executive shall serve as a member of the
Board during the Employment Term. Upon the expiration of the
Employment Term or the earlier termination of this Agreement for
any reason, Executive shall be deemed resigned as an officer and
employee of HCA and its affiliates effective immediately upon such
event.
b.
During the Employment Term, Executive will devote substantially all
of such Executive’s business time and efforts to the
performance of Executive’s duties hereunder and will not
engage in any other business, profession or occupation for
compensation or otherwise which would conflict or interfere with
the rendition of such services either directly or indirectly,
without the prior written consent of the Board; provided
that nothing herein shall preclude Executive, subject to the prior
approval of the Board, from accepting appointment to or continue to
serve on any board of directors or trustees of any business
corporation or any
charitable
organization; provided in each case, and in the aggregate,
that such activities do not conflict or interfere with the
performance of Executive’s duties hereunder or conflict with
Section 8.
3. Base
Salary . During the Employment Term, HCA shall pay Executive a
base salary (i) at the monthly rate of $135,000 for the first three
months of the Employment Term, (ii) at the monthly rate of
$86,957 for the next eight months of the Employment Term, and
(iii) equal to $43,478 for the final 15 days of the
Employment Term, payable in accordance with HCA’s normal
payroll practices (the “ Base Salary
”).
4. Annual
Bonus . Executive shall be entitled to the full amount of any
annual bonus earned, but unpaid, as of the Effective Date for the
year ended December 31, 2008 under the HCA Inc. 2008-2009
Senior Officer Performance Excellence Program (the “
PEP ”), which shall be paid to Executive in accordance
with HCA’s normal payroll practices (except to the extent
payment is otherwise deferred pursuant to any applicable deferred
compensation arrangement with HCA). Executive shall be eligible to
earn a bonus for the calendar year 2009 (the “ Annual
Bonus ”) (which shall, to the extent practicable, be paid
to Executive in accordance with HCA’s normal payroll
practices (except to the extent payment is otherwise deferred
pursuant to any applicable deferred compensation arrangement with
HCA or if otherwise agreed by HCA and Executive)) on the following
terms:
The terms of
the PEP shall be applied to Executive in 2009 to provide for a
“target” bonus payout of $500,000 (the “
Target Bonus ”); if the 2009 target performance goals
generally applicable to the PEP are met, Executive shall receive
the Target Bonus, if such performance goals are met at
“threshold” level, Executive shall receive bonus of 50%
of such Target Bonus, and if such performance goals are met at the
“maximum” level, Executive shall receive a bonus payout
of 200% of such Target Bonus. Performance between threshold and
maximum shall result in a bonus payment as determined by the
compensation committee of the Company using interpolation methods
generally used in the administration of the PEP. Subject to the
terms and conditions of this Agreement, Executive will be eligible
to receive the Annual Bonus notwithstanding that the Employment
Term ends prior to December 31, 2009. The Annual Bonus will
generally be administered consistently with the PEP, except as
otherwise determined in the discretion of the compensation
committee (provided that such determination is consistent with the
determination for other executive officers). Executive shall also
have an additional 2009 bonus opportunity of up to $250,000 based
upon the achievement of certain objectives, as determined by the
compensation committee of the Company (the “ Additional
Bonus ”).
5.
Employee Benefits; Business Expenses; Office Space and
Administrative Support .
a.
During the Employment Term:
(i)
Executive shall be entitled to participate in HCA’s pension
and welfare benefit, deferred compensation, and perquisite plans as
in effect from time to time for senior executives of HCA other
than: (a) after December 31, 2008, the HCA
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Restoration
Plan, and (b) after March 31, 2009, the HCA Supplemental
Executive Retirement Plan, as amended (the “ SERP
”) (such plans and benefits in which he shall participate,
collectively “ Employee Benefits ”). For the
avoidance of doubt, Executive shall continue to accrue benefits
under the HCA Restoration Plan through December 31, 2008 and under
the SERP through March 31, 2009; the full amount of such
accrued benefits shall be paid to Executive under the terms of the
relevant plan and any elections properly filed
thereunder.
(ii)
Notwithstanding any provision in the SERP to the contrary,
Executive may change any previously-filed election regarding
distributions from the SERP in order to elect to receive a lump sum
distribution or distributions as a different form of annuity,
provided that Executive shall have filed this change in election as
to the form of payment with the Compensation Committee of the Board
of Directors of the Company no later than December 31, 2008.
If, prior to 2009, Executive elects a lump-sum payment, it will be
paid as soon as administratively feasible during April of 2009. If
an annuity is payable, the first payment will be made on
April 30, 2009. Executive shall accrue benefits under the SERP
through March 31, 2009 and, thereafter, Executive shall accrue
no further benefits under the SERP.
(iii)
Reasonable business expenses incurred by Executive in the
performance of Executive’s duties hereunder shall be
reimbursed by HCA in accordance with HCA’s policies. During
the Employment Term, HCA shall also provide Executive with
Director’s and Officer’s indemnification and insurance
coverage to the extent that the Board determines to be reasonable,
in its sole discretion, for a company of the nature and size of
HCA.
b.
The Company shall provide or, at the Company’s election,
reimburse Executive for reasonable office space, shared clerical
support and office equipment (including reasonable supplies,
furniture and fixtures). This arrangement shall continue until
Executive reaches age 70 or upon the earlier written notice by the
Executive, or immediately upon written notice by the Company
following the Executive’s termination for Cause (as defined
below) or any uncured breach of his covenants set forth in
Section 8 or 9 below.
c.
All reimbursements and in-kind benefits described in this
Section 5 shall be made within the time periods set forth in
Treasury Reg. § 1.409A-3(i)(1)(iv) to the extent
applicable.
6. Equity
Arrangements . HCA has reserved 10% of the Option Pool to be
granted on the following terms (these options being the “
2x Time Options ”). HCA agrees that after the Closing
Date, it will grant 100% of the 2x Time Options to one or more of
Jack Bovender, Richard Bracken, R. Milton Johnson, Samuel Hazen, W.
Paul Rutledge, Beverly Wallace, and Charles Hall (the “
Tier 1 Executives ”). The individual allocations will
be based upon each executive’s contribution to HCA between
the Closing and the date of grant as determined by the Board in
consultation with the Chief Executive Officer (provided that the
fact that Executive has left the position of Chief Executive
Officer and/or the Employment Term may have expired or been
terminated (other than for Cause) prior to the grant date will not
be held against Executive in making such allocation and shall not
preclude Executive from receiving 2x Time Options). A
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percentage of
the 2x Time Options will be vested and exercisable on the date of
grant, such percentage corresponding to the percentage of the
period measured between the Closing Date and the fifth anniversary
of the Closing Date that has elapsed as of the grant date. The 2x
Time Options will otherwise vest pursuant to the schedule generally
used in connection with HCA’s other time-vesting options,
subject to Section 7(a)(ii) hereof. The 2x Time Options will
have an exercise price of $102 per share (subject to adjustment to
take into account any share splits, extraordinary cash dividends,
or other adjustment events under Section 8 of the 2006 Stock
Incentive Plan For Key Employees of HCA Inc. and its Affiliates
(the “ New Option Plan ”), in any case made on
or after Closing). The Board will in good faith attempt to time the
grant of the 2x Time Options relatively near in time to but before
the earlier of (i) a “Change in Control” or
“Public Offering” as defined in the New Option Plan or
(ii) the time at which the Board in its good faith judgment,
believes that it is likely that the fair market value per share of
HCA common stock will soon thereafter exceed the proposed exercise
price of the 2x Time Options, but not later than the fifth
anniversary of the Closing Date. The form of the award agreement
for the 2x Time Options will otherwise be consistent with the terms
of time-vesting options that the Executive was granted in
connection with the Closing, provided , however ,
that, to the extent necessary to comply with Section 409A of
the Internal Revenue Code of 1986, as amended (the “
Code ”), any 2x Time Options granted to Executive at a
time when such options would not qualify as “service
recipient stock” with respect to Executive (within the
meaning of Section 1.409A-1(b)(5) of the Treasury Regulations)
shall be exercisable only during the period beginning on the
earlier of (i) a qualifying change of ownership or effective
control of the Company or in the ownership of a substantial portion
of the assets of the Company (all within the meaning of Section
1.409A-(3)(i)(5) of the Treasury Regulations) or (ii) the
earlier of (x) January 1 of the third fiscal year following
the year in which the 2x Time Options are granted or
(y) January 1, 2017, and in each case ending on the last
date that would allow Executive to avoid any additional tax under
Section 409A of the Code (which generally shall be the end of
the taxable year of the Company in which the option become
exercisable) or, if earlier, December 31, 2017. If an
executive’s employment is terminated, then any 2x Time
Options which are forfeited (or 2x Time Option shares which are
repurchased) would be re-issued to the other then-remaining Tier 1
Executives or the person who is chosen to replace the forfeiting
Tier 1 Executive.
7.
Retirement; Termination . Notwithstanding any other
provision of this Agreement, the options under the New Option Plan
(the “ New Options ”), HCA’s
shareholder’s agreement or any other related agreements
executed by Executive in connection with the Closing (such
agreements, excluding this Agreement, collectively, the “
Equity Agreements ”), the provisions of this
Section 7 shall exclusively govern Executive’s rights
upon termination of employment with the Company and its affiliates;
provided that, except as modified below, the Equity
Agreements shall remain in full force and effect in accordance with
their terms.
a.
Effective as of the expiration of the Employment Term or
Executive’s sooner voluntary termination for any reason
(including by reason of death or disability, but other than for
Good Reason (as defined below)):
(i) Executive
shall be entitled to receive:
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(A) any
Base Salary earned, but unpaid, through the date of
termination;
(B) any
annual bonus earned, but unpaid, for the year ended
December 31, 2008 under the PEP as of the date of termination,
paid in accordance with Section 4 (except to the extent
payment is otherwise deferred pursuant to any applicable deferred
compensation arrangement with HCA);
(C) a
pro rata portion of the Annual Bonus, if any, that Executive would
have been entitled to receive pursuant to Section 4 hereof for
the Fiscal Year in which the termination occurs, based upon
HCA’s actual results for the year of termination and the
percentage of the year that shall have elapsed through the date of
Executive’s termination of employment, payable to Executive
pursuant to Section 4 had Executive’s employment not
terminated (a “ Prorated Bonus ”); provided,
that in the event the Additional Bonus has not been earned as of
the termination date, the compensation committee of the Company
shall consider in good faith whether or not all or a portion of
such Additional Bonus shall be included as part of the Prorated
Bonus;
(D) reimbursement,
within 60 days following submission by Executive to HCA of
appropriate supporting documentation, for any unreimbursed business
expenses properly incurred by Executive in accordance with HCA
policy prior to the date of Executive’s termination; so long
as claims for such reimbursement (accompanied by appropriate
supporting documentation) are submitted to HCA within 90 days
following the date of Executive’s termination of
employment;
(E) continued
coverage under HCA’s group health plans (on the same basis as
such coverage was provided immediately prior to Executive’s
termination of employment) for Executive and his spouse as of the
date of this Agreement until, in each case, the Executive and his
spouse attains 65 years of age; and
(F) such
Employee Benefits (including applicable disability, death, accrued
vacation pay and, if applicable, continuing SERP benefits) as to
which Executive may be entitled under the employee benefit plans of
HCA.
(ii) The
following will apply with respect to the Executive’s equity
awards:
(A) Neither
the Executive nor the Company shall have any put or call rights
with respect to Executive’s options under the New Option Plan
or stock acquired upon the exercise of any such options;
(B) Executive’s
“rollover” stock options will remain exercisable as if
Executive’s employment terminated by reason of
“retirement” in accordance with the terms of the
applicable equity plans and award agreements;
(C) The
unvested New Options (including any issued 2x Time Options) held by
the Executive that vest solely based on t
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