EXHIBIT 10.2
VANGUARD HEALTH
SYSTEMS, INC.
2009 LONG TERM
INCENTIVE PLAN
Section 1.
Purpose
The purpose of this Long Term Incentive Plan is to create long term
value for the Company by securing the continuity and retention of
its Officers by enabling its Officers to earn additional cash
incentive compensation payable on a long term basis if a specified
Company Performance Goal or Goals are met for a current period and
the Participant remains in the employ of the Company for a
specified period subsequent to the Year in which the Goal is
achieved.
Section 2.
Definitions
“ Account ” shall have the meaning set forth in
Section 5.2.
“ Board ” shall mean the Board of Directors of
the Company.
“ Business Unit ” shall mean any existing or
future facility, region, division, group, subsidiary or other unit
within the Company.
“ Cause ” for termination of the
Participant’s employment, after any Change in Control, shall
mean (i) the conviction of the Participant, 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, (ii) the willful and continued failure by the
Participant to substantially perform the Participant’s duties
with the Company or its subsidiary (other than any such failure
resulting from the Participant’s incapacity due to physical
or mental illness or any such actual or anticipated failure after
the issuance by the Participant to his or her employer of a notice
of termination of employment for Good Reason) after a written
demand for substantial performance is delivered to the Participant
by the Company or its subsidiary, which demand specifically
identifies the manner in which the employer believes that the
Participant has not substantially performed the Participant’s
duties, or (iii) the willful engaging by the Participant in conduct
which is demonstrably and materially injurious to the Company or
its subsidiaries, monetarily or otherwise. For purposes of
clauses (ii) and (iii) of this definition, no act, or failure to
act, on the Participant’s part shall be deemed
“willful” unless done, or omitted to be done, by the
Participant not in good faith and without reasonable belief that
the Participant’s act, or failure to act, was in the best
interest of the Company or its subsidiary.
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“ Change in Control ” shall mean the first to
occur of the following events:
(a) any “Person” (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934 (the “Exchange Act”) as
modified and used in Sections 13(d) and 14(d) of the Exchange Act
(other than (1) the Company or any of its subsidiaries, (2) any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any of its subsidiaries, (3) an
underwriter temporarily holding securities pursuant to an offering
of such securities, (4) any entity owned, directly or indirectly,
by the stockholders of the Company in substantially the same
proportions as their ownership of the Company’s common stock,
(5) any Person that was a stockholder of the Company on September
23, 2004 and any affiliates of such Person, or (6) Blackstone (as
defined in the Company’s 2004 Stock Incentive Plan), or any
of its affiliates), is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
more than 50% of the combined voting power of the Company’s
then outstanding voting securities;
(b) during any period of not more than two consecutive years, not
including any period prior to the date of this Agreement,
individuals who at the beginning of such period constitute the
Board, and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect
a transaction described in clause (a), (c), or (c) of this
definition) whose election by the Board or nomination for election
by the Company’s stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved,
cease for any reason to constitute at least a majority thereof;
(c) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
both (A) (1) a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior
thereto continuing, directly or indirectly, to represent (either by
remaining outstanding or by being converted into voting securities
of the surviving or parent entity) 50% or more of the combined
voting power of the voting securities of the Company or such
surviving or parent entity outstanding immediately after such
merger or consolidation or (2) a merger or consolidation in which
no person acquires 50% or more of the combined voting power of the
Company’s then outstanding securities; and (B) immediately
after the consummation of such merger or consolidation described in
clause (A) (1) or (A) (2) above (and for at least 180 days
thereafter) neither the Company’s Chief Executive Officer nor
its Chief Financial Officer change from the people occupying such
positions immediately prior to such merger or consolidation except
as a result of their death or Disability and neither of such
officers shall have changed prior to such merger or consolidation
at the direction of a Person who has entered into an agreement with
the Company the consummation of which will constitute a Change in
Control of the Company; or
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(d) the stockholders of the Company approve (A) a plan of complete
liquidation of the Company or (B) an agreement for the sale or
disposition by the Company of all or substantially all of the
Company’s assets (or any transaction having a similar
effect);
provided , in each case, that such event constitutes a
Change in Control within the meaning of Section 409A of the Code
and the related Internal Revenue Service regulations and guidance
promulgated thereunder.
For purposes of clauses (a), (b) and (d)(B) of this definition
only, the term “Company” shall mean any of Vanguard
Health Systems, Inc., Vanguard Health Holding Company 1, LLC, or
Vanguard Health Holding Company II, LLC; provided that, any
reorganization involving solely the Company and its subsidiaries
shall not constitute a Change in Control under this definition.
“ Code ” shall mean the Internal Revenue Code of
1986, as amended, and any successor statute and the regulations
promulgated thereunder, as it or they may be amended from time to
time.
“ Code Section 162(m) Award ” shall mean a
Retention Award intended to satisfy the requirements of Code
Section 162(m) and designated as such in an Award Agreement or
other writing.
“ Committee ” shall mean either (i) the
Compensation Committee of the Board or (ii) prior to establishment
of the Compensation Committee of the Board, the Board.
“ Company ” shall mean Vanguard Health Systems,
Inc., a Delaware corporation.
“ Covered Employee ” shall mean a Covered
Employee within the meaning of Code Section 162(m)(3) or a person
designated as a Covered Employee by the Committee.
“ Exchange Act ” shall have the meaning set
forth in Section 4.1.
“ Good Reason ” shall mean that at least one of
the following shall have occurred:
(a) there shall have been a
material diminution in the Participant’s base
compensation, except for across-the-board salary reductions
similarly
affecting all senior executives of the Company and all senior
executives
of any person in control of the Company;
(b) there shall have been
a material diminution in the Participant’s authority,
duties or responsibilities;
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(c) there shall have been
a material diminution in the authority, duties or
responsibilities of the supervisor to whom the Participant is
required to
report, including a requirement that the Participant’s
supervisor report to a
corporate officer or employee instead of reporting directly to the
Board of
Directors of the Company;
(d) there shall have been
a material diminution in the budget over which the
Participant retains authority;
(e) there shall have been
a material change in the geographic location at
which the Participant must perform services, 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; or
(f) there shall
have been any other action or inaction that constitutes a
material breach by the Company of the terms of any Employment
Agreement between the Company and any Participant or any
Severance
Protection Agreement between the Participant and the Company.
“ Officer ” shall mean any officer of the
Company.
“ Participant ” shall mean any Officer to whom a
Retention Award pursuant to the Plan for any Year may be made.
“ Payment Date or Payment Dates ” shall mean the
date or dates on which earned Retention Awards for a Year (or other
measuring period) are to be paid to Participants, in whole or in
part.
“ Performance Criterion ” and “
Performance Criteria ” shall mean any one or more of
the following performance measures, taken alone or in conjunction
with each other, each of which may be adjusted by the Committee to
exclude the before-tax or after-tax effects of any significant
acquisitions or dispositions not included in the calculations made
in connection with setting the Performance Criterion or Performance
Criteria for the related Retention Award:
(1)(A) Basic or diluted earnings per share of common stock, which
may be
calculated (i) as income calculated in accordance with Section
clause (D) below, divided
by (x) the weighted average number of shares, in the case of basic
earnings per share, and
(y) the weighted average number of shares and share equivalents of
common stock, in the
case of diluted
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earnings per share, or (ii) using such other method as may be
specified by the Committee;
(B) Cash flow, which may be
calculated or measured in any manner specified
by the Committee;
(C) Economic value added, which
is after-tax operating profit less the annual
total cost of capital;
(D) Income, which may include,
without limitation, net income and operating
income and may be calculated or measured (i) before or after income
taxes, including or
excluding interest, depreciation and amortization, non-cash stock
compensation, minority
interests, extraordinary items and other material non-recurring
expenses and restructuring
and impairment charges, discontinued operations, the cumulative
effect of changes in
accounting policies and the effects of any tax law changes; or (ii)
using such other
method as may be specified by the Committee;
(E) Quality of service and/or patient care which may be measured by
(i) the extent
to which the Company achieves pre-set quality objectives including,
without limitation,
patient satisfaction objectives, or (ii) such other method as may
be specified by the
Committee;
(F) Return measures (including, but not limited to, return on
assets, capital,
equity, or sales), which may be calculated or measured in any
manner specified by the
Committee; or
(G) The price of the Company’s common or preferred stock
(including, but not
limited to, growth measures and total shareholder return), which
may be calculated or
measured in any manner specified by the Committee.
(2) Except for Code Section 162(m) Awards, any other criteria
related to
performance, including the performance of one or more of the
Business Units, individual
performance or any other category of performance selected by the
Committee.
“ Performance Goals ” shall mean the performance
objectives with respect to one Performance Criterion or two or more
Performance Criteria established by the Committee for the Company,
a Business Unit or an individual for the purpose of determining
whether, and the extent to which, payments will be made for that
Year or other measurement period with respect to a Retention Award
under the Plan.
“ the Plan ” or “ this Plan ”
shall mean this Vanguard Health Systems, Inc. 2009 Long Term
Incentive Plan.
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“ Retention Amount ” shall mean the aggregate
amount, if any, credited to a Participant’s Account in
respect of each Retention Award earned by a Participant.
“ Retention Award ” shall mean a contractual
right, subject to the terms and conditions of the Plan, to receive
a cash incentive award earned under the Plan, which award may be
based on (1) the change (measured as a percentage or an amount) in
or of any one Performance Criterion or two or more Performance
Criteria from one measurement period to another, (2) the difference
(measured as a percentage or an amount) between (A) a specified
target or budget amount of any one Performance Criterion or two or
more Performance Criteria and (B) the actual amount of that
Performance Criterion or two or more Performance Criteria, during
any measurement period, (3) the extent to which a specified target
or budget amount for any one Performance Criterion or two or more
Performance Criteria is met or exceeded during any measurement
period, or (4) any other award, including a discretionary award,
that may be paid from time to time under the Plan.
“ Retention Award Schedule ” shall mean the
Retention Award Schedule established pursuant to Section 5.1.
“ Target Award ” shall mean the amount, which
may be expressed as a dollar amount or as a percentage of a
Participant’s salary, payable to a Participant when actual
performance with respect to any one Performance Criterion or any
two or more Performance Criteria equals the Performance Goals for
that Performance Criterion or those Performance Criteria
established by the Committee.
“ Year ” shall mean the Company’s fiscal
year.
Section 3.
Eligibility and Participation
Participants in the Plan shall be those Officers selected by the
Committee to participate in the Plan. Any Officer shall be eligible
to participate in the Plan. No Officer shall have a right to be
selected to participate in the Plan, or, having once been selected,
to be selected again. The selection of an Officer as a Participant
shall neither entitle such Officer to nor disqualify such Officer
from participation in any other Company benefit or incentive plan
or award.
Section 4. Plan
Administration
4.1 Generally . The Plan shall be administered by the
Committee, which will consist of two or more persons (1) who (after
the Company is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 (the “Exchange Act”) )
satisfy the requirement of a “nonemployee director” for
purposes of Rule 16b-3 under the Exchange Act, and (2) who (after
the Company is subject to the
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deduction limit under Code Section 162(m) ) satisfy the
requirements of an “outside director” for purposes of
Code Section 162(m). Th
