EXHIBIT 10.35
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STOCKHOLDERS AGREEMENT
CONCERNING
VANGUARD HEALTH SYSTEMS, INC.
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DATED AS OF NOVEMBER 4, 2004
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TABLE OF CONTENTS
Page
ARTICLE I PROXY................................................................................. 1
Section 1.1. Proxy................................................................... 1
ARTICLE II EMPLOYEES' REPRESENTATIONS, WARRANTIES AND AGREEMENTS................................ 2
Section 2.1. Shares Unregistered..................................................... 2
Section 2.2. Additional Investment Employee Representations.......................... 3
ARTICLE III TRANSFERS........................................................................... 4
Section 3.1. Limitations on Transfer................................................. 4
Section 3.2. Void Transfers.......................................................... 4
Section 3.3. Certificates; Legend.................................................... 4
Section 3.4. Company Right of First Refusal.......................................... 6
Section 3.5. Tag-Along Rights........................................................ 7
Section 3.6. Right to Drag-Along..................................................... 9
ARTICLE IV CERTAIN PROVISIONS APPLICABLE TO SHAREHOLDERS........................................ 9
Section 4.1. Company Call Option..................................................... 9
ARTICLE V REGISTRATION RIGHTS................................................................... 12
Section 5.1. Incidental Registration................................................. 12
ARTICLE VI COMPETITIVE OPPORTUNITY AND COMPETING ACTIVITIES..................................... 12
Section 6.1. Competitive Opportunity................................................. 12
Section 6.2. Competing Activities.................................................... 12
ARTICLE VII CONFIDENTIALITY; INTELLECTUAL PROPERTY RIGHTS....................................... 13
Section 7.1. Confidentiality......................................................... 13
Section 7.2. Intellectual Property................................................... 14
ARTICLE VIII DEFINITIONS........................................................................ 14
Section 8.1. Defined Terms........................................................... 14
Section 8.2. Other Definitional Terms; Interpretation................................ 21
ARTICLE IX MISCELLANEOUS........................................................................ 22
Section 9.1. Assignment and Binding Effect........................................... 22
Section 9.2. Notices................................................................. 22
Section 9.3. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial......... 23
Section 9.4. Entire Agreement........................................................ 23
Section 9.5. Counterparts............................................................ 24
Section 9.6. Severability............................................................ 24
Section 9.7. Amendment and Modification.............................................. 24
Section 9.8. Waiver.................................................................. 24
Section 9.9. Further Assurances...................................................... 24
Section 9.10. Sections, Exhibits...................................................... 24
Section 9.11. Specific Enforcement.................................................... 24
Section 9.12. Successors.............................................................. 25
Section 9.13. Computation of Time..................................................... 25
Section 9.14. Additional Shares Subject to Agreement.................................. 25
EXHIBIT A: FORM OF JOINDER AGREEMENT............................................................ 36
This STOCKHOLDERS AGREEMENT, dated as of November 4, 2004 (the
"Agreement"), concerning Vanguard Health Systems, Inc., a Delaware corporation
(the "Company"), is entered into by and among the Company, VHS Holdings LLC, a
Delaware limited liability company ("Holdings"), Blackstone FCH Capital Partners
IV L.P., a Delaware limited partnership, and its affiliates identified on the
signature pages hereto as a "Blackstone Party" (collectively, the "Blackstone
Parties") and the parties identified on the signature pages hereto as an
"Employee" or who have otherwise become party to this Agreement and have agreed
to become bound by its terms as an "Employee" by entering into a joinder
agreement substantially in the form attached hereto as Exhibit A (collectively,
the "Employees").
RECITALS
WHEREAS, the Employees have been granted options exercisable for common
stock of the Company and, upon the exercise thereof, will become a shareholder
of the Company; and
WHEREAS, the parties hereto desire to enter into this Agreement in order
to set forth the terms and conditions of the shareholding by the Employees; and
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto hereby agree as follows:
ARTICLE I
PROXY
Section 1.1. Proxy.
(a) Each Employee hereby agrees, (i) until the earlier to occur of (x) the
Lapse Date and (y) a Qualified IPO, in respect of all Designated Actions which
are described in clause (i) of the definition of "Designated Action" set forth
in Section 8.1 and (ii) until the occurrence of the Lapse Date in respect of all
Designated Actions which are described in clause (ii) of the definition of
"Designated Action" set forth in Section 8.1, to take all Designated Actions in
the manner that the Management Representative, in his sole and absolute
discretion, shall direct, at any meeting of the shareholders of the Company, at
any and all adjournments thereof, and on any other occasion in respect of which
the consent of such Employee with respect to his or her Shares may be given or
may be requested or solicited by the Company or any other Person, whether at a
meeting, pursuant to the execution of a written consent, under this Agreement or
otherwise, for all purposes in connection with any Designated Action, and such
Employee hereby ratifies and confirms all that the Management Representative may
do by virtue hereof.
(b) For purposes of effecting any Designated Action, each Employee does
hereby irrevocably constitute and appoint the Management Representative as his
or her true and lawful attorney, agent and proxy for and in his or her name,
place and ▇▇▇▇▇, with the exclusive right to take all Designated Actions, in the
Management Representative's sole and absolute discretion, at any meeting of the
shareholders of the Company, at any and all adjournments thereof, and on any
other occasion in respect of which the consent of such Employee may be given or
may be requested or solicited by the Company or any other Person, whether at a
meeting, pursuant to the execution of a written consent, under this Agreement or
otherwise, for all purposes in connection with any Designated Action, and such
Employee hereby ratifies and confirms all that the Management Representative may
do by virtue hereof. Each Employee agrees with the Management Representative
that, without the prior written consent of the Management Representative, he or
she will not, so long as this Agreement shall be in effect with respect to any
such Employee, take any Designated Action, appoint any person other than the
Management Representative as his or her attorney, agent or proxy with respect to
such Shares, or take any action inconsistent with the appointment of the
Management Representative as his or her lawful attorney, agent and proxy, or the
exercise by the Management Representative of the powers granted to it,
hereunder.
(c) The parties hereto agree that, in taking or giving directions for the
taking of any Designated Action or in otherwise acting hereunder, the Management
Representative shall have no responsibility in respect of the management of the
Company by Directors for whom it shall have voted or for any action taken by any
such Directors or for any action taken pursuant to any consent given or vote
cast by it or other action taken by it, and the Management Representative's
powers herein shall be discretionary and any of them may be exercised from time
to time when he sees fit and without leave of any court or any other Person and
the Management Representative may refrain from exercising any powers or rights
from time to time as he sees fit in each case irrespective of any relationship
that the Management Representative or any of his Affiliates may have with any of
the parties hereto other than pursuant to this Agreement.
(d) The powers granted pursuant to this Section 1.1, and the proxy granted
pursuant hereto, are coupled with an interest and shall be irrevocable (i) prior
to the earlier to occur of (x) the Lapse Date and (y) a Qualified IPO in respect
of all Designated Actions which are described in clause (i) of the definition of
"Designated Action" set forth in Section 8.1 and (ii) prior to the occurrence of
the Lapse Date in respect of all Designated Actions which are described in
clause (ii) of the definition of "Designated Action" set forth in Section 8.1.
(e) Each Employee agrees not to Transfer any of his or her Shares prior to
the Lapse Date (other than (i) Transfers of Shares pursuant to Section 3.4, 3.5
or 3.6 and (ii) Transfers to the Company) unless the proposed Transferee shall
have agreed in writing to be bound as an "Employee" by the terms of this
Section.
(f) The Management Representative accepts his appointment as proxy and
agent and agrees to serve in such capacity pursuant to the terms of this Section
1.1.
ARTICLE II
EMPLOYEES' REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Section 2.1. Shares Unregistered. Each Employee acknowledges and
represents as of the date hereof that such Employee has been advised by the
Company that:
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(a) the Shares have not been registered under the Securities Act;
(b) the Shares must be held, and such Employee must continue to bear the
economic risk of the investment in, the Shares indefinitely unless the
subsequent offer and sale of such Shares by such Employee are registered under
the Securities Act and all applicable state securities laws or an exemption from
such registration is available, and the offer and sale of the Shares may never
be so registered;
(c) there is no established market for the Shares and it is not
anticipated that there will be any public market for the Shares in the
foreseeable future;
(d) a restrictive legend in the form set forth in Section 3.3 shall be
placed on the Stock Certificates; and
(e) a notation shall be made in the appropriate records of the Company
indicating that the Shares are subject to restrictions on transfer and, if the
Company should at some time in the future engage the services of a securities
transfer agent, appropriate stop-transfer instructions may be issued to such
transfer agent with respect to the Shares.
Section 2.2. Additional Investment Employee Representations. Each Employee
represents and warrants as of the date hereof that:
(a) the Employee understands that the Shares are a speculative investment
which involves a high degree of risk of loss of Employee's investment therein,
there are substantial restrictions on the transferability of the Shares and, on
the date on which such Employee receives such Shares and for an indefinite
period following such date, there will be no public market for the Shares and,
accordingly, it may not be possible for the Employee to liquidate the Shares,
including in case of emergency, if at all;
(b) the terms of this Agreement provide that if the Employee ceases to
provide Services to the Company and its Subsidiaries, the Company and certain of
its Affiliates have the right to repurchase the Shares at a price which may be
less than the Fair Market Value thereof;
(c) other than as set forth in this Agreement, no representations or
warranties have been made to the Employee or Employee's representatives
concerning the Shares, the Company, the Subsidiaries or their respective
prospects or other matters;
(d) the Employee has been given the opportunity to examine all documents
and to ask questions of, and to receive answers from, the Company and its
representatives concerning the Company and its Subsidiaries, this Agreement, the
Registration Rights Agreement, the Company's organizational documents and the
terms and conditions relating to the Shares and to obtain any additional
information which the Employee deems necessary; and
(e) all information which the Employee has provided to the Company and the
Company's representatives concerning the Employee and the Employee's financial
position is complete and correct.
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ARTICLE III
TRANSFERS
Section 3.1. Limitations on Transfer.
(a) Except as otherwise permitted in this Agreement, the Employees shall
not Transfer any Shares prior to the earlier to occur of (i) the fifth
anniversary of the Effective Date and (ii) the occurrence of a Change of Control
(the earlier of (i) and (ii) the "Lapse Date").
(b) The restrictions set forth in Section 3.1(a) shall not apply to: (i)
in the case of a Transferor that is a natural person, Transfers of Shares to
Permitted Transferees of the Transferor, (ii) from and after a Qualified IPO,
Transfers of Shares made in compliance with the requirements of Rule 144 of the
Securities Act or Transfers of Shares registered on Form S-8 (or any successor
form), (iii) Transfers of Shares pursuant to Sections 3.4, 3.5 or 3.6 and (iv)
Transfers of Shares from and after the Lapse Date. In addition, no Transfer
permitted pursuant to Section 3.1(a), 3.4 or clause (i) of this Section 3.1(b)
shall be effective unless the Transferee (A) agrees to be bound by the terms and
conditions of this Agreement as an Employee and any related agreements to which
the Transferor of such Transferee previously agreed to be bound and (B) executes
a counterpart to this Agreement and such other documents or instruments as the
Board may determine are necessary or appropriate to effect such Transferee's
admission as a party hereto.
(c) No holder of Shares shall grant any proxy or become party to any
voting trust or other agreement that is inconsistent with, conflicts with or
violates any provision of this Agreement.
Section 3.2. Void Transfers. Any Transfer or attempted Transfer of any
Shares in violation of any provision of this Agreement shall be null and void,
and the Company shall not record such Transfer on its books or, to the fullest
extent permitted by Law, treat any purported Transferee of such Transferee as
the owner thereof for any purpose.
Section 3.3. Certificates; Legend.
(a) Each certificate evidencing Shares held by an Employee (a "Stock
Certificate") shall be stamped or otherwise imprinted with a legend in
substantially the following form, or such similar legend as may be specified in
any other agreement with the Company, provided if the Shares issued to the
Employee were registered by the Company on Form S-8 (or any successor form),
then the first paragraph of the following legend shall be deleted from the
legend placed on the Stock Certificate representing such Shares:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER THE
SECURITIES LAWS OF ANY STATE. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT
AS PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES
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LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE
SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR
RESALE IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO CERTAIN
TRANSFER AND OTHER RESTRICTIONS SET FORTH IN THE EMPLOYEE STOCKHOLDERS
AGREEMENT, DATED AS OF NOVEMBER 4, 2004 AMONG VANGUARD HEALTH SYSTEMS,
INC., VHS HOLDINGS LLC, CERTAIN AFFILIATES OF THE BLACKSTONE GROUP AND
EMPLOYEES OF VANGUARD HEALTH SYSTEMS, INC. AND ITS SUBSIDIARIES, AS IT MAY
BE AMENDED FROM TIME TO TIME, AND, AMONG OTHER THINGS, MAY NOT BE OFFERED
OR SOLD EXCEPT IN COMPLIANCE WITH SUCH TRANSFER RESTRICTIONS. COPIES OF
SUCH AGREEMENT IS ON FILE WITH THE SECRETARY OF VANGUARD HEALTH SYSTEMS,
INC. AND IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES TO
BE BOUND BY ALL OF THE PROVISIONS OF THE AFORESAID AGREEMENT."
(b) Prior to due presentment of a Stock Certificate for registration or
transfer, the Company, or any agent or manager of the Company, may treat the
person in whose name such Stock Certificate is registered as the owner of the
Stock Certificate for the purpose of receiving distributions pursuant to this
Agreement and for all other purposes whatsoever, and the Company shall not be
affected by notice to the contrary.
(c) If (i) any mutilated Stock Certificate is surrendered to the Company,
or (ii) the Company receives evidence to its satisfaction of the destruction,
loss or theft of any Stock Certificate, together with indemnity or security
sufficient to hold it harmless, the Company shall execute, and upon its written
request the Company shall authenticate and deliver, in exchange for any such
mutilated Stock Certificate or in lieu of any such destroyed, lost or stolen
Stock Certificate, a new Stock Certificate of like tenor and principal amount,
bearing a number not contemporaneously outstanding. Upon the issuance of any new
Stock Certificate under this Section 3.3(c), the Company may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses in connection therewith. The
provisions of this Section 3.3(c) are exclusive and shall preclude (to the
extent permissible under applicable law) all other rights and remedies with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Stock Certificates.
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Section 3.4. Company Right of First Refusal.
(a) After the fifth anniversary of the Effective Date and until the
earlier of a Change of Control or a Qualified IPO (the "ROFR Period"), the
Company shall have a right of first refusal with respect to any proposed
Transfer of Shares by any Employee (a "Transferring Shareholder"), and any
Transferring Shareholder must first comply with the provisions of this Section
3.4.
(b) At any time a Transferring Shareholder proposes to make a bona fide
Transfer of Shares during the ROFR Period (other than (i) a Transfer pursuant to
clause (i) of Section 3.1(b), (ii) pursuant to the Registration Rights Agreement
or (iii) pursuant to Section 3.5 or 3.6), and such Transferring Shareholder has
received a bona fide arm's length offer (the "Offer") to purchase all or any
portion of its Shares (the "Offered Securities") from any Person (the "Offeror")
which the Transferring Shareholder wishes to accept, such Transferring
Shareholder shall cause the Offer to be reduced to writing and shall notify the
Company in writing of its wish to accept the Offer (the "Offering Notice").
(c) Offering Notice. The Offering Notice shall contain an irrevocable
offer to sell the Offered Securities to the Company at a price equal or
equivalent (as determined in the manner set forth in Section 3.4(d)(i) below) to
the price contained in, and otherwise on the same terms and conditions of, the
Offer and shall be accompanied by a copy of the Offer (which shall identify the
Offeror).
(d) Company's Option; Exercise.
(i) For a period of 20 days after the date upon which the
Company shall have received the Offering Notice (the "Company Option
Period"), the Company shall have the right to elect to purchase all
(but not less than all) of the Offered Securities either (A) at the
same price and on the same terms and conditions as the Offer or (B)
if the Offer includes any consideration other than cash, then at the
sole option of the Company, at the equivalent cash price, determined
in good faith by the Board and reasonably agreed to by the
Transferring Shareholder. If the Company does not elect to purchase
all of the Offered Securities pursuant to this Section 3.4(d), then
the Transferring Shareholder may sell all of the Offered Securities
to the Offeror in accordance with Section 3.4(f).
(ii) The right of the Company to purchase the Offered
Securities under Section 3.4(d)(i) shall be exercisable by
delivering written notice of the exercise thereof, prior to the
expiration of the Company Option Period, to the Transferring
Shareholder. The failure of the Company to deliver such a notice to
the Transferring Shareholder within the Company Option Period to the
Transferring Shareholder shall be deemed to be a waiver of the
Company's rights under Section 3.4(d)(i).
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(e) Closing. The closing of the purchase of Offered Securities subscribed
for by the Company under Section 3.4(d) shall be held at the executive office of
the Company at 11:00 a.m., local time, no later than 30 days after the Company's
election to purchase the Offered Securities pursuant to Section 3.4(d) is
delivered to the Transferring Shareholder or at such other time and place as the
parties to the transaction may agree; provided that if such sale is subject to
any prior regulatory approval, then such 30-day period shall be extended until
the expiration of ten days after all such approvals shall have been received,
but in no event shall such period be extended for more than an additional 60
days without the consent of the Transferring Shareholder. At such closing, the
Transferring Shareholder shall deliver certificates representing the Offered
Securities, duly endorsed for transfer and accompanied by all requisite transfer
taxes, if any, and such Offered Securities shall be free and clear of any liens,
and the Transferring Shareholder shall so represent and warrant, and shall
further represent and warrant that it is the sole beneficial and record owner of
such Offered Securities with the full right, power and authority to convey the
Offered Securities to the Company. The Company shall deliver at the closing
payment in full in immediately available funds for the Offered Securities
purchased by it. At such closing, all of the parties to the transaction shall
execute such additional documents as are otherwise necessary or appropriate.
(f) Sale to the Offeror. If the Company does not elect to purchase all of
the Offered Securities under Section 3.4(d), or if the Company does so elect but
the regulatory approvals necessary to consummate such purchase are not obtained
within the time periods referred to in Section 3.4(e), then in either such case
the Transferring Shareholder may sell all (but not less than all) of the Offered
Securities to the Offeror on terms and conditions no less favorable to the
Transferring Shareholder than those set forth in the Offering Notice; provided,
however, that such sale is bona fide and made pursuant to a contract entered
into not later than 60 days after the earlier to occur of (i) the waiver by the
Company of its option to purchase the Offered Securities and (ii) the expiration
of the Company Option Period (the "Contract Date"); and provided, further, that
such sale shall not be consummated unless and until (A) such Offeror shall
represent in writing to the Company that it is aware of the rights and
obligations of the Company contained in this Agreement and (B) prior to the
purchase by such Offeror of such Offered Securities, such Offeror shall become a
party to this Agreement and shall agree to be bound by the terms and conditions
hereof to the same extent as the Transferring Shareholder. If such sale is not
consummated within 60 days after the Contract Date for any reason, then the
restrictions provided for herein shall again become effective, and no Transfer
of such Offered Securities may be made thereafter by the Transferring
Shareholder without again complying with this Section 3.4; provided that if such
sale is subject to any prior regulatory approval, then such 60-day period shall
be extended until the expiration of ten days after all such approvals shall have
been received, but in no event shall such period be extended for more than an
additional 120 days without the consent of the Company.
Section 3.5. Tag-Along Rights.
(a) Prior to a Qualified IPO, if Blackstone proposes to Transfer, in a
single transaction or a series of related transactions, any Securities owned by
it to any Person (other than (i) a Transfer to an Affiliate of Blackstone or
(ii) a Transfer pursuant to the Registration Rights Agreement) (a "Tag-Along
Purchaser"), then, unless Blackstone is entitled to give and does give a
Drag-Along Notice pursuant to Section 3.6(b) hereof and the Drag-Along Sale
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that is the subject of such Drag-Along Notice is consummated within the
applicable time period referred to in Section 3.6(c), Blackstone shall first
provide written notice to the Shareholders, which notice (the "Tag-Along
Notice") shall include: (i) the maximum number of Securities proposed to be
Transferred (the "Tag-Along Securities"); (ii) the purchase price per security
(the "Tag-Along Price") for the Tag-Along Securities; (iii) any other material
terms and conditions of such sale, including the proposed transfer date and (iv)
the proposed form of agreement. Each Shareholder (and any other Person that
holds similar tag along RIGHTS) that has been provided with the Tag-Along Notice
(each, a "Tag-Along Shareholder") shall have the right to require Blackstone to
include in such Transfer to such Tag-Along Purchaser, upon the terms set forth
in the Tag-Along Notice, up to the aggregate number of Securities which are held
by such Tag-Along Shareholder multiplied by a fraction, the numerator of which
is the aggregate number of Securities proposed to be Transferred by Blackstone
as reflected in the Tag-Along Notice and the denominator of which is the total
number of Securities which are held by Blackstone (the "Tag-Along Fraction"). If
the number of Securities elected to be Transferred by the Tag-Along Shareholder
together with the number of Securities proposed to be Transferred by Blackstone
is greater than the number of Tag-Along Securities specified in the Tag-Along
Notice, then the number of Securities being sold by each such seller (including
Blackstone) shall be reduced such that the applicable seller shall be entitled
to (and obligated to) sell only its pro rata share of Securities (based on the
aggregate number of Securities held by such seller to the total number of
Securities held by all of such electing sellers).
(b) The tag-along rights provided by this Section 3.5 must be exercised by
any Tag-Along Shareholder wishing to sell its Securities within 15 days
following the date of delivery of the Tag-Along Notice (the "Election Period"),
by delivery of a written notice to the Company indicating such Tag-Along
Shareholder's wish to irrevocably exercise its rights and specifying the number
of Securities it wishes to sell. The failure of a Tag-Along Shareholder to
respond within such 15-day period shall be deemed to be a waiver of such
Tag-Along Shareholder's rights under Section 3.5.
(c) In connection with any Transfer pursuant to this Section 3.5, each
Tag-Along Shareholder shall make to the Tag-Along Purchaser the same
representations, warranties, covenants, indemnities and agreements as Blackstone
makes in connection with such Transfer (except that in the case of
representations, warranties, covenants, indemnities and agreements pertaining
specifically to Blackstone, each Tag-Along Shareholder shall make the comparable
representations, warranties, covenants, indemnities and agreements pertaining
specifically to itself); provided that all representations, warranties and
indemnities shall be made by Blackstone and such Tag-Along Shareholder severally
and not jointly and that the liability of Blackstone and such Tag-Along
Shareholder thereunder shall be borne by each of them on a pro rata basis based
on the number of Securities which are Transferred. The Tag-Along Shareholders
shall receive the same type and amount of consideration per Security as is paid
or delivered to Blackstone in such Transfer. Each Tag-Along Shareholder shall be
responsible for its proportionate share of the costs and expenses incurred in
connection with such Transfer to the extent not paid or reimbursed by the
Company or the Tag-Along Purchaser.
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Section 3.6. Right to Drag-Along.
(a) Prior to a Qualified IPO, any bona fide Transfer proposed by
Blackstone of a majority of the outstanding Securities to any Person (other than
to an Affiliate of Blackstone) shall be subject to the provisions of this
Section 3.6.
(b) If Blackstone enters into a definitive agreement for a Transfer which
is subject to this Section 3.6 (the "Drag-Along Sale"), then Blackstone may,
within 15 days following the execution of such agreement send written notice
(the "Drag-Along Notice") to each Shareholder notifying them that they will be
required to Transfer the number of Shares held by such Shareholder multiplied by
a fraction (the "Drag-Along Fraction") the numerator of which is the aggregate
number of Securities proposed to be sold by Blackstone as reflected in the
Drag-Along Notice and the denominator of which is the total number of Securities
which are held by Blackstone (the "Dragged Securities"). Such Drag-Along Notice
shall set forth the name of the proposed transferee, the proposed amount and
form of consideration and the other terms and conditions of the offer, including
a copy of the definitive agreement relating to the Drag-Along Sale. Upon receipt
of a Drag-Along Notice, each Shareholder shall be required to Transfer its
Dragged Securities to such proposed Transferee at the same price and on the same
terms as those governing the Drag-Along Sale, including making the same
representations, warranties, covenants, indemnities and agreements that
Blackstone agrees to make (except that, in the case of representations and
warranties pertaining specifically to Blackstone, the Shareholders shall make
the comparable representations and warranties pertaining specifically to
itself); provided that all representations, warranties and indemnities shall be
made by each Shareholder severally and not jointly and that the liability of
each Shareholder thereunder shall be borne by each of them on a pro rata basis
based on the number of Securities which are Transferred. Each Shareholder shall
be responsible for its proportionate share of the costs and expenses incurred in
connection with such Transfer to the extent not paid or reimbursed by the
Company or the purchaser.
(c) If the Drag-Along Sale is not consummated within 180 days of the date
of the Drag-Along Notice, then the provisions of this Section 3.6 shall
terminate and be of no further force and effect with respect to such Drag-Along
Sale, but all other provisions of this Agreement (including Section 3.5) shall
continue to apply to the proposed Transfer that was the subject of such
Drag-Along Sale; provided that, if such Drag-Along Sale is subject to prior
regulatory approval, such 180-day period shall be extended until the expiration
of 30 days after all such approvals have been received, but in no event later
than 365 days following the date of the Drag-Along Notice.
ARTICLE IV
CERTAIN PROVISIONS APPLICABLE TO SHAREHOLDERS
Section 4.1. Company Call Option.
(a) If an Employee's Services to the Company and its Subsidiaries
terminate for any reason (a "Termination Event"), the Company shall have the
right but not the obligation to purchase, from time to time after such
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Termination Event, for a period of 181 days following the later of (x)
termination of such Employee's Services and (y) with respect to Shares received
upon the exercise of an option, the date such option is exercised (the "Call
Option Period"), the Shares held by such Employee. To exercise such purchase
right with respect to an Employee, the Company shall deliver to such Employee
prior to the expiration of the Call Option Period a written notice specifying
the number of Shares with respect to which the Company has elected to exercise
such purchase right, whereupon such Employee shall be required to sell to the
Company, the Shares specified in such notice, at a price per Share equal to the
applicable purchase price determined pursuant to Section 4.1(c).
(b) If upon expiration of the Call Option Period, the Company has not
purchased all of a terminated Employee's Shares, the Company shall on or before
the expiration of the Call Option Period provide written notice to all of the
Senior Management Investors and Blackstone and MSCP (collectively, the "Other
Investors") of (i) its decision not to purchase some or all of such Shares and
(ii) the amount of such Shares which the Company did not purchase, and the Other
Investors shall have the right to purchase all or a portion of such remaining
Shares at a price per Share equal to the applicable purchase price determined
pursuant to Section 4.1(c). The Other Investors' rights to purchase such Shares
and such Employee's corresponding obligation to sell such Shares shall terminate
on the 30th day following the expiration of the Call Option Period. Each of the
Other Investors that elects to exercise such purchase right shall provide
written notice to the Company prior to the 30th day following the expiration of
the Call Option Period specifying the amount of such Shares it wishes to
purchase (and, if the aggregate number of Shares specified in such notices
exceeds the number of Shares available, the number of Shares which each Other
Investor shall be entitled to purchase shall be reallocated in proportion to
each such Other Investor's Ownership Percentage). Upon receipt of the Other
Investors' notice, the Company will notify such Employee of the Other Investors'
elections and such Employee will be obligated to sell to the Other Investors the
number of such Shares determined in accordance with this Section 4.1(b).
(c) Upon a termination of an Employee's Services by the Company for Cause,
the purchase price for the Shares will be the lower of Cost and the Fair Market
Value of the Shares determined, in the case of a purchase by the Company
pursuant to 4.1(a), as of the date on which the Company exercised its call right
pursuant to Section 4.1(a) or, in the case of a purchase by an Other Investor
pursuant to 4.1(b), as of the 30th day following the expiration of the
applicable Call Option Period (such date, the "Call Price Determination Date").
Upon a termination of an Employee's Services to the Company for any reason other
than a termination by the Company for Cause (including a termination by an
Employee for Good Reason), the purchase price for the Shares will be Fair Market
Value of the Shares determined as of the Call Price Determination Date.
(d) The closing of the purchase of the Shares pursuant to Section 4.1(a)
or 4.1(b) shall occur at such time and place as the parties to such purchase
shall agree, and in any event within 45 days of the Call Price Determination
Date; provided that if such purchase is subject to any prior regulatory
approval, then such 45-day period shall be extended until the expiration of ten
days after all such approvals shall have been received; provided further that if
all such approvals are not obtained within 120 days of the expiration of such
45-day period, then the provisions of this Section 4.1 shall terminate and be
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no further force and effect with respect to such Shares. At such closing, the
Employee shall deliver Stock Certificates, representing such Shares, duly
endorsed for transfer and accompanied by all requisite transfer taxes, if any,
and such Shares shall be free and clear of any liens, and the Employee selling
such Shares shall so represent and warrant, and shall further warrant that it is
the sole beneficial and record owner of such Shares with the full right, power
and authority to convey such Shares to the purchaser. At such closing, all of
the parties to the transaction shall execute such additional documents as are
otherwise necessary or appropriate. The Shares may be purchased (i) by delivery
of funds deposited into an account designated by the Employee selling such
Shares, a bank cashier's check or a certified check for the purchase price or
(ii) if the purchaser is the Company and it is prohibited from paying cash by
any of its financing arrangements, then by a note of the Company payable in
installments over a period of up to five (5) years from the date of issuance of
such note, having a principal amount equal to the applicable purchase price,
bearing interest at the prime lending rate in effect from time to time (which
note shall be a negotiable instrument under applicable Law). The Company shall
notify the Employees in writing of the method by which it has elected to
purchase the Shares at least 10 days prior to the closing of such purchase.
(e) Notwithstanding anything to the contrary elsewhere herein, the Company
shall not be obligated to purchase any Shares at any time pursuant to this
Section 4.1, regardless of whether it has delivered a notice of its election to
purchase any such Shares, (i) to the extent that the purchase of such Shares
(together with any other purchases of Shares pursuant to this Section 4.1, or
pursuant to similar provisions in any other agreements with other investors, of
which the Company has at such time been given or has given notice), the purchase
of such Shares by the Company would result (y) in a violation of any Law or (z)
after giving effect thereto (including any dividends or other distributions or
loans from a Subsidiary of the Company to the Company in connection therewith),
in a Financing Default, (ii) if immediately prior to such purchase of Shares,
there exists a Financing Default which prohibits such purchase (including any
dividends or other distributions or loans from a Subsidiary of the Company to
the Company in connection therewith), or (iii) if the Company does not have
funds available to effect such purchase of Shares. The Company shall within 15
days of learning of any such fact so notify the Shareholders in writing that it
is not obligated to purchase such Shares, whereupon Sections 4.1(b) and 4.1(c)
shall apply to such Shares as if the Company had never delivered a notice
electing to purchase such Shares (except that each reference to "the 30th day
following the expiration of the Call Option Period" in Section 4.1(b) shall be
deemed a reference to "the 30th day following the delivery by the Company of the
notice referred to in Section 4.1(e)" and the definition of "Call Price
Determination Date" shall be deemed modified in a corresponding manner).
(f) The Fair Market Value for the Shares to be purchased under this
Section 4.1 will be determined by the Board or the compensation committee of the
Board in good faith (without any discounts applied in the case of a termination
of the Services of the relevant Employee by the Company without Cause, by the
relevant Employee with Good Reason or as a result of the death or disability of
the relevant Employee, but with a 25% discount applied to reflect minority
interest and illiquidity in the event of a termination by the relevant Employee
without Good Reason prior to the fifth anniversary of the Effective Date). If
the relevant Employee disagrees with the Board's determination of the Fair
Market Value, he or she may require the Company to retain an Independent
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Appraiser to determine the Fair Market Value (it being understood that the
Independent Appraiser shall be instructed in its determination of Fair Market
Value to apply any discount applicable pursuant to the preceding sentence). The
determination of Fair Market Value by the Independent Appraiser shall be final
and binding upon the Company and such Employee. The Company will bear the cost
of such appraisal unless the Fair Market Value as determined by the Independent
Appraiser is less than 110% of the Board's determination of Fair Market Value
pursuant to the first sentence of this paragraph, in which case the Employee
will bear the cost of the appraisal. Notwithstanding the foregoing, following a
Qualified IPO, Fair Market Value for the Shares for purposes of this Section 4.1
shall in all cases be based on the Public Share FMV.
ARTICLE V
REGISTRATION RIGHTS
Section 5.1. Incidental Registration. The parties hereto agree that the
Employees and their Permitted Transferees shall have all of the rights and
obligations of a "Holder" under the Registration Rights Agreement (other than
those set forth in Section 2(a) thereof) and that any Shares owned by the
Employees and their Permitted Transferees shall constitute "Registrable
Securities" under the Registration Rights Agreement (other than for purposes of
Section 2(a) thereof).
ARTICLE VI
COMPETITIVE OPPORTUNITY AND COMPETING ACTIVITIES
Section 6.1. Competitive Opportunity. If any Director or Other Investor
acquires knowledge of a potential transaction or matter which may be an
investment or business opportunity or prospective economic or competitive
advantage in which the Company could have an interest or expectancy (a
"Competitive Opportunity") or otherwise is then exploiting any Competitive
Opportunity, the Company will have no interest in, and no expectation that, such
Competitive Opportunity be offered to it, any such interest or expectation being
hereby renounced so that each Director and Other Investor shall (i) have no duty
to communicate or present such Competitive Opportunity to the Company and (ii)
have the right to hold any such Competitive Opportunity for such Director's or
Other Investor's (and their agents', partners' or Affiliates') own account and
benefit; or to recommend, assign or otherwise transfer or deal in such
Competitive Opportunity to Persons other than the Company or any Affiliate of
the Company.
Section 6.2. Competing Activities. Except as otherwise expressly provided
in a written agreement between the Company and any Other Investor:
(i) such Other Investor or its Affiliates may engage or invest in,
independently or with others, any business activity of any type or
description, including without limitation those that might be the same as
or similar to the Company's business, and which from time to time compete,
directly or indirectly, with the Company, and, without limiting the
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foregoing, the Other Investor acknowledges that the Other Investor and
their respective Affiliates may in their sole discretion pursue such
competing business without disclosure of such competition to the Company;
(ii) neither the Company, any subsidiary of the Company nor any
Other Investor shall have any right in or to the activities described in
Section 6.2(i) or to receive or share in any income or proceeds derived
therefrom; and
to the extent required by applicable Law in order to effectuate the
purpose of this provision, the Company shall have no interest or expectancy, and
specifically renounces any interest or expectancy, in any such business
activities or ventures.
ARTICLE VII
CONFIDENTIALITY; INTELLECTUAL PROPERTY RIGHTS
Section 7.1. Confidentiality.
(a) No Employee shall at any time (whether during or after the period such
Employee is a Employee of the Company) (i) retain or use for the benefit,
purposes or account of the Employee or any other Person; or (ii) disclose,
divulge, reveal, communicate, share, transfer or provide access to any Person
outside the Company and its Subsidiaries (other than its professional advisers
who are bound by confidentiality obligations), any non-public, proprietary or
confidential information (including trade secrets, know-how, research and
development, software, databases, inventions, processes, formulae, technology,
designs and other intellectual property, information concerning finances,
investments, profits, pricing, costs, products, services, vendors, customers,
clients, partners, investors, personnel, compensation, recruiting, training,
advertising, sales, marketing, promotions, government and regulatory activities
and approval) concerning the past, current or future business, activities and
operations of the Company, its Subsidiaries or Affiliates and/or any third party
that has disclosed or provided any of same to the Company on a confidential
basis, including, without limitation, the terms of this Agreement or the
Registration Rights Agreement ("Confidential Information") without the prior
authorization of the Company. Notwithstanding the foregoing, nothing in this
Agreement shall preclude any Employee or its Permitted Transferees from using
any Confidential Information in any manner reasonably connected to its
investment in the Company or the conduct of its business.
(b) Confidential Information shall not include any information that is (i)
generally known to the industry or the public other than as a result of the
Employee's breach of this covenant or any breach of other confidentiality
obligations by third parties; (ii) made legitimately available to the Employee
by a third party without breach of any confidentiality obligation; or (iii)
required by Law to be disclosed; provided that in connection with sub-clause
(iii), the Employee shall give prompt written notice to the Company of such
requirement, disclose no more information than is so required, and cooperate
with any attempts by the Company to obtain a protective order or similar
treatment.
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(c) Except as required by Law or except in connection with any proposed
Transfer in accordance with this Agreement, the Employee will not disclose to
anyone, other than the Employee's legal or financial advisors, the existence or
contents of this Agreement.
(d) Upon termination of any Employee's Services with the Company or its
Subsidiaries for any reason, such Employee shall (i) cease and not thereafter
commence use of any Confidential Information or intellectual property (including
any patent, invention, copyright, trade secret, trademark, trade name, logo,
domain name or other source indicator) owned or used by the Company, its
Subsidiaries or Affiliates; (ii) immediately destroy, delete, or return to the
Company, at the Company's option, all originals and copies in any form or medium
(including memoranda, books, papers, plans, computer files, letters and other
data) in such Employee's possession or control (including any of the foregoing
stored or located in such Employee's office, home, laptop or other computer,
whether or not such computer is Company property) that contain Confidential
Information or otherwise relate to the business of the Company, its Affiliates
and Subsidiaries, except that such Employee may retain only those portions of
any personal notes, notebooks and diaries that do not contain any Confidential
Information; and (iii) notify and fully cooperate with the Company regarding the
delivery or destruction of any other Confidential Information of which such
Employee is or becomes aware.
Section 7.2. Intellectual Property.(a) Each Employee who has participated
or will participate in the creation or development of any intellectual property
in the course of such Employee's Service to the Company or its Subsidiaries
hereby (i) disclaims and agrees to disclaim any rights with respect to such
intellectual property, (ii) agrees that the Company or a Subsidiary of the
Company, as the case may be, is or will be deemed to be the sole original
owner/author of all such intellectual property and, (iii) if requested by the
Company or a Subsidiary of the Company, will execute an assignment or an
agreement to assign solely in favor of the Company or such Subsidiary or such
predecessor in interest, as applicable, all right, title and interest in all
such intellectual property.
ARTICLE VIII
DEFINITIONS
Section 8.1. Defined Terms. As used in this Agreement, terms defined in
the headings and the recitals shall have their respective assigned meanings, and
the following capitalized terms shall have the meanings ascribed to them below:
"Affiliate" shall have the meaning ascribed thereto in Rule 12b-2
promulgated under the Exchange Act, as in effect on the date hereof.
"Agreement" shall have the meaning specified in the Preamble.
"Award" means any Option, Stock Appreciation Right, or Other Stock-Based
Award granted pursuant to the Company's 2004 Stock Incentive Plan.
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"Blackstone" shall mean the Blackstone Parties and their Affiliates (other
than Holdings and the Company).
"Board" means the Board of Directors of the Company.
"Call Option Period" shall have the meaning specified in Section 4.1(a).
"Call Price Determination Date" shall have the meaning specified in
Section 4.1(c).
"Cause" means, with respect to any Employee, (i) if such Employee is party
to an employment agreement or severance protection agreement with the Company or
any of its Subsidiaries, "Cause" as defined in such agreement (ii) if such
Employee is not party to either an employment agreement or severance protection
agreement with the Company or any of its Subsidiaries, (A) the willful failure
or refusal by such Employee to perform his or her duties to the Company or its
Affiliates (other than any such failure resulting from such Employee's
incapacity due to physical or mental illness), which has not ceased within ten
(10) days after a written demand for substantial performance is delivered to
such Employee by the Company, which demand identifies the manner in which the
Company believes that such Employee has not performed such duties; (B) the
willful engaging by such Employee in misconduct which is materially injurious to
the Company or its Affiliates, monetarily or otherwise (including, but not
limited to, breach of any confidentiality or non-competition covenants to which
such Employee is bound), (C) the conviction of such Employee of, or the entering
of a plea of nolo contendere by such Employee with respect to, a felony or (D)
substantial or repeated acts of dishonesty by such Employee in the performance
of his/her duties to the Company or its Affiliates.
"Change of Control" means the occurrence of any of the following events:
(i) any Person (together with its Affiliates) (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 corporation or other entity owned, directly or indirectly, by
the equityholders of the Company in substantially the same
proportions as their ownership of Securities, or (5) any Person that
is an equityholder of the Company or its Subsidiaries on the Closing
Date), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of Securities
representing more than 50% of the combined voting power of the
Company's then outstanding voting securities;
(ii) a merger or consolidation of the Company with any Person, other than
(a) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing 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 (b) a merger or
consolidation in which no Person (together with its Affiliates)
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(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 corporation or other entity owned,
directly or indirectly, by the equityholders of the Company in
substantially the same proportions as their ownership of
Securities, or (5) any Person that is an equityholder of the
Company or its Subsidiaries on the Closing Date) acquired 50% or
more of the combined voting power of the Company's then outstanding
securities; or
(iii) a complete liquidation of the Company or a sale or disposition by
the Company of all or substantially all of the Company's assets (or
any transaction having a similar effect).
"Class A Units" shall have the meaning specified in the LLC Agreement.
"Closing Date" means September 23, 2004.
"Company" shall have the meaning specified in the Preamble.
"Company Option Period" shall have the meaning specified in Section
3.4(d).
"Competitive Opportunity" shall have the meaning specified in Section 6.1.
"Confidential Information" shall have the meaning specified in Section
7.1(a).
"Contract Date" shall have the meaning specified in Section 3.4(f).
"Control" (including its correlative meanings, "Controlled by" and "under
common Control with") means possession, directly or indirectly, of the power to
direct or cause the direction of management or policies (whether through
ownership of securities or partnership or other ownership interests, by contract
or otherwise) of a Person.
"Cost" means, with respect to an Employee's Share, the price per Share
paid by such Employee (as proportionately adjusted for all subsequent
distributions in respect of Shares and other recapitalizations).
"Designated Action" means (i) the voting of any Shares and any action to
be taken with respect to a matter properly brought before the Company's Board of
Directors, including without limitation the election of members of the Board,
and all actions taken in connection with any of the foregoing actions referred
to in this clause (i) and (ii) any action to be taken by any Employee in its
capacity as such under this Agreement, including without limitation any
amendment, consent or waiver relating to this Agreement, and all actions taken
in connection with any of the foregoing actions referred to in this clause (ii).
"Director" means a member of the Board of Directors of the Company.
-16-
"Drag-Along Fraction" shall have the meaning specified in Section 3.6(b).
"Drag-Along Notice" shall have the meaning specified in Section 3.6(b).
"Drag-Along Sale" shall have the meaning specified in Section 3.6(b).
"Dragged Securities" shall have the meaning specified in Section 3.6(b).
"Effective Date" means, with respect to any Employee, the date such
Employee becomes a party to this Agreement.
"Election Period" shall have the meaning specified in Section 3.5(b).
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Employees" shall have the meaning specified in the Preamble.
"Fair Market Value" means, as of any date and subject to Section 4.1(f),
the fair market value on such date as determined by the Board in good faith
using its reasonable business judgment.
"Family Group," with respect to any natural person, means (i) the spouse,
issue, parents, grandparents, grandchildren, aunts, uncles, nieces and nephews
(in each case, whether natural or adopted) of such natural person and (ii) any
trust established solely for the exclusive benefit of such natural person or any
of the Persons referred to in the foregoing clause (i).
"Financing Default" means an event which would constitute (or with notice
or lapse of time or both would constitute) an event of default under any of the
following as they may be amended from time to time: (i) the Credit Agreement
dated as of September 23, 2004, among Vanguard Health Holding Company II, LLC,
Vanguard Holding Company II, Inc., Vanguard Health Holding Company I, LLC,
Vanguard Holding Company I, Inc., Bank of America, N.A., as Administrative
Agent, Citicorp North America, Inc., as Syndication Agent, General Electric
Capital Corporation, LaSalle Bank, National Association and Wachovia Bank,
National Association, as Co-Documentation Agents, Banc of America Securities LLC
and Citigroup Global Markets Inc., as Joint Lead Arrangers and Book Runners, and
the lending institutions identified in the Credit Agreement and any extensions,
renewals, refinancings or refundings thereof in whole or in part; (ii) any other
agreement or instrument under which an amount of indebtedness of the Company or
any of its subsidiaries in excess of $10,000,000 is outstanding as of the time
of the aforementioned event and any extensions, renewals, refinancings or
refundings thereof in whole or in part; (iii) any provisions of the operating
agreement of the Company or the Company's or any of its material subsidiaries'
organizational documents designating the terms of any membership units or
capital stock or setting forth restrictive financial covenants; (iv) any
amendment of, supplement to or other modification of any of the agreements or
instruments referred to in clauses (i) through (iii) above; and (v) any of the
securities issued pursuant to or whose terms are governed by the terms of any of
the agreements or instruments set forth in clauses (i) through (iv) above,
-17-
and any extensions, renewals, refinancings or refundings thereof in whole or
in part.
"Good Reason" means, with respect to any Employee, (i) if such Employee is
party to an employment agreement or a severance protection agreement with the
Company or any of its Subsidiaries, after the occurrence of a Change of Control,
"Good Reason" as defined in such agreement or (ii) in all other cases (including
in all cases prior to the occurrence of a Change of Control), (A) the failure of
the Company to pay or cause to be paid to such Employee any base salary or
incentive compensation when due, (B) any adverse change in such Employee's title
or position such that they are materially diminished from such Employee's
existing title or position or (C) any substantial and sustained diminution in
such Employee's authority or responsibilities such that they are materially
inconsistent with such Employee's title or position; provided that any of the
events described in clauses (A), (B) or (C) shall constitute "Good Reason" only
if the Company fails to cure such event within 30 days after receipt from such
Employee of written notice of the event which constitutes Good Reason; provided
further that "Good Reason" shall cease to exist for an event on the 60th day
following the later of its occurrence or such Employee's knowledge thereof,
unless such Employee has given the Company written notice thereof prior to such
date.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Holder" shall have the meaning specified in the Registration Rights
Agreement.
"Holdings" shall have the meaning specified in the Preamble.
"Independent Appraiser" shall mean a nationally recognized firm of
independent public accountants or other valuation experts that shall be selected
by the Company and subject to the consent of the Person requesting the retention
of such firm, which consent shall not be unreasonably withheld.
"IPO" means an initial firm commitment underwritten public offering of
Securities pursuant to an effective registration statement under the Securities
Act, other than pursuant to a registration statement on Form S-4 or Form S-8 or
other limited purpose form.
"Lapse Date" shall have the meaning specified in Section 3.1(a).
"Law" means any statute, law, regulation, ordinance, rule, injunction,
order, decree, governmental approval, directive, requirement, or other
governmental restriction or any similar form of decision of, or determination
by, or any interpretation or administration of any of the foregoing by, any
Governmental Authority.
"LLC Agreement" means the Amended and Restated Limited Liability Company
Operating Agreement of Holdings, dated as of September 23, 2004.
-18-
"Management Representative" means ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., or if ▇▇. ▇▇▇▇▇▇
is no longer Chief Executive Officer of the Company, the Representative of the
Management Members (as defined in the LLC Agreement) on the Board of
Representatives of Holdings, if any, designated pursuant to Section 3.2(b)(ii)
of the LLC Agreement. In the absence of any Representative of the Management
Members on the Board of Representatives of Holdings, the Management
Representative shall be Holdings.
"Member" shall have the meaning specified in the LLC Agreement.
"MSCP" shall have the meaning specified in the LLC Agreement.
"Offer" shall have the meaning specified in Section 3.4(b).
"Offered Securities" shall have the meaning specified in Section 3.4(b).
"Offering Notice" shall have the meaning specified in Section 3.4(b).
"Offeror" shall have the meaning specified in Section 3.4(b).
"Option" means a stock option granted pursuant to the Company's 2004 Stock
Incentive Plan.
"Other Investors" shall have the meaning specified in Section 4.1(b).
"Other Stock-Based Award" shall have the meaning specified in the
Company's 2004 Stock Incentive Plan.
"Ownership Percentage" means, with respect to any Person, the percentage
obtained by multiplying 100 by an amount equal to (1) the number of Securities
owned by such Person (together with its Affiliates) divided by (2) the number of
outstanding Securities (other than Securities owned by the Company or any of its
Subsidiaries).
"Permitted Transferee" means any individual who received an Employee's
Shares pursuant to applicable Laws of descent and distribution or any member of
such Employee's Family Group.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Public Share FMV", per Share, means the arithmetic mean of the high and
low prices per share as reported on such date on the composite tape of the
principal national securities exchange on which such shares are listed or
admitted to trading, or, if no composite tape exists for such national
securities exchange on such date, then on the principal national securities
exchange on which such shares are listed or admitted to trading, or, if the
shares are not listed or admitted on a national securities exchange, the
arithmetic mean of the per share closing bid price and per share closing asked
price on such date as quoted on the National Association of Securities Dealers
-19-
Automated Quotation System (or such market in which such prices are regularly
quoted) (the "NASDAQ"), or, if no sale of shares shall have been reported on
such composite tape or such national securities exchange on such date or quoted
on the NASDAQ on such date, then the immediately preceding date on which sales
of the shares have been so reported or quoted shall be used to calculate the
Public Share FMV.
"Qualified IPO" shall mean an IPO that results in gross proceeds of at
least $50 million.
"Registrable Securities" shall have the meaning specified in Section 5.1.
"Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of the date hereof, by and among the Company, the Members
and certain Blackstone Parties, as it may be amended, supplemented or restated
from time to time.
"ROFR Period" shall have the meaning specified in Section 3.4(a).
"Securities" means Class A Units and shares of common stock of the
Company.
"Securities Act" shall have the meaning specified in Section 3.3(a).
"Senior Management Investors" means each of the following management
investors: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇; ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇▇; ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ III; ▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; ▇▇▇▇▇ ▇▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇▇▇▇ ▇. ▇▇▇;
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇; ▇▇▇▇ ▇. ▇▇▇▇▇▇; ▇▇▇▇ ▇. ▇▇▇▇▇▇▇; ▇▇▇▇▇▇ ▇. Ways; and ▇▇▇▇▇▇▇
▇▇▇▇▇.
"Services" means (i) an Employee's employment if the Employee is an
employee of the Company or any of its Affiliates, (ii) an Employee's services as
a consultant, if the Employee is a consultant to the Company or any of its
Affiliates and (iii) an Employee's services as a non-employee director, if the
Employee is a non-employee member of the Board or the board of directors of an
Affiliate; provided however that unless otherwise determined by the Board or the
compensation committee of the Board, a change in an Employee's status from
employee to non-employee (other than with respect to a director of the Company
or an Affiliate) shall constitute a termination of "Services" hereunder.
"Shareholders" means any Employee who is a holder of common stock of the
Company.
"Shares" means shares of common stock of the Company, other than those
shares of common stock received upon conversion of or in redemption for Class A
Units of Holdings pursuant to Section 7.2 or any other applicable section of the
LLC Agreement.
"Stock Appreciation Right" shall have the meaning specified in the
Company's 2004 Stock Incentive Plan.
"Stock Certificate" shall have the meaning set forth in Section 3.3(a).
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"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of which if
a corporation, a majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, Representatives or trustees thereof is at the time owned or
Controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (ii) if a limited
liability company, partnership, association or other business entity, a majority
of the total voting power of stock (or equivalent ownership interest) of the
limited liability company, partnership, association or other business entity is
at the time owned or Controlled, directly or indirectly, by any Person or one or
more Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or Control the managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Tag-Along Fraction" shall have the meaning specified in Section 3.5(a).
"Tag-Along Shareholder" shall have the meaning specified in Section
3.5(a).
"Tag-Along Notice" shall have the meaning specified in Section 3.5(a).
"Tag-Along Price" shall have the meaning specified in Section 3.5(a).
"Tag-Along Purchaser" shall have the meaning specified in Section 3.5(a).
"Tag-Along Securities" shall have the meaning specified in Section 3.5(a).
"Termination Event" shall have the meaning specified in Section 4.1(a).
"Transfer" (including its correlative meanings, "Transferor" and
"Transferee") shall mean, with respect to any security, directly or indirectly,
to sell, contract to sell, give, assign, hypothecate, pledge, encumber, grant a
security interest in, offer, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase,
lend, or otherwise transfer or dispose of any economic, voting or other rights
in or to such security. When used as a noun, "Transfer" shall have such
correlative meaning as the context may require.
"Transferring Shareholder" shall have the meaning specified in Section
3.4(a).
Section 8.2. Other Definitional Terms; Interpretation.
(a) The words "hereof", "herein", and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, Subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
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(b) The headings in this Agreement are included for convenience of
reference only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Assignment and Binding Effect. Except pursuant to Transfers
of Shares in accordance with this Agreement, neither the Company nor any
Employee shall assign all or any part of this Agreement without the prior
written consent of the Company. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the parties permitted hereunder.
Section 9.2. Notices. Any notice, demand, request, waiver, or other
communication under this Agreement shall be personally served in writing, shall
be deemed to have been given on the date of service, and shall be addressed as
follows:
To the Company: Vanguard Health Systems, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
VHS Holdings LLC: VHS Holdings LLC
c/o Blackstone Management Associates IV L.L.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
VHS Holdings LLC
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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To Blackstone: The Blackstone Group
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
To Any Employee: c/o Vanguard Health Systems, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Section 9.3. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial.
(a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY,
THE LAWS OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
WHICH WOULD RESULT IN THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.
(b) The parties hereto agree that any suit, action or proceeding seeking
to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in any federal court located in the State of Delaware or any Delaware
state court, and each of the parties hereby irrevocably consents to the
exclusive jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any such suit, action or proceeding in any such
court or that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 9.2
shall be deemed effective service of process on such party.
(c) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.4. Entire Agreement This Agreement and the Registration Rights
Agreement set forth the entire understanding and agreement of the parties hereto
and supersede any and all other understandings, term sheets, negotiations
-23-
or agreements between the parties hereto relating to the subject matter of this
Agreement and the Registration Rights Agreement.
Section 9.5. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, and all of which together shall
constitute a single agreement.
Section 9.6. Severability. In the event that any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable, the same shall not affect any other provision
of this Agreement, but this Agreement shall be construed in a manner which, as
nearly as possible, reflects the original intent of the parties.
Section 9.7. Amendment and Modification. This Agreement may be amended or
modified only by a written instrument signed by the Company, Holdings,
Blackstone and the Employees which own Shares representing at least a majority
of the voting power represented by all Shares owned by all Employees (it being
assumed for the purposes of this Section 9.7 only that the foregoing clause "all
Shares owned by all Employees" means all Shares actually owned by all Employees
as well as all Shares which would be owned by all Employees if they exercised
all of their outstanding options exercisable for the purchase of Shares).
Section 9.8. Waiver. Any party hereto may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by the party granting
such waiver but such waiver or failure to insist upon strict compliance with
such representation or warranty, obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
future failure.
Section 9.9. Further Assurances. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use its reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable under applicable Laws and regulations, to
consummate and make effective the provisions of this Agreement.
Section 9.10. Sections, Exhibits. References to a section are, unless
otherwise specified, to one of the sections of this Agreement and references to
an "Exhibit" is, unless otherwise specified, to one of the exhibits attached to
this Agreement.
Section 9.11. Specific Enforcement. The parties hereto acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
the provisions of this Agreement and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which they may
be entitled at law or in equity.
-24-
Section 9.12. Successors. Except as otherwise expressly provided in this
Agreement, Permitted Transferees are entitled to all of the rights and subject
to all of the obligations of the Transferor hereunder from whom they received
their Shares regardless of whether the Agreement elsewhere so expressly
provides.
Section 9.13. Computation of Time. In computing any period of time under
this Agreement, the day of the act, event or default from which the designated
period of time begins to run shall not be included. The last day of the period
so computed shall be included, unless it is a Saturday, Sunday or legal holiday,
in which event the period shall run until the end of the next day which is not a
Saturday, Sunday or legal holiday.
Section 9.14. Additional Shares Subject to Agreement. Each Employee agrees
that any other Shares which it shall hereafter acquire by means of a stock
split, stock dividend, distribution, exercise of stock options, or otherwise
shall be subject to the provisions of this Agreement to the same extent as if
held on the date hereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
-25-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
VANGUARD HEALTH SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Chairman of the Board & CEO
VHS HOLDINGS, LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
Title: Chairman of the Board & CEO
The Management Representative
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇.,
solely in his capacity as Management Representative
[additional signature pages follow]
Blackstone Parties:
BLACKSTONE FCH CAPITAL PARTNERS IV L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
BLACKSTONE HEALTH COMMITMENT PARTNERS L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
BLACKSTONE CAPITAL PARTNERS IV - A L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
BLACKSTONE FAMILY INVESTMENT PARTNERSHIP IV - A L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
BLACKSTONE FCH CAPITAL PARTNERS IV-A L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
BLACKSTONE FCH CAPITAL PARTNERS IV-B L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
BLACKSTONE HEALTH COMMITMENT PARTNERS-A L.P.
By: Blackstone Management Associates IV L.L.C.,
as a General Partner
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Managing Director
[additional signature pages follow]
Employees:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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EXHIBIT A
FORM OF JOINDER AGREEMENT
[Date]
To the parties to the Stockholders
Agreement concerning Vanguard
Health Systems, Inc., dated as of
November 4, 2004
Ladies and Gentlemen:
Reference is made to the Stockholders Agreement concerning Vanguard Health
Systems, Inc., dated as of November 4, 2004 (the "Stockholders Agreement") among
Vanguard Health Systems, Inc., VHS Holdings LLC, the Management Representative,
the Blackstone Parties, and the Employees listed in the signature pages thereto
and such other persons who are or shall become party thereto as provided
therein. Capitalized terms used but not defined herein have the meanings
ascribed to them in the Stockholders Agreement.
In consideration of the covenants and agreements contained in the
Stockholders Agreement, the undersigned hereby confirms and agrees that it shall
be bound as an "Employee" by all of the provisions of the Stockholders
Agreement.
This letter shall be construed and enforced in accordance with the laws of
the State of Delaware.
Very truly yours,
_______________________________
[Name]