EXHIBIT 10.2

 

TRIAD HOSPITALS, INC.

2004 CORPORATE ANNUAL INCENTIVE PLAN

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Purpose and Administration of the Plan

 

The Triad Hospitals, Inc. Annual Incentive Plan (“Plan”) is a part of your total
compensation plan. It is designed to encourage superior performance by providing
certain eligible Employees with an opportunity to participate in the success of
Triad Hospitals, Inc. (“Company”). The Plan is designed to assist the Company in
its efforts to attract, retain and motivate these Employees.

 

Administration of the Plan shall be the responsibility of the Compensation
Committee (“Compensation Committee”) of the Board of Directors of Triad
Hospitals, Inc. The Compensation Committee will have full and complete
authority, in its sole and absolute discretion, to interpret, amend, rescind and
make any determinations necessary in administering the Plan. The Committee may,
at its discretion, delegate certain administrative responsibilities to the Plan
Committee, which will consist of the Chairman and CEO, COO, CFO and Vice
President of Human Resources of Triad Hospitals, Inc. The actions and
determinations of the Committee or its designees on all matters relating to the
Plan and any Awards will be final and conclusive.

 

Participation:

 

Eligibility to participate in the Plan shall be restricted to those Employees
who, in the opinion of the Compensation Committee, are in a position to make a
significant contribution to the success of the Company and who have completed at
least three months of employment in an approved position during the fiscal year.
Recommendations for participation in the Plan shall be made by the Plan
Committee to the Compensation Committee and will be subject to review and final
approval by the Compensation Committee. Additional Employees may be selected as
Participants during the Plan Year (Fiscal Year of the Company) or removed from
eligibility if the Compensation Committee determines such action to be
appropriate. For any Participant added to or removed from participation during
the course of the Plan Year by the Compensation Committee, such Participant
shall be eligible to receive a pro rata Award, subject to the Compensation
Committee’s right to reduce or cancel such Award. Additionally, any participant
promoted to a position with a higher target or a lower target, their award will
be based upon the period of the plan year that the employee was in each eligible
position, subject to the Committee right to reduce or cancel such Award.
Participation in any given Plan Year shall not entitle such individual to
participate in any other Plan Year.

 

Termination of Participants:

 

In the event an Award is payable pursuant to the Plan and a Participant’s
employment with the Company is terminated prior to the payment of the Award by
reason of retirement (as defined by the Company’s Retirement Plan), total and
permanent disability (as defined by the Company’s Long Term Disability Plan), or
death, such Participant (or estate in event of death) shall receive a pro rata
Award at the same time Awards are otherwise paid under the Plan. A Participant
who is otherwise voluntarily or involuntarily separated from the Company prior
to the payment of any Award, shall cease to be a Participant and shall not have
earned any right to receive any Award pursuant to the Plan.

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Cash Incentive Calculation

 

Award payments for Participants are based on specific criteria detailed on the
attached exhibits. As soon as practicable after the Plan Year, when the
financial results of the Company’s operations for the Plan Year are known, the
Plan Committee will review performance against award criteria and present
payment recommendations to the Compensation Committee which has final authority
to approve payment of Awards under the Plan. Although adjustments will be kept
to a minimum, the Compensation Committee may consider recommendations for
retroactive adjustments to performance criteria in order to avoid unwarranted
penalties or unearned windfalls.

 

Award Payment

 

Awards under the Plan will be made as soon as practical after the Plan Year. The
total Award for each Participant will be paid in accordance with a payout
schedule prepared by the Plan Committee and approved by the Compensation
Committee. This Plan is not a “qualified” plan for tax purposes and any Award
payments are subject to tax withholding requirements to the same extent as
regular salary payments.

 

Miscellaneous

 

The Plan may be amended or terminated in whole or in part by the Compensation
Committee at any time, provided that no such modification, amendment, or
termination shall negatively affect the payment of Awards allocated with respect
to any Plan Year of the Company which has ended. In the event of Plan
Termination, all earned but unpaid Awards shall be paid to Participants as soon
as practicable. The adoption of the Plan, or any modification hereof, does not
imply any commitment to continue or adopt the same Plan or any modification
thereof, for any succeeding year. Nothing in this Plan will be construed as
creating any contract of employment or conferring upon any Employee or
Participant any right to continue in the employ or other service of the Company
(or a Subsidiary thereof) or limit in any way the right of the Company or
Subsidiary to change such person’s compensation or other benefits, or to
terminate the employment or other service of such person with or without cause.
The Plan will be governed by the laws of the State of Texas, as determined
without regard to the conflict of law principles thereof.

 

Effective Date of Plan

 

The Plan shall be effective as of January 1, 2004 to December 31, 2004.

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Triad Annual Incentive Plan Overview

Corporate Participant

 

Plan Overview

 

  • The Triad Annual Incentive Plan is designed to provide you with a financial
incentive to increase the company’s operating performance.

 

  • Triad must meet or exceed its EPS goal for any bonus payment to be earned.

 

  • If the EPS target is attained, your Gross Bonus is comprised of a Base Bonus
and a Supplemental Bonus.

 

  • The Base Bonus is calculated using a predetermined percentage of your base
salary.

 

  • The Supplemental Bonus is equal to your Base Bonus multiplied by 2.5 times
the percentage that Triad’s Actual EPS exceeds its Target EPS.

 

  • The Supplemental Bonus is limited to 50% of the Base Bonus amount. This
“cap” is reached when Actual EPS is equal to 120% of Target EPS.

 

  • The plan is effective from January 1, 2004 to December 31, 2004.

 

  • Awards will be paid out as soon as practical after the end of the plan year.

 

  • Except in the case of retirement, disability, or death, you will forfeit the
right to any payout from the plan upon termination of employment with the
company prior to the time of payout.

 

  • All bonus payments are subject to pro-ration based on the number of months
service in the eligible position.

 

  • See plan document for further detail.

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Triad Annual Incentive Plan Overview

Division Participant

 

Plan Overview

 

  • The Triad Annual Incentive Plan is designed to provide you with a financial
incentive to increase the company’s and your division’s operating performance.

 

  • Triad must meet or exceed its EPS goal for any bonus payment to be earned.

 

  • If the EPS target is attained, your Gross Bonus is comprised of a Base Bonus
and a Supplemental Bonus.

 

  • The Base Bonus is calculated using a predetermined percentage of your base
salary

 

  • The Supplemental Bonus is calculated using a predetermined percentage
multiplied by your division’s EBITDA in excess of target.

 

  • Your Gross Bonus is subject to a Scale-down Percentage if the division does
not meet the following targets:

 

  • EBITDA - 10% scale-down if target is not met

 

  • Margin - 10% scale-down if target is not met

 

  • Cash A/R - 10% scale-down if target is not met

 

  • Your Net Bonus is equal to your Gross Bonus multiplied by the Scale-down
Percentage.

 

  • Your Net Bonus potential is capped at 150% of your base bonus percentage
times your annual base salary.

 

  • The plan is effective from January 1, 2004 to December 31, 2004.

 

  • Awards will be paid out as soon as practical after the end of the plan year.

 

  • Except in the case of retirement, disability, or death, you will forfeit the
right to any payout from the plan upon termination of employment with the
company prior to the time of payout.

 

  • All bonus payments are subject to pro-ration based on the number of months
service in the eligible position.

 

  • See plan document for further detail.