Document:

Triad Hospitals, Inc. 2004 Annual Incentive Plan

 EXHIBIT 10.2 
  
 TRIAD HOSPITALS, INC. 
 2004 CORPORATE ANNUAL INCENTIVE PLAN 

 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. 

 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.

 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. 

 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.Form of Triad Hospitals, Inc. Nonqualified Stock Option Agreement

 EXHIBIT 10.3 
  
 TRIAD HOSPITALS, INC. 
 NONQUALIFIED STOCK OPTION AWARD AGREEMENT 
  
 Award Agreement, dated as of [                    ] (the “Date of Grant”) between Triad Hospitals, Inc., a
Delaware corporation (the “Corporation”), and [            ] (the “Optionee”), an employee of the Corporation. This Award Agreement is pursuant to the terms of the
Corporation’s 1999 Long Term Incentive Plan (the “Plan”). The applicable terms of the Plan are incorporated herein by reference, including the definition of terms contained in the Plan. 
  
 Section 1. Stock Option Award. The Corporation grants to
the Optionee, on the terms and conditions hereinafter set forth, an Option with respect to [            ] shares of the Corporation’s Common Stock (the “Option Shares”). The
Option is not intended to qualify as an Incentive Stock Option under Section 422 of the Code, and shall be treated as a Non-qualified Stock Option under the Plan. 
  
 Section 2. Exercise Price. The exercise price per Option share shall be
[            ]. 
  
 Section 3. Vesting of Stock Option. Subject to Section 5 hereof, the Option shall become vested and exercisable in [            ]
installments, based on the passage of time, according to the following vesting schedule: 
  

			
	 Vesting Date

	 	 Number of Shares

	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 

  
 Notwithstanding the foregoing, but
subject to Section 5 hereof, the Option shall become fully and immediately vested and exercisable (i) upon a Change in Control of the Corporation, or (ii) upon the death or Disability (as defined below) of the Optionee. 
  
 Section 4. Option Term. Option Shares as to which the
Option has become exercisable pursuant to Section 3 hereof may be purchased at any time during the Option Term. For purposes hereof, the “Option Term” shall commence on the Date of Grant and shall expire on the tenth anniversary thereof,
unless earlier terminated upon the Optionee’s termination of service as an employee as provided in Section 5 hereof. Upon the expiration of the Option Term, the Option (to the extent not previously exercised) shall be cancelled and shall be of
no further force or effect. 

 Section 5. Termination of Service. If Optionee’s service as an employee of the
Corporation is terminated for any reason prior to the occurrence of any otherwise applicable vesting date or event provided in Section 3 hereof, the Optionee shall forfeit his interest in the Option to the extent that it has not yet become vested
and exercisable. If Optionee’s service as an employee is terminated by the Corporation for Cause (as defined below), any Option that is vested as of such termination date shall remain exercisable for thirty days following such termination. If
the Optionee voluntarily terminates his service as an employee, the Optionee shall retain the right to exercise the Option, to the extent exercisable on the date of such termination, for three months after the effective date of such termination of
service. If Optionee’s service as an employee is terminated by the Corporation without Cause, or on account of death or Disability (as defined below), the Optionee shall retain the right to exercise the Option, to the extent exercisable on the
date of such termination, for one year after the effective date of such termination of service. In the event the Optionee’s employment shall terminate by retirement (which shall be considered to include any termination other than for Cause, if
the Optionee shall have reached age 65 or shall have reached age 55 and completed 10 years of vesting service), the Option may be exercised within 36 months after the Optionee’s retirement, to the extent exercisable on the date of his or her
retirement. 
  
 For purposes hereof, any reference to
“Corporation” shall be considered to include all Subsidiaries thereof. 
  
 For purposes hereof, “Cause” shall mean: (i) the conviction of the Optionee of a felony under the laws of the United States or any state thereof, whether or not appeal is taken, as determined by the Board of
Directors in good faith; (ii) the conviction of the Optionee for a violation of criminal law involving the Corporation and its business that materially damages the Corporation as determined by the Board in good faith; (iii) the willful misconduct of
the Optionee, or the willful or continued failure by the Optionee (except in the case of a Disability) to substantially perform his duties hereunder, in either case which has a material adverse effect on the Corporation as determined by the Board in
good faith; (iv) the willful fraud or material dishonesty of the Optionee in connection with his performance of his duties to the Corporation and involving the finances of the Corporation as determined by the Board in good faith; (v) the
Optionee’s repeated use of alcohol in a manner which in the opinion of the Board materially impairs the ability of the Optionee to effectively perform the Optionee’s duties and obligations owed to the Corporation, or the illegal use,
possession, or sale of, or impaired performance due to the illegal use of, controlled substances; or (vi) a violation of the Corporation’s policies on sexual or other illegal harassment of a Corporation employee by the Optionee as determined by
the Board in good faith; provided, however, in no event shall the Optionee’s employment be considered to have been terminated for “Cause” unless and until the Optionee receives written notice from the Corporation stating
the acts or omissions constituting Cause and the Optionee has the opportunity to cure to the Corporation’s satisfaction any such acts or omissions (in the case of (iii), (v) or (vi) above) within 30 days of the Optionee’s receipt of such
notice. 
  
 For purposes hereof, “Disability” shall mean
the inability of the Optionee, after reasonable accommodation, to perform his required duties for a period equal to or in excess of the waiting period under the Corporation’s long term disability insurance policy, as determined in good faith by
the Board. 

 Section 6. Procedure for Exercise. The Option may be exercised, in whole or part
(for the purchase of whole shares only), by delivery of a written notice (the “Notice”) from the Optionee to the Secretary of the Corporation at the Corporation’s principal office, which Notice shall: (i) state the number of Option
Shares as to which the Option is being exercised; (ii) state the method of payment for the Option Shares and tax withholding pursuant to Section 7 hereof; (iii) include any representation of the Optionee required pursuant to Section 8 hereof; (iv)
in the event that the Option shall be exercised by any person other than the Optionee pursuant to Section 11 hereof, include appropriate proof of the right of such person to exercise the Option; and (v) comply with such further requirements
consistent with the Plan as the Committee (as defined in the Plan) may from time to time prescribe. 
  
 Section 7. Payment of Exercise Price and Tax Withholding. Payment of the exercise price for the Option Shares shall be made (i) in
cash or by cash equivalent, (ii) by delivery of stock certificates (in negotiable form) representing shares of Common Stock having a Fair Market Value (as defined in the Plan) equal to the aggregate exercise price of the Option Shares, (iii) by a
delivery of a notice that the Optionee has placed a market sell order (or similar transaction) with a broker with respect to the shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a
sufficient portion of the net proceeds of the sale to the Corporation to fully pay the Option exercise price (conditioned upon the payment of such net proceeds) or (iv) by a combination of the methods set forth in the foregoing clauses (i), (ii) and
(iii). In addition, at the time of exercise, as a condition of delivery of the Option Shares, the Optionee shall remit to the Corporation all required federal, state and local withholding tax amounts in any manner permitted for the payment of the
exercise price as provided above. 
  
 Section 8.
Investment Representation. Upon the exercise of the Option at a time when there is not in effect a registration statement under the Securities Act of 1933 relating to the Option Shares, the Optionee hereby represents and warrants, and by
virtue of such exercise shall be deemed to represent and warrant, to the Corporation that the Option Shares shall be acquired for investment and not with a view to the distribution thereof, and not with any present intention of distributing the
same, and the Optionee shall provide the Corporation with such further representations and warranties as the Corporation may require in order to ensure compliance with applicable federal and state securities, blue sky and other laws. No Option
Shares shall be purchased upon the exercise of the Option unless and until the Corporation and/or the Optionee shall have complied with all applicable federal or state registration, listing and/or qualification requirements and all other
requirements of law or of any regulatory agencies having jurisdiction, unless the Committee has received evidence satisfactory to it that a prospective Optionee may acquire such shares pursuant to an exemption from registration under the applicable
securities laws. Any determination in this connection by the Committee shall be final, binding, and conclusive. The Corporation reserves the right to legend any certificate for shares of Common Stock, conditioning sales of such shares upon
compliance with applicable federal and state securities laws and regulations. 

 Section 9. No Rights as Stockholder or Employee. 
  
 (a) The Optionee shall not have any privileges of a stockholder of the
Corporation with respect to any Option Shares subject to (but not yet acquired upon valid exercise of) the Option, nor shall the Corporation have any obligation to issue any dividends or otherwise afford, with respect to such Option Shares, any
rights to which holders of Common Stock are entitled, until the date of the issuance to the Optionee of a stock certificate evidencing such shares. 
  
 (b) Nothing in this Award Agreement or the Option shall confer upon the Optionee any right to continue as an employee of the Corporation or to interfere
in any way with the right of the Corporation to terminate the Optionee’s employment at any time. 
  
 Section 10. Adjustments. If at any time while the Option is outstanding, there shall occur any recapitalization, reclassification,
stock dividend, stock split, reverse stock split, or other distribution with respect to the shares of Common Stock, or other change in corporate structure affecting the Common Stock, the number and kind of Option Shares and/or the exercise price of
such Option Shares shall be adjusted in accordance with the provisions of the Plan. 
  
 Section 11. Restriction on Transfer of Option. The Option may not be transferred, pledged, assigned, hypothecated or otherwise disposed of in any way by the Optionee, except by (i) will or by the
laws of descent and distribution or (ii) to a “family member” (as defined below), provided that such transfer is made for estate planning, tax planning, donative purposes or pursuant to a domestic relations order, and no consideration
(other than nominal consideration) is received by the Optionee. In the event an Optionee becomes legally incapacitated, his Option shall be exercisable by his legal guardian, committee or legal representative. If the Optionee dies, the Option shall
thereafter be exercisable by the Optionee’s executors or administrators. The Option shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, and the levy of any execution, attachment or similar process upon the Option, shall be null and void and without effect. 
  
 For purposes hereof, a “family member” shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,
sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in
which these persons have more than fifty percent of the beneficial interest, a foundation in which these persons (or the employee) control the management of assets, and any other entity in which these persons (or the employee) own more than fifty
percent of the voting interests. 
  
 No transfer of an Option by
the Optionee by will or by laws of descent and distribution shall be effective to bind the Corporation unless the Corporation shall have been furnished with written notice thereof and an authenticated copy of the will and/or such other evidence as
the Board may deem necessary to establish the validity of the 

 transfer. During the lifetime of an Optionee, except as provided above, the Option shall be exercisable only by the
Optionee, except that, in the case of an Optionee who is legally incapacitated, the Option shall be exercisable by the Optionee’s guardian or legal representative. In the event of any transfer of an Option to a family member in accordance with
the provisions of this section, such family member shall thereafter have all rights that would otherwise be held by such Optionee (or by such Optionee’s guardian, legal representative or beneficiary), except as otherwise provided herein. The
Option shall not be subject to execution, attachment or similar process. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Option contrary to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect. 
  
 Section 12. Notices. Any notice hereunder by the Optionee shall be given to the Corporation in writing and such notice shall be deemed duly given only upon receipt thereof at the
Corporation’s office at 5800 Tennyson Parkway, Plano, TX 75024, or at such other address as the Corporation may designate by notice to the Optionee. Any notice hereunder by the Corporation shall be given to the Optionee in writing and such
notice shall be deemed duly given only upon receipt thereof at such address as the Optionee may have on file with the Corporation. 
  
 Section 13. Construction. The construction of this Award Agreement is vested in the Committee, and the Committee’s construction
shall be final and conclusive. 
  
 Section 14.
Governing Law. This Award Agreement shall be construed and enforced in accordance with the laws of the State of Texas, without giving effect to the choice of law principles thereof. 
  

	
	TRIAD HOSPITALS, INC.
	
	  

	Rick Thomason
	Vice President of Human Resources
	
	OPTIONEE
	
	  

	Name:

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