Document:

EXHIBIT 10.7

                         VANGUARD HEALTH SYSTEMS, INC.
                               CARRY OPTION PLAN

1.   Purpose; Types of Awards; Construction.

     The purpose of the Vanguard Health  Systems,  Inc. Carry Option Plan is to
afford  an  incentive  to  certain  employees  of the  Company,  to  acquire  a
proprietary interest in the Company, to increase their efforts on behalf of the
Company and to promote the success of the  Company's  business.  The awards are
being granted to certain key employees of the Company.

2.   Definitions.

     As used in this  Plan,  the  following  words and  phrases  shall have the
meanings indicated:

     "Aggregate  Carry Amount" means,  with respect to any Liquidity Event, the
product of (i) the Applicable Percentage and (ii) the number of Eligible Shares
immediately prior to the date of such Liquidity Event.

     "Applicable  Percentage"  means (i) with  respect to any  Liquidity  Event
occurring prior to the fourth anniversary of the Effective Date, the percentage
set forth on Annex A-1 hereto  opposite the Net MSCP Exit Multiple (as such Net
MSCP Exit  Multiple  is  calculated  immediately  after  giving  effect to such
Liquidity  Event) and (ii) with respect to any Liquidity  Event occurring on or
following the fourth  anniversary  of the Effective  Date,  the  percentage set
forth on Annex A-2  hereto  opposite  the Net MSCP IRR (as such Net MSCP IRR is
calculated  immediately after giving effect to such Liquidity Event);  provided
that if the calculated  value of the Net MSCP Exit Multiple or Net MSCP IRR, as
the case may be, falls  between any two of the values set forth on Annex A-1 or
A-2, respectively,  the Applicable Percentage shall be determined by taking the
lesser of the two Applicable Percentages set forth opposite such two values.

     "Board" shall mean the Board of Directors of the Company.

     "Cause" shall have the meaning set forth in the Shareholders Agreement.

     "CEO" means the chief executive officer of the Company.

     "Code" shall mean the Internal  Revenue Code of 1986, as amended from time
to time.

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     "Committee"  shall mean the  Compensation  Committee  of the Board or such
other committee established by the Board to administer the Plan; provided if no
such  Committee is established  by the Board,  Committee  shall mean the entire
Board.

     "Common  Stock"  shall  mean  shares of common  stock,  par value $.01 per
share, of the Company.

     "Company"  shall  mean  Vanguard  Health  Systems,   Inc.,  a  corporation
organized  under  the  laws  of  the  State  of  Delaware,   or  any  successor
corporation.

     "Date of  Termination"  means,  with respect to any Grantee,  the "Date of
Termination" as defined in such Grantee's employment agreement with the Company
or, if such Grantee does not have an employment agreement that defines "Date of
Termination",  the date on which  the  Grantee's  employment  with the  Company
terminates.

     "Designated  Holders'  Shares" means, as of any date, the number of shares
equal to the lesser of (i) the total number of shares of Common Stock purchased
on or prior to such date by the  Designated  Holders  and (ii) 1,845  shares of
Common  Stock,  in each case  subject to  adjustment  as provided in Section 12
hereof.

     "Designated MSCP Shares" means, as of any date, the number of shares equal
to the  lesser of (i) the Total  MSCP  Shares as of such date and (ii)  117,565
shares of Common  Stock,  in each case  subject to  adjustment  as  provided in
Section 12 hereof.

     "Designated  Holders"  means  the  Persons  listed  on  Annex  III  to the
Shareholders Agreement and their respective transferees.

     "Effective Date" means June 1, 1998.

     "Eligible  Shares" means, as of any date, the Designated MSCP Shares as of
such date, plus the Designated Holders' Shares as of such date.

     "Exchange Act" shall mean the Securities  Exchange Act of 1934, as amended
from time to time, and as now or hereafter  construed,  interpreted and applied
by regulations, rulings and cases.

     "Exercisable  Options" means, with respect to any Grantee,  the product of
(i) the number of Options  which (A) have vested  pursuant to Section 5 hereof,
(B) have not been  forfeited  under  Section 7 hereof  and (C) are held by such
Grantee upon

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the occurrence of a Liquidity  Event and (ii) the quotient of (x) the Aggregate
Carry Amount divided by (y) the Maximum Options.

     "Fair Market  Value" per share as of a particular  date shall mean (i) the
closing  sales  price  per  share of Common  Stock on the  national  securities
exchange on which the Common Stock is principally traded for the last preceding
date on which there was a sale of such Common  Stock on such  exchange  (or, on
the date of the IPO, the per share IPO price to public),  or (ii) if the shares
of Common Stock are then traded in an  over-the-counter  market, the average of
the  closing  bid and asked  prices  for the  shares  of  Common  Stock in such
over-the-counter  market for the last  preceding date on which there was a sale
of such Common Stock in such market.

     "Good  Reason"  shall  have the  meaning  set  forth  in the  Shareholders
Agreement.

     "Grantee"  shall mean each person  listed on Annex B hereto and each other
person that is designated a Grantee pursuant to Section 4 hereof.

     "Independent  Financial Expert" means a nationally  recognized  investment
banking or other valuation firm that specializes in providing valuation-related
services that (i) is selected by the CEO and is  reasonably  acceptable to MSCP
III, (ii) does not (and whose directors,  officers, employees and Affiliates do
not) have a direct or indirect material financial interest in or other material
relationship with the Company, the MSCP Entities,  the Grantees or any of their
respective  Affiliates,  and (iii)  has not been and,  at the time it is called
upon  hereunder  is not (and none of whose  directors,  officers,  employees or
Affiliates is), a director or officer of the Company,  the MSCP Entities or any
Affiliate of any Grantee;  provided that an Independent Financial Expert may be
compensated  for opinions or services it provides as an  Independent  Financial
Expert.

     "IPO"  means the initial  sale of Common  Stock  pursuant to an  effective
registration statement under the Securities Act of 1933, as amended (other than
a  registration  statement on Form S-4 or Form S-8 or any  successor or similar
form).

     "Liquidity  Event" means the first to occur of (i) the consummation of the
IPO,  (ii) the sale (by way of merger or  otherwise)  by the MSCP  Entities for
cash of all or  substantially  all of their aggregate  equity  interests in the
Company in one transaction or a series of related transactions,  (iii) the sale
(by way of merger or  otherwise)  by the MSCP  Entities,  for capital  stock of
another Person,  of all or  substantially  all of their equity interests in the
Company in one transaction or a series of related transactions, but only if all
of such capital stock (x) has been registered  under the Securities Act and (y)
is capable of being immediately sold by the MSCP

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Entities upon  consummation  of such  transaction(s)  on a national  securities
exchange or quotation  system in accordance  with  applicable  law (the capital
stock  described  in  clauses  (x)  and  (y)  is  hereinafter  referred  to  as
"Marketable  Securities"),  (iv) the sale (by way of merger or  otherwise)  for
cash and/or  Marketable  Securities of all or  substantially  all of the assets
(including  stock) of the Company and its  Subsidiaries in one transaction or a
series of related  transactions  or (v) the  liquidation  or dissolution of the
Company and its Subsidiaries.

     "Maximum Options" means 29,852 Options,  subject to adjustment as provided
in Section 12 hereof.

     "MSCP III"  means  Morgan  Stanley  Capital  Partners  III,  L.P.  and its
successors.

     "MSCP  Entities"  means  the MSCP  Funds and  their  respective  Permitted
Transferees.

     "MSCP Fund" means any of MSCP III, MSCP III 892  Investors,  L.P.,  Morgan
Stanley Capital Investors, L.P., and any successors thereof.

     "Net MSCP Exit Multiple"  means,  (i) with respect to any Liquidity  Event
that is an IPO, (A) (x) the number of Remaining MSCP Shares,  multiplied by the
IPO  price  per  share  of  Common  Stock  (after  underwriting  discounts  and
commissions),  plus (y) all cash dividends or other cash amounts received prior
to such  Liquidity  Event by the MSCP  Entities  in  respect  of the Total MSCP
Shares,  divided  by (B) the amount of the Total  MSCP  Investments  as of such
date,  or (ii) with  respect  to any  other  Liquidity  Event,  (A) (x) the net
proceeds that will be actually received by the MSCP Entities on the date of the
consummation  of such Liquidity  Event in respect of the Remaining MSCP Shares,
plus (y) all  cash  dividends  or other  cash  amounts  received  prior to such
Liquidity  Event by the MSCP  Entities  in respect  of the Total  MSCP  Shares,
divided by (B) the amount of the Total MSCP  Investments  as of such date.  For
purposes of this definition,  any non-cash  consideration  actually received by
the MSCP Entities on the date of the consummation of a Liquidity Event shall be
valued at the fair market value  thereof as of such date.  Notwithstanding  the
foregoing,  Net MSCP Exit Multiple  will be calculated  taking into account the
full impact of (i) the dilution  that will result from (x) the actual  issuance
of shares of Common Stock upon exercise of all Options granted pursuant to this
Plan and (y) (without  duplication)  the forfeiture by the MSCP Entities of all
shares of Common Stock required to be forfeited by them in connection with such
Liquidity Event pursuant to Section 2.08 of the  Shareholders  Agreement,  (ii)
the  assumed  exercise  of any then  outstanding  stock  options of the Company
(including,  without  limitation,  any options outstanding under the 1998 Stock
Option Plan of the Company and any

                                      -4-

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options outstanding under the Non-qualified Initial Option Plan of the Company)
to the  extent  that the per  share  consideration  received  or that  would be
received by such holder upon the deemed  exercise of such option in  connection
with such Liquidity  Event exceeds the exercise  price of any such  outstanding
options at the date of such  Liquidity  Event,  and (iii) any other dilution to
any  of the  MSCP  Entities  resulting  from  any  arrangement  or  transaction
contemplated by Section 8.02 of the Subscription Agreement or any other similar
arrangement or transaction.  For the avoidance of doubt, Net MSCP Exit Multiple
shall not include any investment  banking,  advisory or financing fees paid (or
to be paid) at any time to any  Affiliate  of the MSCP Funds by the  Company or
any of its Subsidiaries or Affiliates.

     "Net MSCP IRR" means the  effective  annual rate of interest  which,  when
applied to all cash flows (as determined  below) with respect to the Total MSCP
Investments,  makes the net present value of all such cash flows equal to zero;
provided  that (i) the cash  outflow  on June 1,  1998  shall be  deemed  to be
$20,219,908 and (ii) the next succeeding cash outflow shall be deemed to be the
sum of (A)  $11,500,000  plus (B) the actual cash outflow on such date.  All of
the Total MSCP  Investments  are deemed to be cash outflows.  Sales by the MSCP
Entities of equity  received in respect of the Total MSCP  Investments and cash
dividends  or other  cash  amounts,  if any,  paid by the  Company  to the MSCP
Entities in respect of the Total MSCP  Investments will be deemed to be interim
cash  inflows  with  respect  to the Total  MSCP  Investments.  The Total  MSCP
Investments made, and  distributions or proceeds received thereon,  by the MSCP
Entities  consisting  of  property  other than cash shall be valued at the fair
market value thereof as  determined as of the date such Total MSCP  Investments
were made or such distributions or proceeds were received.  The final cash flow
with  respect  to the  Total  MSCP  Investments  will be based on the total net
proceeds that will be actually received by the MSCP Entities on the date of the
consummation of a Liquidity Event in respect of the Remaining MSCP Shares,  or,
if such  Liquidity  Event is an IPO,  on the total net  proceeds  that would be
received upon the assumed sale of the Remaining MSCP Shares on the date of such
IPO  based on the IPO  price per  share of  Common  Stock  (after  underwriting
discounts  and  commissions).  For  purposes of this  definition,  any non-cash
consideration  actually  received  by the  MSCP  Entities  on the  date  of the
consummation  of a Liquidity  Event  shall be valued at the fair  market  value
thereof as of such date.  Notwithstanding the foregoing,  the Net MSCP IRR will
be calculated taking into account the full impact of (i) the dilution that will
result from (x) the actual issuance of shares of Common Stock upon the exercise
of all Options granted pursuant to this Plan and (y) (without  duplication) the
forfeiture  by the MSCP  Entities of all shares of Common Stock  required to be
forfeited by them in connection  with such Liquidity  Event pursuant to Section
2.08 of the  Shareholders  Agreement,  (ii) the  assumed  exercise  of any then
outstanding stock options of the Company (including,  without  limitation,  any
options  outstanding  under the 1998 Stock  Option  Plan of the Company and any
options

                                      -5-

<PAGE>

outstanding under the Non-qualified  Initial Option Plan of the Company) to the
extent  that the per share  consideration  received,  or that would be received
upon the deemed  exercise of such option,  in  connection  with such  Liquidity
Event exceeds the exercise price of any such outstanding options at the date of
such Liquidity  Event, and (iii) any other dilution to any of the MSCP Entities
resulting from any  arrangement or transaction  contemplated by Section 8.02 of
the Subscription Agreement or any other similar arrangement or transaction. The
Net MSCP IRR will be calculated  on pre-tax cash flow amounts,  with the timing
of cash flows assumed to be on a monthly basis and with all specific cash flows
during a month deemed to have occurred on the first day of such month.  For the
avoidance  of doubt,  Net MSCP IRR shall not  include any  investment  banking,
advisory or financing fees paid (or to be paid) at any time to any Affiliate of
the MSCP Funds by the Company or any of its Subsidiaries or Affiliates.

     "Option"  shall  mean a grant to a Grantee  of an option to  purchase  one
share of Common Stock.  Options  granted by the Committee  pursuant to the Plan
shall constitute Non-qualified Stock Options.

     "Option  Agreement"  shall mean an  agreement  entered  into  between  the
Company and a Grantee in connection with a grant under the Plan.

     "Option Price" shall mean, with respect to each Option, the exercise price
of the share of Common Stock covered by an Option.

     "Permitted  Transferee"  shall have the meaning set forth in the Surviving
Shareholders Agreement.

     "Person"  means an individual,  partnership,  limited  liability  company,
corporation,  trust, joint stock company,  association,  joint venture,  or any
other entity or organization,  including a government or political  subdivision
or an agency or instrumentality thereof.

     "Plan" means this  Vanguard  Health  Systems,  Inc.  Carry Option Plan, as
amended from time to time.

     "Remaining MSCP Shares" means, as of any date, the Total MSCP Shares as of
such date minus all shares of Common Stock sold or otherwise disposed of by the
MSCP Entities prior to such date.

     "Rule  16b-3"  shall  mean Rule  16b-3,  as from  time to time in  effect,
promulgated by the Securities and Exchange  Commission  under Section 16 of the
Exchange Act, including any successor to such Rule.

                                      -6-

<PAGE>

     "Shareholders  Agreement" means the Shareholders Agreement dated as of the
Effective Date, among the Company and its shareholders, as amended from time to
time.

     "Subscription  Agreement" means the Subscription Agreement dated as of the
Effective Date among the Company,  the MSCP Funds and the Persons listed on the
signature  pages  thereof,  as  amended  from  time to time,  or any  successor
agreement.

     "Subsidiary" means any entity of which ownership interests having ordinary
voting  power to elect a majority of the board of  directors  or other  Persons
performing  similar  functions are at the time directly or indirectly  owned by
the Company.

     "Surviving   Shareholders  Agreement"  means  the  Surviving  Shareholders
Agreement  dated  as  of  the  Effective  Date,   among  the  Company  and  its
Shareholders, as amended from time to time.

     "Total MSCP Shares"  means,  as of any date, the total number of shares of
Common Stock  purchased or otherwise  received by the MSCP Entities on or prior
to such date.

     "Total MSCP  Investments"  means,  as of any date,  the  aggregate  dollar
amount of all equity capital invested by the MSCP Entities in the Company on or
prior to such date; provided that any equity capital invested by Morgan Stanley
Capital Partners III, Inc. on or prior to the date of such calculation shall be
included in "Total MSCP Investments" for purposes of the Plan.

3.   Administration.

     Except as otherwise provided herein, the Plan shall be administered by the
Committee, which shall have the authority in its discretion, subject to and not
inconsistent  with the express  provisions of the Plan, to administer  the Plan
and to exercise all the powers and authorities either  specifically  granted to
it under the Plan or necessary or advisable in the  administration of the Plan.
Except  as  otherwise  provided  herein,  all  decisions,   determinations  and
interpretations  of the Committee shall be final and binding on all Grantees of
any awards under this Plan.

     No MSCP Fund or member of the Board or  Committee  shall be liable for any
action  taken or  determination  made in good faith with respect to the Plan or
any award granted hereunder.

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<PAGE>

     Except as otherwise  provided  below,  MSCP III shall be  responsible  for
determining  the Aggregate  Carry Amount in connection with any Liquidity Event
and making all calculations  necessary for such  determination.  MSCP III shall
provide notice of such  determination,  together with all necessary  supporting
information,  calculations and documentation, to the CEO as soon as practicable
after (i) the  consummation  of the IPO in the case of any Liquidity Event that
is an IPO and (ii) the Board  concludes  that a Liquidity  Event is  reasonably
likely  to occur in the case of any other  type of  Liquidity  Event.  MSCP III
shall make such  determination  in a manner that is  consistent in all material
respects  with the terms and  conditions  of this Plan.  If the CEO  reasonably
disagrees with MSCP III's determination of the Aggregate Carry Amount, then the
Company shall retain an  Independent  Financial  Expert who shall be ultimately
responsible   for  determining  the  Aggregate  Carry  Amount  and  making  all
calculations necessary for such determination (the "Final Determination"). Upon
completion of the Final Determination,  the Independent  Financial Expert shall
provide  notice  of  the  Final  Determination,  together  with  all  necessary
supporting information,  calculations and documentation (collectively, the "ACA
Notice"),  to the CEO and MSCP III.  The  Independent  Financial  Expert  shall
provide the ACA Notice as soon as practicable. The Final Determination shall be
consistent in all material  respects with the terms and conditions of this Plan
and shall be final,  conclusive  and binding on the  parties,  absent  manifest
error.

4.   Eligibility; Grant.

     On the Effective Date, the Committee shall grant to each Grantee listed on
Annex B hereto the number of Options (each  exercisable for one share of Common
Stock,  subject to the terms and  conditions  set forth  herein)  opposite such
Grantee's name on Annex B.

     Prior to the occurrence of a Liquidity  Event,  awards may also be granted
to any other key  employee of the Company that the  Committee  may from time to
time  designate  as a  Grantee.  In  addition,  prior  to the  occurrence  of a
Liquidity Event,  the Committee may, in its sole  discretion,  award Options to
any other  Grantee in an amount  equal to the number of Options  that have been
forfeited  and  canceled  pursuant  to  Section 7 hereof.  Notice of any awards
pursuant to this  Section 4 shall be promptly  delivered to the Company and the
affected Grantees.  Notwithstanding  the foregoing,  the number of Options that
may be outstanding at any time shall not exceed the Maximum  Options.  Upon and
after the  occurrence of a Liquidity  Event,  no Options shall be available for
grant under the Plan.

5.   Vesting.

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<PAGE>

     Subject to the terms and  conditions of the Plan,  one-seventh  (1/7th) of
the number of Options  granted to any Grantee  hereunder  shall vest on each of
the first seven  anniversaries  of the date of the grant of the Options to such
Grantee  under the Plan.  All of the Options  granted under the Plan shall vest
upon the occurrence of a Liquidity Event.  Vested Options may only be exercised
as provided in Section 6 hereof.

6.   Exercisability; Forfeiture.

     None of the Options  (including,  without  limitation,  Options  vested in
accordance  with Section 5 hereof)  shall be  exercisable  prior to a Liquidity
Event.  Upon the  occurrence  of a  Liquidity  Event,  subject to the terms and
conditions of this Plan, a number of Options equal to the  Exercisable  Options
shall  become  exercisable  at such time.  Such  number of Options  may only be
exercised  commencing at such time and ending on the tenth  anniversary  of the
Effective Date, at which time such Options shall expire.  All Options held by a
Grantee in excess of the  Exercisable  Options shall,  upon the occurrence of a
Liquidity  Event,   without  any  action  by  any  party,  be  irrevocably  and
unconditionally  forfeited and cancelled without any  consideration  payable to
the Grantee and the Grantee  shall have no further  right or interest  therein.
Notwithstanding  anything contained herein to the contrary, in no event shall a
number of Options in excess of the Aggregate  Carry Amount  become  exercisable
under this Plan.

7.   Termination of Employment.

     Upon the  termination of the Grantee's  employment with the Company and/or
its  Subsidiaries  for any reason prior to the Liquidity Event, (i) all Options
that  have not  been  vested  in  accordance  with  Section  5 hereof  shall be
forfeited and canceled  without payment therefor and (ii) all Options that have
vested in accordance  with Section 5 hereof shall remain vested and outstanding
in accordance with the terms of the Plan. Notwithstanding the foregoing, if (x)
such Grantee has voluntarily  terminated his employment with the Company and/or
its  Subsidiaries  other  than for Good  Reason or has been  terminated  by the
Company  and/or  its  Subsidiaries  for  Cause  and  (y)  prior  to  the  fifth
anniversary  of the Effective  Date,  has engaged in  Competitive  Activity (as
defined in the Surviving Shareholders Agreement),  then all Options held by the
Grantee  shall be  forfeited  and  canceled by the Company  without any payment
therefor.

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<PAGE>

8.   Certain Agreements.

     If an IPO occurs prior to the fourth  anniversary  of the  Effective  Date
that  results in a Net MSCP Exit  Multiple of less than 3.5x and a Net MSCP IRR
of 40% or greater, the Company, subject to the approval of the MSCP Funds, will
implement  new  equity-based  incentive  arrangements  designed  to afford  the
Grantees the opportunity to earn the number of Eligible Shares (or their equity
equivalents)  that  were  forfeited  and  canceled  pursuant  to  Section  6 in
connection  with such IPO as a result of the Net MSCP Exit Multiple  being less
than 3.5x.

9.   Stock.

     The maximum  number of shares of Common  Stock  reserved  for the grant of
awards  under the Plan shall be 29,852,  subject to  adjustment  as provided in
Section 12 hereof.  Such  shares may, in whole or in part,  be  authorized  but
unissued  shares or shares  that  shall have been or may be  reacquired  by the
Company.

10.  Terms and Conditions of Options.

     Each Option  granted  pursuant to the Plan shall be evidenced by an Option
Agreement  (which  may cover  more than one  Option),  in the form of Exhibit A
hereto.  Each Option shall be subject to the  following  terms and  conditions,
except to the extent otherwise specifically provided in such Option Agreement:

     (a) Number of Shares.  Each  Option  Agreement  shall  state the number of
Options granted thereby.

     (b) Type of Option.  Each Option Agreement shall  specifically  state that
the Options covered thereby constitute Non-qualified Stock Options.

     (c) Option Price.  Each Option  Agreement shall state the Option Price per
Option which,  (i) in the case of any Option granted on the date hereof,  shall
be $170.12  and (ii) in the case of any other  Option,  shall be ten percent of
the fair market value of one share of Common Stock on the date of grant of such
Option(s) as determined by the Committee.  The Option Price shall be subject to
adjustment as provided in Section 12 hereof.

     (d) Medium and Time of Payment. The Option Price shall be paid in full, at
the time of exercise of each Option, in cash or, if permitted by the Committee,
in shares of Common Stock having a Fair Market Value equal to such Option Price
or, if permitted by the Committee, in a combination of cash and Common Stock or
in

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<PAGE>

such  other  manner  as  the  Committee  shall  determine  including,   without
limitation, a cashless exercise procedure through a broker-dealer.

     (e) Term and  Exercisability  of  Options.  The Option  Agreement  of each
Grantee shall provide that,  subject to the terms and conditions of the Plan, a
number of Options  equal to the  Exercisable  Options of such Grantee shall (i)
become  exercisable  upon the  occurrence of a Liquidity  Event and (ii) remain
exercisable  until the tenth  anniversary of the Effective  Date, at which time
such Options shall expire.  Each such Option may be exercised by written notice
delivered  in  person or by mail to the  Secretary  of the  Company.  Each such
Option  Agreement  shall  also  provide  that all  Options  covered by any such
Agreement to which such Grantee is a party in excess of the Exercisable Options
shall upon a Liquidity  Event,  without any action by any party, be irrevocably
and unconditionally forfeited and canceled without any consideration payable to
the Grantee and the Grantee shall have no further right or interest therein.

     (f) Other Provisions.  The Option  Agreements  evidencing awards under the
Plan shall contain only the terms and provisions set forth in Exhibit A.

11.  Shareholders Agreements.

     All  Options  granted  under  this Plan and the  shares  of  Common  Stock
acquired pursuant to the exercise of Options shall be subject to the provisions
of the Shareholders Agreement and the Surviving Shareholders Agreement.

12.  Effect of Certain Changes.

     (a)  In  the  event  of any  recapitalization,  reclassification,  merger,
consolidation, stock split, or combination or exchange of such shares, or other
similar  transactions,  the  number of shares of  Common  Stock  available  for
awards, the number of such shares covered by outstanding  awards, the price per
share of  Options  and any  other  relevant  provisions  of the  Plan  shall be
equitably  adjusted by the  Committee to reflect  such event and preserve  (and
neither  increase nor decrease) the value of such awards and/or the obligations
of the MSCP Entities  and/or the  Designated  Holders under Section 2.08 of the
Shareholders Agreement; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated.

     (b) In the  event of a  change  in the  Common  Stock  of the  Company  as
presently  constituted  that is  limited  to a change of all of its  authorized
shares of Common  Stock into the same  number of shares  with a  different  par
value or without

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<PAGE>

par value,  the shares resulting from any such change shall be deemed to be the
Common Stock within the meaning of the Plan.

13.  Transferability of Awards.

     No award shall be  transferable  or assignable,  or exercisable by, anyone
other than the Grantee to whom it was granted,  except (i) by law,  will or the
laws of descent and  distribution or (ii) to a member of a Grantee's  immediate
family and/or trusts whose beneficiaries are members of the Grantee's immediate
family.  Notwithstanding  the foregoing,  all transfers  shall be in accordance
with  the   provisions  of  the   Shareholders   Agreement  and  the  Surviving
Shareholders Agreement. A beneficiary, transferee, or other person claiming any
rights under the Plan from or through any Grantee shall be subject to all terms
and conditions of the Plan and any Option Agreement applicable to such Grantee,
except as otherwise  determined by the Committee,  and to any additional  terms
and conditions deemed necessary or appropriate by the Committee.

14.  Approval of Stockholders.

     The Plan shall take  effect  upon its  adoption  by the Board but the Plan
(and any grants of awards  made  prior to the  stockholder  approval  mentioned
herein)  shall  be  subject  to the  approval  of the  holder(s)  of more  than
seventy-five  percent  (75%) of the  issued  and  outstanding  shares of voting
securities of the Company  entitled to vote,  which  approval shall occur on or
prior to the Effective Date.

15.  Agreement by Grantee Regarding Withholding Taxes.

     As a condition of exercise of an Option,  each Grantee shall agree that no
later than the date of such  exercise,  the Grantee will pay to the Company any
federal,  state or local taxes of any kind  required by law to be withheld upon
such  exercise.  Alternatively,  if permitted by the  Committee,  a Grantee may
elect,  to the extent  permitted  by law, to have the Company  deduct  federal,
state and local  taxes of any kind  required  by law to be  withheld  upon such
exercise  from any  payment  of any kind due to the  Grantee.  The  withholding
obligation, if permitted by the Company, may be satisfied by the withholding or
delivery of Common Stock valued at Fair Market Value.

16.  Amendment; Waiver and Termination of the Plan.

     The Board may suspend or terminate  the Plan for the purpose of meeting or
addressing any changes in legal requirements or for any other purpose permitted
by law. The Plan, and any awards granted thereunder that have not yet become

                                      -12-

<PAGE>

exercisable, may not be amended without the written consent of (i) the Company,
(ii)  Grantees  having  in excess of 50% of the  Options  held by all  Grantees
employed by the Company or any of its  Subsidiaries at such time, and (iii) for
so long as any MSCP Fund is a stockholder  of the Company,  MSCP III;  provided
that any  amendment to any  outstanding  award must be made to all  outstanding
awards, absent the written consent of the affected Grantee.  Except as provided
in Section 12(a) hereof, no suspension, termination,  modification or amendment
of the Plan may adversely affect any award that has been previously granted and
is exercisable,  without the written consent of each affected  Grantee.  For so
long as any MSCP Fund is a stockholder of the Company,  neither the Company nor
the  Committee  may waive any  provision of this Plan without the prior written
consent of MSCP III.

17.  Rights as a Shareholder.

     A  Grantee  or a  transferee  of  an  award  shall  have  no  rights  as a
shareholder  with respect to any shares  covered by the award until the date of
the issuance of a stock certificate to him for such shares. No adjustment shall
be made for dividends (ordinary or extraordinary,  whether in cash,  securities
or other property) or distribution of other rights for which the record date is
prior to the date such stock  certificate  is  issued,  except as  provided  in
Section 12(a) hereof.

18.  No Rights to Employment.

     Nothing in the Plan or in any award  granted or Option  Agreement  entered
into pursuant hereto shall confer upon any Grantee the right to continue in the
employ of, the Company or to be entitled to any  remuneration  or benefits  not
set forth in the Plan or such  Agreement or to  interfere  with or limit in any
way the right of the Company to terminate such Grantee's employment.

19.  Beneficiary.

     A  Grantee  may  file  with  the  Committee  a  written  designation  of a
beneficiary  on such form as may be  prescribed  by the Committee and may, from
time to time, amend or revoke such  designation.  If no designated  beneficiary
survives the Grantee,  the executor or  administrator  of the Grantee's  estate
shall be deemed to be the Grantee's beneficiary.

20.  Governing Law.

     The Plan and all  determinations  made and actions taken  pursuant  hereto
shall be governed by the laws of the State of New York,  without  regard to its
conflicts of laws principles.

                                      -13-

<PAGE>

21.  Effective Date and Duration of the Plan.

     This Plan shall be effective as of the Effective Date, and shall terminate
on the tenth anniversary of the date hereof.

                                      -14-

<PAGE>

                                                                        ANNEX B

         Grantee                               Initial Option Amount
         -------                               ---------------------

         Charles N. Martin, Jr.                10,448

         W. Lawrence Hough, Jr.                3,134

         Joseph D. Moore                       3,134

         Ronald P. Soltman                     2,687

         Bruce Chafin                          560

         Phillip W. Roe                        560

         Alan G. Thomas                        560

         James Johnston                        560

         Robert E. Galloway                    560

         Thomas M. Ways                        560

         Tony W. Simpson                       280

         James H. Spalding                     280

         Anne L. Sanford                       280

         John M. Geer                          280

         Options Reserved for Future Grant
         ---------------------------------

         5,969 Options

                                      -15-

<PAGE>

                                                                      EXHIBIT A
                                                       TO THE CARRY OPTION PLAN

                                     STOCK OPTION AGREEMENT
                                     ----------------------

     AGREEMENT dated as of [ ], 199[ ], by and between Vanguard Health Systems,
Inc., a Delaware corporation (the "Company"), and [ ] (the "Grantee").

     WHEREAS,  the Company has adopted the Vanguard Health Systems,  Inc. Carry
Option Plan (the "Plan") and the  Company's  stockholders  have  approved  such
adoption; and

     WHEREAS,  the Company  desires to grant to the Grantee  options  under the
Plan to acquire an aggregate of [ ] shares of the Company's common stock,  $.01
par value (the "Common Stock"), on the terms set forth herein.

     NOW, THEREFORE, the parties agree as follows:

     1. Definitions.  Capitalized terms not otherwise defined herein shall have
the meanings set forth in the Plan.

     2. Grant of Options.  The Grantee is hereby granted [ ] Nonqualified Stock
Options  (each,  an  "Option").  Each such Option shall  represent the right to
purchase one share of Common Stock  pursuant to the terms of this Agreement and
the provisions of the Plan.

     3. Option Price. The exercise price of each Option shall be $[170.12/____]
per share of Common Stock issuable thereunder.

     4.  Period of Options;  Exercise;  Termination.  The Options  shall not be
exercisable by the Grantee until the occurrence of a Liquidity Event.  Upon the
occurrence  of a Liquidity  Event,  a number of Options equal to the product of
(i) the number of Options  which (A) have  vested  pursuant to Section 5 of the
Plan, (B) have not been forfeited pursuant to Section 7 of the Plan and (C) are
held by such  Grantee at such time and (B) the  quotient  of (x) the  Aggregate
Carry Amount  divided by (y) the Maximum  Options  (such  product  being herein
referred to as the  "Exercisable  Options"),  shall  become  exercisable.  Such
Options may be exercised  commencing  upon the occurrence of a Liquidity  Event
and ending on the tenth  anniversary of the Effective  Date, at which time such
Options  shall  expire.  Any  Options  granted  pursuant  to  Section  2 hereof
(together with any other Options granted to such Grantee

<PAGE>

under the Plan) in excess of the Exercisable  Options shall upon the occurrence
of a Liquidity  Event,  without  any action by any party,  be  irrevocably  and
unconditionally forfeited and canceled without any consideration payable to the
Grantee  and the  Grantee  shall have no  further  right or  interest  therein.
Notwithstanding  the  foregoing,  if the  Grantee  voluntarily  terminates  his
employment  with  the  Company  other  than  for  Good  Reason  or the  Company
terminates  the  employment  of the Grantee  for Cause,  and prior to the fifth
anniversary  of the  Effective  Date,  the Grantee  engages in any  Competitive
Activity  (as defined in the  Surviving  Shareholders  Agreement),  all Options
shall immediately terminate in full.

     5.  Shareholders  Agreements.  As a condition to the Grantee's  ability to
exercise any Option  pursuant to Section 6, the Grantee (if not already a party
to the Shareholders Agreement and the Surviving  Shareholders  Agreement) shall
have agreed to become  bound by the  provisions  thereof by  delivering  to the
Company an executed counterpart of Exhibit A to the Shareholders  Agreement and
the Surviving Shareholders Agreement.

     6. Exercise of Options.

     (a) None of the Options shall be exercisable  prior to the occurrence of a
Liquidity Event.  Each Option shall be exercised in the following  manner:  the
Grantee, or the person or persons having the right to exercise such Option upon
the death or  disability of the Grantee,  shall deliver to the Company  written
notice specifying the number of shares of Common Stock which the Grantee elects
to  purchase.  The Grantee (or such other  person) must either (i) include with
such  notice  full  payment of the  exercise  price for the Common  Stock being
purchased  pursuant  to such  notice or (ii)  provide  for a  broker-dealer  to
forward such full  payment to the Company,  in a manner and in a period of time
acceptable to the Company,  in a cashless  exercise  procedure.  Payment of the
exercise price must be made (i) in cash, (ii) by certified or cashier's  check,
(iii) if permitted  by the Company,  by delivery to the Company of Common Stock
previously  owned for at least six months and having a Fair Market  Value equal
to the aggregate  exercise price, or (iv) in a combination of cash,  check and,
if  permitted  by the  Company,  Common  Stock.  In lieu of the  payment of the
exercise  price as set forth in the  foregoing  sentence,  upon  request of the
Grantee (or such other person), the Company may, in its sole discretion,  allow
the Grantee to exercise such Option or a portion thereof by tendering shares of
Common  Stock  previously  owned for less  than six  months,  including  shares
received upon exercise of such Option.

     (b) Upon the  request of the  Grantee or the person or persons  having the
right to exercise an Option upon the death or  Disability  of the Grantee,  the
Company may, in its sole  discretion  and subject to financial  capability  (as
determined by the

                                      -2-

<PAGE>

Board),  in lieu of a normal issuance of shares upon exercise of such Option in
whole or in part,  pay the Grantee in cash,  Common Stock or a  combination  of
cash and Common Stock, as the Company shall  determine,  an amount equal to the
excess  of the Fair  Market  Value of a share  of  Common  Stock on the date of
exercise of such Option over the per share exercise price of such Option.

     (c) Full  payment of the exercise  price for a share  subject to an Option
and any applicable  federal and state withholding tax shall be made at the time
of exercise of such  Option.  No shares  shall be issued until full payment has
been made and the Grantee has complied  with his  obligations  under Section 5,
and the Grantee shall have none of the rights of a stockholder until shares are
issued to him.  The  Company may  authorize,  but shall have no  obligation  to
permit,  the payment of any applicable  federal or state withholding tax by the
tender of  shares  of  Common  Stock,  including  the  tender  of shares  which
otherwise would be issued to the Grantee upon exercise of the Option, provided,
however,  that any such  payment  by a director  or officer  subject to Section
16(b) of the Exchange Act shall be in compliance with Rule 16b-3.

     (d) If the Plan or any law,  regulation  or  interpretation  requires  the
Company to take any action regarding the Common Stock before the Company issues
certificates  for the Common  Stock  being  purchased,  the  Company  may delay
delivering the  certificates  for the Common Stock for the period  necessary to
take such action. The certificate or certificates representing the Common Stock
acquired  pursuant to an Option may bear a legend  restricting  the transfer of
such Common  Stock,  and the Company may impose stop transfer  instructions  to
implement such restrictions, if applicable. The Company may refuse to issue any
shares  of  Common  Stock  hereunder  if,  acting  in its sole  discretion,  it
determines that the issuance of such shares might violate any applicable law or
regulation. Without limiting the generality of the foregoing, no rights granted
hereunder shall be construed as an offer to sell securities of the Company, and
no such offer  shall be  outstanding,  unless and until the Company in its sole
discretion has determined that any such offer, if made,  would be in compliance
with all applicable  requirements of the U.S.  federal  securities laws and any
other laws to which such offer, if made, would be subject.

     (e) The Grantee  will not be deemed to be a holder of any shares  pursuant
to exercise of Options until the date of the issuance of a stock certificate to
him for such shares of Common Stock,  until the shares of Common Stock are paid
for in full and until the  Grantee  has  complied  with his  obligations  under
Section 5.

     7.  Representations.  (a) The Company  represents  and warrants  that this
Agreement has been authorized by all necessary  corporate action of the Company
and is a valid and binding  agreement  of the Company  enforceable  against the
Company in accordance with its terms.

                                      -3-

<PAGE>

     (b) The  Grantee  represents  and  warrants  that he is not a party to any
agreement  or  instrument  which  would  prevent  him  from  entering  into  or
performing his duties in any way under this Agreement.

     8.  Entire  Agreement.  This  Agreement  contains  all the  understandings
between the parties hereto  pertaining to the matters  referred to herein,  and
supersedes  all  undertakings  and  agreements,  whether  oral  or in  writing,
previously  entered into by them with respect thereto,  including the letter of
intent dated as of April 2, 1998 among the Issuer,  the Executive  Managers and
MSCP III. The Grantee represents that, in executing this Agreement, he does not
rely and has not relied  upon any  representation  or  statement  not set forth
herein made by the Company with regard to the subject  matter,  bases or effect
of this Agreement or otherwise.

     9. Amendment or Modification;  Waiver.  No provision of this Agreement may
be amended unless such  amendment is agreed to in writing,  signed (A) if prior
to the occurrence of a Liquidity  Event, by (i) any duly authorized  officer of
the Company,  (ii) Grantees  having in excess of 50% of the Options held by all
Grantees  employed by the Company or any of its  Subsidiaries at such time, and
(iii) for so long as any MSCP Fund is a stockholder  of the Company,  MSCP III;
provided  that  any  amendment  to any  outstanding  award  must be made to all
outstanding awards,  absent the written consent of the affected Grantee and (B)
thereafter,  by (i) the Grantee, (ii) a duly authorized officer of the Company,
and (iii) for so long as any MSCP Fund is a  stockholder  of the Company,  MSCP
III. No  provision  of this  Agreement  may be waived  unless such waiver is in
writing  and signed by the party  against  whom the waiver is to be  effective;
provided that for so long as any MSCP Fund is a stockholder of the Company, the
Company may not waive any provision of this Agreement without the prior written
consent  of MSCP III.  No waiver by any party  hereto or any  breach by another
party hereto of any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of a similar or dissimilar  condition
or provision at the same time, any prior time or any subsequent time.

     10.  Notices.  Any notice to be given  hereunder  shall be in writing  and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered  or certified  mail,  postage  prepaid,  return  receipt  requested,
addressed  to the party  concerned  at the address  indicated  below or to such
other  address as such  party may  subsequently  give  notice of  hereunder  in
writing:

              To Grantee at:
              The Grantee's residence address
              then on file with the Company's or its affiliates'

                                      -4-

<PAGE>

              Human Resources Department

              To the Company at:
              Vanguard Health Systems, Inc.
              20 Burton Hills Boulevard
              Suite 100
              Nashville, Tennessee  37215
              Attn: President

              With a copy to:
              Morgan Stanley Capital Partners III, L.P.
              1221 Avenue of the Americas
              New York, New York 10020
              Attn: General Counsel

     Any notice delivered  personally or by courier under this Section 10 shall
be deemed  given on the date  delivered  and any  notice  sent by  telecopy  or
registered or certified mail, postage prepaid, return receipt requested,  shall
be deemed given on the date telecopied or mailed.

     11. Severability. If any provision of this Agreement or the application of
any such  provision to any party or  circumstances  shall be  determined by any
court of competent  jurisdiction to be invalid and unenforceable to any extent,
the remainder of this  Agreement or the  application  of such provision to such
person or  circumstances  other than those to which it is so  determined  to be
invalid and  unenforceable,  shall not be affected thereby,  and each provision
hereof shall be validated and shall be enforced to the fullest extent permitted
by law.

     12. Transferability,  Third Party Beneficiaries. No Option (or any portion
thereof) is  transferable  by the Grantee  except (i) by law, by will or by the
laws of descent and  distribution or (ii) by gift or otherwise to a member of a
Grantee's immediate family and/or trusts whose beneficiaries are members of the
Grantee's immediate family.  Notwithstanding the foregoing, all transfers shall
be in  accordance  with the  provisions of the  Shareholders  Agreement and the
Surviving  Shareholders  Agreement.  Nothing in this  Agreement,  expressed  or
implied, is intended to confer on any entity other than the parties hereto, and
their respective personal or legal representatives,  executors, administrators,
heirs, distributees,  devisees,  legatees,  successors and assigns, any rights,
remedies,  obligations  or  liabilities  under or by reason of this  Agreement;
provided that the MSCP Entities shall be express third party  beneficiaries  of
this Agreement for so long as any of them are stockholders of the Company.

                                      -5-

<PAGE>

     13.  Survivorship.  The respective  rights and  obligations of the parties
hereunder  shall  survive  any  termination  of this  Agreement  to the  extent
necessary to the intended preservation of such rights and obligations.

     14.  Governing  Law. This  Agreement  will be governed by and construed in
accordance  with  the laws of the  State of New  York,  without  regard  to its
conflicts of laws principles.

     15. Headings.  All descriptive headings of sections and paragraphs in this
Agreement  are  intended  solely  for  convenience,  and no  provision  of this
Agreement  is to be  construed  by  reference  to the heading of any section or
paragraph.

     16.  Construction.  This  Agreement  is  made  under  and  subject  to the
provisions  of the  Plan,  and all of the  provisions  of the Plan  are  hereby
incorporated  herein as  provisions of this  Agreement.  If there is a conflict
between the  provisions of this  Agreement and the  provisions of the Plan, the
provisions  of the Plan will  govern.  By signing this  Agreement,  the Grantee
confirms that he has received a copy of the Plan and has had an  opportunity to
review the contents thereof.

     17. Counterparts.  This Agreement may be executed in counterparts, each of
which shall be deemed an original,  but all of which together shall  constitute
one and the same instrument.

                                      -6-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Charles N. Martin, Jr.
                                    -------------------------------------------
                                    Name: Charles N. Martin, Jr.

                                      -7-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ W. Lawrence Hough
                                    -------------------------------------------
                                    Name: W. Lawrence Hough

                                      -8-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Joseph D. Moore
                                    -------------------------------------------
                                    Name: Joseph D. Moore

                                      -9-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Phillip W. Roe
                                        ---------------------------------------

                                    Grantee:

                                     /s/ Ronald P. Soltman
                                    -------------------------------------------
                                    Name: Ronald P. Soltman

                                      -10-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Bruce Chafin
                                    -------------------------------------------
                                    Name: Bruce Chafin

                                      -11-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Robert E. Galloway
                                    -------------------------------------------
                                    Name: Robert E. Galloway

                                      -12-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ John M. Geer
                                    -------------------------------------------
                                    Name: John M. Geer

                                      -13-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ James Johnston
                                    -------------------------------------------
                                    Name: James Johnston

                                      -14-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Phillip W. Roe
                                    -------------------------------------------
                                    Name: Phillip W. Roe

                                      -15-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Dennis Jacobs
                                    -------------------------------------------
                                    Name: Dennis Jacobs

                                      -16-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Anne L. Sanford
                                    -------------------------------------------
                                    Name: Anne L. Sanford

                                      -17-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Tony W. Simpson
                                    -------------------------------------------
                                    Name: Tony W. Simpson

                                      -18-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ James H. Spalding
                                    -------------------------------------------
                                    Name: James H. Spalding

                                      -19-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Alan G. Thomas
                                    -------------------------------------------
                                    Name: Alan G. Thomas

                                      -20-

<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By:  /s/ Ronald P. Soltman
                                        ---------------------------------------
                                        Executive V.P.

                                    Grantee:

                                     /s/ Thomas M. Ways
                                    -------------------------------------------
                                    Name: Thomas M. Ways

                                      -21-EXHIBIT 10.8

                              EMPLOYMENT AGREEMENT

     AGREEMENT made as of June 1, 1998, by and between Vanguard Health Systems,
Inc., a Delaware corporation (the "Company"), and Charles N. Martin, Jr. (the
"Executive").

     WHEREAS, the Executive currently serves as Chairman of the Board,
President and Chief Executive Officer of the Company;

     WHEREAS, the Company desires to secure for itself the continuing services
of the Executive from and after the date hereof and the Executive desires to
render such services, in each case pursuant to the terms and conditions hereof;

     WHEREAS, the Company's Board of Directors (the "Board"; provided, that if
a Compensation Committee of the Board of Directors shall have been duly
appointed, the term "Board" as used herein shall mean either of such Committee
or the full Board of Directors) has approved and authorized the Company's entry
into this Agreement with the Executive; and

     WHEREAS, the parties desire to enter into this Agreement setting forth the
terms and conditions of the employment relationship of the Executive with the
Company.

     NOW, THEREFORE, the parties agree as follows:

     1. Employment. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, upon the terms and subject to the
conditions set forth herein.

     2. Term. This Agreement is for the three-year period (the "Term")
commencing on June 1, 1998 (the "Effective Date") and terminating on the third
anniversary of the Effective Date, or upon the Executive's earlier death,
disability or other termination of employment pursuant to Section 10; provided,
however, that at the end of each day during the Extension Period (as defined
below) the Term shall automatically be extended for one additional day; and
provided, further, that commencing on the fifth anniversary of the Effective
Date and on each anniversary thereafter the Term shall automatically be
extended for one additional year unless, not later than 90 days prior to any
such anniversary, either party hereto shall have notified the other party
hereto that such extension shall not take effect. For purposes of this Section
2, the "Extension Period" shall be the period beginning on the Effective Date
and ending on the earlier of (i) the Date of Termination (as defined below) and
(ii) the day preceding the second anniversary of the Effective Date.

<PAGE>

     3. Position. During the Term, the Executive shall serve as Chairman of the
Board, President and Chief Executive Officer of the Company or in such other
senior executive position in the Company as the Executive should approve.

     4. Duties and Reporting Relationship. During the Term, the Executive
shall, on a full time basis, use his skills and render services to the best of
his ability in supervising and conducting the operations of the Company.

     5. Place of Performance. The Executive shall perform his duties and
conduct his business at the principal executive offices of the Company, except
for required travel on the Company's business.

     6. Salary and Annual Bonus.

     (a) Base Salary. The Executive's base salary hereunder shall be $900,000
per year, payable semi-monthly. The Board shall review such base salary at
least annually and make such adjustment from time to time as it may deem
advisable, but the base salary shall not at any time be less than $900,000 per
year. Notwithstanding the foregoing, since the Company has no operations on
June 1, 1998 other than the operations of Maryvale Medical Center, a 213-bed
acute care hospital located in Phoenix, Arizona, until the first day of the
month subsequent to the day on which the Executive gives to the Company the
Salary Increase Notice (as hereinafter defined), the Executive voluntarily
agrees that the Executive's base salary shall be $450,000 per year. The term
"Salary Increase Notice" shall mean a notice sent by the Executive to the
Company requesting that the Executive's base salary be restored hereunder to
$900,000 per year.

     (b) Annual Bonus. The Board (or if there is a compensation committee of
the Board, the compensation committee) shall provide the Executive with an
annual bonus plan providing the Executive with an opportunity to earn annual
bonus compensation and shall cause the Company to pay to him any earned annual
bonus in addition to his base salary.

     7. Vacation, Holidays and Sick Leave. During the Term, the Executive shall
be entitled to paid vacation, paid holidays and sick leave in accordance with
the Company's standard policies for its senior executive officers.

     8. Business Expenses. The Executive will be reimbursed for all ordinary
and necessary business expenses incurred by him in connection with his
employment upon timely submission by the Executive of receipts and other
documentation as required by the Internal Revenue Code and in conformance with
the Company's normal procedures.

                                       2
<PAGE>

     9. Pension and Welfare Benefits. During the Term, the Executive shall be
eligible to participate fully in all health benefits, insurance programs,
pension and retirement plans and other employee benefit and compensation
arrangements available to senior officers of the Company generally.

     10. Termination of Employment.

     (a) General. The Executive's employment hereunder may be terminated
without any breach of this Agreement only under the following circumstances.

     (b) Death or Disability.

          (i) The Executive's employment hereunder shall automatically
     terminate upon the death of the Executive.

          (ii) If, as a result of the Executive's incapacity due to physical or
     mental illness, the Executive shall have been absent from his duties with
     the Company for any six (6) months (whether or not consecutive) during any
     twelve (12) month period, the Company may terminate the Executive's
     employment hereunder for any such incapacity (a "Disability").

     (c) Cause. The Company may terminate the Executive's employment hereunder
for Cause. For purposes of this Agreement, "Cause" shall mean (i) the willful
failure or refusal by the Executive to perform his duties hereunder (other than
any such failure resulting from the Executive'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 the Executive by the
Company, which demand identifies the manner in which the Company believes that
the Executive has not performed such duties, (ii) the willful engaging by the
Executive in misconduct which is materially injurious to the Company,
monetarily or otherwise (including, but not limited to, conduct described in
Section 14) or (iii) the conviction of the Executive of, or the entering of a
plea of nolo contendere by the Executive with respect to, a felony.
Notwithstanding the foregoing, the Executive's employment hereunder shall not
be deemed to have been terminated for Cause unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Board at a meeting of the Board (after written notice to the Executive and a
reasonable opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board the Executive should be terminated for Cause.

                                       3
<PAGE>

     (d) Termination by the Executive. The Executive shall be entitled to
terminate his employment hereunder (A) for Good Reason or (B) for any other
reason. For purposes of this Agreement, "Good Reason" shall mean, (i) without
the Executive's express written consent, any failure by the Company to comply
with any material provision of this Agreement, which failure has not been cured
within ten (10) days after notice of such noncompliance has been given by the
Executive to the Company or (ii) the occurrence (without the Executive's
express written consent), following a Change in Control during the term of this
Agreement, of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described
below, such act or failure to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect thereof:

          (i) any change in the Executive's title, authorities,
     responsibilities (including reporting responsibilities) which, in the
     Executive's reasonable judgment, represents an adverse change from his
     status, title, position or responsibilities (including reporting
     responsibilities) which were in effect immediately prior to the Change in
     Control or from his status, title, position or responsibilities (including
     reporting responsibilities) which were in effect following a Change in
     Control pursuant to the Executive's consent to accept any such change; the
     assignment to him of any duties or work responsibilities which, in his
     reasonable judgment, are inconsistent with such status, title, position or
     work responsibilities; or any removal of the Executive from, or failure to
     reappoint or reelect him to any of such positions, except if any such
     changes are because of Disability, retirement, death or Cause;

          (ii) a reduction by the Company in the Executive's annual base salary
     as in effect on the date hereof or as the same may be increased from time
     to time except for across-the-board salary reductions similarly affecting
     all senior executives of the Company and all senior executives of any
     Person (as defined in Section 10(h)(i) below) in control of the Company;
     provided in no event shall any such reduction reduce the Executive's base
     salary below $900,000;

          (iii) the relocation of the Executive's office at which he is to
     perform his duties, to a location more than thirty (30) miles from the
     location at which the Executive performed his duties prior to the Change
     in Control, except for required travel on the Company's business to an
     extent substantially consistent with his business travel obligations prior
     to the Change in Control;

                                       4
<PAGE>

          (iv) if the Executive had been based at the Company's principal
     executive offices immediately prior to the Change in Control, the
     relocation of the Company's principal executive offices to a location more
     than 30 miles from the location of such offices immediately prior to the
     Change in Control;

          (v) the failure by the Company, without the Executive's consent, to
     pay to the Executive any portion of the Executive's current compensation,
     or to pay to the Executive any portion of an installment of deferred
     compensation under any deferred compensation program of the Company,
     within seven (7) days of the date such compensation is due;

          (vi) the failure by the Company to continue in effect any stock-
     based and/or cash annual or long-term incentive compensation plan in which
     the Executive participates immediately prior to the Change in Control,
     unless the Executive participates after the Change in Control in other
     comparable plans generally available to senior executives of the Company
     and senior executives of any Person in control of the Company;

          (vii) the failure by the Company to continue to provide the Executive
     with benefits substantially similar in value to the Executive in the
     aggregate to those enjoyed by the Executive under any of the Company's
     pension, life insurance, medical, health and accident, or disability plans
     in which the Executive was participating immediately prior to the Change
     in Control, unless the Executive participates after the Change in Control
     in other comparable benefit plans generally available to senior executives
     of the Company and senior executives of any Person in control of the
     Company;

          (viii) the adverse and substantial alteration of the nature and
     quality of the office space within which the Executive performed his
     duties prior to a Change in Control as well as in the secretarial and
     administrative support provided to the Executive, provided, however, that
     a reasonable alteration of the secretarial or administrative support
     provided to the Executive as a result of reasonable measures implemented
     by the Company to effectuate a cost-reduction or consolidation program
     shall not constitute Good Reason hereunder; or

          (ix) any purported termination of the Executive's employment which is
     not effected pursuant to a Notice of Termination satisfying the
     requirements of Section 10(f) below; for purposes of this Agreement, no
     such purported termination shall be effective.

                                       5
<PAGE>

The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder.

     (e) Voluntary Resignation. Should the Executive wish to resign from his
position with the Company or terminate his employment for other than Good
Reason during the Term, the Executive shall give sixty (60) days written notice
to the Company, setting forth the reasons and specifying the date as of which
his resignation is to become effective.

     (f) Notice of Termination. Any purported termination of the Executive's
employment by the Company or by the Executive shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 18.
"Notice of Termination" shall mean a notice that shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.

     (g) Date of Termination. "Date of Termination" shall mean (i) if the
Executive's employment is terminated because of death, the date of the
Executive's death, (ii) if the Executive's employment is terminated for
Disability, the date Notice of Termination is given, or (iii) if the
Executive's employment is terminated pursuant to Subsection (c), (d) or (e)
hereof or for any other reason (other than death or Disability), the date
specified in the Notice of Termination (which, in the case of a termination for
Good Reason shall not be less than fifteen (15) nor more than sixty (60) days
from the date such Notice of Termination is given, and in the case of a
termination for any other reason shall not be less than thirty (30) days (sixty
(60) days in the case of a termination under Subsection (e) hereof) from the
date such Notice of Termination is given); provided, that in the case of a
termination for Cause, nothing herein shall prevent the Company from
immediately terminating the Executive's employment, so long as the Company
continues to meet all of its responsibilities hereunder with respect to payment
of salary, benefits and other obligations during the minimum notice period
described in this Subsection (g) (and for purposes of measuring such
obligations, the Date of Termination shall be deemed to be the end of such
minimum notice period).

     (h) Change in Control. For purposes of this Agreement, a Change in Control
of the Company shall have occurred if

          (i) any "Person" (as defined in Section 3(a)(9) of the Securities
     Exchange Act of 1934 (the "Exchange Act") as modified and used in Sections
     13(d) and 14(d) of the Exchange Act (other than (1) the Company

                                       6
<PAGE>

     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 owned, directly or
     indirectly, by the stockholders of the Company in substantially the same
     proportions as their ownership of the Company's common stock, or (5) any
     Person that is a stockholder of the Company on the date hereof)), is or
     becomes the "beneficial owner" (as defined in Rule 13d-3 under the
     Exchange Act), directly or indirectly, of securities of the Company
     representing more than 50% of the combined voting power of the Company's
     then outstanding voting securities;

          (ii) during any period of not more than two consecutive years, not
     including any period prior to the date of this Agreement, individuals who
     at the beginning of such period constitute the Board, and any new director
     (other than a director designated by a person who has entered into an
     agreement with the Company to effect a transaction described in clause
     (i), (iii), or (iv) of this Section 10(h)) whose election by the Board or
     nomination for election by the Company's stockholders was approved by a
     vote of at least two-thirds (2/3) of the directors then still in office
     who either were directors at the beginning of the period or whose election
     or nomination for election was previously so approved, cease for any
     reason to constitute at least a majority thereof;

          (iii) the stockholders of the Company approve a merger or
     consolidation of the Company with any other corporation, other than both
     (A)(1) a merger or consolidation which would result in the voting
     securities of the Company outstanding immediately prior thereto continuing
     to represent (either by remaining outstanding or by being converted into
     voting securities of the surviving or parent entity) 50% or more of the
     combined voting power of the voting securities of the Company or such
     surviving or parent entity outstanding immediately after such merger or
     consolidation or (2) a merger or consolidation in which no person acquires
     50% or more of the combined voting power of the Company's then outstanding
     securities; and (B) immediately after the consummation of such merger or
     consolidation described in clause (A)(1) or (A)(2) above (and for at least
     180 days thereafter) neither the Company's Chief Operating Officer nor its
     Chief Financial Officer change from the people occupying such positions
     immediately prior to such merger or consolidation except as a result of
     their death or Disability and neither of such officers shall have changed
     prior to such merger or consolidation at the direction of a Person who has
     entered into an

                                       7
<PAGE>

     agreement with the Company the consummation of which will constitute a
     Change in Control of the Company; or

          (iv) the stockholders of the Company approve a plan of complete
     liquidation of the Company or an agreement for the sale or disposition by
     the Company of all or substantially all of the Company's assets (or any
     transaction having a similar effect).

     (i) Resignation as Member of Board. If the Executive's employment by the
Company is terminated for any reason, the Executive hereby agrees that he shall
simultaneously submit his resignation as a member of the Board in writing on or
before the Date of Termination if the Executive is a member of the Board at
such time. If the Executive fails to submit such required resignation in
writing, the provisions of this Subsection 10(i) may be deemed by the Company
to constitute the Executive's written resignation as a member of the Board
effective as of the Date of Termination.

     11. Compensation During Disability, Death or Upon Termination.

     (a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), the Executive shall continue to receive his full salary
at the rate then in effect for such period until his employment is terminated
pursuant to Section 10(b)(ii) hereof, provided that payments so made to the
Executive during the Disability Period shall be reduced by the sum of the
amounts, if any, payable to the Executive with respect to such period under
disability benefit plans of the Company or under the Social Security disability
insurance program, and which amounts were not previously applied to reduce any
such payment.

     (b) If the Executive's employment is terminated by his death or
Disability, the Company shall pay (i) any amounts due to the Executive under
Section 6 through the date of such termination and (ii) all such amounts that
would have become due to the Executive under Section 6 had the Executive's
employment hereunder continued until the last day of the calendar year in which
such termination of employment occurred, in each case in accordance with
Section 13(b), if applicable.

     (c) If the Executive's employment shall be terminated by the Company for
Cause or by the Executive for other than Good Reason, the Company shall pay the
Executive his full salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, and the Company shall have no
further obligations to the Executive under this Agreement.

                                       8
<PAGE>

     (d) If (A) following a Change in Control the Company shall terminate the
Executive's employment in breach of this Agreement, or (B) following a Change
in Control the Executive shall terminate his employment for Good Reason, then

          (i) the Company shall pay the Executive (x) his full salary through
     the Date of Termination at the rate in effect at the time Notice of
     Termination is given, (y) a pro rata portion of his current year annual
     bonus pursuant to Section 6(b) and (z) all other unpaid amounts, if any,
     to which the Executive is entitled as of the Date of Termination under any
     compensation plan or program of the Company, at the time such payments are
     due;

          (ii) in lieu of any further salary payments to the Executive for
     periods subsequent to the Date of Termination, the Company shall pay as
     liquidated damages to the Executive an aggregate amount equal to the
     product of (A) the sum of (1) the Executive's annual salary rate in effect
     as of the Date of Termination and (2) the average of the annual bonuses
     actually paid to the Executive by the Company with respect to the two
     fiscal years which immediately precede the year of the Term in which the
     Date of Termination occurs; provided if there was a bonus or bonuses paid
     to the Executive with respect only to one fiscal year which immediately
     precedes the year of the Term in which the Date of Termination occurs,
     then such single year's bonus or bonuses shall be utilized in the
     calculation pursuant to this clause (2) and (B) the number three (3);

          (iii) the Company shall (x) continue coverage for the Executive under
     the Company's life insurance, medical, health, disability and similar
     welfare benefit plans (or, if continued coverage is barred under such
     plans, the Company shall provide to the Executive substantially similar
     benefits) for a period equal to the greater of (A) the remainder of the
     Term and (B) 18 months, and (y) provide the benefits which the Executive
     would have been entitled to receive pursuant to any supplemental
     retirement plan maintained by the Company had his employment continued at
     the rate of compensation specified herein for a period equal to the
     greater of (A) the remainder of the Term and (B) 18 months. Benefits
     otherwise receivable by the Executive pursuant to clause (x) of this
     Subsection 11(d)(iii) shall be reduced to the extent comparable benefits
     are actually received by the Executive from a subsequent employer during
     the period during which the Company is required to provide such benefits,
     and the Executive shall report any such benefits actually received by him
     to the Company; and

                                       9
<PAGE>

          (iv) the payments provided for in this Section 11(d) (other than
     Section 11(d)(iii)) shall be made not later than the fifth day following
     the Date of Termination, provided, however, that if the amounts of such
     payments, and the limitation on such payments set forth in Section 15
     hereof, cannot be finally determined on or before such day, the Company
     shall pay to the Executive on such day an estimate, as determined in good
     faith by the Company, of the minimum amount of such payments to which the
     Executive is clearly entitled and shall pay the remainder of such payments
     (together with interest at the rate provided in section 1274(b)(2)(B) of
     the Code (as defined in Section 15)) as soon as the amount thereof can be
     determined but in no event later than the thirtieth (30th) day after the
     Date of Termination. In the event that the amount of the estimated
     payments exceeds the amount determined by the Company within six (6)
     months after payment to have been due, such excess shall constitute a loan
     by the Company to the Executive, payable no later than the thirtieth
     (30th) business day after demand by the Company (together with interest at
     the rate provided in section 1274(b)(2)(B) of the Code). At the time that
     payments are made under this Section 11(d), the Company shall provide the
     Executive with a written statement setting forth the manner in which such
     payments were calculated and the basis for such calculations including,
     without limitation, any opinions or other advice the Company has received
     from outside counsel, auditors or consultants (and any such opinions or
     advice which are in writing shall be attached to the statement).

     (e) If (A) prior to any Change in Control the Company shall terminate the
Executive's employment in breach of this Agreement or (B) prior to any Change
in Control the Executive shall terminate his employment for Good Reason, then

          (i) the Company shall pay the Executive (x) his full salary through
     the Date of Termination at the rate in effect at the time Notice of
     Termination is given, (y) a pro rata portion of his current year annual
     bonus pursuant to Section 6(b) and (z) any all other unpaid amounts, if
     any, to which the Executive is entitled as of the Date of Termination
     under any compensation plan or program of the Company, at the time such
     payments are due;

          (ii) in lieu of any further salary payments to the Executive for
     periods subsequent to the Date of Termination, the Company shall pay as
     liquidated damages to the Executive an aggregate amount equal to the
     product of (A) the sum of (1) the Executive's annual salary rate in effect
     as of the Date of Termination and (2) the average of the annual bonuses

                                       10
<PAGE>

     actually paid to the Executive by the Company with respect to the two
     fiscal years which immediately precede the year of the Term in which the
     Date of Termination occurs; provided if there was a bonus or bonuses paid
     to the Executive with respect only to one fiscal year which immediately
     precedes the year of the Term in which the Date of Termination occurs,
     then such single year's bonus or bonuses shall be utilized in the
     calculation pursuant to this clause (2) and (B) the lesser of (x) the
     number three (3) and (y) the greater of (aa) the number of years
     (including partial years) remaining in the Term and (bb) the number two
     (2); such amount to be paid in substantially equal monthly installments
     during the period commencing with the month immediately following the
     month in which the Date of Termination occurs and ending with the month
     corresponding to the end of the Term hereunder; and

          (iii) the Company shall, at its cost (provided that Executive shall
     continue to be responsible to pay the standard employee portion of such
     cost), (x) continue coverage for the Executive under the Company's life
     insurance, medical, health, disability and similar welfare benefit plans
     (or, if continued coverage is barred under such plans, the Company shall
     provide to the Executive substantially similar benefits) for a period
     equal to the greater of (A) the remainder of the Term and (B) 18 months,
     and (y) provide the benefits which the Executive would have been entitled
     to receive pursuant to any supplemental retirement plan maintained by the
     Company had his employment continued at the rate of compensation specified
     herein for a period equal to the greater of (A) the remainder of the Term
     and (B) 18 months. Benefits otherwise receivable by the Executive pursuant
     to clause (x) of this Subsection 11(e)(iii) shall be reduced to the extent
     comparable benefits are actually received by the Executive from a
     subsequent employer during the period during which the Company is required
     to provide such benefits, and the Executive shall report any such benefits
     actually received by him to the Company.

     (f) The Executive shall not be required to mitigate the amount of any
payment provided for in this Section 11 by seeking other employment or
otherwise, and, except as provided in Sections 11(d) and 11(e) hereof, the
amount of any payment or benefit provided for in this Section 11 shall (i) not
be reduced by any compensation earned by the Executive as the result of
employment by another employer or by retirement benefits and (ii) be the sole
amount due to the Executive from the Company upon such termination of
employment, the Executive hereby waiving any claim for other compensation or
related damages (whether consequential, punitive or other) as a result of such
termination.

                                       11
<PAGE>

     12. Representations.

     (a) The Company represents and warrants that this Agreement has been
authorized by all necessary corporate action of the Company and is a valid and
binding agreement of the Company enforceable against it in accordance with its
terms.

     (b) The Executive represents and warrants that he is not a party to any
agreement or instrument which would prevent him from entering into or
performing his duties in any way under this Agreement.

     13. Successors; Binding Agreement.

     (a) The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.

     (b) This Agreement is a personal contract and the rights and interests of
the Executive hereunder may not be sold, transferred, assigned, pledged,
encumbered, or hypothecated by him, except as otherwise expressly permitted by
the provisions of this Agreement. This Agreement shall inure to the benefit of
and be enforceable by the Executive and his personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If the Executive should die while any amount would still be payable
to him hereunder had the Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to his devisee, legatee or other designee or, if there is no such
designee, to his estate.

     14. Confidentiality and Non-Competition Covenants.

     (a) The Executive covenants and agrees that he will not at any time during
and after the end of the Term, directly or indirectly, use for his own account,
or disclose to any person, firm or corporation, other than authorized officers,
directors and employees of the Company or its subsidiaries, Confidential
Information (as hereinafter defined) of the Company. As used herein,
"Confidential Information" of the Company means information of any kind, nature
or description which is disclosed to or otherwise known to the Executive as a
direct or indirect consequence of his association with the Company, which
information is not generally known to the public or in the businesses in which
the Company is engaged or which information relates to specific investment
opportunities within the scope of the Company's business which were considered

                                       12
<PAGE>

by the Executive or the Company during the term of this Agreement. During the
Term and for a period of two years following the termination of the Executive's
employment, the Executive shall not induce any employee of the Company or its
subsidiaries to terminate his or her employment by the Company or its
subsidiaries in order to obtain employment by any person, firm or corporation
affiliated with the Executive.

     (b) The Executive covenants and agrees that during the Term and for a
period of two (2) years following the termination of the Executive's
employment, the Executive shall not, directly or indirectly, own any interest
in, operate, join, control, or participate as a partner, director, principal,
officer, or agent of, enter into the employment of, act as a consultant to, or
perform any services for any entity which is a hospital system or is in the
hospital or hospital management business. Notwithstanding anything herein to
the contrary, (1) the foregoing provisions of this Section 14(b) shall not
prevent the Executive from (x) acquiring securities representing not more than
5% of the outstanding voting securities of any publicly held corporation or (y)
working as an accountant or an attorney for a law or accounting firm and (2)
the foregoing provisions of this Section 14(b) shall not be applicable to a
termination of the Executive's employment (i) by the Company or (ii) by the
Executive for Good Reason.

     15. Prohibition on Parachute Payments.

     (a) Notwithstanding any other provisions of this Agreement (except the
provisions of Section 15(c)) below, in the event that any payment or benefit
received or to be received by the Executive in connection with a Change in
Control of the Company or the termination of the Executive's employment
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person) (all such
payments and benefits, including, without limitation, base salary and bonus
payments, being hereinafter called "Total Payments") would not be deductible
(in whole or in part), by the Company, an affiliate or any Person making such
payment or providing such benefit as a result of section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then, to the extent necessary to
make such portion of the Total Payments deductible (and after taking into
account any reduction in the Total Payments provided by reason of section 280G
of the Code in such other plan, arrangement or agreement), (A) the cash portion
of the Total Payments shall first be reduced (if necessary, to zero), and (B)
all other non-cash payments by the Company to the Executive shall next be
reduced (if necessary, to zero). For purposes of this limitation (i) no portion
of the Total Payments the receipt or enjoyment of which the Executive shall
have effectively waived in writing prior to the Date of Termination shall be
taken into account, (ii)

                                       13
<PAGE>

no portion of the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive does not constitute a "parachute
payment" within the meaning of section 280G(b)(2) of the Code, including by
reason of section 280G(b)(4)(A) of the Code, (iii) such payments shall be
reduced only to the extent necessary so that the Total Payments (other than
those referred to in clauses (i) or (ii)) in their entirety constitute
reasonable compensation for services actually rendered within the meaning of
section 280G(b)(4)(B) of the Code or are otherwise not subject to disallowance
as deductions, in the opinion of the tax counsel referred to in clause (ii);
and (iv) the value of any non-cash benefit or any deferred payment or benefit
included in the Total Payments shall be determined by the Company's independent
auditors in accordance with the principles of sections 280G(d)(3) and (4) of
the Code.

     (b) If it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding that, notwithstanding the good faith of
the Executive and the Company in applying the terms of this Section 15, the
aggregate "parachute payments" paid to or for the Executive's benefit are in an
amount that would result in any portion of such "parachute payments" not being
deductible by reason of section 280G of the Code, then the Executive shall have
an obligation to pay the Company upon demand an amount equal to the sum of (i)
the excess of the aggregate "parachute payments" paid to or for the Executive's
benefit over the aggregate "parachute payments" that could have been paid to or
for the Executive's benefit without any portion of such "parachute payments"
not being deductible by reason of section 280G of the Code; and (ii) interest
on the amount set forth in clause (i) of this sentence at the rate provided in
section 1274(b)(2)(B) of the Code from the date of the Executive's receipt of
such excess until the date of such payment.

     (c) The provisions of Sections 15(a) and 15(b) shall be effective and
shall be applied only on and after June 1, 2000. Prior to June 1, 2000, the
provisions of Sections 15(a) and 15(b) shall be of no force or effect.

     16. Entire Agreement. This Agreement contains all the understandings
between the parties hereto pertaining to the matters referred to herein, and on
the Effective Date shall supersede all undertakings and agreements, whether
oral or in writing, previously entered into by them with respect thereto. The
Executive represents that, in executing this Agreement, he does not rely and
has not relied upon any representation or statement not set forth herein made
by the Company with regard to the subject matter, bases or effect of this
Agreement or otherwise.

     17. Amendment or Modification, Waiver. No provision of this Agreement may
be amended or waived unless such amendment or waiver is

                                       14
<PAGE>

agreed to in writing, signed by the Executive and by a duly authorized officer
of the Company. No waiver by any party hereto of any breach by another party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of a similar or dissimilar condition or
provision at the same time, any prior time or any subsequent time.

     18. Notices. Any notice to be given hereunder shall be in writing and
shall be deemed given when delivered personally, sent by courier or telecopy or
registered or certified mail, postage prepaid, return receipt requested,
addressed to the party concerned at the address indicated below or to such
other address as such party may subsequently give notice of hereunder in
writing:

     To Executive at:             Charles N. Martin, Jr.
                                  20 Burton Hills Blvd.
                                  Suite 100
                                  Nashville, Tennessee  37215

     To the Company at:           Vanguard Health Systems, Inc.
                                  20 Burton Hills Blvd.
                                  Suite 100
                                  Nashville, TN 37215
                                  Attention: General Counsel
                                  Telecopy: (615) 665-6197

                                  with a copy to:

                                  Morgan Stanley Capital Partners III, Inc.
                                  1221 Avenue of the Americas
                                  New York, NY 10017
                                  Attention: General Counsel
                                  Telecopy: (212) 762-7951

     Any notice delivered personally or by courier under this Section 18 shall
be deemed given on the date delivered and any notice sent by telecopy or
registered or certified mail, postage prepaid, return receipt requested, shall
be deemed given on the date telecopied or mailed.

     19. Severability. If any provision of this Agreement or the application of
any such provision to any party or circumstances shall be determined by any
court of competent jurisdiction to be invalid and unenforceable to any extent,
the remainder of this Agreement or the application of such provision to such
person or circumstances other than those to which it is so determined to be
invalid and

                                       15
<PAGE>

unenforceable, shall not be affected thereby, and each provision hereof shall
be validated and shall be enforced to the fullest extent permitted by law.

     20. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.

     21. Governing Law; Attorney's Fees.

     (a) This Agreement shall be governed by and construed in accordance with
the laws of the State of Tennessee, without regard to its conflicts of laws
principles.

     (b) The prevailing party in any dispute arising out of this Agreement
shall be entitled to be paid its reasonable attorney's fees incurred in
connection with such dispute from the other party to such dispute.

     22. Headings. All descriptive headings of sections and paragraphs in this
Agreement are intended solely for convenience, and no provision of this
Agreement is to be construed by reference to the heading of any section or
paragraph.

     23. Withholdings. All payments to the Executive under this Agreement shall
be reduced by all applicable withholding required by federal, state or local
tax laws.

     24. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

                                       16
<PAGE>

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

                                    VANGUARD HEALTH SYSTEMS, INC.

                                    By: /s/ Ronald P. Soltman
                                       ---------------------------
                                       Ronald P. Soltman
                                       Executive Vice President

                                    THE EXECUTIVE

                                     /s/ Charles N. Martin, Jr.
                                    ------------------------------
                                    Charles N. Martin, Jr.

                                       17
<PAGE>

                                AMENDMENT NO. 1
                                       TO
                              EMPLOYMENT AGREEMENT

     This Amendment No. 1 ( this "Amendment') dated as of May 31, 2001, is made
by and between Vanguard Health Systems, Inc., a Delaware corporation (the
"Company"), and Charles N. Martin, Jr. (the "Executive").

     WHEREAS, the Company and the Executive executed a certain Employment
Agreement (the "EA") dated as of June 1, 1998, to secure the services of the
Executive as its Chairman of the Board, President and Chief Executive Officer;
and

     WHEREAS, the Company and the Executive wish the Executive to relinquish
his position as President, but retain his other current positions with the
Company.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree that the EA is
amended as follows:

     1. Defined Terms. Except for those terms defined above, the definitions of
     capitalized terms used in this Amendment are as provided in the EA.

     2. Amendment to Section 3. Section 3 of the EA entitled "Position" is
     hereby deleted and replaced with the following new Section 3:

          " 3. Position. During the Term, the Executive shall serve as Chairman
          of the Board and Chief Executive Officer of the Company or in such
          other senior executive position in the Company as the Executive
          should approve."

     3. Ratification. All other provisions of the EA remain unchanged and are
     hereby ratified by the Company and the Executive.

     IN WITNESS WHEREOF, the Company has caused this Amendment to be executed
by its duly authorized officer and the Executive has executed this Amendment,
each as of the day and year first set forth above.

                                            VANGUARD HEALTH SYSTEMS, INC.

                                            By: /s/ Ronald P. Soltman
                                               ----------------------------
                                               Ronald P. Soltman
                                               Executive Vice President

                                            EXECUTIVE

                                            By: /s/ Charles N. Martin, Jr.
                                               ----------------------------
                                               Charles N. Martin, Jr.

                                       18

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