Document:

Ex-10.16

 

Exhibit 10.16

FORM OF

STOCK OPTION AGREEMENT

     THIS AGREEMENT, dated as of                , 2008 (the “Grant Date”) is made by and between HCA
Inc., a Delaware corporation (hereinafter referred to as the “Company”), and the individual
whose name is set forth on the signature page hereof, who is an employee of the Company or a
Subsidiary or Affiliate of the Company, hereinafter referred to as the “Optionee”. Any
capitalized terms herein not otherwise defined in Article I shall have the meaning set forth in the
2006 Stock Incentive Plan for Key Employees of HCA Inc. and its Affiliates (the “Plan”).

     WHEREAS, the Company wishes to carry out the Plan, the terms of which are hereby incorporated
by reference and made a part of this Agreement; and

     WHEREAS, the Compensation Committee of the Board of Directors of the Company (or, if no such
committee is appointed, the Board of Directors of the Company) (the “Committee”) has
determined that it would be to the advantage and best interest of the Company and its shareholders
to grant the Option provided for herein to the Optionee as an incentive for increased efforts
during his term of office with the Company or its Subsidiaries or Affiliates, and has advised the
Company thereof and instructed the undersigned officers to issue said Option;

     NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and
valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree
as follows:

ARTICLE I

DEFINITIONS

     Whenever the following terms are used in this Agreement, they shall have the meaning specified
below unless the context clearly indicates to the contrary.

Section 1.1.
Base Price

     “Base Price” shall mean $51.00.

Section 1.2.
Cause

     “Cause” shall mean “Cause” as such term may be defined in any employment agreement or
change-in-control agreement in effect at the time of termination of employment between the Optionee
and the Company or any of its Subsidiaries or Affiliates, or, if there is no such employment or
change-in-control agreement, “Cause” shall mean (i) willful and continued failure by Optionee
(other than by reason of a Permanent Disability) to perform his or her material duties with respect
to the Company or it Subsidiaries which continues beyond ten (10) business days after a written
demand for substantial performance is delivered to Optionee by the Company (the

 

 

“Cure Period”); (ii) willful or intentional engaging by Optionee in material
misconduct that causes material and demonstrable injury, monetarily or otherwise, to the Company,
the Investors or their respective Affiliates; (iii) conviction of, or a plea of nolo contendere to,
a crime constituting (x) a felony under the laws of the United States or any state thereof or (y) a
misdemeanor for which a sentence of more than six months’ imprisonment is imposed; or (iv) willful
and material breach of the Management Stockholder’s Agreement or related agreements, or Optionee’s
engaging in any action in breach of restrictive covenants made by Optionee under the Management
Stockholder’s Agreement or any employment or change-in-control agreement between the Optionee and
the Company or any of its Subsidiaries, which continues beyond the Cure Period (to the extent that,
in the Board’s reasonable judgment, such breach can be cured).

Section 1.3. Closing Date

     “Closing Date” shall have the same meaning as that term is defined in the Merger Agreement.

Section 1.4. EBITDA Performance Option

     “EBITDA Performance Option” shall mean the right and option to purchase, on the terms and
conditions set forth herein, all or any part of an aggregate of the number of shares of Common
Stock set forth on the signature page hereof opposite the term EBITDA Performance Option.

Section 1.5. Fiscal Year

     “Fiscal Year” shall mean each of the 2008, 2009, 2010, and 2011 fiscal years of the Company
(which, for the avoidance of doubt, ends on December 31 of any given calendar year).

Section 1.6. Good Reason

     “Good Reason” shall mean “Good Reason” as such term may be defined in any employment agreement
or change-in-control agreement in effect at the time of termination of employment between the
Optionee and the Company or any of its Subsidiaries or Affiliates, or, if there is no such
employment or change-in-control agreement, “Good Reason” shall mean (i) (A) a reduction in
Optionee’s base salary (other than a general reduction in base salary that affects all similarly
situated employees (defined as all employees within the same Company pay grade as that of Optionee)
in substantially the same proportions that the Board implements in good faith after consultation
with the Chief Executive Officer (“CEO”) and Chief Operating Officer of the Company); (B) a
reduction in Optionee’s annual incentive compensation opportunity; or (C) the reduction of benefits
payable to Optionee under the Company’s Supplemental Executive Retirement Plan (if Optionee is a
participant in such plan), in each case other than any isolated, insubstantial and inadvertent
failure by the Company that is not in bad faith and is cured within ten (10) business days after
Optionee gives the Company written notice of such event; provided that the events described
in (i)(A) or (i)(B) above will not

 

 

be deemed to give rise to Good Reason if employment is terminated, but Optionee declines an offer
of employment involving a loss of compensation of less than 15% from a purchaser, transferee,
outsourced vendor, new operating entity or affiliated employer; (ii) a substantial diminution in
Optionee’s title, duties and responsibilities, other than any isolated, insubstantial and
inadvertent failure by the Company that is not in bad faith and is cured within ten (10) business
days after Optionee gives the Company written notice of such event; or (iii) a transfer of
Optionee’s primary workplace to a location that is more than twenty (20) miles from his or her
workplace as of the date of this Agreement; provided that Good Reason shall not be deemed
to occur merely because Optionee’s willful decision to change position or status within the Company
or any of its Subsidiaries causes one or more of the occurrences described in (i), (ii), or (iii)
to come about.

Section 1.7. Investor Return

     “Investor Return” shall mean, on any date, as determined on a fully diluted, per Share basis,
all cash proceeds actually received by the Investors after the Closing Date in respect of their
shares of Common Stock, including the receipt of any cash dividends or other cash distributions
thereon. The Fair Market Value of any shares of Common Stock distributed by the Investors to their
limited partners shall be deemed to be “cash proceeds” for purposes of this definition.

Section 1.8. Management Stockholder’s Agreement

     “Management Stockholder’s Agreement” shall mean that certain Management Stockholder’s
Agreement between the Optionee and the Company.

Section 1.9. Option

     “Option” shall mean the aggregate of the Time Option, the EBITDA Performance Option, and the
Return Performance Option granted under Section 2.1 of this Agreement.

Section 1.10. Merger Agreement

     “Merger Agreement” shall mean the Agreement and Plan of Merger by and Among HCA Inc., Hercules
Holdings II, LLC, and Hercules Acquisition Corporation, dated July 24, 2006.

Section 1.11 Permanent Disability

     “Permanent Disability” shall mean “Disability” as such term is defined in any employment
agreement between Optionee and the Company or any of its Subsidiaries, or, if there is no such
employment agreement, “Disability” as defined in the long-term disability plan of the Company.

 

 

Section 1.12 Retirement

     “Retirement” shall mean Optionee’s resignation (other than for Good Reason) from service with
the Company and its Service Recipients (i) after attaining 65 years of age or (ii) after attaining
60 years of age and completing thirty-six (36) months of service with the Company or any Service
Recipients following the Closing Date.

Section 1.13 Return Performance Option

     “Return Performance Option” shall mean the option to purchase, on the terms and conditions set
forth herein, all or any part of an aggregate of the number of shares of Common Stock set forth on
the signature page hereof opposite the term Return Performance Option.

Section 1.14
Secretary

     “Secretary” shall mean the Secretary of the Company.

Section 1.15
Time Option

     “Time Option” shall mean the right and option to purchase, on the terms and conditions set
forth herein, all or any part of an aggregate of the number of shares of Common Stock set forth on
the signature page hereof opposite the term Time Option.

ARTICLE II

GRANT OF OPTIONS

Section 2.1. Grant of Options

     For good and valuable consideration, on and as of the date hereof the Company irrevocably
grants to the Optionee the following Stock Options: (a) the Time Option, (b) the EBITDA
Performance Option, and (c) the Return Performance Option, in each case on the terms and conditions
set forth in this Agreement.

Section 2.2. Exercise Price

     Subject to Section 2.4, the exercise price of the shares of Common Stock covered by the Option
(the “Exercise Price”) shall be as set forth on the signature page hereof.

Section 2.3. No Guarantee of Employment

     Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue
in the employ of the Company or any Subsidiary or Affiliate or shall interfere with or restrict in
any way the rights of the Company and its Subsidiaries or Affiliates, which are hereby expressly
reserved, to terminate the employment of the Optionee at any time for any reason whatsoever, with
or without cause, subject to the

 

 

applicable provisions of, if any, the Optionee’s employment agreement with the Company or
offer letter provided by the Company to the Optionee.

Section 2.4. Adjustments to Option

     The Option shall be subject to the adjustment provisions of Sections 8 and 9 of the Plan,
provided, however, that in the event of the payment of an extraordinary dividend by
the Company to its stockholders, then; first, the Exercise Prices of the Option shall be
reduced by the amount of the dividend paid, but only to the extent the Committee determines it to
be permitted under applicable tax laws and it will not have adverse tax consequences to the
Optionee; and, if such reduction cannot be fully effected due to such tax laws, second, the
Company shall pay to the Optionee a cash payment, on a per Share basis, equal to the balance of the
amount of the dividend not permitted to be applied to reduce the Exercise Price of the applicable
Option as follows: (a) for each Share subject to a vested Option, immediately upon the date of such
dividend payment; and (b), for each Share subject to an unvested Option, on the date on which such
Option becomes vested and exercisable with respect to such Share.

ARTICLE III

PERIOD OF EXERCISABILITY

Section 3.1. Commencement of Exercisability

     (a) So long as the Optionee continues to be employed by the Company or any other Service
Recipients, the Option shall become exercisable pursuant to the following schedules:

          (i) Time Option. The Time Option shall become vested and exercisable with respect to 25% of
the Shares subject to such Option on each of the first four anniversaries of the Grant Date.

          (ii) EBITDA Performance Option. The EBITDA Performance Option shall be eligible to become
vested and exercisable as to 25% of the Shares subject to such Option at the end of each of the
four Fiscal Years if the Company, on a consolidated basis, achieves its annual EBITDA targets as
set forth in Schedule A attached hereto (each an “EBITDA Target”) for the given
Fiscal Year. Notwithstanding the foregoing, in the event that an EBITDA Target is not achieved in
a particular Fiscal Year, then that portion of the EBITDA Performance Option that was eligible to
vest but failed to vest due to the Company’s failure to achieve its EBITDA Target shall
nevertheless vest and become exercisable at the end of any subsequent Fiscal Year (or the 2012
fiscal year) if the cumulative EBITDA Target (each a “Cumulative EBITDA Target”)
set forth on Schedule A attached hereto is achieved on a cumulative basis at the end of
such Fiscal Year (or the 2012 fiscal year) with respect to all then completed Fiscal Years;

          (iii) Return Performance Option. The Return Performance

 

 

Option shall be eligible to become vested and exercisable as to:

	 	(A)	 	12.5% of the Shares subject
to such Option at the end of each of the four Fiscal Years,
if and to the extent that on any such date, the Investor
Return is at least equal to 2.0 times the Base Price (the “2x
Return Performance Option”); and
	 
	 	(B)	 	12.5% of the Shares subject
to such Option at the end of each of the four Fiscal Years,
if and to the extent that on any such date, the Investor
Return is at least equal to 2.5 times the Base Price (the
“2.5x Return Performance Option”).

Notwithstanding the foregoing, in the event that the applicable Investor Return is not achieved in
a particular Fiscal Year, then any portion of the Return Performance Option that was eligible to
vest but failed to vest due to the Investor Return not achieving the applicable multiple (as set
forth above) shall nevertheless vest and become exercisable on any subsequent date occurring prior
to the ninth anniversary of the Grant Date, if the applicable Investor Return is achieved on such
subsequent date, so long as the Optionee remains employed by the Company or any other Service
Recipient.

     (b) Notwithstanding the foregoing, upon the occurrence of a Change in Control:

          (i) the Time Option shall become immediately exercisable as to 100% of the shares of Common
Stock subject to such Option immediately prior to a Change in Control (but only to the extent such
Option has not otherwise terminated or become exercisable);

          (ii) the EBITDA Performance Option shall become immediately exercisable as to 100% of the
shares of Common Stock subject to such Option immediately prior to a Change in Control (but only to
the extent such Option has not otherwise terminated or become exercisable) if (x) the EBITDA
Targets have been achieved for each of the Fiscal Years completed on or prior to such event, (y) on
the date of the occurrence of such event, the Company’s cumulative EBITDA for all of the Fiscal
Years occurring after the Grant Date through such date meets or exceeds the Cumulative EBITDA
Target for all such Fiscal Years, or (z) as a result of the Change in Control, the Investors Group
achieves an Investor Return of at least 2.5 times the Base Price; provided that for
purposes of clause (y) above, if the Change in Control occurs during a fiscal year, the Cumulative
EBITDA Target for such fiscal year shall be equitably adjusted in good faith by the Board in
consultation with the CEO of the Company to reflect that portion of the then current fiscal year
that has elapsed through the date of the Change in Control; and

          (iii) the Return Performance Option shall become 100%

 

 

immediately exercisable as to the shares of Common Stock subject to such Option immediately prior
to a Change in Control (but only to the extent such Option has not otherwise terminated or become
exercisable) if, as a result of such event, (x) with respect to the Shares subject to the 2x Return
Performance Option, the Investor Group achieves an Investor Return of 2.0 times the Base Price and
(y) with respect to the Shares subject to the 2.5x Return Performance Option, the Investor Group
achieves an Investor Return of 2.5 times the Base Price.

     (c) Notwithstanding the foregoing, no Option shall become exercisable as to any additional
shares of Common Stock following the termination of employment of the Optionee for any reason and
any Option, which is unexercisable as of the Optionee’s termination of employment, shall
immediately expire without payment therefor.

Section 3.2. Expiration of Option

     Except as otherwise provided in Section 6 or 7 of the Management Stockholder’s Agreement, the
Optionee may not exercise the Option to any extent after the first to occur of the following
events:

     (a) The tenth anniversary of the Grant Date so long as the Optionee remains employed with the
Company or any Service Recipient through such date;

     (b) The third anniversary of the date of the Optionee’s termination of employment with the
Company and all Service Recipients, if the Optionee’s employment is terminated by reason of death
or Permanent Disability (unless earlier terminated as provided in Section 3.20 below);

     (c) Immediately upon the date of the Optionee’s termination of employment by the Company and
all Service Recipients for Cause;

     (d) One hundred and eighty (180) days after the date of an Optionee’s termination of
employment by the Company and all Service Recipients without Cause (for any reason other than as
set forth in Section 3.2(b));

     (e) One hundred and eighty (180) days after the date of an Optionee’s termination of
employment with the Company and all Service Recipients by the Optionee for Good Reason;

     (f) One hundred and eighty (180) days after the date of an Optionee’s termination of
employment with the Company and all Service Recipients by the Optionee upon Retirement.

     (g) Thirty (30) days after the date of an Optionee’s termination of employment with the
Company and all Service Recipients by the Optionee without Good

 

 

Reason (except due to Retirement, death or Permanent Disability);

     (h) The date the Option is terminated pursuant to Section 6 or 7 of the Management
Stockholder’s Agreement; or

     (i) At the discretion of the Company, if the Committee so determines pursuant to Section 9 of
the Plan.

ARTICLE IV

EXERCISE OF OPTION

Section 4.1. Person Eligible to Exercise

     During the lifetime of the Optionee, only the Optionee (or his or her duly authorized legal
representative) may exercise an Option or any portion thereof. After the death of the Optionee,
any exercisable portion of an Option may, prior to the time when an Option becomes unexercisable
under Section 3.2, be exercised by his personal representative or by any person empowered to do so
under the Optionee’s will or under the then applicable laws of descent and distribution.

Section 4.2. Partial Exercise

     Any exercisable portion of an Option or the entire Option, if then wholly exercisable, may be
exercised in whole or in part at any time prior to the time when the Option or portion thereof
becomes unexercisable under Section 3.2; provided, however, that any partial
exercise shall be for whole shares of Common Stock only.

Section 4.3. Manner of Exercise

     An Option, or any exercisable portion thereof, may be exercised solely by delivering to the
Secretary or his office all of the following prior to the time when the Option or such portion
becomes unexercisable under Section 3.2:

     (a) Notice in writing signed by the Optionee or the other person then entitled to exercise the
Option or portion thereof, stating that the Option or portion thereof is thereby exercised, such
notice complying with all applicable rules established by the Committee;

     (b) (i) Full payment (in cash or by check or by a combination thereof) for the shares with
respect to which such Option or portion thereof is exercised or (ii) indication that the Optionee
elects to have the number of Shares that would otherwise be issued to the Optionee reduced by a
number of Shares having an equivalent Fair Market Value to the payment that would otherwise be made
by Optionee to the Company pursuant to clause (i) of this subsection (b);

     (c) (i) Full payment (in cash or by check or by a combination thereof)

 

 

to satisfy the minimum withholding tax obligation with respect to which such Option or portion
thereof is exercised or (ii) indication that the Optionee elects to have the number of Shares that
would otherwise be issued to the Optionee upon exercise of such Option (or portion thereof) reduced
by a number of Shares having an aggregate Fair Market Value, on the date of such exercise, equal to
the payment to satisfy the minimum withholding tax obligation that would otherwise be required to
be made by the Optionee to the Company pursuant to clause (i) of this subsection (c);

     (d) A bona fide written representation and agreement, in a form satisfactory to the Committee,
signed by the Optionee or other person then entitled to exercise such Option or portion thereof,
stating that the shares of Common Stock are being acquired for his own account, for investment and
without any present intention of distributing or reselling said shares or any of them except as may
be permitted under the Securities Act of 1933, as amended (the “Act”), and then applicable
rules and regulations thereunder, and that the Optionee or other person then entitled to exercise
such Option or portion thereof will indemnify the Company against and hold it free and harmless
from any loss, damage, expense or liability resulting to the Company if any sale or distribution of
the shares by such person is contrary to the representation and agreement referred to above;
provided, however, that the Committee may, in its reasonable discretion, take
whatever additional actions it deems reasonably necessary to ensure the observance and performance
of such representation and agreement and to effect compliance with the Act and any other federal or
state securities laws or regulations; and

     (e) In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by
any person or persons other than the Optionee, appropriate proof of the right of such person or
persons to exercise the option.

Without limiting the generality of the foregoing, the Committee may require an opinion of counsel
acceptable to it to the effect that any subsequent transfer of shares acquired on exercise of an
Option does not violate the Act, and may issue stop-transfer orders covering such shares. Share
certificates evidencing stock issued on exercise of this Option shall bear an appropriate legend
referring to the provisions of subsection (d) above and the agreements herein. The written
representation and agreement referred to in subsection (d) above shall, however, not be required if
the shares to be issued pursuant to such exercise have been registered under the Act, and such
registration is then effective in respect of such shares.

Section 4.4. Conditions to Issuance of Stock Certificates

     The shares of stock deliverable upon the exercise of an Option, or any portion thereof, may be
either previously authorized but unissued shares or issued shares, which have then been reacquired
by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be
required to issue or deliver any certificate or certificates for shares of stock purchased upon the
exercise of an Option or portion thereof prior to fulfillment of all of the following conditions:

     (a) The obtaining of approval or other clearance from any state or

 

 

federal governmental agency which the Committee shall, in its reasonable and good faith discretion,
determine to be necessary or advisable;

     (b) The execution by the Optionee of the Management Stockholder’s Agreement and a Sale
Participation Agreement; and

     (c) The lapse of such reasonable period of time following the exercise of the Option as the
Committee may from time to time establish for reasons of administrative convenience or as may
otherwise be required by applicable law.

Section 4.5. Rights as Stockholder

     Except as otherwise provided in Section 2.4 of this Agreement, the holder of an Option shall
not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any
shares purchasable upon the exercise of the Option or any portion thereof unless and until
certificates representing such shares shall have been issued by the Company to such holder.

ARTICLE V

MISCELLANEOUS

Section 5.1. Administration

     The Committee shall have the power to interpret the Plan and this Agreement and to adopt such
rules for the administration, interpretation and application of the Plan as are consistent
therewith and to interpret or revoke any such rules. All actions taken and all interpretations and
determinations made by the Committee shall be final and binding upon the Optionee, the Company and
all other interested persons. No member of the Committee shall be personally liable for any
action, determination or interpretation made in good faith with respect to the Plan or the Option.
In its absolute discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under the Plan and this Agreement.

Section 5.2. Option Not Transferable

     Neither the Option nor any interest or right therein or part thereof shall be liable for the
debts, contracts or engagements of the Optionee or his successors in interest or shall be subject
to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other
means whether such disposition be voluntary or involuntary or by operation of law by judgment,
levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy),
and any attempted disposition thereof shall be null and void and of no effect; provided, however,
that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and
distribution.

 

 

Section 5.3. Notices

     Any notice to be given under the terms of this Agreement to the Company shall be addressed to
the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed
to him at the address given beneath his signature hereto. By a notice given pursuant to this
Section 5.3, either party may hereafter designate a different address for notices to be given to
him. Any notice, which is required to be given to the Optionee, shall, if the Optionee is then
deceased, be given to the Optionee’s personal representative if such representative has previously
informed the Company of his status and address by written notice under this Section 5.3. Any
notice shall have been deemed duly given when (i) delivered in person, (ii) enclosed in a properly
sealed envelope or wrapper addressed as aforesaid, deposited (with postage prepaid) in a post
office or branch post office regularly maintained by the United States Postal Service, or (iii)
enclosed in a properly sealed envelope or wrapper addressed as aforesaid, deposited (with fees
prepaid) in an office regularly maintained by FedEx, UPS, or comparable non-public mail carrier.

Section 5.4. Titles; Pronouns

     Titles are provided herein for convenience only and are not to serve as a basis for
interpretation or construction of this Agreement. The masculine pronoun shall include the feminine
and neuter, and the singular the plural, where the context so indicates.

Section 5.5. Applicability of Plan, Management Stockholder’s Agreement and Sale Participation
Agreement

     The Option and the shares of Common Stock issued to the Optionee upon exercise of the Option
shall be subject to all of the terms and provisions of the Plan, the Management Stockholder’s
Agreement and a Sale Participation Agreement, to the extent applicable to the Option and such
Shares.

Section 5.6. Amendment

     Subject to Section 10 of the Plan, this Agreement may be amended only by a writing executed by
the parties hereto, which specifically states that it is amending this Agreement.

Section 5.7 Governing Law

     The laws of the State of Delaware shall govern the interpretation, validity and performance of
the terms of this Agreement regardless of the law that might be applied under principles of
conflicts of laws.

 

 

Section 5.8 Arbitration

     In the event of any controversy among the parties hereto arising out of, or relating to, this
Agreement which cannot be settled amicably by the parties, such controversy shall be finally,
exclusively and conclusively settled by mandatory arbitration conducted expeditiously in accordance
with the American Arbitration Association rules, by a single independent arbitrator. Such
arbitration process shall take place within the Nashville, Tennessee metropolitan area. The
decision of the arbitrator shall be final and binding upon all parties hereto and shall be rendered
pursuant to a written decision, which contains a detailed recital of the arbitrator’s reasoning.
Judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each
party shall bear its own legal fees and expenses, unless otherwise determined by the arbitrator.
If the Optionee substantially prevails on any of his or her substantive legal claims, then the
Company shall reimburse all legal fees and arbitration fees incurred by the Optionee to arbitrate
the dispute.

[Signatures on next page.]

 

 

     IN WITNESS WHEREOF, this Agreement has been executed and delivered by the parties hereto.

	 	 	 	 	 
	 	HCA INC.

 	 
	 	By:  	 	 
	 	 	Its: 	 	 
	 	 	 	 

 

 

	 	 	 	 	 

Option Grants:

	 	 	 	 	 
	Aggregate number of shares of Common Stock
for which the Time Option granted hereunder is
exercisable (100% of number of shares):

	 	 

	 	 
	 
	 	 	 	 
	Aggregate number of shares of Common Stock
for which the EBITDA Performance Option
granted hereunder is exercisable (100% of the
number of shares):

	 	 
	 	 
	 
	 	 	 	 
	Aggregate number of shares of Common Stock
for which the Return Performance Option
granted hereunder is exercisable (100% of
number of shares):

	 	 
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	Exercise Price of all options:

	 	$      per share	 	 
	 
	 	 	 	 
	Grant Date:	 	 
	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 

	 	OPTIONEE:	 	 
	 
	 	 	 	 
	 	 	 

	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 

	 

	 	Address	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	 

[Signature Page of Stock Option Agreement]Ex-10.27

 

Exhibit 10.27

HCA INC.

2008-2009 SENIOR OFFICER PERFORMANCE EXCELLENCE PROGRAM

Purpose and Administration of the Program

The 2008-2009 Senior Officer Performance Excellence Program (the “Program”) has been established by
HCA Inc. (the “Company”) to encourage outstanding performance from its senior officers. Subject to
applicable law, all designations, determinations, interpretations, and other decisions under or
with respect to the Program or any award shall be within the sole discretion of the Compensation
Committee (the “Committee”), may be made at any time and shall be final, conclusive and binding
upon all persons. Designations, determinations, interpretations, and other decisions made by the
Committee with respect to the Program or any award need not be uniform and may be made selectively
among Participants (as defined below), whether or not such Participants are similarly situated.

Participation

All officers of the Company who have been designated by the Committee as “executive officers” of
the Company during each of 2008 and 2009 (individually, the “Fiscal Year,” collectively, the
“Fiscal Years”) are eligible to receive an award pursuant to the Program.

Incentive Calculation and Payment of Awards

The Committee will make awards pursuant to the Program as set forth on Schedule A hereto,
on such terms as the Committee may prescribe based on the performance criteria set forth on
Schedule A hereto and such other factors as it may deem appropriate. The targets for the
performance criteria shall be determined by the Committee in its discretion within the first ninety
(90) days of each Fiscal Year. The Committee shall determine whether and to what extent each
performance or other goal has been met.

Awards shall be calculated based on the financial results for the Fiscal Year and shall be paid
within two and one-half months following the end of each Fiscal Year. No awards will be paid to a
Participant if the Committee determines that the Participant’s conduct during the Fiscal Year was
inconsistent with the Company’s stated mission and values, the Code of Conduct or the Corporate
Integrity Agreement (or successor thereto). Awards pursuant to the Program will be paid in cash
and on such other terms as the Committee may prescribe. Except as the Committee may otherwise
determine in its sole and absolute discretion, termination of a Participant’s employment prior to
the end of the Fiscal Year, other than for reasons of death or disability, will result in the
forfeiture of the award by the Participant, and no payments shall be made with respect thereto.

This Program is not a “qualified” plan for federal income tax purposes, and any payments are
subject to applicable tax withholding requirements.

 

 

Adjustments for Unusual or Nonrecurring Events

In addition to any adjustments enumerated in the definition of the performance goals set forth on
Schedule A hereto, the Committee is hereby authorized to make adjustments in the terms and
conditions of, and the criteria included in, awards in recognition of unusual or nonrecurring
events affecting any Participant, the Company, or any subsidiary or affiliate, or the financial
statements of the Company or of any subsidiary or affiliate; in the event of changes in applicable
laws, regulations or accounting principles; or in the event the Committee determines that such
adjustments are appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Program. The Committee is also
authorized to adjust performance targets or awards to avoid unwarranted penalties or windfalls.
Notwithstanding the foregoing, the Committee shall not have the discretion to increase any award
payable to any Named Executive Officer in excess of that provided by the application of the terms
and conditions of Schedule A attached hereto.

No Right to Employment

The grant of an award shall not be construed as giving a Participant the right to be retained in
the employ of the Company or any subsidiary or affiliate.

No Trust or Fund Created

Neither the Program nor any award shall create or be construed to create a trust or separate fund
of any kind or a fiduciary relationship between the Company or any subsidiary or affiliate and a
Participant or any other person. To the extent that any person acquires a right to receive
payments from the Company or any subsidiary or affiliate pursuant to an award, such right shall be
no greater than the right of any unsecured general creditor of the Company or any subsidiary or
affiliate.

No Rights to Awards

No person shall have any claim to be granted any award and there is no obligation for uniformity of
treatment among Participants. The terms and conditions of awards, if any, need not be the same
with respect to each Participant. The Company reserves the right to terminate the Program at any
time in the Company’s sole discretion.

Interpretation and Governing Law

This Program shall be governed by and interpreted and construed in accordance with the internal
laws of the State of Tennessee, without reference to principles of conflicts or choices of laws.
In the event the terms of this Program are inconsistent with the terms of any written employment
agreement between a Participant and the Company, the terms of such written employment agreement
shall govern the Participant’s participation in the Program.

 

 

Schedule A

2008-2009 Measures and Weightings

	 	 	 	 	 	 	 	 	 
	 	 	EBITDA2	 	Other3
	Named Executive Officers1
	 	 	100	%	 	 	—	 
	All other Senior Officers
	 	 	80	%	 	 	20	%

 

			
	1	 	Named Executive Officers shall include the Chairman and Chief Executive Officer,
the President and Chief Operating Officer, the Executive Vice President and Chief Financial
Officer, and the Group Presidents (“Named Executive Officers”).
	 
	2	 	Eastern, Central, Western and Outpatient Group executives’ EBITDA goals will be
based 50% on group performance and 50% on overall Company performance. For the purposes of this
calculation, EBITDA means earnings before interest, taxes, depreciation, amortization, minority
interest expense, gains or losses on sales of facilities, gains or losses on extinguishment of
debt, asset or investment impairment charges, restructuring charges, and any other significant
nonrecurring non-cash gains or charges (but excluding any expenses for share-based compensation
under FAS-123R with respect to any awards granted under the Program), as determined in good faith
by the Board in consultation with the CEO. In the event the Company disposes of or acquires any
facility during the Fiscal Year, the EBITDA target for such year shall be adjusted appropriately
(based on the number of days during the year for which the facility was owned) to reflect the
acquisition or disposition.
	 
	3	 	Other measures may include patient, physician, employee or client satisfaction,
or other individual goals.

2009 PEP Measures

With respect to 2009, the Committee may supplement the measures and weightings set forth in the
foregoing chart with one or more of the following Company, operating unit, business segment or
division financial performance measures: (a) operating income, profit or efficiencies; (b) return
on equity, assets, capital, capital employed or investment; (c) after-tax operating income; (d) net
income; (e) earnings or book value per share; (f) cash flow(s); (g) stock price or total
shareholder return; (h) debt reduction; (i) strategic business objectives, consisting of one or
more objectives based on meeting specified cost targets, business expansion goals and goals
relating to acquisitions or divestitures; or (j) any combination thereof. Each such measure may be
expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons
based on internal targets, the past performance of the Company, operating unit, business segment or
division of the Company and/or the past or current performance of other companies, and in the case
of earnings-based measures, may use or employ comparisons relating to capital, shareholders’ equity
and/or shares outstanding, or to assets or net assets.

 

 

2008-2009 Named Executive Officer PEP Opportunities:

Each Participant in the Program is assigned an annual award target expressed as a percentage of
salary (“Annual Award Goals”). The Annual Award Goals are expressed in terms of Threshold, Target
and Maximum levels (as percentages of base salary) for officers who were designated as Named
Executive Officers for 2008 and 2009 and are as set forth below.

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Threshold	 	Target	 	Maximum
	 	 	2008	 	2009	 	2008	 	2009	 	2008	 	2009
	Chairman & CEO
	 	 	63	%	 	 	66	%	 	 	126	%	 	 	132	%	 	 	252	%	 	 	264	%
	President & COO
	 	 	48	%	 	 	51	%	 	 	96	%	 	 	102	%	 	 	192	%	 	 	204	%
	Executive Vice
President & CFO and
Group Presidents
	 	 	33	%	 	 	36	%	 	 	66	%	 	 	72	%	 	 	132	%	 	 	144	%

The percentages included in the foregoing table with respect to Named Executive Officers for 2009
shall apply to the lesser of: (a) the Covered Executive’s 2009 base salary, or (b) 125% of the
Covered Executive’s 2008 base salary. The Committee shall retain the discretion to reduce, but not
increase, the 2009 Threshold, Target and Maximum percentages set forth above. The provisions of
this Program applicable to Named Executive Officers are intended to allow the Program to comply
with the reliance and transition rules set forth in Section 1.162-27(f) of the U.S. Treasury
Regulations and shall be interpreted consistently therewith.

2008-2009 Senior Officer (other than Named Executive Officers) PEP Opportunities

The annual awards for senior officers other than the Named Executive Officers are 36% to 56% of
base salary (Target), as determined by the Committee. The minimum (threshold), target and maximum
levels shall be set by the Committee in its sole discretion. The Committee shall adjust these
levels and percentages for 2009 in its sole discretion. Participants shall receive 100% of the
target award for target performance, 50% of the target award for a minimum acceptable (threshold)
level of performance, and a maximum of 200% of the target award for maximum performance.

Payouts between threshold and maximum for Named Executive Officers and Senior Officers (other than
Named Executive Officers) shall be calculated by the Committee in its sole discretion using
straight-line interpolation. The threshold, target and maximum EBITDA performance levels and other
goals (if applicable) shall be set by the Committee in its sole discretion.

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