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EXHIBIT 10.44
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
AGREEMENT, made as of January 1, 2000 by and between MEDCATH
INCORPORATED, a North Carolina corporation (the "Company") and XXXXX XXXXX
("Executive").
RECITALS
Executive has previously been employed by the Company as its Executive
Vice President and Chief Operating Officer and the Company now desires to amend
and restate in its entirety the terms and conditions of Executive's employment
in order to induce him to serve as the President and Chief Executive Officer of
the Company.
Executive is willing to accept such employment and perform services for
the Company, on the terms and conditions hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the term hereof as its President and Chief
Executive Officer. In his capacity as the President and Chief Executive Officer
of the Company, Executive shall report to the board of directors of the Company
(the "Board") and shall have the customary powers, responsibilities and
authorities of a president and chief executive officer for corporations of the
size and character of the Company, as it exists from time to time, and as are
assigned by the Board.
1.2 Subject to the terms and conditions of this Agreement, Executive
hereby accepts employment with the Company commencing on the date hereof, and
agrees to devote his full working time and efforts, to the best of his ability,
experience and talent, to the performance of services, duties and
responsibilities in connection therewith. Executive shall perform such duties
and exercise such powers, commensurate with his position, as the Board shall
from time to time delegate to him on such terms and conditions and subject to
such restrictions as the Board may reasonably from time to time impose.
Executive also agrees to serve, if elected, as a member of the Board.
1.3 Nothing in this Agreement shall preclude Executive from engaging,
so long as, in the reasonable determination of the Board, such activities do not
interfere with his duties and responsibilities hereunder, in charitable and
community affairs, from managing any passive investment made by him in publicly
traded equity securities or other property (provided that no such investment may
exceed 5% of the equity of any entity or, without prior notice to the Board
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and subject to Section 13(b) hereof, from serving as a member of boards of
directors or as a trustee of any other corporation, association or entity.
2. Term of Employment. Executive's term of employment under this
Agreement shall commence on the date hereof and, subject to the terms hereof,
shall terminate on the earlier of (i) December 31, 2004 (the "Termination Date")
or (ii) termination of Executive's employment pursuant to this Agreement;
provided, however, that, unless earlier terminated as a result of Executive's
termination of employment, this Agreement shall automatically renew for one
additional year following the Termination Date unless, at least 90 days prior to
the Termination Date, Executive provides written notice to the Company of his
intention not to continue his employment with the Company for such additional
year; provided, further, that (A) any other termination of employment by
Executive (other than for death, Permanent Disability or Good Reason) may only
be made upon 90 days prior written notice to the Company and any termination of
employment by Executive for Good Reason may only be made upon 30 days prior
written notice to the Company and (B) any termination of employment by the
Company for any reason may only be made upon 30 days prior written notice to
Executive.
3. Compensation.
3.1 Salary. The Company shall pay Executive a base salary ("Base
Salary") at the rate of $400,000 per annum for the year commencing on the
beginning of Executive's term of employment hereunder. Base Salary shall be
adjusted annually at the discretion of the Board but in no event shall Base
Salary be reduced nor be less than the median base salary for a comparable
position at corporations of similar size and character as the Company, as it
exists from time to time, and, as increased, shall constitute "Base Salary"
hereunder. Base Salary shall be payable in accordance with the ordinary payroll
practices of the Company.
3.2 Annual Bonus. In addition to his Base Salary, the Company shall pay
to Executive an annual cash bonus (the "Bonus") during the term of his
employment hereunder equal to a percentage of Executive's Base Salary (the
"Target Bonus"). The Bonus for each fiscal year of the Company will be tied to
either the Company's earnings per share as reported in its annual financial
statements excluding any extraordinary or nonrecurring items set forth therein
(the "EPS") and the annual EPS target for that year (the "EPS Target"), or such
other applicable performance targets as are established by the Board (or a
committee thereof). On or before the beginning of each fiscal year, the Board
(or a committee thereof) shall establish an EPS Target or other applicable
performance target (the "Target") for that year. At the end of each fiscal year,
Executive shall be paid a Target Bonus based upon the following formula:
If the Company's actual performance results equal 80% of the
Target or greater (e.g., actual EPS is 80% of the EPS Target or
greater) (the comparative percentage of the actual performance results
to the Target is referred to herein as the "Bonus Growth Percentage"),
then Executive's Target Bonus shall be the Bonus Growth Percentage
multiplied by 50% of Executive's Base Salary for the fiscal year then
ended, subject to a maximum Bonus Growth Percentage of 120%. If the
Bonus Growth Percentage is less than 80%, no Bonus will be earned or
paid.
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3.3 Compensation Plans and Programs. Executive shall be eligible to
participate in any compensation plan or program maintained by the Company from
time to time, which compensation plans and programs are intended to be
comparable to those currently maintained by the Company, in which other senior
executives of the Company participate on terms that are intended to be
comparable to those applicable to such other senior executives.
4. Employee Benefits.
4.1 Employee Benefit Programs, Plans and Practice. The Company shall
provide Executive during the term of his employment hereunder with coverage
under all employee pension and welfare benefit programs, plans and practices
(commensurate with his positions in the Company from time to time and to the
extent permitted under any employee benefit plan) in accordance with the terms
thereof, which the Company makes available to its senior executives and which
employee pension and welfare benefit programs, plans and practices that are
intended to be comparable to those currently maintained by the Company.
4.2 Vacation and Fringe Benefits. Executive shall be entitled to no
less than the number of business days paid vacation in each calendar year to
which Executive is currently entitled, which shall be taken at such times as are
consistent with Executive's responsibilities hereunder. In addition, Executive
shall be entitled to the perquisites and other fringe benefits currently made
available to senior executives of the Company, commensurate with his position
with the Company.
5. Expenses. Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement, including,
without limitation, expenses for travel and similar items related to such duties
and responsibilities. The Company will reimburse Executive for all such expenses
upon presentation by Executive from time to time of appropriately itemized and
approved (consistent with the Company's policy) accounts of such expenditures.
6. Termination of Employment.
6.1 Termination By the Company Without Cause or By Executive for Good
Reason.
(a) The Company may terminate Executive's employment at any time for
any reason. If Executive's employment is terminated by the Company without Cause
(as defined in Section 6.4 hereof) (other than as a result of Executive's death
or Permanent Disability (as defined in Section 6.2 hereof)) or if Executive
terminates his employment for Good Reason (as defined in Section 6.1(d) hereof)
prior to the Termination Date, Executive shall receive such payments, if any,
under applicable plans or programs, including but not limited to those referred
to in Section 3.3 hereof, to which he is entitled pursuant to the terms of such
plans or programs. In addition, Executive shall be entitled to receive the
following: (i) an amount equal to (A) one times the Executive's Base Salary (for
employment termination occurring on or before the first anniversary of the
Purchase Date as defined in the Management Stockholder's Agreement attached
hereto) or (B) two times the Executive's Base Salary (for termination occurring
after the
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first anniversary of the Purchase Date), at the annual rate as of the date of
termination under this Section 6.1(a), payable over the twelve month period
following the Termination Date in substantially equal installment payments and
in accordance with the normal payroll practices of the Company; (ii) a cash lump
sum payment in respect of (x) accrued but unused vacation days (the "Vacation
Payment"), (y) compensation earned but not yet paid (including any deferred
Bonus payments) (the "Compensation Payment") and (z) reasonable expenses
incurred under Section 5 but not yet reimbursed (the "Expense Payment"); and
(iii) continued coverage under any employee medical, disability and life
insurance plans in accordance with the respective terms thereof for a period
ending on the earlier of (A) the second anniversary of the date of termination
under this Section 6.1(a) or (B) the date on which the Executive becomes covered
under comparable benefit plans of a new employer.
(b) The Vacation Payment, the Compensation Payment, and the Expense
Payment shall be paid by the Company to Executive within 30 days after the
termination of Executive's employment by check payable to the order of Executive
or by wire transfer to an account specified by Executive.
(c) For purposes of this Agreement, "Good Reason" shall mean any of the
following (without Executive's express prior written consent):
(i) A substantial reduction by the Company of Executive's
duties or responsibilities, other than in connection with the
termination of Executive's employment by the Company for Cause, by
Executive without Good Reason or as a result of Permanent Disability or
Executive's death;
(ii) A reduction by the Company in Executive's Base Salary or
an amendment to the terms of the bonus plan in effect for senior
executives and in which Executive participates on the date hereof which
would adversely effect the ability of Executive to receive a Bonus
(except that the establishment of the EPS or other performance targets
to be set by the Board annually shall be deemed not to constitute such
an amendment);
(iii) A reduction or elimination of Executive's eligibility to
participate in any of the Company's employee benefit plans that is
inconsistent with the eligibility of similarly situated executives of
the Company to participate therein; or
(iv) Any relocation to a primary workplace that is more than
fifty (50) miles from the Executive's workplace in effect as of the
date of this Agreement.
(d) With respect to (i) the payments Executive could receive under this
Section 6.1 and (ii) the provisions of the options for capital stock of the
Company granted as of the date of this Agreement (whether as new or replacement
options), the Company represents that it has received from Welsh, Carson,
Xxxxxxxx & Xxxxx VII, L.P. and MedCath 1998 L.L.C. (holders of more than 75% of
all outstanding shares of capital stock of the Company and its parent entities),
after adequate disclosure, stockholder approval in a separate vote to make such
payments and provide for such acceleration, both of which are made on the terms
of the agreements presented to such stockholders.
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6.2 Permanent Disability. If the Executive becomes totally and
permanently disabled (as defined in the Company's Long-Term Disability Benefit
Plan applicable to senior executive officers as in effect on the date hereof)
("Permanent Disability"), the Company or Executive may terminate Executive's
employment on written notice thereof, and Executive shall receive or commence
receiving, as soon as practicable:
(i) amounts payable pursuant to the terms of a disability
insurance policy or similar arrangement which the Company maintains
during the term hereof;
(ii) the Target Bonus in respect of the fiscal year in which
his termination occurs, prorated by a fraction, the numerator of which
is the number of days of the fiscal year until termination and the
denominator of which is 365;
(iii) the Vacation Payment, the Compensation Payment, and the
Expense Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.3 hereof,
to which he is entitled pursuant to the terms of such plans or
programs.
6.3 Death. In the event of Executive's death during the term of his
employment hereunder, Executive's estate or designated beneficiaries shall
receive or commence receiving, as soon as practicable:
(i) the Target Bonus in respect of the fiscal year in which
his death occurs, prorated by a fraction, the numerator of which is the
number of days of the fiscal year until his death and the denominator
of which is 365;
(ii) any death benefits provided under the employee benefit
programs, plans and practices referred to in Section 4.1 hereof, in
accordance with their terms;
(iii) the Vacation Payment, the Compensation Payment, and the
Expense Payment; and
(iv) such payments under applicable plans or programs,
including but not limited to those referred to in Section 3.3 hereof,
to which Executive's estate or designated beneficiaries are entitled
pursuant to the terms of such plans or programs.
6.4 Termination By the Company for Cause or By Executive without Good
Reason.
(a) The Company shall have the right to terminate the
employment of Executive for Cause. In the event that Executive's employment is
terminated by the Company for Cause, as hereinafter defined, or by Executive
without Good Reason (other than as a result of the Executive's Permanent
Disability or death), prior to the Termination Date, notwithstanding any other
provision in this Agreement, the Executive shall be entitled only to the
Compensation
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Payment, the Vacation Payment, and the Expense Payment, and shall not be
entitled to any further compensation or benefits hereunder including, without
limitation, the payment of any Bonus in respect of all or any portion of the
fiscal year in which such termination occurs.
(b) As used herein, the term "Cause" shall be limited to (i) willful
misconduct by Executive involving dishonesty or breach of trust in connection
with his employment which results in a demonstrable injury (which is other than
de minimis or insignificant) to the Company, (ii) willful and continued failure
by Executive to perform his material duties with respect to the Company or its
subsidiaries, which failure continues beyond 10 days after a written demand for
substantial performance of such duties was given to Executive by the Company, or
(iii) the Executive's conviction of, or plea of nolo contendere to, a felony.
Termination of Executive pursuant to this Section 6.4 shall be made by delivery
to Executive of written notice that, in the reasonable judgment of the Board,
Executive was guilty of conduct set forth in any of clauses (i) through (iii)
above and specifying the particulars thereof.
7. Mitigation of Damages. Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise after the termination of his employment
hereunder.
8. Notices. All notices or communications hereunder shall be in
writing, addressed as follows:
To the Company:
MedCath Incorporated
x/x Xxxxxxxx Xxxxxx Xxxxxxx & Co.
0 Xx. Xxxxx Xxxxxx
Xxxxxx XX0X 0XX
Xxxxxx Xxxxxxx
Attn: Xxxxxx X. Xxxxxxx
with a copy to:
Xxx X. Xxxxxxxx
Xxxxx & Xxx Xxxxx, PLLC
000 X. Xxxxx Xxxxxx, Xxxxx 00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
with a copy to:
Xxxxx X. Xxxxx, Esq.
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
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To Executive:
Xxxxx Xxxxx
0000 Xxxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
with a copy to Executive's attorney:
C. Xxxxxxx Xxxxxxx, Xx., Esq.
Xxxxxxx, Moon & Xxxxx, P.A.
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Any such notice or communication shall be delivered by hand, by telecopy (with
machine confirmation) or by courier or sent certified or registered mail, return
receipt requested, postage prepaid, addressed as above (or to such other address
as such party may designate in a notice duly delivered as described above), and
the third business day after the actual date of mailing shall constitute the
time at which notice was given.
9. Separability; Legal Fees. If any provision of this Agreement shall
be declared to be invalid or unenforceable, in whole or in part, such invalidity
or unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect. Each party shall bear the costs of any legal
fees and other fees and expenses which may be incurred in respect of enforcing
its respective rights under this Agreement.
10. Assignment. This contract shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign this Agreement
to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock, assets or businesses of the Company, if such
successor expressly agrees to assume the obligations of the Company hereunder.
11. Amendment. This Agreement may only be amended by written agreement
of the parties hereto.
12. Nondisclosure of Confidential Information; Non-Competition.
(a) At any time during or after Executive's employment with the
Company, Executive shall not, without the prior written consent of the Company,
use, divulge, disclose or make accessible to any other person, firm,
partnership, corporation or other entity any Confidential Information (as
hereinafter defined) pertaining to the business of the Company or any of its
subsidiaries, except (i) while employed by the Company, in the business of and
for the benefit of the Company, or (ii) when required to do so by a court of
competent jurisdiction, by
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any governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of this Section 13(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, and other non-public, proprietary and
confidential information of the Company, its subsidiaries, Kohlberg Kravis
Xxxxxxx & Co., Welsh, Carson, Xxxxxxxx & Xxxxx VII, L.P., or their respective
affiliates as in existence as of the date of Executive's termination of
employment (collectively, the "Restricted Group") that, in any case, is not
otherwise available to the public (other than by Executive's breach of the terms
hereof).
(b) During the period of his employment hereunder and for one year
thereafter, Executive agrees that, without the prior written consent of the
Company, (A) he will not, directly or indirectly, either as principal, manager,
agent, consultant, officer, stockholder, partner, investor, lender or employee
or in any other capacity, carry on, be engaged in or have any financial interest
in (other than an ownership position of less than 5 percent in any company whose
shares are publicly traded), any business, which is in Competition (as
hereinafter defined) with the existing business of the Company or its
subsidiaries (which business shall consist of owning or managing cardiac care
hospitals, centers or clinics, and any such business in which the Company or any
of its subsidiaries has taken concrete steps toward engaging) and (B) he shall
not, on his own behalf or on behalf of any person, firm or company, directly or
indirectly, solicit or offer employment to any person who has been employed by
the Company or its subsidiaries at any time during the 12 months immediately
preceding such solicitation.
(c) For purposes of this Section 13, a business shall be deemed to be
in Competition with the Company or its subsidiaries if it is engaged in or has
taken concrete steps toward engaging in the business of owning or managing
cardiac care hospitals, centers or clinics in the United States.
(d) Executive and the Company agree that this covenant not to compete
is a reasonable covenant under the circumstances, and further agree that if in
the opinion of any court of competent jurisdiction such restraint is not
reasonable in any respect, such court shall have the right, power and authority
to excise or modify such provision or provisions of this covenant as to the
court shall appear not reasonable and to enforce the remainder of the covenant
as so amended. Executive agrees that any breach of the covenants contained in
this Section 13 would irreparably injure the Company. Accordingly, Executive
agrees that the Company may, in addition to pursuing any other remedies it may
have in law or in equity, cease making any payments otherwise required by this
Agreement and obtain an injunction against Executive from any court having
jurisdiction over the matter restraining any further violation of this Agreement
by Executive.
13. Beneficiaries; References. Executive shall be entitled to select
(and change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal
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representative. Any reference to the masculine gender in this Agreement shall
include, where appropriate, the feminine.
14. 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, including
the provisions of Section 13 herein. The provisions of this Section 15 are in
addition to the survivorship provisions of any other section of this Agreement.
15. Governing Law. This Agreement shall be construed, interpreted and
governed in accordance with the laws of the State of North Carolina without
reference to rules relating to conflicts of law.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding between the Company or any affiliate
of the Company and Executive other than the agreements referred to in Section 7
hereof.
17. Withholding. The Company shall be entitled to withhold from payment
any amount of withholding required by law.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
MEDCATH INCORPORATED
By:
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Xxxxxxx X. Xxxxxxx, Chairman
/s/ Xxxxx Xxxxx
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Xxxxx Xxxxx
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