Amendment No. 1 to EMPLOYMENT AGREEMENT
EXHIBIT
10.5
Amendment
No. 1
to
THIS
AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (“Agreement”) effective as of October
31, 2007, by and between Xxxxxxxx X. Xxxxxx (“Executive”) and Sun Healthcare
Group, Inc., a Delaware corporation (“Sun”);
WHEREAS,
Sun and Executive entered into an Employment Agreement dated as of October
12,
2006 (the “Employment Agreement”), and they desire to amend the Employment
Agreement with respect to the terms and conditions of Executive’s bonus
eligibility, as approved by the Compensation Committee of the Board of Directors
of Sun on February 27, 2007 and, as to the quality of care component referenced
in Schedule A attached hereto, August 22, 2007), as set forth below (capitalized
terms used in this Agreement without definition shall have the meanings provided
in the Employment Agreement).
NOW,
THEREFORE, in consideration of the above recitals and the mutual covenants
and
agreements contained herein, Executive and Sun agree as follows:
1. Amendment. Schedule
A to the Employment Agreement is amended by deleting it in its entirety and
inserting Schedule A hereto in lieu thereof.
2. Miscellaneous.
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(a)
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Amendments,
Waivers, Etc. Except as otherwise provided herein,
no provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
signed by both parties. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with,
any
condition or provision of this Agreement to be performed by such
other
party shall be deemed a waiver of similar or dissimilar provisions
or
conditions at the same or at any prior or subsequent
time.
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(b)
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Entire
Agreement. The Employment Agreement, as amended by
this Agreement, sets forth the entire agreement and understanding
of the
parties hereto with respect to the matters covered hereby and supersedes
all prior agreements and understandings of the parties with respect
to the
subject matter hereof. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter
hereof have been made by either party which are not expressly set
forth in
the Employment Agreement, as amended hereby, and the Employment Agreement,
as so amended, shall supersede all prior agreements, negotiations,
correspondence, undertakings and communications of the parties, oral
or
written, with respect to the subject matter hereof. Except for
the changes set forth in Section 1 and Schedule A hereto, the Employment
Agreement shall remain in full force and
effect.
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(c)
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Counterparts. This
Agreement may be executed in one or more counterparts, each of which,
when
so executed and delivered, shall be deemed an original, but all such
counterparts together shall constitute one and the same
instrument.
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1
The
parties hereto have executed this
Agreement as of the date first above written.
| /s/ Xxxxxxxx X. Xxxxxx | October 31, 2007 |
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Xxxxxxxx
X. Xxxxxx
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Date
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SUN
HEALTHCARE GROUP, INC.
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By /s/
Xxxxxxx X.
Xxxxxx
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October
31, 2007
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Its
Chief Executive Officer
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Date
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2
Schedule
A
Executive’s
Bonus for any fiscal year (the “Applicable Fiscal Year”) shall be based on the
criteria set forth below. There are three components to
his Bonus: EBITDA, quality of care and individual
goals. In no event shall his Bonus exceed 100% of his Base Salary for
the Applicable Fiscal Year.
1. Maximum
Amount. The maximum amount of the Bonus shall be based upon
the earnings before interest, taxes, depreciation and amortization of Sun
(“EBITDA”), as published by Sun in its press release announcing financial
results for the Applicable Fiscal Year, but excluding the effect of actuarial
adjustments for self-insurance for general and professional
liability. The Compensation Committee reserves the right to make
adjustments to the calculation, including the inclusion or exclusion of
discontinued operations and other normalizing adjustments.
The
Compensation Committee shall
establish the EBITDA target each year.The potential amount
of
the Bonus shall be based upon actual EBITDA attained as a percentage
of the target EBITDA as follows: if actual EBITDA is less than 85% of
target EBITDA, the maximum amount of the Bonus (the “Maximum Amount”) will be
zero; if actual EBITDA is 85% of target EBITDA, the Maximum Amount will be
8% of
Base Salary; if actual EBITDA is 100% of target EBITDA, the Maximum Amount
will
be 50% of Base Salary (if actual EBITDA is greater than 85% but less than 100%
of target EBITDA, the amount will be pro rated between 8% and 50% of Base
Salary); and if actual EBITDA is 115% (or greater) of target EBITDA, the Maximum
Amount will be 100% of Base Salary (if actual EBITDA is greater than 100% but
less than 115% of target EBITDA, the Maximum Amount will be pro rated between
50% and 100% of Base Salary).
2. EBITDA
Component. Subject to
the provisions
of paragraph 4 below, in the event that the Maximum Amount is greater than
zero,
then Executive shall be paid 70% of the Maximum Amount in recognition of the
achievement of the EBITDA target.
3. Individual
Goals Component. The Chief Executive Officer of Sun (the
“CEO”) shall establish the individual goals each year after consulting
with
Executive, the Compensation Committee, and such others as the CEO deems
appropriate. Subject to the provisions of paragraph 4 below, in the
event that the Maximum Amount is greater than zero, then Executive shall be
paid
up to 30% of the Maximum Amount in recognition of the achievement of his
individual goals, to be determined as follows: after the end of the Applicable
Fiscal Year, the CEO shall make a recommendation to the Compensation Committee
as to what extent the goals have been met. The Compensation Committee
shall determine the amount of this component of the Bonus to be paid to
Executive based upon the level of attainment of the goals.
4. Quality
of Care Component. If the quality of care target
is met, the EBITDA Component and the Individual Goals Component shall be paid
in
the amounts determined as set forth above. If the quality of care
target is not met, the Compensation Committee shall deduct such amount of the
EBITDA Component and the Individual Goals Component as it determines in its
discretion from the amounts otherwise payable. The quality of care
target is met if quality of care at skilled nursing centers operated by
SunBridge Healthcare Corporation and its subsidiaries
(“SunBridge”) is better than or equal to the quality of care at
skilled nursing centers
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of
SunBridge’s for-profit peer group of companies for the Applicable Fiscal Year
(or the twelve month period ending as close as possible to the end of Applicable
Fiscal Year for which data are available at the time the Compensation Committee
considers the amount of the Bonus), in each case as measured by the Health
Deficiency Index reported by the Long Term Care Institute.
5. Timing
of Payment. The Bonus shall be paid to Executive at the time
specified in Section 3(b).
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