EMPLOYMENT
AGREEMENT
THIS AMENDED
AND RESTATED EMPLOYMENT AGREEMENT (this
“Agreement”) is made as of September 30, 2005 by
and between MEDCATH CORPORATION , a Delaware corporation
(the “Company”), and THOMAS K. HEARN
(“Executive”).
Executive and
MedCath Incorporated, a wholly-owned subsidiary of the Company, are
parties to an Employment Agreement dated as of December 3,
1999 (the “Initial Employment Agreement”). The Company
and Executive desire to amend and restate the Initial Employment
Agreement and to set forth in this Agreement the terms and
conditions applicable to Executive’s continued employment as
President, Diagnostic Division and Chief Development Officer of the
Company.
NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto agree that the
Initial Employment Agreement is amended and restated in its
entirety to consist of the following terms and
provisions:
1.1
Position . Subject to the terms and conditions of this
Agreement, the Company agrees to continue to employ Executive
during the term hereof as its President, Diagnostic Division and
Chief Development Officer. In such capacity, Executive shall report
to the President of the Company (the “President”) and
shall have the customary powers, responsibilities and authorities
of such position and office for corporations of the size and
character of the Company, as it exists from time to time and as are
assigned by the President.
1.2
Duties . Subject to the terms and conditions of this
Agreement, Executive hereby agrees to continue employment with the
Company 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 President shall from time to
time delegate to him on such terms and conditions and subject to
such restrictions as the board of directors of the Company (the
“Board”) may reasonably from time to time
impose.
1.3
Outside Activities . Nothing in this Agreement shall
preclude Executive (i) from engaging 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 (ii) subject to Section 12(b) hereof, from serving as a
member of boards of directors or as a trustee of any other
corporation, association or entity, so long as in the reasonable
determination of the Board none of the activities described in
clauses (i) or (ii) interferes with his duties and
responsibilities hereunder.
2. Term
of Employment . Subject to the terms and conditions of this
Agreement, the Company hereby agrees to continue to employ
Executive, and Executive hereby accepts such employment, for a
period commencing on the date of this Agreement and ending on the
third anniversary of the date of this Agreement; provided ,
however , that this Agreement shall be automatically renewed
and the term extended for additional one-year periods commencing on
the third anniversary of the date of this Agreement and on each
anniversary date thereafter, unless the Company or Executive
provides written notice to the other party, at least 90 days prior
to the expiration of the initial term or any renewal term, of the
non-renewal of this Agreement.
3.1
Salary . From and after the date of this Agreement, the
Company shall pay Executive a base salary (“Base
Salary”) at the rate of $280,000 per annum. 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 normal payroll
practices of the Company but no less frequently than
monthly.
3.2
Bonus . For each fiscal of Executive’s employment
hereunder, Executive shall participate in the bonus plan
established for the Company’s senior executives.
Executive’s target bonus with respect to each such fiscal
year shall be equal to 50% of Executive’s Base Salary for
such fiscal year (the “Target Bonus”). The Board (or a
committee thereof) shall have complete authority to establish all
other terms and provisions of the bonus plan, including the
performance goals for the bonus plan, the threshold performance
required for the payment of any bonus under the plan and the
maximum bonus opportunity for Executive under the plan. Bonuses
shall be paid within 2- 1 / 2
months following the fiscal year to
which they relate, and
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Executive must
be employed by the Company on the day the bonus is payable to be
eligible to receive the bonus.
3.3
Compensation Plans and Programs . Executive shall be
eligible to participate in any other compensation plan or program
maintained by the Company from time for senior executives of the
Company on terms and conditions that are comparable to those
applicable to such other senior executives.
4.1
Employee Benefit Programs, Plans and Practices . The Company
shall provide Executive during the term of his employment hereunder
with participation in or coverage under all employee pension and
welfare benefit programs, plans and practices (commensurate with
his position in the Company from time to time and to the extent
permitted under any employee benefit plan) which the Company makes
available to its senior executives.
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 which have historically been provided to Executive,
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 under this Agreement at any time for
any reason, provided that any such termination other than
for Cause (as defined in Section 6.4 hereof) may only be made
upon 30 days prior written notice to Executive. If
Executive’s employment under this Agreement is terminated by
the Company without Cause (other than as a result of
Executive’s death or Permanent Disability (as defined
in
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Section 6.2 hereof)) or if Executive
terminates his employment for Good Reason (as defined in
Section 6.1(c) hereof), Executive shall receive any payments
to which he is entitled under any applicable compensation or
employee benefit plan or program in which he participates,
including but not limited to those referred to in Section 3.3
hereof. In addition, in the event of any such termination described
in the immediately preceding sentence, Executive shall be entitled
to receive the following:
(i) an amount
equal to (A) one times Executive’s Base Salary if such
termination occurs prior to a Change in Control (as defined in
Section 6.1(c) hereof) or more than 12 months after a
Change in Control, or (B) if such termination occurs upon a
Change in Control or at any time within 12 months after a
Change in Control, the sum of two times Executive’s Base
Salary and one times Executive’s Target Bonus (such amount,
the “Severance Payment”);
(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 awarded but 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 first anniversary of the date
of termination under this Section 6.1(a) or (B) the date
on which Executive becomes covered under comparable benefit plans
of a new employer.
(b) The
Severance Payment shall be paid by the Company to Executive over
the 12 month period following the date of termination in
substantially equal installment payments and in accordance with the
normal payroll practices of the Company but no less frequently than
monthly. The Vacation Payment, the Compensation Payment and the
Expense Payment shall be paid by the Company to Executive in a cash
lump sum payment within 30 days after the date of
termination.
(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 Executive’s Permanent
Disability or death;
(ii) A reduction
by the Company in Executive’s Base Salary or Target Bonus;
or
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(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.
For purposes of
this Agreement, “Change in Control” shall
mean:
(i) Sales of all
or substantially all of the assets of the Company, M
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