Exhibit 10.19
FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS FIRST AMENDED AND RESTATED
EMPLOYMENT AGREEMENT is made and entered into this 31st day of
January, 2005, by and between Rotech Healthcare Inc., a Delaware
corporation (together with its successors and assigns, the “
Company ”), and Philip L. Carter (the “
Executive ”).
WHEREAS, the Company and the
Executive (the “ parties ”) entered into
an Employment Agreement dated November 1, 2002 (the “
Original Agreement ”), by which the Executive
became President and Chief Executive Officer of the
Company;
WHEREAS, an Addendum to the
Employment Agreement dated November 1, 2002 between Rotech
Healthcare Inc. and Philip L. Carter (the “
Addendum ”) was entered into by the parties in
March 2004 to provide for certain payments to be made to the
Executive in the event that the Executive should incur liability
for certain excise taxes under Section 4999 of the Internal Revenue
Code of 1986, as amended, as a result of the payment of certain
benefits to the Executive following a change of control of the
Company;
WHEREAS, the Company desires to
continue to employ and the Executive desires to continue his
employment with the Company as its President and Chief Executive
Officer pursuant to the terms and conditions of this First Amended
and Restated Employment Agreement (the “
Agreement ”);
WHEREAS, the Original Agreement is
hereby replaced and superceded by this Agreement; and
WHEREAS, the Addendum shall survive
and not be superceded or replaced by this Agreement.
NOW, THEREFORE, in consideration of
the mutual promises and covenants set forth herein and for other
good and valuable consideration, the Company and the Executive
hereby agree as follows:
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1
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Employment;
Duties; Acceptance and Term
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1.1
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The Company
hereby employs the Executive as President and Chief Executive
Officer (“ CEO ”) and the Executive
agrees to be so employed during the Employment Period (as defined
in Section 1.4 hereof), and as such the Executive shall report
directly to the Board of Directors of the Company (the “
Board ”).
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1.2
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During the Employment Period (as
defined in Section 1.4 hereof), the Executive will be
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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responsible for (a) managing the
business and affairs of the Company, (b) the day-to-day operations
of the Company, (c) all personnel related decisions, including but
not limited to, employee hiring and terminations and retention of
consultants or other contractors, and (d) such other or changed
responsibilities as shall be determined from time to time by the
Board. All staff in the Company’s offices are expected to
report to the Executive through their managers or as otherwise
determined by the Board. In addition, with the approval of the
Board, the Executive shall serve on the boards of directors and
hold executive positions at certain other subsidiary and affiliated
companies of the Company (each such related entity referred to
individually as a “ Group Affiliate ”).
The Executive shall take all such actions as may be required to
fulfill his duties as President and CEO or which may be necessary
to carry out any additional responsibilities as may be given to the
Executive by the Board, including responsibilities concerning or
related to Group Affiliates.
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1.3
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The Executive
shall devote his full business time and attention to the business
of the Company, including such additional duties and
responsibilities to which he is assigned by the Board, during the
Employment Period and shall not, during such period, be engaged in
any other business activity, whether or not such business activity
is pursued for gain, profit or other pecuniary or non-pecuniary
advantage, without the prior written and informed consent of the
Board. Notwithstanding the above, the Executive may (a) serve on
the boards of directors of charitable or other organizations and
companies not competing with the Company or any Group Affiliate or
as an unpaid officer of a charitable organization, (b) manage his
own personal investments and affairs, and (c) continue to serve as
a director of Mazelle; provided , however , that such
activities do not interfere with the execution of the
Executive’s duties hereunder, do not otherwise violate any
provision of this Agreement or otherwise conflict in any way with
the business of the Company or any Group Affiliate. The Executive
shall not accept, directly or indirectly, any compensation,
remuneration or other thing of value from any individual or entity
which has or may have the prospect of a business relationship with
the Company or any Group Affiliate, other than a gift of immaterial
value, without the prior written and informed consent of the
Board.
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1.4
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Unless earlier terminated
pursuant to Section 3 of this Agreement, the Executive’s
employment with the Company under this Agreement shall be for an
initial term of four (4) years, commencing no later than December
9, 2002 and continuing until the four (4) year anniversary of the
actual date the Executive commences his employment (the “
Initial Employment Period ”). The term of the
Executive’s employment under this Agreement shall be
automatically renewed for additional one-year terms (each a “
Renewal Period ”) upon the expiration of the
Initial Employment Period or any Renewal Period unless the Company
or the Executive delivers to the other, at least one hundred and
eighty (180) days prior to the expiration of the Initial Employment
Period or the then current Renewal Period, as the case may be, a
written notice specifying that the term of the Executive’s
employment will not be renewed at the end of the Initial Employment
Period or such Renewal Period, as the case may be. The period from
the actual date the Executive commences his employment with the
Company until the fourth anniversary of said date or,
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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in the event that the
Executive’s employment hereunder is earlier terminated as
provided in Section 3 hereof or renewed as provided in this Section
1.4, such shorter or longer period, as the case may be, is
hereinafter called the “ Employment Period
”.
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1.5
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The Executive
acknowledges and agrees that he shall be required to observe all
lawful rules and policies of the Company.
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1.6
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The Executive
agrees that he shall not knowingly participate in any activity that
is detrimental to the interests of the Company, interferes with the
performance of his duties hereunder or otherwise constitutes a
conflict of interest.
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1.7
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The Executive
acknowledges that the Company and its Board will encourage the
Executive to purchase at least 100,000 shares of Rotech Healthcare
common stock in the open market no later than the six (6) month
anniversary of the commencement of the Executive’s
employment; provided , however , that such purchase
or purchases of shares shall comply with all internal Company
policies, including, but not limited to, policies concerning the
purchase or sale of Company securities, and any applicable
securities laws.
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1.8
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The
Executive’s primary location of employment shall be at the
Company’s corporate headquarters located in Orlando,
Florida.
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2
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Compensation
and Benefits
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2.1
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During the
Employment Period and in consideration of the services performed by
the Executive for the Company, the Company will pay to the
Executive a Base Salary at an annual rate of Seven Hundred Thousand
U.S. Dollars ($700,000.00), subject to applicable payroll
withholdings and deductions, to be paid in substantially equal
installments pursuant to the Company’s standard payroll
practice (such salary, as increased from time to time, being the
“ Base Salary ”). The Executive’s
Base Salary shall be reviewed by the Board or the compensation
committee thereof (the “ Compensation Committee
”) a minimum of one time each year commencing on the one year
anniversary of the Commencement Date.
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2.2
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In addition to
Base Salary, the Executive shall be eligible to receive an annual
bonus targeted at one hundred percent (100%) of his Base Salary
(“ Target Bonus ”). The Board and/or the
Compensation Committee, at its or their discretion, in conjunction
with non-binding consultation with the Executive, shall determine
the exact amount of such bonus, if any, based on Company and
individual performance goals, criteria and targets established by
the Board and/or the Compensation Committee, which terms shall be
disclosed to the Executive in writing within one hundred and twenty
(120) days of the Effective Date (as defined below) of this
Agreement and thereafter on an annual basis. The annual incentive
bonus provided for in this Section 2.2 may exceed the Target Bonus
if the Board and/or the Compensation Committee determine(s) that
the Executive and the Company’s performance exceeded the
targeted levels. Such Target Bonus shall be payable within ninety
(90) days of the close of each calendar year during the Employment
Period. The Board and/or the Compensation Committee shall review
the Target Bonus and related terms on an annual basis and may
increase (but not decrease) the Target Bonus.
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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2.3
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The Company
shall pay or reimburse the Executive for all reasonable expenses
actually incurred or paid by him during the period of his
employment hereunder in the performance of his services under this
Agreement, upon timely presentation of expense statements or
vouchers or such other supporting information as the Company may
require.
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2.4
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The Company
shall purchase the Executive’s Mercedes Benz automobile at
book value as determined by GECC Fleet Services, the
Company’s leasing vendor. Following the purchase, the
Executive will be entitled to use of the vehicle during the
Employment Term and the Company shall reimburse the Executive for
all normal and customary expenses associated with the operation of
such automobile (e.g., insurance, gasoline and
maintenance).
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2.5
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The Company
shall provide to the Executive medical and disability benefits and
insurances and coverage under applicable employee benefit plans
provided generally to senior executives of the Company, including,
but not limited to, life insurance, accident, medical, dental,
disability and retirement plans and programs, pursuant to the
terms, conditions and limitations of the Company’s plans and
its regulations then in effect and as they may be modified from
time to time; provided , however , that because the
terms of the Executive’s severance package is covered by this
Agreement, he is not eligible to participate in or for coverage
under any Company separation, severance or change of control plan,
policy or benefit or similar program, unless such program or policy
explicitly states that it will apply to the Executive without
limitation under this Section 2.5 of the Agreement.
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2.6
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The Executive
shall be entitled to non-cumulative paid vacation in the amount of
four (4) weeks of paid vacation per calendar year. No more than two
(2) weeks of accrued but unused vacation in each calendar year
shall be carried forward to the next year; provided ,
however , that at no time during the Employment Period,
regardless of the amount of vacation accrued by the Executive,
shall the Executive be entitled to take more than six (6) weeks of
vacation in any single calendar year. The Executive shall not be
entitled to receive a payment for any accrued but unused vacation
unless and except as expressly set forth in this Agreement. The
Executive will schedule his vacations subject to the operating
needs of the Company.
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2.7
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The Board has
approved and the Executive shall be issued pursuant to an agreement
(the “ Stock Option Agreement ”) a stock
option to purchase 750,000 shares of the Company’s common
stock, $0.01 par value per share (the “ Options
”), pursuant to the Rotech Healthcare Inc. 2002 Stock Option
Plan (the “ Plan ”). .
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(a) Vesting; Exercisability .
The Options shall vest (and thereby become exercisable) over a
period of four (4) years pursuant to the terms of the Stock Option
Agreement and the Plan; provided , however , that, on
the first anniversary of the Effective Date of this Agreement,
150,000 of the Options may be cancelled by the Board of Directors
of the Company in its reasonable discretion based upon
performance.
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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(b) Change of Control . In
the event of a Change of Control, the Options shall immediately
become fully vested and exercisable. For purposes of this
Agreement, a “ Change of Control ” shall
be deemed to have occurred if, after the Effective Date of this
Agreement, there shall have occurred any of the following: (i) any
“ person ,” as such term is used in
Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
“ Exchange Act ”), other than the
Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company or a Group Affiliate, or any
company owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their ownership of
stock of the Company, acquires beneficial ownership (as defined
under Section 13(d) of the Exchange Act) of voting securities of
the Company and immediately thereafter is a “ 50%
Beneficial Owner .” For purposes of this provision, a
“ 50% Beneficial Owner ” shall mean a
person who is the “ beneficial owner ”
(as defined under Section 13(d) of 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; provided ,
however , that the term “ 50% Beneficial
Owner ” shall not include any person who was
a
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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beneficial owner of outstanding
voting securities of the Company at the Effective Date (an “
Existing Shareholder ”), including any group
that may be formed which is comprised solely of Existing
Shareholders or any affiliate of an Existing Shareholder to whom
voting securities may be transferred if and for so long as the
Existing Shareholder remains an indirect beneficial owner of the
voting securities following such transfer, unless and until such
time after the Effective Date as any such Existing Shareholder
shall have acquired beneficial ownership (other than by means of a
stock dividend, stock split, gift, inheritance or receipt of
securities in compensation for individual services as a director or
officer of the Company) of any additional voting securities of the
Company; (ii) during any period of two (2) consecutive years
commencing on or after the Effective Date, individuals who at the
beginning of such period constitute the Board, and any new director
(other than a director designated by a “ person
” (as defined above) who has entered into an agreement with
the Company to effect a transaction described in subsections (i),
(iii) or (iv) of this definition) whose election by the Board or
nomination for election by the Company’s shareholders 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 (the “ Continuing
Directors ”), cease for any reason to constitute at
least a majority thereof; (iii) the shareholders of the Company
have approved a merger, consolidation, recapitalization, or
reorganization of the Company, or a reverse stock split of any
class of voting securities of the Company, or the consummation of
any such transaction if shareholder approval is not obtained, other
than any such transaction which would result in at least 50% of the
combined voting power of the voting securities of the Company or
the surviving entity outstanding immediately after such transaction
being beneficially owned by persons who together beneficially owned
at least 80% of the combined voting power of the voting securities
of the Company outstanding immediately prior to such transaction
with the relative voting power of each such continuing holder
compared to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided
that, for purposes of this Section 2.7(b)(iii), such continuity of
ownership (and preservation of relative voting power) shall be
deemed to be satisfied if the failure to meet such 50% threshold
(or to substantially preserve such relative voting power) is due
solely to the acquisition of voting securities by an employee
benefit plan of the Company or Group Affiliate, such surviving
entity or a subsidiary thereof; and provided further, that, if
consummation of the corporate transaction referred to in this
Section 2.7(b)(iii) is subject, at the time of such approval by
shareholders, to the consent of any government or governmental
agency or approval of the shareholders of another entity or other
material contingency, no Change of Control shall occur until such
time as such consent and approval has been obtained and any other
material contingency has been satisfied; or (iv) the shareholders
of the Company have approved 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); provided that, if
consummation of the transaction referred to in this Section
2.7(b)(iv) is subject, at the time of such approval by
shareholders, to the consent of any government or governmental
agency or approval of the shareholders of another entity or other
material contingency, no Change of Control shall occur until such
time as such consent and approval has been obtained and any other
material contingency has been satisfied.
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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The foregoing notwithstanding, a
transaction shall not constitute a Change of Control if its sole
purpose is to change the state of the Company’s
incorporation. In addition, an initial public offering (“
IPO ”) of the securities of the Company shall
not constitute a Change of Control for purposes of this
Agreement.
(c) IPO . In the event of an
IPO, the vesting of the Options shall accelerate by one (1)
year.
(d) Pricing of Options . The
exercise or strike price of the Options shall be determined as
follows: the highest average seven (7) day closing price of Rotech
Healthcare, Inc. [ROHI.PK] common stock in the sixty (60) day
period immediately following the announcement of the employment of
the Executive as the CEO of the Company (the “
Measurement Period ”), with a minimum of $16
per share and a maximum of $20 per share. In the event that at any
time during the Measurement Period the stock price exceeds $20 per
share, the exercise price for the Options shall be set at $20 per
share and the Measurement Period shall terminate.
(e) General . Except as
otherwise provided for in this Agreement, the terms and conditions
regarding vesting, transfer, exercise and termination of the Option
shall be set forth within and governed by the Stock Option
Agreement and the Plan. The Executive shall be eligible for grants
of additional stock options during the Employment Period, in
accordance with the terms of Company plans and determinations of
the administrators of such plans
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2.8
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The Executive
agrees to permanently relocate to the Orlando, Florida metropolitan
area by no later than July 1, 2003. The Company will reimburse the
Executive for all reasonable and customary real estate brokerage
commissions and moving expenses incurred by the Executive with
respect to the sale of his home in California as well as any loan
origination fees. In addition, the Company will pay to the
Executive one (1) months’ base salary to cover miscellaneous
costs and expenses associated with this relocation. The amount of
relocation expenses and payments actually paid to the Executive
pursuant to this paragraph shall be appropriately grossed up by the
Company with all withholding taxes with respect thereto to be paid
by the Company on behalf of the Executive.
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2.9
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Nothing
contained herein shall prevent the Company from modifying or
terminating at any time any Company-wide plan, policy ,
benefit or program. However, the Company may also make available
other policies, benefits or programs.
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3
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Termination
of Employment Relationship
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3.1
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The
Executive’s employment with the Company shall automatically
terminate, and the Employment Term shall thereupon
terminate:
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3.1.1
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Upon the
Executive’s death;
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Philip L. Carter – First
Amended
and Restated Employment
Agreement
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3.1.2
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Upon the
Company’s written notice to the Executive (or his guardian if
applicable) of the termination of his employment due to Incapacity
(as that term is defined hereinafter);
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3.1.3
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In the event
this Agreement is not renewed by the Company at the expiration of
the Initial Employment Period or any Renewal Period, if applicable,
following delivery by the Company to the Executive of the
non-renewal notice pursuant to Section 1.4 above;
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3.1.4
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Upon the
Company’s written notice to the Executive of the termination
of his employment for Cause (as that term is defined below),
provided that termination will deemed to be under this Section
3.1.4 only if Cause in fact exists;
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