EX-10.44 48 g68668ex10-44.txt AMENDED & RESTATED/EMPLOYMENT AGREEMENT/CRANE 1 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 DAVID CRANE ("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 2 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. 2 3 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 3 4 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, Anderson & Stowe 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. 4 5 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 5 6 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 c/o Kohlberg Kravis Roberts & Co. 3 St. James Square London SW1Y 4JU United Kingdom Attn: Edward A. Gilhuly with a copy to: Hal A. Levinson Moore & Van Allen, PLLC 100 N. Tryon Street, Floor 47 Charlotte, North Carolina 28202-4003 with a copy to: Alvin H. Brown, Esq. Simpson Thacher & Bartlett 425 Lexington Avenue New York, New York 10017 6 7 To Executive: David Crane 8329 Providence Road Charlotte, North Carolina 28277 with a copy to Executive's attorney: C. Richard Rayburn, Jr., Esq. Rayburn, Moon & Smith, P.A. 227 West Trade Street, Suite 1200 Charlotte, North Carolina 28202 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 7 8 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 Roberts & Co., Welsh, Carson, Anderson & Stowe 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 8 9 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: ------------------------------------- Stephen R. Puckett, Chairman /s/ David Crane ---------------------------------------- David Crane 9