EXHIBIT 10.5


 


FIRST AMENDMENT TO EMPLOYMENT AGREEMENT


 


THIS FIRST AMENDMENT TO EMPLOYMEENT AGREEMENT, made as of this 5th day
of December, 2008, is between Orleans Homebuilders, Inc., a Delaware
corporation, with offices at 3333 Street Road, Suite #101, Bensalem,
Pennsylvania 19020 (the “Company” or “Orleans”), and Garry Herdler, an individual (hereinafter
called “Employee”).


 


BACKGROUND


 


As of February 27, 2007, the Company and Employee
entered into an Employment Agreement pursuant to which Employee was employed by
the Company as Executive Vice President and Chief Financial Officer (the “Original Agreement”).


 


The Company desires to continue to employ Employee as
Executive Vice President and Chief Financial Officer, and Employee desires to
continue to be so employed on the terms and conditions contained in the
Original Agreement, subject only to the changes contained in this First
Amendment.


 


The Company and Employee desires to amend the Original
Agreement in certain respects to reward Employee for strong performance of his
duties and to encourage longer term retention through certain incentives.


 


Certain provisions of the Original Agreement may be treated
as providing for payments that are in the nature of “nonqualified deferred
compensation,” as that phrase is used for purposes of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), the modification of such arrangements in order to comply with
applicable provisions of the Code is permitted during a transitional period
that ends as of December 31, 2008 and Employee and the Company desire to
make certain amendments pursuant thereto.


 


NOW THEREFORE, in consideration of the promises and the mutual
covenants and agreements contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:


 


AMENDMENTS


 


1.               Section 2.1(a) of
the Original Agreement is hereby amended and restated to read in its entirety
as follows:


 


Base Salary.  As compensation for Employee’s services
hereunder, the Company shall pay to Employee for Fiscal Years (hereinafter
defined) 2007 and 2008 an annual base salary of Four Hundred Fifty Thousand
Dollars ($450,000), which annual salary shall increase to Six Hundred Fifty
Thousand Dollars ($650,000) retroactively effective as of July 1, 2008,
and increase to Six Hundred Seventy Five Thousand Dollars ($675,000) for Fiscal
Years 2010, 2011, 2012 and thereafter (the “Base
Salary”), commencing July 1st of


 

















 


each such fiscal year. 
For Fiscal Year 2013 and thereafter, if applicable, the parties shall discuss
whether Employee’s base salary shall be increased.  Employee’s base salary shall be payable in
accordance with the Company’s regular payroll practices in effect from time to
time during Employee’s employment, but not less frequently than monthly.  The Company’s fiscal year runs from July 1
through June 30 (“Fiscal Year”) so that, for example, Fiscal Year 2009 runs from July 1, 2008
through June 30, 2009.


 


2.               Section 2.1(b)(i) of
the Original Agreement is hereby amended and restated to read in its entirety
as follows:


 


The Company shall pay Employee a Signing Bonus in the
amount of $900,000, payable as follows:  (a) $250,000
payable ten (10) days after the Effective Date or the business day
immediately following such tenth day if not a business day; (b) $250,000
payable on the first anniversary of the Effective Date: (c) $250,000
payable on or before December 31, 2008; and (d) $150,000 payable on
the third anniversary of the Effective Date. 
Except as described in Section 2.7 (a) and (c), in order to
receive each of the four Signing Bonus payments, Employee must be employed by
the Company on the date of the relevant Signing Bonus payment is required to be
made.


 


3.               Section 2.1(b)(ii)a.
of the Original Agreement is hereby amended and restated to read in its
entirety as follows:


 


a.                                       The
Company shall pay Employee a “Guaranteed Minimum Bonus”
pursuant to the following schedule for Fiscal Year 2007 through Fiscal Year
2011:


 


	
  Period

  	
   

  	
  Guaranteed Minimum

  Bonus

  	
   

  	
  Payment Dates

  	
   

  
	
  Fiscal Year 2007 (Effective Date through
  June 30, 2007)

  	
   

  	
  $

  	
  150,000

  	
   

  	
  100% on July 1, 2007

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fiscal Year 2008 (July 1, 2007 through
  June 30, 2008)

  	
   

  	
  $

  	
  300,000

  	
   

  	
  50% on December 31, 2007 and 50% on June 30, 2008

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fiscal Year 2009 (July 1, 2008 through
  June 30, 2009)

  	
   

  	
  $

  	
  300,000

  	
   

  	
  50% on December 31, 2008 and 50% on June 30, 2009

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fiscal Year 2010 (July 1, 2009 through
  June 30, 2010)

  	
   

  	
  $

  	
  350,000

  	
   

  	
  50% on December 31, 2009 and 50% on June 30, 2010

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Fiscal Year 2011 (July 1, 2010 through
  June 30, 2011)

  	
   

  	
  $

  	
  350,000

  	
   

  	
  50% on December 31, 2010 and 50% on June 30, 2011

  	
   

  



 


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Except as described in Section 2.7(a) and
(c), Employee must be employed by the Company on each Payment Date for the
Employee to receive the Guaranteed Minimum Bonus payable on that date.


 


4.              The definition of “Annual Bonus”
contained in Section 2.1(b)(iii)(a) is hereby amended to provide that
when determining the amount of Annual Bonus, if any, payable with respect to
any particular Fiscal Year, the amount of any Guaranteed Minimum Bonus payable
with respect to such Fiscal Year shall be deducted from the amount otherwise
payable as an Annual Bonus for such Fiscal Year.


 


5.              Section 2.1(b)(iv) of
the Original Agreement is hereby amended and restated to read in its entirety
as follows:


 


(iv)  Aggregate Minimum Compensation.  For clarification purposes only, the
following chart represents Employee’s total minimum compensation (i.e., the sum
of Employee’s Base Salary, Signing Bonus and Guaranteed Minimum Bonus) for each
fiscal year through Fiscal Year 2011 assuming Employee remains continuously
employed by the Company through the end of Fiscal 2011:


 


	
   

  	
   

  	
  Fiscal Year

  2007

  	
   

  	
  Fiscal Year

  2008

  	
   

  	
  Fiscal Year

  2009

  	
   

  	
  Fiscal Year

  2010

  	
   

  	
  Fiscal Year

  2011

  	
   

  
	
  Base
  Salary

  	
   

  	
  $

  	
  150,000

  	
   

  	
  $

  	
  450,000

  	
   

  	
  $

  	
  650,000

  	
   

  	
  $

  	
  675,000

  	
   

  	
  $

  	
  675,000

  	
   

  
	
  Signing
  Bonus

  	
   

  	
  $

  	
  250,000

  	
   

  	
  $

  	
  250,000

  	
   

  	
  $

  	
  250,000

  	
   

  	
  $

  	
  150,000

  	
   

  	
  0

  	
   

  
	
  Guaranteed
  Minimum Bonus

  	
   

  	
  $

  	
  150,000

  	
   

  	
  $

  	
  300,000

  	
   

  	
  $

  	
  300,000

  	
   

  	
  $

  	
  350,000

  	
   

  	
  $

  	
  350,000

  	
   

  
	
  Aggregate
  Minimum Compensation

  	
   

  	
  $

  	
  550,000

  	
   

  	
  $

  	
  1,000,000

  	
   

  	
  $

  	
  1,200,000

  	
   

  	
  $

  	
  1,175,000

  	
   

  	
  $

  	
  1,025,000

  	
   

  



 


6.              Section 2.7(a)(ii) of
the Original Agreement is amended and restated to read in its entirety as
follows:


 


Termination Following Change of Control.  If Employee is terminated by
the Company for any reason other than Disability or death within 120 days prior
to, or is terminated by the Company for any reason within one (1) year
following, a Change of Control (as that term is defined in Section 3.6),
or if Employee terminates his employment with the Company for Good Reason
within one (1) year following a Change of Control, the Company shall pay
Employee (to the extent such amounts have not been previously paid pursuant to
an earlier termination under Section 2.7(a)(i)) two (2) times the sum
of Employee’s annual Base Salary (at the rate in effect on the Date of
Termination) and the greater of (I) the Average Annual Bonus or (II) the
Prior Year’s Bonus.  In addition, if 


 


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Employee is terminated without Cause or terminates his
employment for Good Reason during such one-year period, Employee shall be
entitled to the payments and benefits described in Section 2.7(a)(i)(A),
(B), (D) and (E) (to the extent such amounts have not been previously
paid pursuant to an earlier termination under Section 2.7(a)(i)).  The foregoing shall be in lieu of amounts
that would otherwise be payable to Employee under Section 2.7(a)(i)(C) above.  Anything in the Agreement to the contrary
notwithstanding, (X) a termination by the Employee for any reason during
the thirty (30) day period immediately preceding the one (1) year
anniversary of a Change of Control, (Y) a termination of Employee’s
employment within one (1) year following a Change of Control as a result
of Employee’s death, or (Z) a termination of Employee’s employment by the
Company within one (1) year following a Change of Control as a result of
Employee’s Disability, shall each be deemed to be a termination for Good Reason
for all purposes of this Agreement.


 


7.               Section 2.7(a)(v) of
the Original Agreement is hereby amended and restated to read in its entirety
as follows:


 


(v)                                 Notwithstanding
anything in this Agreement to the contrary: 
(x) Employee shall have no right to any payments under Section 2.7(a)(i) if
Employee is terminated by the Company for Cause, if employee terminates his own
employment for other than Good Reason, or if Employee’s employment is
terminated due to his death or Disability; and (y) Employee shall have no
right to any payments under Section 2.7(a)(ii) if Employee terminates
his own employment other than for Good Reason, or except as specifically
provided in Section 2.7(a)(ii), if Employee’s employment is terminated due
to his death or Disability.


 


8.               Section 3.8(b)(i) of
the Original Agreement is hereby amended and restated to read in its entirety
as follows:


 


For a period of sixty (60) days following such termination,
directly or indirectly, engage in (as a principal, shareholder, partner,
director, officer, agent, employee, consultant or otherwise) or be financially
interested in any business operating within any state in the United States in
which the Company is doing business at the time of such termination, which is
primarily engaged in the construction or marketing of any homes (whether single
family, multi-family, owner-occupied, rental or other) or the acquisition or
development of any property for residential purposes; provided, however,
nothing contained in this Section 3.8 shall prevent Employee from holding
for investment no more than one percent (1%) of any class of equity securities
of a company whose securities


 


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are publicly traded on a national securities exchange or in
a national market system;


 


9.              Section 6.10 of the
Employment Agreement is hereby amended by adding a new Section 6.10(e) to
the end thereof to read in its entirety as follows:


 


(e)                                  Notwithstanding
anything in this Section 6.10 to the contrary, all amounts payable to the
Employee as a Gross-Up Payment shall be paid as soon as practicable following
the determination of the amount required to be paid to the Employee, and in no
event later than the end of the calendar year following the calendar year in
which the Employee pays the taxes subject to the “gross-up” provision.  This Section 6.10(e) is intended to
require a time and manner of payment for Gross-Up Payments that is consistent
with the requirements for treatment of such payments as payable at a specified
time for purposes of Code Section 409A, as such requirements are set forth
in Treasury Regulation Section 1.409A-3(i)(1)(v) and shall in all
cases be interpreted consistent with such requirements, or any successor
provisions or guidance regarding compliance with Section 409A of the
Internal Revenue Code.


 


10.        Section 6.12of the
Employment Agreement is hereby amended and restated to read in its entirety as
follows:


 


6.12                        Special
Rules Regarding Section 409A of the Internal Revenue Code.  Notwithstanding anything to the contrary set
forth in this Agreement, all payments of compensation or provision of taxable
benefits that are determined to constitute a form of “nonqualified deferred
compensation” subject to Section 409A of the Internal Revenue Code of
1986, as amended (the “Code”) shall be paid at a time and in a manner that is
consistent with the requirements of that Code Section.  Specifically, any payments or provision of
benefits otherwise required to be made, distributed or otherwise made available
to Employee by reason of Employee’s termination of employment during the six
month period following Employee’s termination of employment shall be deferred
until the six month anniversary of Employee’s termination of employment, but
only to the extent necessary to comply with Section 409A(2)(B)(i) of
the Code.  All other payments and taxable
benefits shall be made available or distributed to Employee at such time(s) as
provided by the applicable provisions of this Agreement.  In the event any payments are deferred until
the six month anniversary of Employee’s termination of employment by reason of
this Section 6.12, those payments shall be made in a single lump sum with
interest, determined by reference to the lesser of 5% or prime rate as
published from time to time in the Money Rates section of the Wall Street Journal. 
References to “termination of employment” shall be interpreted to refer
to events that qualify as a “separation from service” (as that phrase is used
in applicable regulations issued pursuant to Section 409A of the Code) to
the extent such event is the basis for payments of amounts that are treated as
nonqualified deferred compensation subject to Section 409A of the
Code.  To the extent any
reimbursements or in-kind benefits due to


 


5

















 


Employee under this Agreement constitutes “deferred compensation” under
Section 409A of the Code, any such reimbursements or in-kind benefits
shall be paid to you in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).  Each payment made under this Agreement shall
be designated as a “separate payment” within the meaning of Section 409A
of the Code.  The Company shall
consult with Employee in good faith regarding the implementation of the
provisions of this Section 6.12.


 


11.        Employee shall be eligible to
receive a bonus as provided in the Cash Bonus Plan for Garry P. Herdler
approved by the Compensation Committee on December 4, 2008, which Bonus Plan
shall, with respect to Employee, be in addition to and not a replacement of the
Company’s Incentive Compensation Plan.


 


12.        Company
confirms that all bonus income, whether received before, on or after, the date
hereof, and regardless of whether such bonus income is sign-on, guaranteed
minimum bonus, additional bonus or other bonus amounts and whether deferred or
not or elected to be in a non-cash form shall be considered “Recognized Bonus” for purposes of the Company’s Supplemental
Executive Retirement Plan (“SERP”).


 


13.        Except as set forth herein, the terms, conditions and provisions of the Employment Agreement remain unchanged and such
terms, conditions and provisions are hereby confirmed.


 


14.        This Amendment to Employment
Agreement may be executed
in more than one counterpart, each of which shall be an original and all of
which together shall constitute one instrument.


 


IN WITNESS WHEREOF, the Company and the
Employee have caused this Second Amendment to Employment Contract to be
executed as of the date first set forth above.


 


 


	
   

  	
  ORLEANS HOMEBUILDERS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ MICHAEL T. VESEY

  
	
   

  	
   

  	
  Name:

  	
  Michael T. Vesey

  
	
   

  	
   

  	
  Title:

  	
  President & COO

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GARRY P. HERDLER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
     /s/ GARRY P. HERDLER

  



 


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