EXHIBIT 10.5
EXECUTION VERSION
EMPLOYMENT AGREEMENT
This
Employment Agreement dated as of November 28, 2006, between
National Home Health Care Corp. , a Delaware corporation
having an address at 700 White Plains Road, Scarsdale, New York
10583 (the “ Company ”), and Robert P.
Heller , an individual having an address at 700 White Plains
Road, Scarsdale, New York 10583 (“ Employee
”).
W I T N E S S E T H :
WHEREAS,
the Company desires that Employee continue to be employed by it and
continue to render services to it, and Employee is willing to
continue to be so employed and to continue to render such services
to the Company, all upon the terms and subject to the conditions
contained herein.
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1.
Employment . Subject to and upon the terms and conditions
contained in this Agreement, the Company hereby agrees to continue
to employ Employee and Employee agrees to continue in the employ of
the Company, for the period set forth in Paragraph 2 hereof, to
render the services to the Company, its affiliates and/or
subsidiaries described in Paragraph 3 hereof. This Agreement is not
effective until and is contingent upon the “effective
time” (the “Effective Date”) of the merger
pursuant to that certain agreement among the Company, AG Home
Health Acquisition Corp., and AG Home Health LLC(the “
Merger Agreement ”).
2.
Term . Employee’s term of employment under this
Agreement shall commence on the Effective Date and shall continue
for a period through and including the fifth anniversary of the
Effective Date (the “ Employment Term ”) unless
extended in writing by both parties or earlier terminated pursuant
to the terms and conditions set forth herein.
3.
Duties . (a) Employee shall be employed as the
Company’s Executive Vice President of Finance, Chief
Financial Officer and Treasurer. It is agreed that Employee shall
perform his services, subject to required business travel, in the
Company’s Scarsdale, New York facilities or within 10 miles
of such facility, or any other facilities mutually agreeable to the
parties. If the Company undergoes a Change in Control (as defined
in Paragraph 11 hereof) or other significant corporate transaction
(collectively a “Corporate Transaction ”), then
a change in the title of the Employee shall not be a breach of this
Agreement, so long as following such Corporate Transaction the
Employee remains the principal financial officer of the division or
other entity which comprises essentially the same operations as
were conducted by the Company prior to such Corporate Transaction.
Except as set forth above, the rights and duties of Employee shall
not in any way be curtailed by the Company without his consent nor
shall he be deprived of the dignity ordinarily associated with his
offices.
(b)
Employee agrees to abide by all By-laws and applicable policies of
the Company promulgated from time to time by the Board of Directors
of the Company (the “ Board ”), including
without limitation the Business Policies of the Company annexed
hereto as Annex A.
4.
Exclusive Services and Best Efforts . Employee shall devote
all of his working time, attention, best efforts and ability during
regular business hours exclusively to the service of the Company,
its affiliates and subsidiaries during the term of this
Agreement.
5.
Compensation . As compensation for his services and
covenants hereunder, the Company shall pay Employee the
following:
(a)
Base Salary . The Company shall pay Employee a minimum base
salary (“ Salary ”) of $255,000 per year plus
the CPI Increase described below. The Salary shall be subject to
review and adjustment on an annual basis provided, however, that in
no event shall Employee’s Salary be adjusted below the Salary
designated herein. The Salary for Employee shall be increased
annually by a percentage increase in the Consumer Price Index (the
“CPI Increase”); the first such increase shall be
effective retroactively as of August 1, 2006whereupon the salary
for Employee in effect on that date shall be increased as of that
date by a percentage equal to the percentage increase in the
Consumer Price Index from January 1, 2006 to December 31, 2006.
Employee shall receive a lump sum payment equal to the CPI Increase
appropriately prorated for the period from August 1 until the date
coinciding with the end of the payroll period in which such lump
sum payment is made, and such lump sum payment shall be paid to
Employee on or prior to March 15, 2007. Each payroll period after
such lump sum payment is made shall reflect Employee’s
Salary, as augmented by the CPI Increase. During the Employment
Term, Employee shall also be given CPI Increases (based on his then
current Salary) as of each August 1 that occurs after August 1,
2006 with respect to the percentage increase in the Consumer Price
Index for the 12-month period beginning on the immediately
preceding January 1. Notwithstanding the foregoing, if Employee has
already received the above described lump sum payment from the
Company for the period beginning August 1, 2006, then such lump sum
payment shall not be paid to Employee in 2007; however,
Employee’s Salary for payroll periods after the Effective
Date shall reflect the CPI Increase. As used in this Paragraph
5(a), Consumer Price Index shall mean the Consumer Price Index for
Urban Wage Earners and Clerical Workers prepared by the Bureau of
Labor Statistics of the U.S. Department of Labor, or, if that index
is not then being published, the most nearly comparable successor
index that the parties may agree upon or, if they fail to agree, an
index designated by Company’s independent registered public
accounting firm. If a successor index is used, the Company’s
independent registered public accounting firm shall make such
adjustments to the index as may be appropriate to carry out the
intention of this paragraph and their determination shall be final
and binding on the parties.
(b)
Bonus Compensation .
(i)
The Company shall pay Employee a bonus equal to one percent of the
amount by which the income from operations for the fiscal period
from August 1, 2006 to the Effective Date (determined in accordance
with United States generally accepted accounting principles
consistently applied) exceeds the product of $5,000,000 multiplied
by the number of days between August 1, 2006 and the Effective Date
and divided by Three Hundred Sixty-Five (365). The foregoing bonus
shall be paid by the Company within thirty (30) days after the
Effective Date.
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(ii)
The Employee shall also receive annual bonus compensation (“
Bonus Compensation ”) equal to one percent of the
amount by which the “EBITDA of the Company” (as such
term is defined in the Merger Agreement) exceeds (i) (x)
$8,176,500, if the EBITDA of the Company for the EBITDA Period (as
such term is defined in the Merger Agreement) as determined in
accordance with the Merger Agreement is equal to or greater than
$7,900,000 but less than $8,150,000, or (y) $8,435,200, if the
EBITDA of the Company for the EBITDA Period as determined in
accordance with the Merger Agreement is equal to or greater than
$8,150,000 (as applicable, the “ Base Year Amount
”) in the twelve month period, which commences on the first
day of the calendar quarter in which occurs the Effective Date (the
“ Base Year ”) or (ii) Base Year Amount plus a
compound annual growth rate of 3.5% for each subsequent twelve
month period (each such period commencing with the calendar quarter
in which an anniversary of the Effective Date occurs) in the
Employment Term. The foregoing Bonus Compensation shall be paid by
the Company within thirty (30) days after completion of the audited
financial results of the Company for the applicable fiscal year,
but in no event later than 2 and 1/2 months after the end of the
fiscal year for which the bonus relates. Notwithstanding the
foregoing, in the event of a Corporate Transaction, the Board shall
equitably and in good faith adjust the above bonus targets to
appropriately account for such event.
(c)
LLC Interest . As soon as practical following the Effective
Date, the Company shall grant to Employee an interest in AG Home
Health LLC, which shall be treated for federal income tax purposes
as a profits only interest and shall represent an interest in 3.0%
of the future profits of the Company (the “ Profits
Interest ”). Such Profits Interest means the right to
share in any cash or property distributions made by AG Home Health
LLC, after the return of the Contributed Capital to, and the
payment of a preferred return of 5.0% per annum on the Contributed
Capital of, Angelo Gordon & Company, LP and/or its affiliates,
and Eureka Capital Partners, LLC and/or its affiliates. The vesting
of the Profits Interest shall be in accordance with the schedule
attached hereto as Schedule A. For illustrative purposes, attached
hereto as Schedule B is a description of the payments of the
preferred return and the distributions of Contributed Capital and
Profits Interest to be made by AG Home Health LLC. “
Contributed Capital ” shall mean the contributed cash
capital of Angelo Gordon & Company, LP and/or its affiliates,
and Eureka Capital Partners, LLC and/or its affiliates, and credits
for any expenses related to the transactions contemplated by the
Merger Agreement paid prior to the Effective Date by Angelo Gordon
& Company, LP and/or its affiliates, or Eureka Capital
Partners, LLC and/or its affiliates.
6.
Business Expenses . Employee shall be reimbursed for, and
entitled to advances (subject to repayment to the Company if not
actually incurred by Employee) with respect to, those business
expenses incurred by him which are reasonable and necessary for
Employee to perform his duties under this Agreement in accordance
with policies established from time to time by the
Company.
7.
Employee Benefits . (a) During the Employment Term, Employee
shall be entitled to such insurance, disability, health and dental
and medical benefits and be entitled to participate in such
retirement plans or programs pursuant to the policies of the
Company, as are, in the aggregate, no less beneficial to the
Employee than the benefits to which the Employee is currently
entitled; providedthat Employee shall be required to comply
with the conditions attendant to coverage by such plans and shall
comply with and be entitled to benefits only in
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accordance with the terms and
conditions of such plans. The Company shall cause its non-qualified
deferred compensation plan (the “ Deferred
Compensation Plan”) to distribute to Employee all sums
credited to Employee’s account in such Plan no later than
fifteen (15) days after the Effective Date. In addition, the
Company shall credit Employee’s account in its Deferred
Compensation Plan with $12,000 no later than October 31
st of each year during the Employment Term beginning on
the November 1st following the Effective Date, provided
that the Employee is employed by the Company on such October 31
st . If Employee’s employment with the Company
terminates prior to October 31, 2011 for reasons other than
Employee’s death or termination without Cause, as of the date
of such termination, Employee’s benefit under the Deferred
Compensation Plan and all amounts credited to Employee’s
account thereunder (including any earnings thereon) shall be
forfeited. Employee shall be entitled to four weeks paid vacation
each year during the Employment Term at such times as does not, in
the reasonable opinion of the Board of Directors, interfere with
Employee’s performance of his duties hereunder, provided that
any unused vacation in any given calendar year shall not carry over
into a subsequent calendar year. Notwithstanding anything to the
contrary contained herein, the Company shall provide Employee with
term life insurance in the amount of $545,000 and/or reimburse
Employee for premiums paid by him on term life insurance (in an
amount up to $545,000, inclusive of insurance maintained by the
Company) as is currently in effect. The Company may withhold from
any benefits payable to Employee all federal, state, local and
other taxes and amounts as shall be permitted or required pursuant
to law, rule or regulation. In addition to the foregoing, the
Company shall pay to Employee the full amount of Employee’s
annual contribution under the Company’s Premium Conversion
Plan with respect to the Employee’s health, medical and
dental premiums, payable in accordance with the Company’s
normal payment practices.
(b)
Employee shall be entitled to receive the sum of $550 per month as
an automobile allowance provided at the expense of the Company from
the Effective Date and during the Employment Term, which allowance
shall be exclusive of all expenses related to car-phone, insurance,
repairs and maintenance for such automobile, which expenses also
shall be the responsibility of the Company. Employee agrees not to
lease any automobile covered by such allowance for a term longer
than three years. Notwithstanding the foregoing, the Company may,
at its option, elect to provide Employee an automobile of the make,
model and year mutually agreeable to the Company and Employee, all
costs of which associated with insurance, repairs, maintenance and
other expenses shall be the responsibility of the Company, in lieu
of the above described automobile allowances, all as may be
mutually agreed between Employee and the Company. Employee
acknowledges that some or all of the foregoing may be deemed
compensation to him.
8.
Death and Disability . (a) The Employment Term shall
terminate on the date of Employee’s death, in which event
Employee’s Salary, reimbursable expenses and benefits owing
to Employee through the date of Employee’s death shall be
paid to his estate. Except as may be provided in Paragraph 11
hereof, the Employee’s estate will not be entitled to any
other compensation upon termination of this Agreement pursuant to
this Paragraph 8(a).
(b)
If, during the Employment Term, in the opinion of a duly licensed
physician selected by Employee and reasonably acceptable to the
Company, Employee, because of physical or mental illness or
incapacity, shall become substantially unable to perform
the
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duties and services required of
him under this Agreement for a period of six consecutive months the
Company may, upon at least twenty (20) days’ prior written
notice given at any time after the expiration of such six-month
period to Employee of its intention to do so, terminate this
Agreement as of such date as may be set forth in the notice. In
case of such termination, Employee shall be entitled to receive his
Salary, reimbursable expenses and benefits owing to Employee
through the date of termination. Except as may be provided in
Paragraph 11 hereof, the Employee will not be entitled to any other
compensation upon termination of this Agreement pursuant to this
Paragraph 8(b).
9.
Termination for Cause . (a) The Company may terminate the
employment of Employee for Cause (as hereinafter defined). Upon
such termination, the Company shall be released from any and all
further obligations under this Agreement, except that the Company
shall be obligated to pay Employee his Salary, reimbursable
expenses and benefits owing to Employee through the day on which
Employee is terminated. Employee will not be entitled to any other
compensation upon termination of this Agreement pursuant to this
Paragraph 9(a).
(b)
As used herein, the term “ Cause ” shall mean:
(i) the willful failure of Employee to perform his duties pursuant
to Paragraph 3 hereof, which failure is not cured by Employee
within thirty days following written notice thereof from the
Company; (ii) any material breach of the representations or
warranties made by Employee herein, which breach is or could
reasonably be expected to be materially detrimental to the Company;
(iii) except with respect to matters covered by subsections (i) and
(ii) of this Section 9(b), any other material breach of this
Agreement by Employee which breach is or could reasonably be
expected to be materially detrimental to the Company and which
breach (to the extent curable) is not cured by Employee within 10
business days following written notice thereof from the Company;
(iv) any act, or failure to act, by Employee in bad faith or
intentionally to the material detriment of the Company, which act
or failure to act (to the extent curable) is not cured by Employee
within 10 business days following written notice thereof from the
Company; or (v) the commission by Employee of an act involving
theft, dishonesty or any other wrongful action or conduct which
materially damages the Company, its subsidiaries or
affiliates.
10.
Termination for Non-Performance or for Good Reason or upon a
Change in Control .
(a)
Notwithstanding anything to the contrary herein, including without
limitation Paragraph 2 hereof, the Company may terminate the
employment of Employee for Non-Performance (as defined in Paragraph
10(b) hereof) at any time on or after the second anniversary of the
Effective Date or the Company may terminate the Employee upon or
after a Change in Control (as defined in Paragraph 11) or the
Employee may terminate his employment for Good Reason (as provided
in Paragraph 12(f) hereof). Upon any such termination, the Company
shall be released from any and all further obligations under this
Agreement, except that (i) the Company shall be obligated to pay
Employee his Salary, reimbursable expenses and benefits owing to
Employee through the day on which Employee is terminated, (ii) the
Company shall be obligated to continue to pay to the Employee, as
severance compensation, his Salary through the expiration of the
Employment Term, (iii) the Company shall be obligated to provide
COBRA continuation coverage under the Company’s medical plan
for the lesser of (x) 18 months or (y) until the expiration of the
Employment Term (the “ Initial Medical Period
”), in
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accordance with applicable law at
the Company’s sole expense provided that the Employee is not
enrolled in another group health plan, (iv) after expiration of the
Initial Medical Period and provided that the Employee is not then
enrolled in another group health plan, the Company shall be
obligated to pay to the Employee a lump sum payment equal to the
discounted net present value of the premium cost, if any, of
providing COBRA continuation coverage under the Company’s
medical plan to the Employee from the expiration of the Initial
Medical Period until the expiration of the Employment Term (as of
the date of such payment as determined in good faith by the
Company) and (v) the Profits Interest shall vest in accordance with
Schedule A. Such severance compensation shall be paid in equal
monthly installments, with the first such installment commencing on
the last day of the month in which Employee’s employment so
terminates. In the event of any breach by the Employee of the
covenants contained in Paragraph 12 hereof, the Company shall be
released from any further obligation to pay the severance
compensation specified herein. Except as may be provided in
Paragraph 11 hereof, the Employee will not be entitled to any other
compensation upon termination of this Agreement under this
Paragraph 10.
(b)
As used herein, the term “ Non-Performance ”
shall mean the: (i) failure of the Company to achieve an EBITDA of
the Company of the Base Year Amount for the Base Year and/or (ii)
failure of the Company to achieve a compounded annual growth rate
of at least 3.5% in the EBITDA of the Company in each and every
subsequent twelve month period (each such period commencing with
the calendar quarter in which an anniversary of the Effective Date
occurs) during the Employment Term. Notwithstanding the foregoing,
in the event of a Corporate Transaction, if the Board determines
that the above non-performance targets should be adjusted, then the
parties shall equitably and in good faith negotiate the adjustment
of the above non-performance targets to appropriately account for
such event.
11.
Additional Payment upon a Change in Control or upon Certain
Other Terminations . In addition to any post-termination
payments that may be due to employee as set forth in Paragraph 8 or
10, if, during the Employment Term (as may be extended from time to
time pursuant to Paragraph 2) (a) the employment of the Employee is
terminated: (i) by the Company without “Special Cause”
(as defined below), or (ii) by the Company by reason of the
Employee’s disability, or (iii) by the death of the Employee,
or (iv) by the Employee for Good Reason, or (b) there shall occur a
“Change in Control,” then within five (5) business days
following such Change in Control, the Company shall pay to the
Employee in a lump sum an amount equal to $739,396.00, but in no
event shall such severance compensation and all other payments or
benefits or accelerations, which constitute “parachute
payments�
