EXHIBIT 10.4 EMPLOYMENT AGREEMENT

 

 

                                                                    EXHIBIT 10.4

 

                              EMPLOYMENT AGREEMENT

                              --------------------

 

         This EMPLOYMENT   AGREEMENT dated as of August 1, 2005 between   NATIONAL

HOME HEALTH CARE CORP.,   a Delaware   corporation   having an address at 700 White

Plains Road, Scarsdale,   New York 10583 (the "Company"),   and STEVEN FIALKOW, 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 :

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         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.

 

         2. Term.   Employee's   term of   employment   under this   Agreement   shall

commence on the date hereof (the   "Commencement   Date") and shall continue for a

period through and including the fifth anniversary of the Commencement 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   President,

Chief Executive Officer and Secretary.   It is agreed that Employee shall perform

his   services in the   Company's   Scarsdale,   New York   facilities,   or any other

facilities mutually agreeable to the parties.   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,   including   without   limitation   the   Business   Policies of the

Company annexed hereto as Annex A..

 

 

 

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         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 $525,000 per year.   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 first such   increase   shall be effective   retroactively   as of

August 1, 2005 whereupon 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, 2005 to   December   31,   2005 which

increase   shall be paid to Employee on or about March 15, 2006 or as promptly as

practicable   thereafter);   and such increases shall also be given effect on each

August 1 that   occurs   after   August   1,   2005 with   respect   to the   percentage

increase in the   Consumer   Price   Index for the   12-month   period   ending on the

immediately   preceding January 1. 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   certified public   accountants.   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.   The Company   shall pay Employee   annual

bonus compensation ("Bonus Compensation") equal to four percent of the amount by

which the income from   operations in any fiscal year during the Employment   Term

(determined   in   accordance    with   general    accepted    accounting    principles

consistently    applied   and   reported   on   the   Company's   audited   consolidated

statement of earnings for such fiscal year)   exceeds   $5,000,000.   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.

 

               (c) Options.   The Company may grant to Employee from time to time

options to purchase   shares of the Company's   common stock pursuant to the terms

of any of the   Company's   stock   option   plans   and   any   related   stock   option

agreement   required to be executed in connection   therewith.   Such options shall

have such terms and conditions as shall be determined by the Board of Directors.

 

 

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               (d) Cap.   Notwithstanding   anything to the contrary   contained in

Paragraphs   5(a) and   5(b)   hereof,   the   maximum   aggregate   Salary   and   Bonus

Compensation   payable to Employee in respect of any fiscal year shall not exceed

$750,000.

 

         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 and health and medical   benefits and be

entitled to   participate in such   retirement   plans or programs as are generally

made available to executive   officers of the Company pursuant to the policies of

the   Company;   provided   that   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 accordance   with the terms and   conditions of such

plans.   In   addition,   the   Company   shall   credit   Employee's   account   in   its

non-qualified deferred compensation plan (the "Deferred Compensation Plan") with

$12,000   no later   than   October   31st of each   year   during   the next six years

beginning   on November 1, 2005,   provided   that the   Employee is employed by the

Company   on such   October   31st.   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.   Notwithstanding   anything   to the   contrary   contained   herein,   the

Company shall provide   Employee with life insurance in the amount of $1,000,000.

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, payable in accordance with the Company's

normal payment practices.

 

               (b)   Employee   shall be   entitled   to receive the sum of $800 per

month as an automobile allowance provided at the expense of the Company from the

Commencement   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

 

 

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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. 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 duties and services required of him

under this Agreement for a period of twelve   consecutive months the Company may,

upon at least twenty (20) days' prior written notice given at any time after the

expiration   of such   twelve-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.   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 other   material   breach of this Agreement by

Employee,   including any of the material   representations   or warranties made by

Employee;   (iii)   any act,   or   failure   to act,   by   Employee   in bad   faith or

intentionally   to the detriment of the Company;   (iv) the commission by Employee

of an act involving   moral   turpitude,   dishonesty,   theft,   unethical   business

conduct, or any other conduct which significantly   impairs the reputation of, or

harms,    the    Company,    its    subsidiaries    or    affiliates;    or    (v)    any

misrepresentation,   concealment   or omission by Employee of any material fact in

seeking employment hereunder.

 

         10.   Termination   without   Cause   or for Good   Reason.   Notwithstanding

anything   to the   contrary   herein,   including   without   limitation   Paragraph 2

hereof,   the Company may terminate the employment of Employee   without Cause (as

defined in Paragraph   9(b) hereof)

 

 

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and 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

the Company shall be obligated to pay to the Employee as severance   compensation

his Salary,   reimbursable   expenses and benefits   owing to Employee   through the

earlier of the third anniversary of the day on which Employee's employment is so

terminated or the expiration of the Employment Term. 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. Employee will not

be entitled to any other   compensation   upon termination of this Agreement under

this Paragraph 10.

 

         11.   Termination    Following   a   Change   in   Control.   If,   during   the

Employment Term and within one year following a Change in Control of the Company

(as defined below),   the employment of the Employee is terminated by the Company

without Cause or by the Employee for any reason,   the Company shall   immediately

pay to the Employee in a lump sum as severance   compensation   an amount equal to

2.99 times the sum of (a) his annual Salary and (b) the Bonus   Compensation paid

or payable to him for the most   recently   completed   fiscal year of the Company,

but in no event shall such   severance   compensation   exceed the amount   which is

deductible   by the Company in   accordance   with   Section   280(G) of the Internal

Revenue Code of 1986, as amended.   Such severance   compensation shall constitute

the sole amounts payable to the Employee upon such   termination,   except for any

unpaid salary, reimbursement expenses and benefits owing to Employee through the

date of   termination   and except for payments   under the   Deferred   Compensation

Plan.   The Company   hereby   agrees to obtain an agreement   from any successor to

assume and agree to honor and   perform   this   Agreement.   For   purposes   of this

Agreement, a "Change in Control" shall have occurred if:

 

               (a) any   "person",   as such   term is used in   Sections   13(d) and

14(d) of the Securities   Exchange Act of 1934, as amended (the   "Exchange   Act")

(other than the Company, any trustee or other fiduciary holding securities under

an employee   benefit   plan of the Company,   Frederick H. Fialkow or Dr.   Bernard

Levine or any of their   respective   immediate   family   members or affiliates (as

such   term is   defined   in Rule 405   under   the   Securities   Act of 1933) or any

corporation owned, directly or indirectly, by the stockholders of the Company in

substantially   the same proportions as their ownership of stock of the Company),

is or   becomes   the   "beneficial   owner" (as   defined   in Rule   13d-3   under the

Exchange Act), directly or indirectly, of securities of the Company representing

30% or more of the   combined   voting   power of the   Company's   then   outstanding

securities;

 

               (b) during any period of not more than two consecutive years (not

including any period prior to the execution of this Agreement),   individuals who

at the   beginning   of such period   constitute   the Board,   and any new   director

(other than a director   designated by a person who has entered into an agreement

with the Company to effect a transaction   described in

 

 

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clause   (a),   (c) or (d) of this   Paragraph)   whose   election   by the   Board   or

nomination for election by the Company's   shareholders was approved by a vote of

at least   two-thirds   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, cease for any reason to constitute at least

a majority thereof;

 

               (c)   the    shareholders   of   the   Company   approve   a   merger   or

consolidation of the Company with any other corporation, other than (A) a merger

or   consolidation   which would   result in the voting   securities   of the Company

outstanding   immedia