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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 "parachu
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