EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into
by and between Apria Healthcare Group Inc. (the "Company") and
Xxxxxx X. Xxxxxx (the "Executive"), as of the 5th day of May,
1998.
I. EMPLOYMENT.
The Company hereby employs the Executive and the Executive
hereby accepts such employment, upon the terms and conditions
hereinafter set forth, from May 5, 1998, to and including April
30, 2002. The period of employment covered by this Agreement
shall be automatically extended for an additional year until
April 30, 2003, unless either party shall send the other a
notice prior to November 1, 2002, declining to accept such
extension.
II. DUTIES.
A. The Executive shall serve during the course of his
employment as the Chief Executive Officer of the Company,
reporting to the Board of Directors. The Executive shall be
the senior executive officer of the Corporation, with the
authority to supervise and direct the other officers and
employees of the Corporation, and with authority from time to
time to delegate to other officers such executive and other
powers with duties as he shall deem appropriate, subject in all
respects to the authority of the Board.
B. The Executive agrees to devote substantially all of
his time, energy and ability to the business of the Company.
Nothing herein shall prevent the Executive, upon approval of the
Board of Directors of the Company, from serving as a director or
trustee of other corporations or businesses which are not in
competition with the business of the Company or in competition
with any present or future affiliate of the Company. Nothing
herein shall prevent the Executive from investing in real estate
for his own account or from becoming a partner or a stockholder
in any corporation, partnership or other venture not in
competition with the business of the Company or in competition
with any present or future affiliate of the Company.
III. COMPENSATION.
A. The Company will pay to the Executive a base
salary at the rate of $500,000 per year. Such salary shall be
payable in periodic installments in accordance with the
Company's customary practices. Amounts payable shall be reduced
by standard withholdings and other authorized deductions. The
Executive's salary may be increased from time to time at the
discretion of the Company's Board of Directors or its
Compensation Committee.
B. Annual Bonus, Incentive, Savings and Retirement Plans.
The Executive shall be entitled to participate in all annual
bonus, incentive, savings and retirement plans, practices,
policies and programs applicable generally to other executives
of the Company, including without limitation the Company's
Incentive Compensation Plan at the 40% target level, with
eligibility for over-achievement up to 80% of base salary. For
the 1998 fiscal year, the Executive's bonus under the Incentive
Compensation Plan shall be not less than $200,000, payable on
the earlier of (i) the last day of the Executive's employment,
in the event the Company terminates his employment for other
than Cause or death or Disability (as such terms are defined
below) or in the event the Executive terminates his employment
for Good Reason (as defined below, but not including a
termination for Good Reason as defined under Section IV-D-3(b)-
(iv) if the Executive gives notice terminating his employment
prior to January 4, 1999), or (ii) January 4, 1999.
C. Welfare Benefit Plans. The Executive and/or his
family, as the case may be, shall be eligible for participation
in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company
(including, without limitation, medical, prescription, dental,
disability, salary continuance, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other executives of the Company. The
Company reserves the right to modify, suspend or discontinue any
and all of the above plans, practices, policies and programs at
any time without recourse by the Executive so long as such
action is taken generally with respect to other similarly
situated peer executives and does not single out the Executive.
D. Expenses. The Executive shall be entitled to receive
prompt reimbursement for all reasonable employment expenses
incurred by him in accordance with the policies, practices and
procedures as in effect generally with respect to other
executives of the Company.
E. Fringe Benefits. The Executive shall be entitled to
fringe benefits, including without limitation (i) a car
allowance of $8,400 per year, payable in periodic installments
in accordance with the Company's customary practices, (ii)
reasonable access to the Company's independent auditors for
personal financial planning, (iii) reasonable travel and
entertainment expenses of the Executive's spouse, on an actually
incurred basis when necessary in connection with participation
in Company events, and (iv) such other benefits in accordance
with the plans, practices, programs and policies as may be in
effect generally with respect to other executives of the
Company.
F. Vacation. The Executive shall be entitled to four
weeks of paid vacation annually, to be available and prorated
monthly during the term of this Agreement and otherwise to be
consistent with the vacation policy and practice applicable to
other executives of the Company.
G. Stock Options. Within ten days following
the execution and delivery of this Agreement, the Company shall
deliver to the Executive one or more signed stock option
agreements dated May 5, 1998, evidencing the Executive's right
to purchase a total of 750,000 shares of the Company's common
stock at a price per share equal to $9.00. Such stock options
shall have a ten-year term and shall be consistent with the form
of stock options generally provided to the Company's executives,
except that the vesting shall be as follows:
(i) 375,000 shares shall vest and become exercisable
immediately as of the date of this Agreement, and
(ii) 187,500 shares shall vest and become exercisable on
the first date subsequent to May 5, 1999 on which the
average closing price of the Company's common stock traded
on the New York Stock Exchange during any period of 90
consecutive calendar days subsequent to May 5, 1998 shall
have been greater than $14.00 per share, and
(iii) 187,500 shares shall vest and become exercisable
on the first date subsequent to November 5, 2000 on which
the average closing price of the Company's common stock
traded on the New York Stock Exchange during any period of
90 consecutive calendar days subsequent to May 5, 1998
shall have been greater than $18.00 per share.
Such options shall also provide that all unvested portions of
said options shall immediately vest and become exercisable (i)
in the event a Change of Control (as defined below) occurs
subsequent to January 1, 1999, and (ii) in the event that,
prior to November 5, 2000, the Executive's employment is
terminated by the Company other than for Cause or if the
Executive terminates his employment for Good Reason (as defined
below, but not including a termination for Good Reason as
defined under Section IV-D-3(b)-(iv) if the Executive gives
notice terminating his employment prior to January 1, 1999.
All vested portions of such options shall remain exercisable for
a period of three years following any termination of the
Executive's employment other than for Cause.
H. Relocation. In order to facilitate his employment
and performance under this Agreement, the Executive agrees, as
promptly as practical, to relocate his principal residence to
Orange County, California. In connection with such relocation,
the Company will reimburse the Executive for his reasonable
relocation costs in accordance with the Company's Policy No. D-
9C, such reimbursable costs to include the moving of the
Executive's household goods and furnishings, closing costs on
the sale of his present home (including, if incurred, a sales
commission of up to 6% of the sales price), closing costs, if
incurred, on the purchase of his new home (including, if
incurred, up to 1.5 points on any mortgage loan arranged at the
time of purchase) and a lump sum amount of $1,500 for
incidentals in connection with the relocation. Such
reimbursements will be made promptly upon delivery by the
Executive to the Company of appropriate receipts in accordance
with the Company's normal practices, and will be "grossed-up" to
compensate the Executive for the Federal and State tax
implications of the reimbursement.
IV. TERMINATION.
A. Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death. If the
Company determines in good faith that the Disability of the
Executive has occurred (pursuant to the definition of Disability
set forth below), it may give to the Executive written notice in
accordance with Section XVIII of its intention to terminate the
Executive's employment. In such event, the Executive's
employment with the Company shall terminate effective on the
30th day after receipt of such notice by the Executive, provided
that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of his duties. For
purposes of this Agreement, "Disability" shall mean a physical
or mental impairment which substantially limits a major life
activity of the Executive and which renders the Executive unable
to perform the essential functions of his position, even with
reasonable accommodation which does not impose an undue hardship
on the Company. The Company reserves the right, in good faith,
to make the determination of Disability under this Agreement
based upon information supplied by the Executive and/or his
medical personnel, as well as information from medical personnel
(or others) selected by the Company or its insurers.
B. Cause. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement, "Cause"
shall mean that the Company, acting in good faith based upon the
information then known to the Company, determines that the
Executive has engaged in or committed: willful misconduct;
theft, fraud or other illegal conduct; failure to substantially
perform his duties (other than such failure resulting from the
Executive's Disability) for a 30-day period after written demand
for substantial performance is delivered by the Company that
specifically refers to this paragraph and identifies the manner
in which the Company believes the Executive has not
substantially performed his duties; insubordination; any
willful act that is likely to and which does in fact have the
effect of injuring the reputation or business of the Company;
violation of any fiduciary duty; violation of the Executive's
duty of loyalty to the Company; or a breach of any term of this
Agreement. For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered willful unless
done or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the
Executive shall not be deemed to have been terminated for Cause
without delivery to the Executive of a notice of termination
signed by the Company's Chairman of the Board stating that the
Board of Directors of the Company has determined that the
Executive has engaged in or committed conduct of the nature
described in the second sentence of this paragraph, and
specifying the particulars thereof in detail.
C. Other than Cause or Death or Disability. The
Executive or the Company may terminate the Executive's
employment at any time, without Cause, by giving the other party
to this Agreement at least 30 days advance written notice of
such termination, subject to the provisions of this Agreement.
D. Obligations of the Company Upon Termination.
1. Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability,
this Agreement shall terminate without further obligations to
the Executive or his legal representatives under this Agreement,
other than for (a) payment of the sum of (i) the Executive's
base salary through the date of termination to the extent not
theretofore paid, plus (ii) any earned vacation pay, to the
extent not theretofore paid (the sum of the amounts described in
clauses (i) and (ii) shall be hereinafter referred to as the
"Accrued Obligations"), which shall be paid to the Executive or
his estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the date of termination; and (b) payment to
the Executive or his estate or beneficiary, as applicable, any
amounts due pursuant to the terms of any applicable welfare
benefit plans.
2. Cause. If the Executive's employment is terminated by
the Company for Cause, this Agreement shall terminate without
further obligations to the Executive other than for the timely
payment of the Accrued Obligations. If it is subsequently
determined that the Company did not have Cause for termination
under this Section IV-D-2, then the Company's decision to
terminate shall be deemed to have been made under Section IV-D-3
and the amounts payable thereunder shall be the only amounts the
Executive may receive for his termination.
3. Other than Cause or Death or Disability.
(a) If, during the term of this Agreement , (i) the
Company terminates the Executive's employment for other
than Cause or death or Disability, or (ii) the Executive
terminates his employment hereunder with Good Reason (as
defined below), this Agreement shall terminate and the
Executive shall be entitled to receive a severance payment
payable in one lump sum upon the termination of his
employment in an amount equal to 300% of his Annual
Compensation (as defined below).
Any payment made pursuant to this Section IV-D-3(a) shall
be reduced by all amounts required to be withheld by
applicable law, and shall only be made in exchange for a
valid release of all claims the Executive may have against
the Company in a form acceptable to the Company. Such
payment shall constitute the sole and entire obligation of
the Company to provide any compensation or benefits to the
Executive upon termination, except for obligations under
the Company's 401(k) Savings Plan, obligations pursuant to
the terms of any outstanding stock option agreements and
the Company's obligation to provide the benefits required
by Section IV-D-3(d) below, and except that the Company
will also pay to the Executive any Accrued Obligations (as
defined in Section IV-D-1).
(b) The term "Good Reason" means:
(i) if the Executive's annual base salary is reduced,
except for a general one-time "across-the board"
salary reduction not exceeding ten percent (10%)
which is imposed simultaneously on all officers
of the Company; or
(ii) if, following the Executive's relocation to
Orange County, California, the Company requires
the Executive to be based at an office location
which will result in an increase of more than
thirty (30) miles in the Executive's one-way
commute; or
(iii) if the Company's Board of Directors does not
permit the Executive to continue to serve as the
Chief Executive Officer with the responsibilities
as described in Section II-A or another mutually
acceptable senior executive position; or
(iv) if a Change of Control of the Company occurs and,
at any time concurrent with or during the six-
month period following said Change of Control,
the Executive shall have sent to the Chairman of
the Company a written notice terminating his
employment on a date specified in said notice.
(c) The term "Annual Compensation" means an amount equal
to the Executive's annual base salary at the rate in effect
on the date on which the Executive received or gave written
notice of his termination, plus the sum of (i) an amount
equal to the average of the Executive's two most recent
annual bonuses, if any, received under the Company's
Incentive Compensation Plan prior to the notice of
termination, (ii) the amount of the Executive's annual car
allowance, and (iii) an amount determined by the Company
from time to time in its sole discretion to be equal to the
average annual cost for Company employees of obtaining
medical, dental and vision insurance under COBRA, which
amount is hereby initially determined to be $5,000. In the
event that such notice of termination is received or given
by the Executive (but not including any notice of
termination given by the Executive pursuant to Section IV-D-
3(b)-(iv) if the Executive gives such notice prior to
January 4, 1999) prior to January 4, 1999, then solely for
purposes of calculating Annual Compensation, the
Executive's average of his two most recent annual bonuses
shall be deemed to be his guaranteed 1998 minimum bonus of
$200,000.
(d) A "Change of Control" shall be deemed to have occurred if:
(i) any "person," as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "1934 Act") is, becomes or
enters a contract to become, the "beneficial owner",
as such term is used in Rule 13d-3 promulgated under
the 1934 Act, directly or indirectly, of securities
representing twenty-five percent (25%) or more of the
voting common stock of the Company;
(ii) all or substantially all of the business of the
Company is disposed of, or a contract is entered to
dispose of all of the business of the Company pursuant
to a merger, consolidation other transaction in which
(a) the Company is not the surviving company or (b)
the stockholders of the Company prior to the
transaction do not continue to own at least sixty
percent (60%) of the surviving corporation;
(iii) the Company is materially or completely liquidated; or
(iv) any person (other than the Company) purchases any
common stock of the Company in a tender or exchange
offer with the intent, expressed or implied, of
purchasing or otherwise acquiring control of the
Company.
Notwithstanding clause (i) above, a "Change of Control"
shall not be deemed to have occurred solely because a
person shall be, become or enter into a contract to become
the beneficial owner of 25% or more, but less than 40%, of
the voting common stock of the Company, if and for so long
as such person is bound by, and in compliance with, a
contract with the Company providing that such person may
not nominate, vote for, or select more than a minority of
the directors of the Company. The exception provided by
the preceding sentence shall cease to apply with respect to
any person upon expiration, waiver, or non-compliance with
any such contract, by which such person was bound.
(e) In the event of any termination of the Executive's
employment pursuant to Section IV-D-3(a), the Company
shall, for a period of one year following the termination
date, provide the Executive with appropriate office space
in a furnished office suite, including reasonable
secretarial, telephone, copying and delivery services. The
Company shall not be required to spend more than a total of
$50,000 to provide this benefit to the Executive.
4. Exclusive Remedy. The Executive agrees that the
payments contemplated by this Agreement shall constitute the
exclusive and sole remedy for any termination of his employment
and the Executive covenants not to assert or pursue any other
remedies, at law or in equity, with respect to any termination
of employment.
V. ARBITRATION.
Any dispute or controversy arising under or in connection
with this Agreement or Executive's employment by the Company
shall be settled exclusively by arbitration, conducted before a
single neutral arbitrator in accordance with the American
Arbitration Association's National Rules for Resolution of
Employment Disputes as then in effect. Judgment may be entered
on the arbitrator's award in any court having jurisdiction;
provided, however, that the Company shall be entitled to seek a
restraining order or injunction in any court of competent
jurisdiction to prevent any continuation of any violation of the
provisions of Sections VI, VII, or VIII of this Agreement and
the Executive hereby consents that such restraining order or
injunction may be granted without the necessity of the Company's
posting any bond, and provided, further, that the Executive
shall be entitled to seek specific performance of his right to
be paid until the date of employment termination during the
pendency of any dispute or controversy arising under or in
connection with this Agreement. The fees and expenses of the
arbitrator shall be borne by the Company.
VI. ANTISOLICITATION.
The Executive promises and agrees that during the term of
this Agreement (including any renewal) and for a period of one
year thereafter, he will not influence or attempt to influence
customers of the Company or any of its present or future
subsidiaries or affiliates, either directly or indirectly, to
divert their business to any individual, partnership, firm,
corporation or other entity then in competition with the
business of the Company or any subsidiary or affiliate of the
Company.
VII. SOLICITING EMPLOYEES.
The Executive promises and agrees that, for a period of one
year following termination of his employment, he will not
directly or indirectly solicit any of the Company employees who
earned annually $50,000 or more as a Company employee during the
last six months of his or her own employment to work for any
other business, individual, partnership, firm, corporation, or
other entity.
VIII. CONFIDENTIAL INFORMATION.
A. The Executive, in the performance of his duties on
behalf of the Company, shall have access to, receive and be
entrusted with confidential information, including but not
limited to systems technology, field operations, reimbursement,
development, marketing, organizational, financial, management,
administrative, clinical, customer, distribution and sales
information, data, specifications and processes presently owned
or at any time in the future developed, by the Company or its
agents or consultants, or used presently or at any time in the
future in the course of its business that is not otherwise part
of the public domain (collectively, the "Confidential
Material"). All such Confidential Material is considered secret
and will be available to the Executive in confidence. Except in
the performance of duties on behalf of the Company, the
Executive shall not, directly or indirectly for any reason
whatsoever, disclose or use any such Confidential Material,
unless such Confidential Material ceases (through no fault of
the Executive's) to be confidential because it has become part
of the public domain. All records, files, drawings, documents,
notes, disks, diskettes, tapes, magnetic media, photographs,
equipment and other tangible items, wherever located, relating
in any way to the Confidential Material or otherwise to the
Company's business, which the Executive prepares, uses or
encounters during the course of his employment, shall be and
remain the Company's sole and exclusive property and shall be
included in the Confidential Material. Upon termination of this
Agreement by any means, or whenever requested by the Company,
the Executive shall promptly deliver to the Company any and all
of the Confidential Material, not previously delivered to the
Company, that may be or at any previous time has been in the
Executive's possession or under the Executive's control.
B. The Executive hereby acknowledges that the sale or
unauthorized use or disclosure of any of the Company's
Confidential Material by any means whatsoever and at any time
before, during or after the Executive's employment with the
Company shall constitute unfair competition. The Executive
agrees that he shall not engage in unfair competition either
during the time employed by the Company or any time thereafter.
IX. PARACHUTE LIMITATION.
Notwithstanding any other provision of this Agreement, the
Executive shall not have any right to receive any payment or
other benefit under this Agreement, any other agreement, or any
benefit plan if such right, payment or benefit, taking into
account all other rights, payments or benefits to or for the
Executive under this Agreement, all other agreements, and all
benefit plans, would cause any right, payment or benefit to the
Executive under this Agreement to be considered a "parachute
payment" within the meaning of Section 280G(b) (2) of the
Internal Revenue Code as then in effect (a "Parachute Payment").
In the event that the receipt of any such right or any other
payment or benefit under this Agreement, any other agreement, or
any benefit plan would cause the Executive to be considered to
have received a Parachute Payment under this Agreement, then the
Executive shall have the right, in the Executive's sole
discretion, to designate those rights, payments or benefits
under this Agreement, any other agreements, and/or any benefit
plans, that should be reduced or eliminated so as to avoid
having the right, payment or benefit to the Executive under this
Agreement be deemed to be a Parachute Payment.
X. SUCCESSORS.
A. This Agreement is personal to the Executive
and shall not, without the prior written consent of the Company,
be assignable by the Executive.
B. This Agreement shall inure to the benefit of and be
binding upon the Company, its subsidiaries and its successors
and assigns and any such subsidiary, successor or assignee shall
be deemed substituted for the Company under the terms of this
Agreement for all purposes. As used herein, "successor" and
"assignee" shall include any person, firm, corporation or other
business entity which at any time, whether by purchase, merger
or otherwise, directly or indirectly acquires the stock of the
Company or to which the Company assigns this Agreement by
operation of law or otherwise.
XI. WAIVER.
No waiver of any breach of any term or provision of this
Agreement shall be construed to be, nor shall be, a waiver of
any other breach of this Agreement. No waiver shall be binding
unless in writing and signed by the party waiving the breach.
XII. MODIFICATION.
This Agreement may not be amended or modified other than by
a written agreement executed by the Executive and the Company's
Chairman.
XIII. SAVINGS CLAUSE.
If any provision of this Agreement or the application
thereof is held invalid, such invalidity shall not affect any
other provisions or applications of the Agreement which can be
given effect without the invalid provisions or applications and,
to this end, the provisions of this Agreement are declared to be
severable.
XIV. COMPLETE AGREEMENT.
This Agreement constitutes and contains the entire
agreement and final understanding concerning the Executive's
employment with the Company and the other subject matters
addressed herein between the parties. It is intended by the
parties as a complete and exclusive statement of the terms of
their agreement. It supersedes and replaces all prior
negotiations and all agreements proposed or otherwise, whether
written or oral, concerning the subject matter hereof. Any
representation, promise or agreement not specifically included
in this Agreement shall not be binding upon or enforceable
against either party. This is a fully integrated agreement.
XV. GOVERNING LAW.
This Agreement shall be deemed to have been executed and
delivered within the State of California and the rights and
obligations of the parties hereunder shall be construed and
enforced in accordance with, and governed by, by the laws of the
State of California without regard to principles of conflict of
laws.
XVI. CONSTRUCTION.
In any construction to be made of this Agreement, the same
shall not be construed against any party on the basis that the
party was the drafter. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect.
XVII. COMMUNICATIONS.
All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been
duly given if delivered by hand or by courier, or if mailed by
registered or certified mail, postage prepaid, addressed to the
Executive at 00000 Xxxxxxxx Xxxxxxxxx, #000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000, or addressed to the Company at 0000 Xxxxxx
Xxxxxx, Xxxxx Xxxx, Xxxxxxxxxx 00000, Attention: Senior Vice
President and General Counsel, with a copy to the attention of
the Senior Vice President, Human Resources. Either party may
change the address at which notice shall be given by written
notice given in the above manner.
XVIII. EXECUTION.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Xerographic copies of such signed counterparts may be used in
lieu of the originals for any purpose.
IX. LEGAL COUNSEL.
The Executive and the Company recognize that this is a
legally binding contract and acknowledge and agree that they
have each had the opportunity to consult with legal counsel of
their choice.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
APRIA HEALTHCARE GROUP INC. THE EXECUTIVE
By:
----------------------------- -----------------------------
Xxxxx X. Xxxxxxxxx Xxxxxx X. Xxxxxx
Chairman
