EXHIBIT 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into by and
between Apria Healthcare Group Inc. (the "Company") and Xxxx X. Xxxxx (the
"Executive"), as of the 19th day of October 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 the earlier of (i) a date mutually acceptable to the Executive and the
Company or (ii) November 30, 1998, (the "Commencement Date"), 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 notice prior to November 1, 2002, declining to
accept such extension.
II. DUTIES
The Executive shall serve during the course of his employment as an
Executive Vice President and the Chief Financial Officer of the Company,
reporting to the Chief Executive Officer. The Executive shall undertake such
duties and have such authority as the Company, through its Chief Executive
Officer, shall assign to the Executive from time to time in the Company's sole
and absolute discretion provided such duties and responsibilities are the types
of duties that would ordinarily be assigned to a person with employment
experience and a position comparable to that of the Executive. The Executive
agrees to devote substantially all of his working time and efforts to the
business and affairs of the Company. The Executive further agrees that he shall
not undertake any outside activities which create a conflict in interest with
his duties to the Company, or which, in the judgment of the Board of Directors
of the Company, interfere with the performance of the Executive's duties to the
Company.
III. COMPENSATION
A. The Company will pay to the Executive a base salary at the rate of $350,000
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, provided,
however, that such increase shall not be less than 5% for the calendar years
2000, 2001 and 2002.
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 the Chief
Executive Officer of the Company, including without limitation (i) the Company's
Incentive Compensation Plan at the 40% target level, with eligibility for
over-achievement up to 80% of base salary, and (ii) the Company's target
incentive plan for the two years ended December 31, 2000. For the 1999 fiscal
year, the Executive's bonus under the Incentive Compensation Plan shall be not
less than 140,000, payable on January 4, 2000.
C. Welfare Benefits 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. Such employment expenses will include, but are not
limited to, reasonable costs to maintain the Executive's California CPA license
and the related continuing education requirements.
E. Fringe Benefits. The Executive shall b 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 conjunction 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 the Chief Executive Officer 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 Commencement Date, the Company
shall deliver to the Executive one or more signed stock option agreements dated
the Commencement Date evidencing the Executive's right to purchase a total of
225,000 shares of the Company's common stock at a price per share equal to the
closing market price for the Company's common stock on the New York Stock
Exchange on the business day immediately preceding the Commencement Date. 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) 112,500 shares shall vest and become exercisable immediately as of the
Commencement Date, and
(ii) 56,250 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 the Commencement Date shall have been
greater than $14.00 per share, and
(iii) 56,250 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 the Commencement Date shall have
been greater than $18.00 per share.
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. Sign-on Bonus. Within ten days following commencement of employment, the
Company will pay Executive $100,000 as a sign-on bonus.
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 XVII if 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 material term of this Agreement for a 30-day period after
written notification is delivered by the Company that specifically refers to
this paragraph and identifies the manner in which the Company believes the
Executive had breached a material 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 Chief Executive Officer or
Chairman of the Board stating that in the good faith opinion of the officer
signing such notice, 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, (i) any
amounts due pursuant to the terms of any applicable welfare benefit plans;
(ii) obligations pursuant to the terms of any outstanding stock option
agreements; and (iii) obligations under the Company's 401(k) Savings Plan.
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 200% 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 except that the Company will also pay to the Executive
any Accrued Obligation (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 provided, however, that the minimum
salary increases described in Section III.A. shall continue to
apply to any such reduced base salary; or
(ii) if 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 does not permit the Executive to continue to
serve as the Chief Financial Officer 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 Chief
Executive Officer 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, provided, however, that the amount to be included in the
Executive's Annual Compensation pursuant to this clause (i) shall not
be less than the $140,000 guaranteed amount of his bonus for 1999,
(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.
(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; or
(iii) the Company is materially or completely liquidated.
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 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. 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 if 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,
reimbursements, 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 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 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 application of
the Agreement which can be given effect without the valid 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 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,
the laws of the State of California without regard to principles of conflicts 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 c/o Law Offices of Xxxxxxx X. Xxxxxxxx at 0000 Xxx
Xxxxxxx Xxxxx Xxxx, Xxxxxxx Xxxxx, 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 notices
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 written.
APRIA HEALTHCARE GROUP INC. THE EXECUTIVE
By:
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Xxxxxx X. Xxxxxx Xxxx X. Xxxxx
Chief Executive Officer
