EXHIBIT 10.1
STOCK OWNERSHIP REQUIREMENTS AGREEMENT
This Stock Ownership Requirements Agreement (this "Agreement") is
entered into by and between Apria Healthcare Group Inc. (the "Company") and
________________________ (the "Officer") as of this 18th day of February, 2003.
RECITALS
A. The Corporation has adopted Stock Ownership Requirements For Senior
Executive Officers that apply to certain senior executive officers of the
Company (the "Requirements"). The Requirements, as currently in effect, are
attached to this Agreement as Exhibit A.
B. The Officer is currently a Senior Executive Officer within the
meaning of the Requirements and owns shares of Company stock and/or holds
previously-granted options to acquire additional shares of Company stock.
C. The Officer and the Company desire that any Company stock that the
Officer may currently own, and any stock that the Officer may acquire in the
future upon exercise of a previously-granted Company option, be subject to
certain transfer restrictions set forth below.
NOW, THEREFORE, the parties hereto agree as follows:
1. The Officer will not sell or otherwise transfer (other than as
permitted by Section 4 below) more than one-half of the "Net Shares" (as such
term is defined in the Requirements) the Officer acquires upon exercise of any
Company stock option granted prior to December 31, 2002 earlier than (A) 90 days
after the date such shares were acquired upon exercise of the option or (B) the
termination of the Officer's employment with the Company, whichever first
occurs.
2. As to all shares of Company stock subject to the 90-day restriction
referred to in Section 1 above (one-half of the Net Shares acquired upon
exercise of a pre-2003 option), if the Officer's level of ownership of Company
stock does not meet the applicable target level of ownership determined in
accordance with the Requirements or if a sale of Company stock would cause the
Officer's level of ownership of Company stock to fall short of the applicable
target, then the Officer will not, prior to the termination of the Officer's
employment with the Company, sell or otherwise transfer (other than as permitted
by Section 4 below) more than one-half of such shares.
3. As to all shares of Company stock that the Officer may own on the
date hereof (regardless of whether such shares were previously acquired upon
exercise of an option or otherwise), if the Officer's level of ownership of
Company stock does not meet the applicable target level of ownership determined
in accordance with the Requirements or if a sale of Company stock would cause
the Officer's level of ownership of Company stock to fall short of the
applicable target, then the Officer will not, prior to the termination of the
Officer's employment with the Company, sell or otherwise transfer (other than as
permitted by Section 4 below) more than one-half of such shares in the
aggregate.
4. The foregoing transfer restrictions shall not apply with respect to
either (1) a transfer to the Officer's spouse or minor child who resides with
the Officer, or (2) a transfer to a trust established for estate and/or tax
planning purposes that is revocable by the Officer and/or the Officer's spouse;
provided, that the transferee spouse, child or trust, as applicable, shall not
be able to further transfer the subject shares unless and until such shares
could have been transferred by the Officer in accordance with this Agreement had
the Officer continued to own such shares directly.
5. In addition to the transfer restrictions set forth in this
Agreement, the Officer further agrees that, so long as he or she is subject to
the Requirements, the Officer will comply with the requirement to notify the
Company's Chairman of the Board and Chief Executive Officer at least ninety days
in advance of any sale or other transfer of shares of Company stock.
6. This Agreement, and the restrictions imposed hereunder on the
Officer and any shares of Company stock he or she may own or acquire, shall
terminate upon and cease to apply following a Change in Control Event (as such
term is defined in the Company's 1997 Stock Incentive Plan), except that if a
Change in Control Event is triggered by stockholder approval of a transaction or
other event and that transaction or other event is not actually consummated,
this Agreement and the restrictions hereunder shall continue in effect
notwithstanding such Change in Control Event.
7. To the extent permitted by applicable law, the Company may issue
stop transfer instructions and/or impose legend conditions on certificates
evidencing any shares of Company stock to be issued to the Officer to enforce
the restrictions set forth herein. The Compensation Committee of the Board may,
in its sole discretion, permit exceptions to the covenants and restrictions set
forth herein on a case-by-case basis or otherwise.
8. The Officer is also subject to applicable federal and state laws and
Company policies restricting trading when in possession of material non-public
or "inside" information. These policies, laws and rules may also limit the
Officer's ability to buy or sell shares from time to time. Affiliates of the
Company (which term may include the Officer) may also be subject to reporting
obligations and potential liability under Section 16 of the Securities Exchange
Act of 1934. Any resales of Company shares by an affiliate must be made in
accordance with the volume, manner of sale, notice and other requirements of SEC
Rule 144. Compliance with this Agreement and the Requirements is in addition to,
not in lieu of, compliance with applicable laws and Company policies.
9. This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of California without giving effect to
conflicts of laws principles thereunder.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first written above.
"OFFICER" APRIA HEALTHCARE GROUP INC.
________________________________ By:__________________________________
Signature
Its:_________________________________
________________________________
Print Name
EXHIBIT A
APRIA HEALTHCARE GROUP INC.
STOCK OWNERSHIP REQUIREMENTS
FOR SENIOR EXECUTIVE OFFICERS
Consistent with an emphasis on higher standards of corporate governance, the
Board of Directors (the "Board") of Apria Healthcare Group Inc. (the "Company")
believes that the investment community values stock ownership by senior
management and that, by holding an equity position in the Company, officers
demonstrate their commitment to and belief in the long-term profitability of the
Company. Accordingly, the Board believes that ownership of Company stock by
officers should be encouraged.
COVERED OFFICERS
----------------
These Stock Ownership Requirements For Senior Executive Officers (these
"Requirements") apply to the Company's officers at the Senior Vice President
level and above (each, a "Senior Executive Officer").
TARGET OWNERSHIP
----------------
Each Senior Executive Officer should seek to acquire and maintain a level of
ownership of Company common stock (determined based on the fair market value of
such stock from time to time) as follows:
Ownership Target
Officer as Multiple of Base Salary
------- --------------------------
CEO 3.0 x
COO 2.5 x
Executive Vice Presidents, CFO and General Counsel 2.0 x
Senior Vice Presidents 1.5 x
Each Senior Executive Officer should work toward achieving these levels of
ownership with the objective of meeting the Requirements by January 31, 2008 or
within five years of becoming subject to these Requirements, as applicable. Once
a Senior Executive Officer has achieved the targeted level of stock ownership,
the Senior Executive Officer (1) should maintain at least that level of
ownership for the duration of his or her tenure with the Company and (2) within
three years after receiving an increase in salary or a promotion, should seek to
achieve the resulting greater target level of ownership.
IMPLEMENTATION
--------------
For purposes of determining whether the above ownership target is satisfied, the
following sources of stock ownership will be included:
- shares of Company common stock purchased by a Senior Executive Officer
on the open market or acquired and held upon exercise of stock options
and/or after the vesting of any Company restricted stock awards;
- shares of Company common stock owned directly by a Senior Executive
Officer's spouse or minor children who reside with the Senior Executive
Officer; and
- shares of Company common stock held in a trust established for estate
and/or tax planning purposes that is revocable by the Senior Executive
Officer and/or the Senior Executive Officer's spouse.
For purposes of determining whether the ownership target is satisfied, the
following sources will not be included:
- shares underlying any outstanding options; and
- shares of unvested restricted stock.
STOCK RETENTION; ONE-YEAR HOLDING PERIOD
----------------------------------------
Upon exercise of an option, the Board understands that a Senior Executive
Officer may reasonably need to sell a portion of the shares acquired in order to
settle any financing of the exercise price. For purposes of these Requirements,
the "net" number of shares of stock received upon exercise of an option refers
to the total number of shares acquired on exercise less the number of shares
sold in order to pay the exercise price of the option and/or settle any
financing of such exercise price. The Board also understands that a Senior
Executive Officer may reasonably need to sell a portion of the net number of
shares acquired upon exercise of an option or a portion of the shares subject to
a restricted stock award that become vested, as the case may be, in order to
provide for related tax obligations. Accordingly, for options granted after
January 1, 2003 and any restricted stock awards, the Board believes that, of the
net number of shares acquired upon exercise of an option or of the number of
shares subject to a restricted stock award that become vested, as the case may
be, up to 50% of such shares should be available to provide for related tax
obligations. The balance of the shares so acquired (the 50% of such number of
shares not used to provide for related tax obligations, also referred to as the
"Net Shares") should not be sold or otherwise transferred by the Senior
Executive Officer (other than in accordance with the spouse/child/tax planning
exception provided below) until the earlier of:
(A) the termination of the officer's employment with the Company, or
(B) one year after the officer acquired the shares upon exercise of the
stock option or one year after the shares subject to a restricted stock
award became vested, as the case may be.
After the one-year holding period, if the officer's ownership of Company stock
meets the applicable target indicated above (and a sale would not cause the
officer to fall short of the target), then all of the shares acquired pursuant
to the award could be sold. If the officer's ownership of Company stock does not
meet the applicable target indicated above or to the extent a sale of the Net
Shares acquired pursuant to the award would cause the officer to fall short of
the target, then, after expiration of such one-year holding period, the officer
may not sell or otherwise transfer (other than in accordance with the
spouse/child/tax planning exception provided below) more than half of the Net
Shares and the remaining shares should continue to be held as an investment in
the Company counting toward meeting the applicable target for the rest of the
officer's career with the Company or, if earlier, until the officer has acquired
a sufficient number of other shares so that a sale of such shares would not
cause the officer to fall short of the target.
Stock Option Example: Assume that a Senior Executive Officer exercises a
stock option for 100 shares and sells 60 shares to settle financing of the
exercise price. The officer acquired 40 "net" shares in this example. The
officer could sell up to 20 of those net shares to provide for related tax
obligations. The other 20 shares (the Net Shares) should be retained by the
Senior Executive Officer for at least one year after the option exercise
date. Of the 20 shares retained: (A) all 20 could be sold after the
one-year period if the officer then satisfied the target ownership level
(and the sale would not cause the officer to fall short of the target), or
(B) if the officer did not satisfy the target ownership level after the
one-year period, 10 of the shares could be sold but the officer should
continue to hold the other 10.
Restricted Stock Example: Assume that a Senior Executive Officer receives a
restricted stock award that vests as to 100 shares. The officer could sell
up to 50 of those shares to provide for related tax obligations. The other
50 shares (the Net Shares) should be retained by the Senior Executive
Officer for at least one year after the date that the shares became vested.
Of the 50 shares retained: (A) all 50 could be sold after the one-year
period if the officer then satisfied the target ownership level (and the
sale would not cause the officer to fall short of the target), or (B) if
the officer did not satisfy the target ownership level after the one-year
period, 25 of the shares could be sold but the officer should continue to
hold the other 25.
The foregoing transfer restrictions shall not apply with respect to either (1) a
transfer to one's spouse or minor child who resides with the Senior Executive
Officer, or (2) a transfer to a trust established for estate and/or tax planning
purposes that is revocable by the Senior Executive Officer and/or his or her
spouse; provided, that the transferee spouse, child or trust, as applicable,
shall not be able to further transfer the subject shares unless and until such
shares could have been transferred by the Senior Executive Officer in accordance
with these Requirements had the Senior Executive Officer continued to own such
shares directly.
OWNERSHIP OPPORTUNITIES
-----------------------
Various alternatives for accumulating shares of the Company's stock are
available to Senior Executive Officers:
- exercise employee stock options and hold the net shares acquired (after
selling enough shares to pay the purchase price and the tax
obligations); and
- using bonus money or other funds, purchase shares directly on the open
market (subject to compliance with securities laws and the Company's
black-out policy, etc.).
HEDGING TRANSACTIONS
--------------------
Senior Executive Officers should not engage in the purchase or sale of puts,
calls or other hedging transactions involving Company stock.
NOTIFICATION OF CHAIRMAN
------------------------
Any Senior Executive Officer who desires to sell or otherwise transfer Company
stock (including, without limitation, a transfer to a trust, spouse, child and
any other transfer for charitable or estate planning purposes) should give at
least ninety days advance written notice of the proposed transfer to the
Company's Chairman of the Board, with a copy to the Chief Executive Officer. The
notice should include the number of shares that the officer proposes to sell or
transfer and the expected date of the transfer, and a brief description of the
nature of the contemplated transaction (e.g., an open market sale, transfer to a
trust for tax planning purposes, etc.). With respect to shares that the officer
proposes to acquire upon exercise of a stock option and then sell, the notice
may be given in connection with, or in advance of, the officer's exercise of the
stock option and acquisition of the shares. With respect to shares subject to a
restricted stock award that the officer proposes to sell after vesting, the
notice may be given in connection with, or in advance of, the vesting of the
shares.
An officer is not, merely by giving the notice to the Company referred to in the
preceding paragraph, committed to effect the proposed sale or other transfer
described in such notice. However, following the 90-day notice period, if the
officer still desires to effect such sale or other transfer, the officer should
do so reasonably promptly. In the event the ninetieth day following the date on
which an officer gave notice to the Company of a proposed sale or other transfer
(or the first trading day thereafter if such date is not a trading day) occurs
during a blackout period in which such a sale or other transfer would be
prohibited by the Company's xxxxxxx xxxxxxx policies, then the officer has until
the end of the immediately succeeding open trading window pursuant to such
policies to effect such sale or other transfer. If a sale or other transfer is
not completed within the foregoing periods of time, or if there are other
material changes to the terms of the contemplated transaction as described in
the original notice to the Company, then the officer should file a new notice
with the Company pursuant to the preceding paragraph at least ninety days in
advance of the contemplated transaction date if the officer still desires to
effect such sale or other transfer.
An officer who is subject to these Requirements and who ceases to be a Senior
Executive Officer as a result of the officer's retirement or other voluntary
resignation from employment shall continue to be subject to this notification
requirement for the one-year period following the date on which he or she ceases
to be a Senior Executive Officer. Such notice requirement, however, shall not
continue to apply following a termination by the Company of the Senior Executive
Officer's employment.
TERMINATION UPON CHANGE IN CONTROL EVENT
----------------------------------------
These Requirements, and the restrictions hereunder, shall terminate upon and
cease to apply following a Change in Control Event (as such term is defined in
the stock option or incentive plan applicable to the option or under which such
shares were acquired from the Company or, if not so defined, as defined in the
Company's 1997 Stock Incentive Plan), except that if a Change in Control Event
is triggered by stockholder approval of a transaction or other event and that
transaction or other event is not actually consummated, these Requirements and
the restrictions hereunder shall continue in effect notwithstanding such Change
in Control Event.
OTHER IMPORTANT INFORMATION
---------------------------
Senior Executive Officers are also subject to applicable federal and state laws
and Company policy restricting trading on material non-public or "inside"
information. These laws and rules may also limit a Senior Executive Officer's
ability to buy or sell shares from time to time. Affiliates of the Company may
also be subject to reporting obligations and potential matching liability under
Section 16 of the Securities Exchange Act of 1934. Any resales of Company shares
by an affiliate must typically be made in accordance with the volume, manner of
sale, notice and other requirements of SEC Rule 144. Compliance with these
Requirements is in addition to, not in lieu of, compliance with any other
applicable laws or Company policies.
