Exhibit 10.5
This
Noncompetition and Nonsolicitation Agreement (this “Agreement”) is dated as of
the 7th day of March, 2007 (the “Effective Date”) by and between Xxxxxxxx Xxxxxxxxxx
(the “Executive”) and Apria Healthcare Group Inc. (the
“Company”).
INTRODUCTORY PROVISIONS
The
following provisions are true and correct and constitute the basis for this Agreement:
| A. |
Concurrently herewith, the Executive is entering into one or more agreements
(herein referred to as “Incentive Compensation Agreements”) with the
Company pursuant to which the Executive, subject to continued employment through
the dates therein described and certain other restrictions, is receiving the
option to purchase and/or otherwise receive shares of common stock issued by the
Company as well as certain other benefits and the Executive is now being or may
hereafter be offered the opportunity, at the Company’s discretion, to
participate in one or incentive compensation or similar plans pursuant to which
the Executive will be eligible to earn additional compensation beyond the
Executive’s base salary (hereinafter referred to as “Incentive
Compensation Plans”). |
| B. |
The Executive and the Company are executing this document to express their
agreement concerning certain covenants pertaining to the protection of the
Company’s confidential information and trade secrets and its business
whereby the Executive agrees to satisfy certain obligations to perform and
refrain from performing certain acts during the Executive’s employment with
the Company and following the termination of the Executive’s employment
with the Company. |
| C. |
The Executive and the Company acknowledge and agree that the rights granted to
the Executive under the Incentive Compensation Plans and Incentive Compensation
Agreements, as well as the Executive’s continued at-will employment with
the Company and access to the Company’s confidential information and trade
secrets, Executive’s continued receipt of salary and other remuneration and
benefits associated with that at-will employment, and other good and valuable
consideration, constitute adequate and sufficient consideration for the
Executive’s entering into this Agreement. |
NOW,
THEREFORE, for the purposes and considerations expressed above, the parties hereto,
intending to be legally bound, agree as follows:
1.
Confidential Information.
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(a)
The Executive acknowledges that, in the performance of the Executive’s
duties on behalf of the Company, the Executive has had and will have access to,
has received and will receive, and has been entrusted and will be entrusted with
confidential information and trade secrets 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 owned by
the Company or any of its affiliates (collectively, the “Company
Group”), or used presently or at any time in the future in the course of
the business of the Company Group that is not otherwise part of the public
domain (collectively, the “Confidential Material”). All such
Confidential Material is considered secret and was and will be made available to
the Executive in confidence. |
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(b)
The Executive hereby agrees that the Executive shall not at any time (whether
during or after the Executive’s employment with the Company), directly or
indirectly, other than in the course of the Executive’s duties for the
Company, disclose or make available to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever, any
Confidential Material; provided, however, that this Section 1(b) shall not apply
(i) when disclosure is required by law or by any court, arbitrator, mediator or
administrative or legislative body (including any committee thereof) with
apparent jurisdiction to order the Executive to disclose or make available such
information (provided, however, that the Executive shall promptly notify the
Company in writing upon receiving a request for such information), or (ii) with
respect to any other litigation, arbitration or mediation involving this
Agreement, including but not limited to enforcement of this Agreement. The
Executive agrees that, upon termination of the Executive’s employment with
the Company, all Confidential Material in the Executive’s possession that
is in written, digital or other tangible form (together with all copies or
duplicates thereof, including computer files) shall be returned to the Company
and shall not be retained by the Executive or furnished to any third party, in
any form except as provided herein; provided, however, that the Executive shall
not be obligated to treat as confidential, or return to the Company copies of
any Confidential Material that (x) was publicly known at the time of disclosure
to the Executive, (y) becomes publicly known or available thereafter other than
by any means in violation of this Agreement or any other duty owed to the
Company by any person or entity, or (z) is lawfully disclosed to the Executive
by a third party. |
2.
Noncompetition Covenants.
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(a)
The Executive acknowledges that the Executive’s employment with a
competitor of the Company Group within a reasonable time following the
termination of the Executive’s employment with the Company Group would
create a substantial likelihood that the Executive would inevitably disclose or
use, to the detriment of the Company Group, Confidential Material, and that it
is essential to the Company Group’s legitimate business interests and also
to free and fair competition in the industry within which the Company Group does
business, to protect the Company Group’s Confidential Material from
disclosure. |
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(b)
The risk of inevitable disclosure is particularly applicable to any such
employment by the Executive with those competitors of the Company Group that are
similar in operation, service, missions and markets to the Company Group
(“Principal Competitors”). As of the date of this Agreement, the
Principal Competitors are: Lincare Holdings, Inc.; Rotech Healthcare, Inc.;
American HomePatient, Inc.; Coram Healthcare Corporation; Option Care, Inc.;
Pacific Pulmonary Services Corporation; LifeCare Solutions, Inc.; and the home
healthcare businesses of Air Products & Chemicals, Inc. and Praxair, Inc.
and their respective parent, affiliated and subsidiary companies. |
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(c)
In order avoid the disclosure by the Executive of the Company’s trade
secrets or other Confidential Material to those businesses that could most
adversely affect the performance of the Company Group and damage its goodwill,
the Executive agrees that, during the period of the Executive’s employment
by the Company and for a period of one year following the date on which the
Executive’s employment with the Company Group terminates for any reason
(the “Post-Termination Period”), the Executive will not engage,
directly or indirectly, in business with or work with or for, whether as an
owner, employee, consultant or otherwise, any Principal Competitor; provided,
however, that this restriction shall not prevent the Executive from owning less
than 1% of any class of publicly-traded securities (or other equity interests
held through a publicly-traded mutual fund or similar investment) of a Principal
Competitor following the termination of the Executive’s employment with the
Company. The Executive expressly acknowledges and agrees that the foregoing
restriction is reasonable and necessary in order to protect the Confidential
Material of the Company Group. The phrase “engage, directly or
indirectly” means engaging or having an interest in, directly or
indirectly, as owner, partner, participant of a joint venture, trustee,
proprietor, shareholder, member, manager, director, officer, employee,
independent contractor, capital investor, lender, consultant, advisor or similar
capacity. |
3.
Nonsolicitation Covenants.
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(a)
During the term of the Executive’s employment with the Company and during
the Post-Termination Period, the Executive will not, directly or indirectly,
individually or as a consultant to, or as an employee, officer, stockholder,
director or other owner or participant in any business, influence or attempt to
influence customers, patients, referral sources, vendors, suppliers, licensors,
lessors, joint venturers, associates, consultants, agents, or partners of the
Company Group, either directly or indirectly, to divert their business away from
the Company Group, to any individual, partnership, firm, corporation or other
entity then in competition with the business of any entity within the Company
Group, and the Executive will not otherwise interfere with, disrupt or attempt
to disrupt the business relationships, contractual or otherwise, between the
Company, any of its respective affiliates or subsidiaries, and any customers,
suppliers, vendors, lessors, licensors, joint venturers, associates, officers,
employees, consultants, managers, partners, members of or investors in any
entity within the Company Group. |
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(b)
During the term of the Executive’s employment with the Company and during
the Post-Termination Period, the Executive will not on behalf of any individual
or entity (other than the Company Group) directly or indirectly (i) induce,
encourage or otherwise solicit (or assist in soliciting) any person who is an
employee, independent contractor, consultant or business partner of any entity
within the Company Group to terminate his, her or its employment relationship,
contract, consulting relationship or partnership arrangement with such entity to
accept any other employment or position; or (ii) assist any other entity in
hiring any such employee, independent contractor, consultant or business
partner. |
4.
Cooperation; Nondisparagement. The Executive agrees that, following
termination of employment with the Company, the Executive will cooperate, at no
financial cost to the Executive, with any reasonable request the Company may
make for information or assistance with respect to any matter involving the
Executive. Furthermore, the Executive shall at no time make any libelous or
slanderous remarks or writings about any entity within the Company Group, or any
such entity’s officers or directors.
5.
Company Remedies. In the event that the Company, acting in good faith and
based on its reasonable belief at the time, determines that the Executive has
engaged in Detrimental Activity, the Company shall have the right to take any or
all of the actions set forth in this Section 5 to the fullest extent not
prohibited by law; provided, however, that in the case of Detrimental Activity
described in clause (i) of the definition of the term Detrimental Activity as
set forth below, the Company shall have the right to take any or all of the
actions set forth in Sections 5(a) and 5(b) (but, for purposes of clarity, shall
not have the ability to take any of the actions set forth in Sections 5(c) and
5(d) with respect to such nature of Detrimental Activity). For purposes of this
Agreement, “Detrimental Activity” shall mean (i) a breach of any of
the covenants set forth in Sections 1 through 4 above that has resulted in
material and demonstrable injury, monetarily or otherwise, to the Company, (ii)
that, as a result of fraud or other misconduct by the Executive, the Company is
required to prepare an accounting restatement due to the material noncompliance
of the Company with any financial reporting requirement under applicable
securities laws, or (iii) the Executive is found to have engaged in activities which
are in violation of applicable law and such activities have resulted in material
and demonstrable injury, monetarily or otherwise, to the Company. (The date of
any determination by the Company that the Executive has engaged in Detrimental
Activity is referred to herein as the “Determination Date.”) For these
purposes, a determination by the Company that Detrimental Activity has occurred
shall occur when either the Company’s Chairman of the Board of Directors or
the Company’s Chief Executive Officer shall have notified the
Company’s General Counsel in writing of the Company’s belief that the Executive
engaged in Detrimental Activity within the meaning of this Agreement. For
purposes of this Agreement, material damage to the Company may include damage to
its reputation or standing before current or potential customers, current or
potential sources of patient or customer referrals, industry suppliers, current
or potential sources of financing or equity capital, or public or semi-public
regulatory bodies such as the United States Department of Health and Human
Services or the Joint Commission on Accreditation of Healthcare Organizations,
and such damage need not be demonstrable as pecuniary damage. The parties
stipulate that such damage may be shown in any judicial or arbitration by
providing copies of media and analytical reports supported by written affidavit
or oral testimony as having been published to the general public or a particular
group in addition to any other form of evidence ordinarily allowed in judicial
or arbitration proceedings.
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(a)
Termination of Cash Bonuses. The Company shall have the right to
terminate immediately any and all rights the Executive may have with respect to
any cash bonuses or other cash incentive opportunities (“Cash
Bonuses”) awarded to the Executive under any Incentive Compensation Plan to
the extent such Cash Bonuses have not been paid as of the Determination Date. |
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(b)
Termination of Equity Awards. The Company shall have the right to
terminate immediately any or all (i) stock options granted to the Executive that
are outstanding and unexercised (whether or not vested) as of the Determination
Date, and/or (ii) other equity-based or cash awards granted or issued under any
Incentive Compensation Plan or Incentive Compensation Agreement to the Executive
that are outstanding and unpaid (whether or not vested) as of the Determination
Date. |
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(c)
Company Repurchase Option. |
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(i)
The Company shall have the right to repurchase any shares of the Company’s
common stock (“Common Stock”) acquired by the Executive during the
one-year period preceding the Determination Date pursuant to either (A) the
exercise of any stock option granted by the Company to the Executive (whether
granted on, before or after the date of this Agreement) or (B) the vesting or
payment of any restricted stock, restricted stock unit or other equity-based
award granted by the Company under any Incentive Compensation Agreement or Plan
to the Executive whether granted on, before or after the date of this Agreement)
(the “Repurchase Right”). The per-share price of any such repurchase
of shares by the Company shall be equal to the lesser of (x) the Fair
Market Value of the Common Stock at the time the Company gives notice of its
intention to repurchase such shares, or (y) the per-share price paid by the
Executive for such shares in connection with such exercise or vesting or payment
event. For purposes of this Agreement, “Fair Market Value” shall be
determined in accordance with the Company’s 2003 Performance Incentive Plan
as in effect on the Effective Date. For purposes of clarity, the repurchase
price for such shares shall be zero if the Executive did not pay any cash amount
to acquire such shares. |
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(ii)
The closing of any repurchase of shares following the Company’s exercise
of its Repurchase Right shall be at a date specified by the Corporation in the
Detrimental Activity Notice (as defined below), such date to be no later than 30
days after the date of the Detrimental Activity Notice. The purchase price (if
any) shall be paid at the closing in the form of a check against surrender by
the Executive of a stock certificate evidencing the repurchased shares with duly
endorsed stock powers, free of adverse claims. No adjustments (other than as
provided in the applicable stock incentive plan and/or award agreement) shall be
made to the purchase price for fluctuations in the Fair Market Value of the
shares after the date of the Detrimental Activity Notice. The Executive shall
represent to the Company that the shares are not subject to any lien,
encumbrance, pledge, or other interest of a third party. The Executive may not
sell, encumber, pledge or otherwise transfer or alienate any of the shares after
the date of the Detrimental Activity Notice. The Company shall have the right,
to the maximum extent permitted by law, to offset against any payment otherwise
due from the Executive any amount the Company is required to pay to the
Executive in accordance with this Section 5. |
(d)
Company Cash Reimbursement Right.
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(i)
In the event that all or a portion of any of the shares of Common Stock
referred to in the first sentence of Section 5(c) are not then owned by the
Executive without restriction (for this purpose, the shares will be considered
“restricted” if they are subject to, without limitation, any lien,
encumbrance, pledge or other interest of a third party), the Company shall have
the right to require the Executive to pay to the Company an amount equal to (x)
the total number of shares acquired by the Executive on such option exercise,
multiplied by (y) the difference between (A) the greater of the Fair Market
Value of the Common Stock on the date of the Detrimental Activity Notice or
the per-share consideration received by the Executive in any sale or other
transfer or all or a portion of such shares, and (B) the per-share price (if
any) paid by the Executive for such shares in connection with such exercise or
vesting or payment event (the “Cash Reimbursement Right”). |
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(ii)
Any payment required to be made by the Executive to the Company following the
Company’s exercise of its Cash Reimbursement Right shall (a) be paid in the
form of a certified or cashier’s check payable to the order of the Company,
and (b) be delivered no later than 30 days after the date of the Detrimental
Activity Notice to the Company at the address of its principal executive offices
to the attention of the Company’s Chief Executive Officer, such delivery to
be made by postage pre-paid registered or certified U.S. Mail. The Company shall
have the right, to the maximum extent permitted by law, to offset against any
payment otherwise due to the Executive any amounts the Executive is required to
pay to the Company in accordance with this Section 5. |
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(e)
Exercise of Company’s Rights. The Company’s exercise of any of
its rights under the provisions of this Section 5 shall be exercisable by the
Company by delivery of a written notice to the Executive (the “Detrimental
Activity Notice”), which notice must set forth the general basis of the
Company’s finding of Detrimental Activity, be mailed to the attention of or
otherwise actually delivered to the Executive at the Executive’s most
recent address reflected in the Company’s payroll records, and be so mailed
or delivered during the Exercise Period set forth below. The “Exercise
Period” shall commence on the Determination Date and shall terminate on the
date that is sixty days after the Determination Date. The Company shall have the
right to exercise any or all rights or remedies provided for in this Agreement
at its sole discretion and the fact that the Company shall fail or defer its
rights to exercise such rights or remedies in any given situation shall not
preclude the Company from exercising such rights or remedies in any other
situation even if such situation is identical or similar to the situation in
which the Company declined to exercise such rights or remedies. All remedies
provided herein are cumulative and are in addition to and not in limitation of
any other remedies available at law, in equity or by contract. The pursuit of
any one remedy shall not be deemed to limit the right to pursue any other
remedy, except to the extent that such remedy has been fully realized in am
manner that excludes the possibility of pursuing the other remedy. |
6.
Miscellaneous.
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(a)
Arbitration. Any dispute or controversy arising under or in connection
with this Agreement or the Executive’s employment by the Company shall be
settled exclusively by arbitration, conducted before a single neutral arbitrator
in accordance with the National Rules for Resolution of Employment Disputes of
the American Arbitration Association (“AAA”) as then in effect. Such
arbitration shall be conducted in Orange County, California, and the arbitrator
shall be a resident of Orange County, California or of a county contiguous to
Orange County, California; provided, however, that provisional injunctive relief
may, but need not, be sought in a court of law or equity in aid of arbitration
while arbitration proceedings are pending, and any provisional injunctive relief
granted by such court shall remain effective until the matter is finally
determined by the arbitrator. The arbitration shall be administered by AAA
pursuant to its Commercial Arbitration Rules. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. |
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The
parties acknowledge and agree that they are hereby waiving any rights to trial by jury in
any action, proceeding or counterclaim brought by either of the parties against the other
in connection with any matter whatsoever arising out of or in any way connected with any
of the matters referenced in the first sentence of the first paragraph of this Section
6(a).
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The
parties agree that the Company shall be responsible for payment of the forum costs of any
arbitration hereunder, including the arbitrator’s fee. The parties further agree that
in any proceeding with respect to such matters, the prevailing party will be entitled to
recover its reasonable attorney’s fees and costs from the non-prevailing party (other
than forum costs associated with the arbitration which in any event shall be paid by the
Company).
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Without
limiting the remedies available to the parties and notwithstanding the foregoing
provisions of this Section 6(a), the Executive and the Company acknowledge that any breach
of any of the covenants or provisions contained in Sections 1, 2, 3 or 4 of this Agreement
could result in irreparable injury to either of the parties hereto for which there might
be no adequate remedy at law, and that, in the event of such a breach or threat thereof,
the non-breaching party shall be entitled to obtain a temporary restraining order and/or a
preliminary injunction and a permanent injunction restraining the other party hereto from
engaging in any activities prohibited by any covenant or provision in Sections 1, 2, 3 or
4 of this Agreement or such other equitable relief as may be required to enforce
specifically any of such covenants or provisions.
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(b)
Successors.
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(i)
This Agreement is personal to the Executive and shall not, without the prior
written consent of the Company, be assignable by the Executive. |
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(ii)
This Agreement shall inure to the benefit of and be binding upon the Company,
its subsidiaries and its successors and any successor to the Company shall be
deemed substituted for the Company under the terms of this Agreement for all
purposes. As used herein, “successor” shall include any person, firm,
corporation or other business entity which at any time, whether by purchase,
merger or otherwise, directly or indirectly acquires either a controlling
interest in the voting stock of the Company or substantial portion of or the
business of the Company. This Agreement shall be considered to be assigned to
any such successor, whether that happens by operation of law, operation of the
terms of this Agreement, or otherwise. |
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(c)
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. |
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(d)
Modification. This Agreement may not be amended or modified other than
by a written agreement executed by the Executive and the Company. |
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(e)
Severability. It is the desire and intent of the parties that the
provisions of this Agreement shall be enforced to the fullest extent permissible
under applicable law. If any provision of this Agreement or any part of any such
provision is held under any circumstances to be invalid or unenforceable by any
arbitrator or court of competent jurisdiction, then: (i) such provision or part
thereof shall, with respect to such circumstances and in such jurisdiction, be
modified by such arbitrator or court to conform to applicable laws so as to be
valid and enforceable to the fullest possible extent; (ii) the invalidity or
unenforceability of such provision or part thereof under such circumstances and
in such jurisdiction shall not affect the validity or enforceability of such
provision or part thereof under any other circumstances or in any other
jurisdiction; (iii) the invalidity or unenforceability of such provision or part
thereof shall not affect the validity or enforceability of the remainder of such
provision or the validity or enforceability of any other provision of this
Agreement. Each provision of this Agreement is separable from every other
provision of this Agreement, and each part of each provision of this Agreement
is separable from every other part of such provision. |
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(f)
Governing Law. This Agreement shall be deemed to have been executed and
delivered in the State of California, which is the State in which the Executive is
principally employed by the Company as of the date of this Agreement, and the
rights and obligations of the parties hereunder shall be construed and enforced
in accordance with, and governed by, by the laws of that particular State
without regard to principles of conflict of laws. |
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(g)
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. |
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(h)
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 the Executive’s most recent
address on record with the Company, or addressed to the Company at 00000
Xxxxxxxxxx Xxxxx, Xxxx Xxxxxx, XX 00000, Attention: 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. |
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(i)
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. |
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first
above written.
APRIA HEALTHCARE GROUP INC.
By ____________________________
Xxxxxxxx X. Xxxxx
Chief Executive Officer
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EXECUTIVE
By ____________________________
Xxxxxxxx Xxxxxxxxxx
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