APRIA HEALTHCARE GROUP INC.
NON-QUALIFIED
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is made by and
between
APRIA HEALTHCARE GROUP INC., a Delaware corporation (the
"Corporation"),
and XXXXXX X. XXXXXX, an individual (the "Employee").
W I T N E S S E T H
WHEREAS, pursuant to an Employment Agreement (herein so
called) dated
May 5, 1998, between Employee and the Corporation, the Corporation
has agreed
to grant the Employee the right and option to purchase 750,000
shares of the
Corporation's Common Stock, par value $0.001 per share (the
"Common Stock")
on the terms and conditions described in the Employment Agreement;
WHEREAS, the Corporation has satisfied a portion of its
obligation to
grant stock options to the Employee under the Employment Agreement
by granting
the Employee a stock option (the "1997 Plan Option") to purchase
all or any
part of 100,000 Shares of Common Stock pursuant to the Apria
Healthcare Group
Inc. 1997 Stock Incentive Plan (the "1997 Plan"), effective as of
the 5th
day of May, 1998 (the "Award Date");
WHEREAS, the Corporation has satisfied a further portion of
its
obligation to grant stock options to the Employee under the
Employment
Agreement by granting the Employee a stock option (the "1992 Plan
Option") to
purchase all or any part of 200,000 shares of Common Stock
pursuant to the
Apria Healthcare Group Inc. Amended and Restated 1992 Stock
Incentive Plan
(the "1992 Plan") effective as of the Award Date;
WHEREAS, the Corporation has determined to satisfy the
remainder of its
obligation to grant stock options to the Employee pursuant to the
Employment
Agreement by granting the Employee an option under this Agreement
to purchase
450,000 shares of Common Stock which are not to be issued under
any stock
incentive plan; and
WHEREAS, the option evidenced hereby is not intended to
constitute an
incentive stock option within the meaning of Section 422 of the
Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual promises and
covenants
made herein and the mutual benefits to be derived herefrom, the
parties agree
as follows:
1. Defined Terms. Capitalized terms used and not
otherwise defined
herein shall have the meanings assigned to such terms in the
1997 Plan.
2. Grant of Option. This Agreement evidences the
Corporation's
grant to the Employee of the right and option to purchase, on
and subject
to the terms and conditions set forth in this Agreement and
in the 1997
Plan, all or any part of 450,000 shares of Common Stock (the
"Shares") at
the price of $9.00 per Share (the "Option"), exercisable from
time to
time, subject to the provisions of this Agreement and the
1997 Plan,
prior to the close of business on May 5, 2008 (the
"Expiration Date").
It is the intent of the Corporation that (i) the Option shall
be a
nonqualified stock option within the meaning of Section 422
of the Code,
and (ii) as more fully described in Section 10 below,
although the Option
is not being issued under or pursuant to any qualified stock
incentive
plan of the Corporation, for purposes of administrative
convenience it
shall, to the extent applicable, be administered and
processed by the
Corporation and the Employee as if it had been issued under
the 1997
Plan.
3. Exercisability of Option. The Option shall vest and
be
exercisable (i) as to 75,000 Shares at any time from and
after the Award
Date; (ii) as to 187,500 Shares on the first date subsequent
to May 5,
1999 on which the average Fair Market Value of the Common
Stock during
any period of 90 consecutive calendar days subsequent to the
Award Date
shall have been greater than $14.00 per share; and (iii) as
to 187,500
Shares on the first date subsequent to November 5, 2000 on
which the
average Fair Market Value of the Common Stock during any
period of 90
consecutive calendar days subsequent to the Award Date shall
have been
greater than $18.00 per share. Notwithstanding the
foregoing, any
unvested portion of the Option shall immediately vest and
become
exercisable (i) in the event a "Change of Control" (as such
term is
defined in the Employment Agreement (herein so called)
between the
Employee and the Corporation dated May 5, 1998) occurs
subsequent to
January 1, 1999; (ii) in the event that the Employee's
employment is
terminated prior to November 5, 2000 (a) by the Corporation
for any
reason other than for "Cause" (as defined in the Employment
Agreement),
or (b) by the Employee with "Good Reason" (as defined in the
Employment Agreement, but not including a termination for
"Good Reason"
as defined in Section IV-D-3(b)-(iv) thereof if the Employee
gives notice
terminating his employment prior to January 1, 1999); and
(iii) on May 5,
2005, regardless of whether a "Change of Control" has
occurred prior to
that date.
Except as provided in Section 6 below, once the Option
becomes
exercisable with respect to a portion of the Shares, the
Employee shall
have the right thereafter to purchase any of such exercisable
Shares, in
whole or in part, from time to time; and such right shall
continue until
the Option terminates or expires. The Option shall only be
exercisable
in respect of whole Shares and fractional share interests
shall be
disregarded. The Option may only be exercised as to at least
100 Shares,
unless the number purchased is the total number at the time
available
for purchase under the Option.
4. Method of Exercise of Option. The Option shall be
exercisable
by the delivery to the Secretary of the Corporation of a
written notice
stating the number of Shares to be purchased pursuant to the
Option and
accompanied by payment made in accordance with and in a form
permitted
by Section 2.2 of the 1997 Plan for the full purchase price
of the Shares
to be purchased, subject to such further limitations and
rules or
procedures as the Committee may from time to time establish
as to any
non-cash payment. Subject to the express approval of the
Committee at
the time of exercise and applicable law, the purchase price
may be paid
in full or in part by a note meeting the requirements of
Section 1.9 of
the 1997 Plan or by shares of Common Stock already owned by
the Employee;
provided, however, that any shares delivered which were
initially
acquired upon exercise of a stock option or otherwise
acquired from the
Corporation must have been owned by the Employee for at least
six months
before the date of exercise. Shares used to satisfy the
exercise price
of the Option shall be valued at their Fair Market Value on
the date of
exercise. In addition, the Employee (or the Employee's
Beneficiary or
Personal Representative) shall furnish any assurances and
representations
required pursuant to Section 6.4 of the 1997 Plan.
5. Continuance of Employment. Nothing contained herein
or in the
1997 Plan shall confer upon the Employee any right with
respect to the
continuation of employment by the Corporation or any
Subsidiary or
interfere in any way with the right of the Corporation or of
any
Subsidiary at any time to terminate such employment or to
increase or
decrease the compensation of the Employee from the rate in
existence at
any time.
6. Effect of Termination of Employment or Death; Change
in
Subsidiary Status. The Option and all other rights
hereunder, to the
extent not exercised, shall terminate and become null and
void at such
time as the Employee ceases to be employed by either the
Corporation or
any Subsidiary, provided, however, that (i) all vested
portions
of the Option shall remain exercisable for a period of three
years
following any termination of the Employee's employment other
than for
"Cause" (as defined in the Employment Agreement), and (ii) if
the
Employee should die or become permanently disabled (within
the meaning
of Code Section 22 (e)(3) or as otherwise defined by the
Committee) while
employed by the Corporation or any Subsidiary or during the
three-year
period described in clause (i) above, then the Option may be
exercised
within a period of one year after the date of such death or
disability
or, if later, at any time before the end of such three-year
period.
Notwithstanding the foregoing, the Option shall not be
exercisable under
any circumstances by anyone under this Section 6, or
otherwise, after the
Expiration Date.
If the Employee is employed by an entity which ceases to be a
Subsidiary,
such event shall be deemed for purposes of this Section 6 to
be a
termination of the Employee's employment by the Corporation
other than
for "Cause." Absence from work caused by military service or
authorized
sick leave shall not be considered as a termination of
employment for
purposes of this Section 6.
7. Adjustment; Termination of Option Upon Certain
Events. The
Option is subject to adjustment pursuant to Section 6.2 of
the 1997 Plan
and, to the extent permitted by Section 6.2(c) of the 1997
Plan, the
Committee retains the right to terminate (prior to the
Expiration Date)
the Option to the extent not previously exercised.
8. Non-Transferability of Option. The Option and any
other rights
of the Employee under this Agreement or the Plan are
nontransferable as
provided in Section 1.8 of the 1997 Plan (subject to the
limited
exceptions set forth therein).
9. Notices. Any notice to be given under the terms of
this
Agreement shall be in writing and addressed to the
Corporation at its
principal executive offices, to the attention of the
Secretary and to
the Employee at the address given beneath the Employee's
signature
hereto, or at such other address as either party may
hereafter designate
in writing to the other. Any such notice shall be deemed to
have been
duly given when personally delivered or enclosed in a
properly sealed
envelope addressed as aforesaid, registered or certified, and
deposited
(postage and registry or certification fee prepaid) in a post
office or
branch post office regularly maintained by the United States
Government.
10. Plan. The Option is not being issued under the 1997
Plan.
However, the Option and all rights of Employee under this
Agreement are
subject to, shall be administered under, and the Employee
agrees to be
bound by, all of the terms and conditions of the provisions
of the 1997
Plan (other than those restricting the maximum number of
shares which may
be the subject of the award of stock options to an individual
in any one
calendar year), which 1997 Plan is incorporated herein by
this reference,
as if it had been issued thereunder. In the event of a
conflict or
inconsistency between the terms and conditions of this
Agreement and the
1997 Plan, the terms and conditions of the 1997 Plan shall
govern. The
Employee acknowledges receipt of a copy of the 1997 Plan, and
agrees to
be bound by the terms thereof. Unless otherwise expressly
provided in
other sections of this Agreement, provisions of the 1997 Plan
that
confer discretionary authority on the Committee (or the
Board) do not
(and shall not be deemed to) create any rights in the
Employee unless
such rights are expressly set forth herein or are otherwise
in the sole
discretion of the Committee (or the Board) so conferred by
appropriate
action of the Committee (or the Board) under the 1997 Plan
after the
date hereof and evidenced in a writing authorized by the
Committee.
11. Compliance With Law. The Corporation shall use its
best efforts
to register the Shares under the Securities Act of 1933 as
soon as
reasonably possible following the date of the full and final
execution
hereof. The Option and the issuance and delivery of Shares
of Common
Stock under the Option are subject to compliance with all
applicable
federal and state laws, rules and regulations (including but
not limited
to state and federal securities law and federal margin
requirements)
and to such approvals by any listing, regulatory or
governmental
authority as may, in the opinion of counsel for the
Corporation, be
necessary or advisable in connection therewith. Any Shares
of Common
Stock delivered under the Option shall be subject to such
restrictions,
and the Employee shall, if requested by the Corporation,
provide such
assurances and representations to the Corporation as the
Corporation may
deem necessary or desirable to assure compliance with all
applicable
legal requirements.
12. Entire Agreement. This Agreement, the 1997 Plan,
the 1997 Plan
Option and the 1992 Plan Option together constitute the
entire agreement
and supersede all prior understandings and agreements,
written or oral,
of the parties hereto with respect to the grant of options to
acquire
750,000 shares of Common Stock contemplated by the Employment
Agreement.
The 1997 Plan and this Agreement may be amended pursuant to
Section 6.6
of the 1997 Plan. Such amendment must be in writing and
signed by the
Corporation. The Corporation may, however, unilaterally
waive any
provision hereof in writing to the extent such waiver does
not adversely
affect the interests of the Employee hereunder, but no such
waiver shall
operate or be construed to be a subsequent waiver of the same
provision
or a waiver of any other provision hereof.
13. Governing Law. This Agreement shall be governed by
and
construed and enforced in accordance with the laws of the
State of
Delaware without regard to conflict of law principles
thereunder.
14. Satisfaction of Requirements. The issuance by the
Corporation
of this Agreement, together with the 1997 Plan Option and the
1992 Plan
Option, constitutes complete satisfaction of the obligations
of the
Corporation under Section III (G) of the Employment
Agreement.
