EXHIBIT 10.4
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This
Amended and Restated Employment Agreement (the
“Agreement”) is entered into by and between Apria
Healthcare Group Inc. (the “Company”) and
Lawrence A. Mastrovich (the “Executive”), as of
May 5, 2006.
I.
EMPLOYMENT .
The
Company hereby employs the Executive and the Executive hereby
accepts such employment, upon the terms and conditions hereinafter
set forth. The term of the employment will continue until the
termination of the Executive’s employment by reason of his
written resignation, termination by the Company for any reason by
written notice of termination, or death, provided that for purposes
of Section IV-D-3, the “Expiration Date” shall
initially be April 7, 2004, and shall be extended one (1) day for
each day of the Executive’s employment during the term of
this Agreement until the Executive’s employment is terminated
for any reason. For instance, if the Executive’s employment
with the Company is terminated on January 1, 2003, the Expiration
Date shall be December 31, 2004. The Executive’s employment
may be terminated at any time by written notice from the Executive
to the Company or from the Company to the Executive, in the manner
provided in Section XIX hereof.
II.
DUTIES .
The
Executive shall serve during the course of his employment as the
President and Chief Operating 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. Initially, the
Executive shall have responsibility for the following areas: field
operations, corporate logistics, corporate revenue management,
clinical services and regulatory affairs and compliance. 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 $512,000 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.
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 Executive Bonus Plan (a
copy of which has been previously provided to the Executive) and
(ii) the Company’s 401(k) Savings Plan. The parties to this
Agreement recognize that such plans may be amended and/or
terminated by the Company at any time without the consent of the
Executive in accordance with the terms of such plans.
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 senior
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. The parties to this
Agreement recognize that such policies may be amended and/or
terminated by the Company at any time without the consent of the
Executive.
E. Fringe Benefits
. The Executive shall be entitled to fringe benefits, including
without limitation (i) 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
(ii) 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.
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 XIX 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 (except as set forth below),
“Cause” shall mean that the Company, acting in good
faith based upon the information then known to the Company,
determines that the Executive has (i) engaged in or committed
willful misconduct; (ii) engaged in or committed theft, fraud or
other illegal conduct; (iii) refused or demonstrated an
unwillingness to substantially perform his duties for a 30-day
period after written demand for substantial performance that refers
to this paragraph and is delivered by the Company that specifically
identifies the manner in which the Company believes the Executive
has not substantially performed his duties; (iv) refused or
demonstrated an unwillingness to reasonably cooperate in good faith
with any Company or government investigation or provide testimony
therein (other than such failure resulting from the
Executive’s disability); (v) engaged in or committed
insubordination; (vi) engaged in or committed any willful act that
is likely to and which does in fact have the effect of injuring the
reputation or business of the Company; (vii) willfully violated his
fiduciary duty or his duty of loyalty to the Company or the
Company’s Code of Ethical Business Conduct in any material
respect; (viii) used alcohol or drugs (other than drugs
prescribed to the Executive by a physician and used by the
Executive for their intended purpose for which they had been
prescribed) in a manner which materially and repeatedly interferes
with the performance of his duties hereunder or which has the
effect of materially injuring the reputation or business of the
Company; or (ix) engaged in or committed a material breach 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 has materially breached 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 or without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding anything herein to the contrary, for purposes of
any termination of employment that occurs within the period that
(i) begins with the first to occur of (1) the initial
public announcement of a Specified Change of Control (as defined
below), or (2) the 90th day preceding a Specified Change of
Control and (ii) ends two years following such Specified
Change of Control, “Cause” shall instead mean only the
occurrence of either or both of the following: (A) the
Executive’s conviction for committing an act of fraud,
embezzlement, theft, or other act constituting a felony (other than
traffic related offenses or as a result of vicarious liability); or
(B) the willful engaging by the Executive in misconduct that is
significantly injurious to 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 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 of employment 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 of
employment; 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 .
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(a)
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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), the Executive’s employment shall terminate
and the Executive shall be entitled to receive the
following:
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(1)
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an amount equal to the Contract
Balance (as defined below) in one lump sum upon such termination of
his employment; and
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(2)
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the Accrued Obligations as of the
date of termination of employment.
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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 the form attached hereto as
Exhibit A (which may be modified only to the extent necessary
to reflect developments in applicable law that would jeopardize
enforceability of such release unless the modifications are not
made). 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 obligations to make payments required to be made
under any other incentive compensation plan.
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(b) The term “Good
Reason” means (except as set forth below):
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(i)
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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 executive
officers of the Company; or
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(ii)
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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, except in connection with a relocation of the
Company’s principal executive offices; or
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(iii)
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if the Company does not permit
the Executive to continue to serve as the President and Chief
Operating Officer or another mutually acceptable senior executive
position.
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provided , however , that “Good
Reason” shall cease to exist for an event on the 60th day
following the earlier of the Company’s written notice of the
change to the Executive or the Executive’s becoming aware
thereof, unless the Executive has given the Company written notice
of his/her objection thereto prior to such date.
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Notwithstanding
anything herein to the contrary, for purposes of any termination of
employment that occurs within the period that (i) begins with
the first to occur of (1) the initial public announcement of a
Specified Change of Control (as defined below), or (2) the
90th day preceding a Specified Change of Control and (ii) ends
two years following such Specified Change of Control, “Good
Reason” shall instead mean, without the Executive’s
express written consent, the occurrence of any one or more of the
following:
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(i)
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a material reduction in the
nature, status or scope of the Executive’s authorities,
duties, and/or responsibilities, (when such authorities, duties,
and/or responsibilities are viewed in the aggregate) from their
level in effect on the day immediately prior to the Specified
Change of Control (provided, however, that neither of (A) a change
in the Executive’s reporting relationships, nor (B) an
adjustment in the nature of the Executive’s duties and
responsibilities that in either case does not remove from him the
authority with respect to the Company’s functional area,
employees or products and services that the Executive had
immediately prior to such change or adjustment shall constitute
“Good Reason”);
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(ii)
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a reduction in the
Executive’s base salary from its highest level in effect at
any point in the three months preceding the Specified Change of
Control or a significant reduction in the Executive’s
aggregate incentive opportunities under the Company’s short
and/or long-term incentive programs, as such opportunities exist
immediately prior to the Specified Change of Control;
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(iii)
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the failure of the Company to
maintain the Executive’s relative level of coverage and
accruals (as compared to other Company executives) under the
Company’s employee benefit and/or retirement plans, policies,
practices, or arrangements in which the Executive participates
immediately prior the Specified Change of Control (both in terms of
the amount of benefits provided, and amounts accrued) (for this
purpose, the Company may eliminate and/or modify existing programs
and coverage levels without the Executive’s consent;
provided, however, that the Executive’s level of coverage
under all such programs must be at least as great as is provided to
executives who have the same or lesser levels of reporting
responsibilities within the Company’s
organization);
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(iv)
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the Executive is informed by the
Company that his or her principal place of employment for the
Company will be relocated to a location that will result in an
increase of more than thirty (30) miles in the Executive’s
one-way commute (as compared to the Executive’s one-way
commute prior to the Change in Control); or
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(v)
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the Company’s not
permitting the Executive to continue to serve as the President and
Chief Operating Officer or another mutually acceptable senior
executive position.
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For purposes of
this Agreement, the term a “Specified Change of
Control” shall be any Change of Control that is specifically
designated, in writing, by the Board of Directors of the Company or
Compensation Committee thereof prior to the consummation of the
Change of Control to be a Specified Change of Control.
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(c)
The term “Contract Balance” means an amount equal to
the annual base salary that the Executive would have earned from
the Company had the Executive continued his employment from the
date the Executive’s employment terminated through the
Expiration Date (i.e., base salary for two (2) years), using the
rate of base salary in effect on the date on which the Executive
received or gave written notice of his termination, plus an amount
equal to two (2) times the sum of (i) an amount equal to the
average of the annual bonuses with respect to the Company’s
two (2) most recently completed fiscal years, if any, determined to
be payable and/or paid to the Executive under the Company’s
the Executive Bonus Plan (or comparable bonus plan) prior to such
notice of termination, and (ii) an amount determined by the Company
from time to time in its sole discretion to be equal to the annual
cost for the Executive of obtaining medical, dental and vision
insurance under COBRA, which annual amount is hereby initially
estimated to be $20,000.
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(d) A
“Change of Control” shall be deemed to have occurred
if:
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(i)
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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;
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(ii)
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all or substantially all of the
business or assets of the Company are 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 parent 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 parent company in
substantially the same proportions as their ownership immediately
prior to such transaction; or
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(iii)
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the Company is materially or
completely liquidated.
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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.
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(e) In
the event the Executive initiates arbitration pursuant to Section
VI to enforce his rights to any payments under this Section IV-D-3,
or the Company seeks to withhold or reduce any such payments for
any reason, then:
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(i)
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the burden of proving that the
Executive is not entitled to such payments shall be on the
Company;
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(ii)
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the Company shall pay all
expenses incurred by the Executive in prosecuting or defending any
such proceeding as they are incurred by the Executive in advance of
the final disposition of such dispute, together with any tax
liability incurred by the Executive in connection with the receipt
of such amounts; provided , however , that the
payment of such expenses incurred in advance of the final
disposition of such proceeding shall be made only upon delivery to
the Company of an undertaking, by or on behalf of the Executive, to
repay all amounts so advanced to the extent the arbitrator in such
proceeding so determines as provided in Section V; and
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(iii)
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all such payments required under
this Agreement shall continue to be made on the dates provided
herein without any offsets, claims or charges of any kind
whatsoever being asserted by the Company, except in the event a
final determination pursuant to the arbitration provisions of
Section V has been rendered and such determination provides that
the Company is entitled to assert any such offset, claim or charge
against the Executive.
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(f)
No Mitigation or Offset . Notwithstanding anything herein to
the contrary, the amount of any payment or benefit provided for in
this Section IV-D-3 shall not be reduced, offset or subject to
recovery by the Company or any of its subsidiaries or affiliates by
reason of any compensation earned by the Executive as the result of
employment by another employer after the Executive’s
employment with the Company terminates for any reason. In addition,
the Executive shall be under no obligation to seek other employment
or to take any other actions to mitigate the amounts payable under
this Section IV-D-3.
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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 the 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. 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. Ju
