EXHIBIT 10.13
EMPLOYMENT AGREEMENT
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THIS AGREEMENT is made and entered into as of July 23, 1997, by and between
Alliance Imaging, Inc., a Delaware corporation (hereinafter called the
"Corporation"), and Xxxxxxx X. Xxxxxx (hereinafter called the "Executive").
WITNESSETH THAT:
A. The Compensation Committee of the Board of Directors of the Corporation
has previously determined that the execution of employment agreements with
certain of the Corporation's key executives, including Executive, that provide,
among other things, for severance compensation benefits under the circumstances
described herein, will assist the Corporation in attracting and retaining highly
qualified individuals to serve as executive employees of the Corporation. As a
result, the Corporation and the Executive previously entered into an Amended and
Restated Employment Agreement dated as of June 6, 1994 which was further amended
and restated as of May 15, 1997 (the "Original Agreement").
B. Simultaneously herewith, the Corporation is entering into an Agreement
and Plan of Merger (the "Merger Agreement") with Newport Investment LLC,
pursuant to which a subsidiary of Newport Investment LLC will be merged with and
into the Corporation (the "Merger"), on the terms and subject to the conditions
set forth in the Merger Agreement.
C. In connection with the proposed Merger, the Compensation Committee of
the Board and Executive wish to amend and restate the terms of the Original
Agreement in certain respects, and therefore wish to enter into this Agreement
to evidence their agreement, as so amended and restated, on the terms and
conditions of Executive's employment by the Corporation.
D. The Corporation desires to continue to employ the Executive as its
Chief Executive Officer ("CEO"), and the Executive desires to continue in such
employment;
NOW, THEREFORE, the Corporation and the Executive, each intending to be
legally bound, hereby mutually covenant and agree as follows:
1. Employment and Term.
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(a) Employment. The Corporation shall employ the Executive as the CEO of
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the Corporation, and the Executive shall so serve, for the term set forth in
Paragraph 1(b).
(b) Term. The term of the Executive's employment under this Agreement
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shall commence on the Effective Time (as defined in the Merger Agreement) of the
Merger and shall end on the third anniversary of the Effective Time of the
Merger, subject to the extension of such term as hereinafter provided and
subject to earlier termination as provided in Paragraph 9. The expiration of
the term of this Agreement shall be extended automatically for three (3)
additional months as of the last day of the month in which the fifteen month
anniversary of the Effective Time of the Merger shall occur and each quarterly
anniversary thereof unless, no later than thirty (30) days prior to any such
renewal date, either the Board of Directors of the Corporation (the "Board"), on
behalf of the Corporation, or the Executive gives written notice to the other,
in accordance with Paragraph 15, that the expiration of the term of this
Agreement shall not be so extended. The period of employment as provided in
this Paragraph 1(b) is sometimes referred to herein as the "Term".
(c) Effectiveness. This Agreement shall not become effective until the
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Effective Time of the Merger. If the Merger Agreement shall terminate, this
Agreement shall also terminate and the Original Agreement shall remain in full
force and effect. The Corporation's entering into the Merger Agreement and the
execution of the Stockholders Agreement referred to therein shall not, on their
own, be a change of control under the Original Agreement.
2. Duties. During the Term, the Executive shall serve as CEO of the
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Corporation and have all powers and duties consistent with such positions. The
Executive shall devote substantially his entire time during reasonable business
hours (reasonable sick leave and vacations excepted) and use diligent efforts to
fulfill faithfully, responsibly and to the best of his ability his duties
hereunder; provided, however, that Executive may engage in and devote time to
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other non-competitive activities to the extent that such time spent is
immaterial and does not interfere with Executive's obligations hereunder.
During the term of employment, Executive shall report to the Board. Executive's
duties shall be performed, initially, principally at the Corporation's current
offices located in Anaheim, California and Executive shall not be required to
perform duties outside of Orange County, California, unless Executive otherwise
agrees in writing. Notwithstanding the foregoing, Executive may be required to
travel in the conduct of the Corporation's business and to discharge his duties
hereunder, provided that the amount and nature of such travel is reasonably
consistent with the amount and nature of travel engaged in by Executive during
the twelve-month period immediately preceding the date of this Agreement.
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3. Salary.
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(a) Base Salary. For services performed by the Executive for the
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Corporation pursuant to this Agreement during the period of employment as
provided in Paragraph 1(b) hereof, the Corporation shall pay the Executive a
base salary at the rate of three hundred fifteen thousand dollars ($315,000) per
year, payable in substantially equal installments in accordance with the
Corporation's regular payroll practices. The Executive's base salary (with any
increases under paragraph (b), below) shall not be subject to reduction. Any
compensation which may be paid to the Executive under any additional
compensation or incentive plan of the Corporation or which may be otherwise
authorized from time to time by the Board (or an appropriate committee thereof)
shall be in addition to the base salary to which the Executive shall be entitled
under this Agreement.
(b) Salary Increases. During the period of employment as provided in
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Paragraph 1(b) hereof, the base salary of the Executive shall be reviewed no
less frequently than annually by the Board to determine whether or not the same
should be increased further in light of the duties and responsibilities of the
Executive and the performance thereof (taking into account the growth of the
Corporation's business), and if it is determined by the Board that an increase
is merited, such increase shall be promptly put into effect and the base salary
of the Executive as so increased shall constitute the base salary of the
Executive for purposes of Paragraph 3(a).
4. Annual Bonuses. (a) For each calendar year during the term of
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employment after December 31, 1997, the Executive shall be eligible to receive a
cash bonus based on the Corporation's achievement of certain operating and/or
financial goals, with an annual target bonus amount (based on the Corporation's
achievement of a reasonable operating budget to be approved by the Board on or
prior to February 15 of each year) equal to 75% (the "Target Bonus") of the
Executive's then current annual base salary. The bonus plan shall be adopted
and administered by the Compensation Committee of the Board and shall be
substantially similar to the Executive's current bonus program with respect to
the formula for determining the extent to which the Executive's Target Bonus is
achieved or exceeded based on the extent to which the operating budget is
achieved or exceeded.
(b) For calendar year 1997, the Executive shall be entitled to receive a
cash bonus based upon achievement of the performance objectives previously
established and at the percentages of Base Salary previously set for such
calendar year; provided, however, that appropriate adjustments shall be made to
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the performance criteria for 1997 so as to eliminate the impact of the
transactions contemplated by the Merger Agreement on the achievement of the 1997
performance objectives (including, without limitation, eliminating expenses
associated with such transaction and the debt service charges associated with
the debt incurred to finance such transaction).
5. Equity Incentive Compensation. During the term of employment
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hereunder the Executive shall be eligible to participate in the Company's Stock
Option Plan, the terms
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of which are described on Exhibit A. Executive shall be granted 1,925,000
options under such plan as of the Effective Time (assuming a $1/share value;
175,000 options assuming an $11/share value).
6. Impact of Merger Transaction.
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(a) Long Term Incentive Plan. Pursuant to the provisions of the
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Corporation's Amended and Restated Long Term Incentive Plan ("LTIP") Executive's
pro-rata accrued benefits under the LTIP (in the amount determined by the
Compensation Committee of the Board prior to the Merger), shall be payable on
the date of consummation of the merger transaction (the "Merger") pursuant to
the Merger Agreement and following the Merger Executive shall continue to
participate in the LTIP at the same level as previously established in
accordance with its terms.
(b) Payment Under Original Agreement. The Corporation shall pay to
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Executive $850,000, in full satisfaction of the Corporation's obligations under
Section 3.2 of the Original Agreement, with $206,000 of such amount payable at
the Effective Time of the Merger, and $644,000 payable on January 2, 1998.
7. Other Benefits. In addition to the compensation described in
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Paragraphs 3 through 6, above, the Executive shall also be entitled to the
following:
(a) Expense Reimbursement. Executive will be reimbursed all reasonable,
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ordinary and necessary business expenses, including expenses for entertainment,
travel and similar items that are approved by the Corporation in accordance with
its regular policy(ies) for business expense reimbursement. The Corporation
will reimburse Executive for all expenses upon a presentation by Executive of
itemized accounts of such expenditures in accordance and in the manner and on a
form reasonably prescribed by the Corporation.
(b) Car Allowance. The Corporation shall pay to the Executive, on the
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first day of each month during the term of employment, a monthly automobile
allowance (the "Automobile Allowance") of not less than $1,000, to help defray
the costs associated with Executive's acquisition or maintenance (by lease or
otherwise) of an automobile and the related insurance and maintenance therefor.
(c) Vacation. The Executive shall be entitled to all legal holidays, and
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five (5) weeks paid vacation per annum, with the option to accrue up to two
weeks of any unused vacation time to subsequent periods or to collect payment
for up to two weeks of any unused vacation at the end of each fiscal year at the
Executive's then base salary.
(d) Insurance and Benefits. The Executive and his "dependents," to the
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extent eligible thereunder, shall be entitled to participate in all employee and
executive benefit plans, programs and policies currently available to other
Corporation employees of comparable status, title and experience, as well as any
plans, programs and policies adopted by the Corporation during the Term of this
Agreement.
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(e) Life Insurance. The Corporation shall pay for the entire premium on a
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life insurance contract, in the amount of $1,000,000 on the life of the
Executive, which shall be subject to a "split dollar" plan pursuant to which the
Executive shall have the exclusive right to designate the beneficiary, and shall
have the right to have the policy transferred to his name upon his termination
of employment without additional cost. Pursuant to such "split dollar" plan,
Executive is expected to recognize income with respect to the PS58 cost of such
insurance. The Executive shall reasonably cooperate in any effort by the
Corporation to secure additional key man life insurance on his life, in such
amount as may be determined by the Board with the beneficiaries designated by
the Corporation.
(f) Participation in Other Benefit Plans. In addition to the foregoing,
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the Executive shall be entitled to participate in all of the other various
retirement, welfare, fringe benefit, executive perquisite, and expense
reimbursement plans, programs and arrangements of the Corporation to the same
extent that any senior executive of the Corporation is eligible for
participation under the terms of such plans, programs and arrangements.
8. Confidentiality. In view of the fact that Executive's work as an
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executive of the Corporation will bring Executive into close contact with many
confidential affairs of the Corporation, including matters of a business nature,
such as information about customers (including pricing information), costs,
profits, markets, sales, strategic plans for future development and any other
information not readily available to the public, Executive hereby agrees:
(a) To keep secret all confidential matters of the Corporation (including
without limitation such matters which the Corporation notifies Executive are
confidential) learned prior to the date of this Agreement and in the course of
Executive's employment hereunder, and not to disclose them to anyone outside of
the Corporation, either during or after Executive's employment with the
Corporation, or both, until such time as the Corporation gives its written
consent to such disclosure;
(b) To deliver promptly to the Corporation on termination of Executive's
employment by the Corporation or at any other time the Corporation may so
request, all memoranda, notes, records, reports and other documents (and all
copies thereof) relating to the Corporation's business which Executive may then
possess or have under Executive's control; and
(c) That violation of this Paragraph 8 would cause the Corporation
irreparable damage for which the Corporation cannot be reasonably compensated in
damages in an action at law, and therefore in the event of any breach or
threatened breach by Executive of this Paragraph 8, the Corporation shall be
entitled to make application to a court of competent jurisdiction for equitable
relief by way of injunction or otherwise (without being required to post a
bond). This provision shall not, however, be construed as a waiver of any of
the rights which the Corporation may have for damages under this Agreement or
otherwise, and all of the Corporation's rights and remedies shall be
unrestricted and cumulative.
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9. Termination. Unless earlier terminated in accordance with the
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following provisions of this Paragraph 9, the Corporation shall continue to
employ the Executive and the Executive shall remain employed by the Corporation
during the entire Term. Paragraph 10 hereof sets forth certain obligations of
the Corporation in the event that the Executive's employment hereunder is
terminated. Certain capitalized terms used in this Xxxxxxxxx 0, Xxxxxxxxx 10
and Paragraph 11 hereof are defined in Paragraph 9(d), below.
(a) Death or Disability. Except to the extent otherwise provided in
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Paragraph 10 with respect to certain post-Date of Termination payment
obligations of the Corporation, this Agreement shall terminate immediately as of
the Date of Termination in the event of the Executive's death or in the event
that the Executive becomes disabled. The Executive will be deemed to be
disabled upon the earlier of (i) the end of a six (6)-consecutive month period
during which, by reason of physical or mental injury or disease, the Executive
has been unable to perform substantially all of his usual and customary duties
under this Agreement or (ii) the date that a reputable physician selected by the
Board, and as to whom the Executive has no reasonable objection, determines in
writing that the Executive will, by reason of physical or mental injury or
disease, be unable to perform substantially all of the Executive's usual and
customary duties under this Agreement for a period of at least six (6)
consecutive months. If any question arises as to whether the Executive is
disabled, upon reasonable request therefor by the Board, the Executive shall
submit to reasonable medical examination for the purpose of determining the
existence, nature and extent of any such disability. In accordance with
Paragraph 15, the Board shall promptly give the Executive written notice of any
such determination of the Executive's disability and of any decision of the
Board to terminate the Executive's employment by reason thereof.
(b) Discharge for Cause. In accordance with the procedures hereinafter set
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forth, the Board may discharge the Executive from his employment hereunder for
Cause. Except to the extent otherwise provided in Paragraph 10 with respect to
certain post-Date of Termination obligations of the Corporation, this Agreement
shall terminate immediately as of the Date of Termination in the event the
Executive is discharged for Cause. Any discharge of the Executive for Cause
shall be communicated by a Notice of Termination to the Executive given in
accordance with Paragraph 15 of this Agreement. For purposes of this Agreement,
a "Notice of Termination" means a written notice which (i) indicates the
specific termination provision in this Agreement relied upon and (ii) if the
Date of Termination is to be other than the date of receipt of such notice,
specifies the termination date (which date shall in all events be within fifteen
(15) days after the giving of such notice). In the case of a discharge of the
Executive for Cause, the Notice of Termination shall include a copy of a
resolution duly adopted by the Board at a meeting called and held for such
purpose authorizing such action. No purported termination of the Executive's
employment for Cause shall be effective without a Notice of Termination.
(c) Termination for Other Reasons. The Corporation may discharge the
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Executive without Cause by giving written notice to the Executive in accordance
with Paragraph 15 at least thirty (30) days prior to the Date of Termination.
The Executive may
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resign from his employment by giving written notice to the Corporation in
accordance with Paragraph 15 at least thirty (30) days prior to the Date of
Termination. Except to the extent otherwise provided in Paragraph 10 with
respect to certain post-Date of Termination obligations of the Corporation, this
Agreement shall terminate immediately as of the Date of Termination in the event
the Executive is discharged without Cause or resigns.
(d) Definitions. For purposes of this Agreement, the following capitalized
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terms shall have the meanings set forth below:
(i) "Accrued Obligations" shall mean, as of the Date of Termination, the
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sum of (A) the Executive's base salary under Paragraph 3 through the Date of
Termination to the extent not theretofore paid, (B) the amount of any bonus,
incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Date of Termination to the extent not
theretofore paid and (C) any vacation pay, expense reimbursements and other cash
entitlements accrued by the Executive as of the Date of Termination to the
extent not theretofore paid. For the purpose of this Paragraph 9(d)(i), the
amount of bonus accrued shall be equal to (A) the Average Bonus, multiplied by
(B) a fraction equal to the number of days in such year preceding the Date of
Termination divided by 365.
(ii) "Average Bonus" means (A) if a termination of employment of the
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Executive occurs prior to January 1, 1999, the Target Bonus of the Executive
payable in respect of the calendar year in which such termination occurs and (B)
if a termination of employment of the Executive occurs on or after January 1,
1999, the actual cash bonus earned by the Executive pursuant to Section 4 for
the calendar year completed immediately prior to the time in question.
(iii) "Cause" means that any of the following has occurred with respect
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to Executive: (A) Executive has committed a felony (other than a motor vehicle
moving violation); (B) Executive has stolen funds or property from the
Corporation or otherwise engaged in fraudulent conduct against the Corporation;
(C) Executive has engaged in knowing and willful misconduct which is materially
injurious to the Corporation; (D) Executive has failed or refused to comply with
the directions of the Board that are reasonably consistent with Executive's
current executive employee title and the terms of this Agreement, the failure
with which to comply is materially injurious to the Corporation; or (E)
Executive has repeatedly failed or refused to comply with the directions of the
Board that are reasonably consistent with Executive's current executive employee
title and the terms of this Agreement. Notwithstanding clause (E) of the
preceding sentence, no act or omission by the Executive shall constitute Cause
hereunder unless the Corporation has given detailed written notice thereof to
the Executive, and the Executive has failed to remedy such act or omission
within a reasonable time after receiving such notice.
(iv) "Date of Termination" shall mean (A) in the event of a discharge of
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the Executive by the Board for Cause, the date the Executive receives a Notice
of Termination, or any later date specified in such Notice of Termination, as
the case may be,
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(B) in the event of a discharge of the Executive without Cause or a resignation
by the Executive, the date specified in the written notice to the Executive (in
the case of discharge) or the Corporation (in the case of resignation), which
date shall be no less than thirty (30) days from the date of such written
notice, (C) in the event of the Executive's death, the date of the Executive's
death, and (D) in the event of termination of the Executive's employment by
reason of disability pursuant to Paragraph 9(a), the date the Executive receives
written notice of such termination (or, if earlier, six (6) months following the
date the Executive's disability began).
(v) "Good Reason" shall mean any of the following:
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(A) the Corporation reduces Executive's base salary; or
(B) the assignment to the Executive of any duties inconsistent in any
material respect with the Executive's positions with the Corporation as set
forth in this Agreement (including status, offices, titles and reporting
requirements), authority, duties or responsibilities as contemplated by
Paragraph 2; or
(C) any material failure by the Corporation to comply with any of the
provisions of this Agreement, which is not remedied within 15 days after notice
thereof from the Executive.
(D) the Corporation requires Executive to change the location of his
principal office or offices in a manner inconsistent with Paragraph 2 hereof;
(E) the Corporation or the Board shall notify the Executive that it does
not want to renew the Term pursuant to Paragraph 1(b); or
(F) the Corporation otherwise subjects Executive to abusive, critical or
adversarial conditions such that there is a material worsening of the general
quality of Executive's job conditions immediately prior to such change.
10. Obligations of the Corporation Upon Termination. The following
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provisions describe the obligations of the Corporation to the Executive under
this Agreement upon termination of his employment.
(a) Death, Disability, Discharge for Cause, or Resignation Without Good
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Reason. In the event this Agreement terminates pursuant to Paragraph 9(a) by
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reason of the death or disability of the Executive, or pursuant to Paragraph
9(b) by reason of the discharge of the Executive by the Corporation for Cause,
or pursuant to Paragraph 9(c) by reason of the resignation of the Executive
other than for Good Reason, the Corporation shall pay to the Executive, or his
heirs or estate, in the event of the Executive's death, all Accrued Obligations
in a lump sum in cash within thirty (30) days after the Date of Termination;
provided further that in the event this Agreement terminates pursuant to
Paragraph 9(a) by reason of the disability of the Executive, the Corporation
shall continue to provide to the Executive, for a period of twenty-four (24)
months from the commencement of such
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disability, all health benefits at least equal to those which would have been
provided to Executive in accordance with the plans, programs and arrangements
referred to in Paragraph 7 of this Agreement, in addition to any other benefits
or payments to which Executive is entitled hereunder or otherwise.
(b) Discharge Without Cause or Resignation with Good Reason. In the event
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that this Agreement terminates pursuant to Paragraph 9(c) by reason of the
discharge of the Executive by the Corporation other than for Cause, death or
disability or by reason of the resignation of the Executive for Good Reason (any
such termination, a "Severance"):
(i) The Corporation shall pay all Accrued Obligations to the Executive in a
lump sum in cash within thirty (30) days after the Date of Termination;
(ii) For a period equal to the greater of two years and the remainder of
the Term (assuming the Term had not expired on the Date of Termination), the
Corporation shall continue to provide benefits to the Executive and/or the
Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs and arrangements referred to in
Paragraph 7 of this Agreement; and
(iii) The Corporation shall, at its sole expense (not to exceed $25,000),
provide the Executive with outplacement services the scope and provider of which
shall be selected by the Executive.
11. DEFRA Limitation. (a) Notwithstanding anything in this Agreement to
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the contrary, in the event that the provisions of the Deficit Reduction Act of
1984 ("DEFRA") relating to "excess parachute payments" shall be applicable to
any payment or benefit received or to be received by Executive in connection
with a termination of the Executive's employment with the Company, then the
total amount of payments or benefits payable to Executive which are deemed to
constitute parachute payments shall be reduced to the largest amount such that
provisions of DEFRA relating to "excess parachute payment" shall no longer be
applicable. Should such a reduction be required, the Executive shall determine,
in the exercise of his sole discretion, which payment or benefit to reduce or
eliminate. Pending such determination, the Company shall continue to make all
other required payments to Executive at the time and in the manner provided
herein and shall pay the largest portion of any parachute payments such that the
provisions of DEFRA relating to "excess parachute payments" shall no longer be
applicable.
(b) Recharacterization of Payments. Due to the complexity in the
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application of Section 280(G) of the Code, it is possible that payments made or
benefits received hereunder or under the Original Agreement should not have been
made under Paragraph 11(a) (an "Overpayment"). In the event that it is
determined in writing by the Company's outside auditors in their reasonable good
faith judgment or by any court of competent jurisdiction that an Overpayment has
been made resulting in an "Excess Parachute Payment" as defined in Section
280G(b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), then
any such Overpayment shall be treated for all purposes as an
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unsecured, long-term loan from the Company to the Executive, his personal
representative, his successors or assigns, as the case may be, that is payable,
together with accrued interest from the date of the making of the Overpayment at
the rate of 8% per annum on the later to occur of the third anniversary of the
payment of such Overpayment, or 6 months following the date upon which it is
determined an Overpayment was made. Should it be determined that such an
Overpayment has been made, the Executive shall determine, in the exercise of his
sole discretion, which payments or benefits shall be deemed to constitute the
Overpayment.
12. No Set-Off or Mitigation. The Corporation's obligation to make the
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payments provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Corporation may have against
the Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced whether or not the Executive obtains other
employment.
13. Payment of Certain Expenses. The losing party in any suit or
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proceeding to enforce this Agreement shall reimburse the prevailing party for
all reasonable costs and expenses incurred in connection with such suit or
proceeding.
14. Binding Effect. This Agreement shall be binding upon and inure to the
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benefit of the heirs and representatives of the Executive and the successors and
assigns of the Corporation. The Corporation shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation,
acquisition of property or stock, liquidation, or otherwise) to all or a
substantial portion of its assets, by agreement in form and substance reasonably
satisfactory to the Executive, expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform this Agreement if no such succession had taken place.
Regardless of whether such an agreement is executed, this Agreement shall be
binding upon any successor of the Corporation in accordance with the operation
of law, and such successor shall be deemed the "Corporation" for purposes of
this Agreement.
15. Notices. All notices, requests, demands and other communications
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hereunder shall be in writing and shall be deemed to have been duly given if
delivered by hand or mailed within the continental United States by first class
certified mail, return receipt requested, postage prepaid, addressed as follows:
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(a) If to the Board or the Corporation, to:
Xxxxxxx X. Xxxxxx
Alliance Imaging, Inc.
0000 Xxxxx XxxxxxXxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000
with a copy to:
Xxxxxx Xxxxxx
Apollo Management, L.P.
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
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(b) If to the Executive, to:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxx
Xxxxx Xxxx, XX 00000
Such addresses may be changed by written notice sent to the other party at the
last recorded address of that party.
16. Indemnification. The Corporation agrees to indemnify the Executive to
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the fullest extent permitted by law for his services to, or on behalf of the
Corporation, as an Executive hereunder, as a director (as applicable) and in any
and every other capacity in which he may serve the Corporation or its interests.
In furtherance of such agreement to indemnify, but not by way of limitation, the
terms of the Corporation's certificate of incorporation and by-laws providing
for such indemnification and payment of expenses, as in effect on the date
hereof (and, which are attached hereto as Exhibit B), are hereby incorporated by
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reference as if fully stated herein. For the purpose of this Agreement, any
amendment to said certificate of incorporation or by-laws shall not be effective
to reduce, qualify or otherwise limit the scope, benefit or enforceability of
this provision; provided, however, if any such amendment extends or improves the
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scope, benefit or enforceability of the indemnification and payment of expenses
contained in such certificate of incorporation or by-laws for any officer,
director, employee or agent, such extended or improved provisions shall be
deemed to be incorporated by reference herein for the benefit of the Executive
without any further action by the Corporation or the Executive.
17. Tax Withholding. The Corporation shall provide for the withholding of
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any taxes required to be withheld by federal, state, or local law with respect
to any payment in cash, shares of stock and/or other property made by or on
behalf of the Corporation to or for the benefit of the Executive under this
Agreement or otherwise. The Corporation may, at its option: (a) withhold such
taxes from any cash payments owing from the Corporation to the Executive, (b)
require the Executive to pay to the Corporation in cash such amount as may be
required to satisfy such withholding obligations and/or (c) make other
satisfactory arrangements with the Executive to satisfy such withholding
obligations.
18. Arbitration. Except as to (a) actions described in Paragraph 8(d) and
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(b) any controversy or claim which the Executive elects, by written notice to
the Corporation, to have adjudicated by a court of competent jurisdiction, any
controversy or claim arising out of or relating to this Agreement or the breach
hereof shall be settled by arbitration in Los Angeles, California in accordance
with the laws of the State of California. The arbitration shall be conducted in
accordance with the rules of the American Arbitration Association. The costs
and expenses of the arbitrator(s) shall be borne by the Corporation. The award
of the arbitrator(s) shall be binding upon the parties. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction.
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19. No Assignment. Except as otherwise expressly provided herein, this
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Agreement is not assignable by any party and no payment to be made hereunder
shall be subject to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance or other charge.
20. Execution in Counterparts. This Agreement may be executed by the
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parties hereto in two (2) or more counterparts, each of which shall be deemed to
be an original, but all such counterparts shall constitute one and the same
instrument, and all signatures need not appear on any one counterpart.
21. Jurisdiction and Governing Law. Except as provided in Paragraph 15,
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jurisdiction over disputes with regard to this Agreement shall be exclusively in
the courts of the State of California, and this Agreement shall be construed and
interpreted in accordance with and governed by the laws of the State of
California, other than the conflict of laws provisions of such laws.
22. Severability. If any provision of this Agreement shall be adjudged by
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any court of competent jurisdiction to be invalid or unenforceable for any
reason, such judgment shall not affect, impair or invalidate the remainder of
this Agreement. Furthermore, if the scope of any restriction or requirement
contained in this Agreement is too broad to permit enforcement of such
restriction or requirement to its full extent, then such restriction or
requirement shall be enforced to the maximum extent permitted by law, and the
Executive consents and agrees that any court of competent jurisdiction may so
modify such scope in any proceeding brought to enforce such restriction or
requirement.
23. Prior Understandings. This Agreement embodies the entire
--------------------
understanding of the parties hereto and, upon its effectiveness, will supersede
all other oral or written agreements or understandings between them (including,
without limitation, the Original Agreement) regarding the subject matter hereof.
No change, alteration or modification hereof may be made except in a writing,
signed by each of the parties hereto. The headings in this Agreement are for
convenience and reference only and shall not be construed as part of this
Agreement or to limit or otherwise affect the meaning hereof.
-13-
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
Attest: CORPORATION
_____________________ By: __________________________________
Name: Name:
Title: ________________________________
EXECUTIVE
By: __________________________________
Name:
Title: _______________________________
-14-
EXHIBIT A
Issuer Alliance Imaging, Inc. ("Company")
Percent of Assuming $45,000,000 in initial equity at $1 per
Outstanding Common share, options with respect to a total of 5,800,000
StocK shares will be available for grant. Options will be
incentive stock options if permitted by the rules
applicable to incentive stock options.
Allocation The option shares shall be allocated by the
Compensation Committee of the Board of Directors
(the "Compensation Committee").
Time Vesting 50% of the total number of available options will
time vest in equal increments over four years
ending on the fourth anniversary of the last day of
the month during which the merger of a subsidiary
of Newport Investment LLC into the Company shall
become effective. In the event of a sale of the
Company to a nonaffiliated party that is followed
within one year by the termination of employment by
the Company without cause or by the employee for
good reason, all of the options described in the
preceding sentence allocated to such terminated
employee shall vest immediately upon such
termination.
PERFORMANCE VESTING Tier One: 25% of total available options will vest
--------
based upon the attainment by the Company of the
Year Target
---- -----
1998 $1.35
1999 $1.82
2000 $2.46
2001 $3.32
Tier Two: 25% of total available options will
--------
vest based upon the attainment by the Company of
the following per share corporate value targets:
Year Target
---- ------
1998 $1.40
1999 $1.96
2000 $2.74
2001 $3.84
For each target that is achieved, the options
attributable to that year for such target will vest
on December 31 of such year, provided that the
determination as to whether a target was achieved
shall be made when the Company's audited financials
for such year become available. If the target per
share equity levels for a tier are not achieved for
any year, the Compensation Committee, upon
consultation with management, will have the
discretion to cause all or part of such options to
vest. In addition, for any year in which a per
share equity target for a tier is missed by less
than 20%, the shares that did not vest in such year
with respect to such tier shall vest if either (i)
the per share equity target for such tier is
attained for the next succeeding year, or (ii) for
the next succeeding year the per share equity
target for a tier is missed by less than 20% and
the per share equity target is attained for the
second succeeding year. Per share equity will equal
(((i) EBITDA for the relevant calendar year times
(ii) six); plus ((i) 12/31 cash plus the aggregate
----
exercise price of vested options and options which
vest with respect to the per share equity targets
achieved in such year, minus (ii) 12/31 debt));
divided by (as of 12/31) (i) number of shares
----------
outstanding plus (ii) number of shares subject to
vested options and options which vest with respect
to the per share equity targets achieved in such
year.
In the event of the sale of the Company (including
a merger, the sale of substantially all assets, or
the sale of the stock of the Company), other than
to an
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affiliate of Apollo prior to 12/31/01, all
performance-based options for a tier will vest if
the fair market value of the per share
consideration received in the sale (after giving
effect to the vesting described herein) equals or
exceeds the per share equity target established for
the applicable tier for the year in which such
transaction occurs (with such target to be prorated
for the time that a sale closes during any such
year).
Exercise Price $1 per share, Apollo's assumed per share buy-in
price
Expiration Date Options expire ten years from the date of
grant.
Tag Along/ Shares purchased pursuant to the options
Drag Along Rights ("Shares") will have the benefit of tag along
rights if the Company is sold and be subject to
drag along rights in favor of the Company and/or
the controlling stockholder.
Repurchase Right Vested options and Shares will be subject to
repurchase rights in favor of the Company and
Apollo beginning 60 days after a termination of
employment at the fair market value thereof. If
employment is terminated, employee must exercise
all vested options within (x) 30 days if such
termination shall be for cause or due to the
resignation of the employee without good reason and
(y) 60 days in all other instances other than death
or disability, in which case options must be
exercised within 6 months. The options will provide
for a cashless exercise option. Employee is
entitled to the fair market value of shares
received upon exercise of such options if the
repurchase right is exercised.
VESTING Vesting of options will occur only during an
employee's term of employment.
REGISTRATION RIGHTS Within one year after the Company's next public
offering of equity securities, the Company will
register the options under the plan and all other
employee options of the
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Company on Form S-8.
IPO If the Company sells shares of Common Stock in a
qualified public offering (the "IPO") before
12/31/01, the per share equity performance targets
for 12/31 of each year after the close of the IPO
will be measured against the average closing stock
price for the 30 trading days immediately preceding
the applicable target date. All tag along/drag
along rights and repurchase rights terminate upon
consummation of the IPO.
If, after an IPO, Apollo shall sell more than 50%
of its original stockholdings at an average price
exceeding the pro rata target for a performance
tier, the options relating to such tier shall
thereafter vest solely upon time vesting in
accordance with the original time vesting options.
Compensation Committee will consider whether the
performance targets should be revised in light of
the IPO.
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