EXHIBIT 10.40
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into as of February 6, 2003,
between Radiologix, Inc., a Delaware corporation (the "Company"), and Xxxxxxx X.
Xxxxxxx ("Xxxxxxx").
In consideration of the mutual covenants and conditions set forth herein, the
parties hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Xxxxxxx in the capacity of Chief
Executive Officer. Xxxxxxx accepts such employment and agrees to perform such
services as are customary to such office and as shall from time to time be
assigned to him by the Board of Directors that are consistent with such office.
The Company and Xxxxxxx hereby acknowledge and agree that Xxxxxxx shall be
required to move to, and establish his primary residence in, the Dallas, Texas
area to perform the services contemplated by this Agreement.
2. TERM. The employment hereunder shall be for a period of three years,
commencing on February 6, 2003 (the "Commencement Date") and shall continue
until terminated as provided in Section 5. Xxxxxxx'x employment will be on a
full-time basis requiring the devotion of such amount of his productive time as
is necessary for the efficient operation of the business of the Company;
provided, however, that Xxxxxxx may serve on the board of directors (or similar
entity) of one business organization, subject to prior written approval by the
Company's Board of Directors in its sole discretion.
3. COMPENSATION AND BENEFITS
3.1 SALARY. For the performance of Xxxxxxx'x duties hereunder, the Company shall
pay Xxxxxxx an annual salary of $440,000, payable (less required withholdings)
no less frequently than twice monthly.
3.2 BONUS. The Board of Directors and Xxxxxxx will establish a mutually
acceptable bonus plan for 2003 that will provide, among other things, that he
will receive at least $264,000 if the Company achieves identified performance
goals based on the 2003 budget. Xxxxxxx will receive a bonus of at least
$125,000 for 2003 if he is employed by the Company on the one-year anniversary
of the Commencement Date. During the first employment year, the Board of
Directors and Xxxxxxx will establish a mutually acceptable bonus plan for the
second and subsequent employment years, which plan will provide Xxxxxxx with
appropriate incentives and the opportunity to earn bonus amounts comparable to
those available to top executives officers of similar companies.
3.3 STOCK OPTIONS. Upon commencement of Xxxxxxx'x employment hereunder, the
Company shall grant to Xxxxxxx non-qualified options under the Company's Stock
Option Plan to purchase 900,000 shares of the Company's common stock at an
exercise price equal to the closing price of the Company's Common Stock on the
Commencement Date. Four hundred thousand of the options will vest as follows:
200,000 on the Commencement Date;
100,000 on the one-year anniversary of the Commencement Date; and
100,000 on the two-year anniversary of the Commencement Date.
The remainder of the options will vest as follows:
Closing Sales Price of the Company's Common Stock
(Subject to Stock Splits)
Number of Options For 20 Consecutive Trading Days Is
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80,000 greater than $5.00
80,000 greater than 7.50
80,000 greater than 10.00
80,000 greater than 12.50
80,000 greater than 15.00
100,000 greater than 17.50
Upon the Company's consummation of a merger transaction or if any person or
entity completes a tender offer for not less than a majority of the shares of
the Company's common stock, the actual value received by holders of shares of
the Company's common stock in the merger, or by holders of shares of the
Company's common stock who tender and whose shares are purchased in the tender
offer, shall be used to determine whether Xxxxxxx shall be vested in the option
shares that vest based on the closing sales price of the Company's common stock,
without regard to the actual average closing sales prices of the Company's
common stock during the 20 consecutive trading day period prior to consummation
of such transaction.
Each option will be exercisable for a period of ten years from the Commencement
Date. Unvested options will immediately terminate upon termination of Xxxxxxx'x
employment hereunder. Upon termination of his employment under Section 5.1(b),
5.1(d) or 5.1(e) after a Change of Control (as defined in Section 4), Xxxxxxx
will have 12 months to exercise vested options. Beginning with the third
anniversary of the Commencement Date, Xxxxxxx shall be considered for
participation in plans granting additional options or stock awards to top
executive personnel.
3.4 BENEFITS. Xxxxxxx shall be entitled to such medical, disability and life
insurance coverage and such vacation, sick leave and holiday benefits, if any,
and any other benefits as are made available to the Company's top executive
personnel, all in accordance with the Company's benefits program in effect from
time to time.
3.5 REIMBURSEMENT OF EXPENSES. Xxxxxxx shall be entitled to be reimbursed for
all reasonable expenses, including but not limited to expenses for travel, meals
and entertainment, incurred by Xxxxxxx in connection with and reasonably related
to the furtherance of the Company's business.
3.6 MOVING AND RELOCATION EXPENSES. The Company will reimburse Xxxxxxx for (i)
the reasonable, documented out-of-pocket costs incurred by Xxxxxxx in connection
with the relocation from his primary residence in Orlando, Florida ("Primary
Residence") to the Dallas,
Texas area, including real estate commissions and
moving costs and (ii) his reasonable, documented attorneys' fees incurred in
connection with the execution of this Agreement; provided, however, that the
aggregate amount of such costs and fees that the Company shall be obligated to
reimburse shall not exceed $150,000; provided further, however, that Xxxxxxx
completes his move and establishes a primary residence in the Dallas,
Texas,
area on or before September 1, 2003. The Company also shall pay to Xxxxxxx an
additional amount equal to any federal income tax liability that Xxxxxxx owes as
a result of the Company's reimbursement to Xxxxxxx of the relocation and moving
expenses and attorneys' fees described in this Section 3.6, to substantially the
effect that Xxxxxxx shall receive the benefit of the relocation and moving
expense and attorneys' fee reimbursement as if there were no federal income tax
liability for such reimbursement.
3.7 ANNUAL REVIEW. On each anniversary of the Commencement Date, the Board of
Directors will review Xxxxxxx'x performance and compensation hereunder
(including salary, bonus and stock options and/or other equity incentives) and
in its sole discretion may increase such compensation in accordance with his
performance and then current labor market conditions.
4. CHANGE OF CONTROL. In the event of a Change of Control of the Company (as
defined below), all options then granted to Xxxxxxx which are unvested at the
date of the Change of Control will vest pursuant to the provisions of the
Company's 1996 stock option plan. In addition, in lieu of the provisions of
Section 5.2(b), if the Company terminates Xxxxxxx'x employment hereunder at any
time following a Change of Control, then immediately upon such termination of
employment, the Company shall pay Xxxxxxx, in addition to the amounts required
under Section 5.2(a), a lump sum severance payment in an amount equal to the sum
of (i) the product of Xxxxxxx'x then current annual salary for one year
multiplied by two plus (ii) the product of Xxxxxxx'x most recent annual bonus
payment received for the fiscal year immediately preceding the Change of Control
multiplied by two. If the Company terminates Xxxxxxx'x employment following a
Change of Control and prior to his receipt of a bonus for 2003, he will be
deemed to have received a bonus of $125,000 for purposes of clause (ii) above.
In addition, the Company shall continue to provide Xxxxxxx with the benefits
described in Section 3.4 until the earlier of (i) the two-year anniversary of
the date of Xxxxxxx'x termination of employment or (ii) the date on which
Xxxxxxx obtains substantially equivalent benefits from another party.
As used herein, a "Change of Control" of the Company shall be deemed to have
occurred:
(a) Upon the consummation, in one transaction or a series of related
transactions, of the sale or other transfer of voting power (including voting
power exercisable on a contingent or deferred basis as well as immediately
exercisable voting power) representing effective control of the Company to a
person or group of related persons who, on the date of this Agreement, does not
have effective voting control of the Company, whether such sale or transfer
results from a tender offer or otherwise; or
(b) Upon the consummation of a merger or consolidation in which the Company
is a constituent corporation and in which the Company's shareholders immediately
prior thereto will beneficially own, immediately thereafter, securities of the
Company or any surviving or new corporation resulting therefrom having less than
a majority of the voting power of the Company or any such surviving or new
corporation; or
(c) Upon the consummation of a sale, lease, exchange or other transfer or
disposition by the Company of all or substantially all its assets to any person
or group of related persons:
5. TERMINATION
5.1 TERMINATION EVENTS. The employment hereunder will terminate upon the
occurrence of any of the following events:
(a) Xxxxxxx dies;
(b) the Company, by written notice to Xxxxxxx or his personal
representative, discharges Xxxxxxx due to the inability to perform the essential
duties assigned to him hereunder, with or without reasonable accommodation, for
a continuous period exceeding 120 days by reason of injury, physical or mental
illness or other disability, which condition has been certified by a physician;
provided, however, that prior to discharging Xxxxxxx due to such disability, the
Company shall give a written statement of findings to Xxxxxxx or his personal
representative setting forth specifically the nature of the disability and the
resulting performance failures, and Xxxxxxx shall have a period of ten days
thereafter to respond in writing to the Board of Directors' findings;
(c) Xxxxxxx is discharged by the Board of Directors of the Company for
cause. As used in this Agreement, the term "cause" shall mean:
(i) Xxxxxxx'x conviction of (or pleading guilty or nolo contendere to)
any (A) felony or (B) misdemeanor involving fraud, dishonesty in connection
with the performance of his duties hereunder or moral turpitude; provided,
however, that prior to discharging Xxxxxxx for cause, the Company shall
give a written statement of findings to Xxxxxxx setting forth specifically
the grounds on which cause is based, and Xxxxxxx shall have a period of ten
days thereafter to respond in writing to the Board of Directors' findings;
or
(ii) the willful and continued failure of Xxxxxxx for a total of ten
days within any fiscal year of the Company to substantially perform his
duties with the Company (other than any such failure resulting from illness
or disability) after a written demand for substantial performance is
requested by the Company's Board of Directors, which specifically
identifies the manner in which it is claimed Xxxxxxx has not substantially
performed his duties, or (b) Xxxxxxx is willfully engaged in misconduct
which has, or can reasonably be expected to have, a direct and material
adverse monetary effect on the Company. For purposes of this Section no act
or failure to act on Xxxxxxx'x part shall be considered "willful" unless
Xxxxxxx acted in bad faith or without a reasonable belief that Xxxxxxx'x
action or omission was in the best interest of the Company. No termination
shall be effected for Cause unless Xxxxxxx has been provided with specific
information as to the acts or omissions which form the basis of the
allegation of Cause, and Xxxxxxx has had an opportunity to be heard, with
counsel if he so desired, before the Board of Directors and such Board
determines, by majority vote, in good faith that Xxxxxxx was guilty of
conduct constituting "Cause" as herein defined, specifying the particulars
thereof in detail;
(d) Xxxxxxx is discharged by the Board of Directors of the Company without
cause, which the Company may do at any time, with at least 30 days advance
written notice;
(e) Xxxxxxx voluntarily terminates his employment due to either (i) a
default by the Company in the performance of any of its obligations hereunder,
or (ii) an Adverse Change in Duties (as defined below), which default or Adverse
Change in Duties remains unremedied by the Company for a period of ten days
following its receipt of written notice thereof from Xxxxxxx; or
(f) Xxxxxxx voluntarily terminates his employment for any reason other than
the Company's default or an Adverse Change in Duties, which Xxxxxxx may do at
any time with at least 30 days advance notice.
As used herein, "Adverse Change in Duties" means an action or series of actions
taken by the Board of Directors of the Company, without Xxxxxxx'x prior written
consent, which results in:
(1) A change by the Board of Directors of the Company in Xxxxxxx'x
reporting responsibilities, titles, job responsibilities or offices which
results in a material diminution of his status, control or authority as a chief
executive officer of a company that is (i) not controlled by a majority
stockholder, (ii) with annual revenues substantially equal to the Company's
revenues for its most recent fiscal year and (iii) whose common stock is
publicly traded; or
(2) The assignment to Xxxxxxx of any positions, duties or responsibilities
which are materially inconsistent with Xxxxxxx'x positions, duties and
responsibilities or status with the Company; or
(3) A requirement by the Company that Xxxxxxx be based or perform his
duties anywhere other than (i) at the Company's corporate office location on the
date of this Agreement, or (ii) if the Company's corporate office location is
moved after the date of this Agreement, at a new location that is no more than
60 miles from such prior location; or
(4) A failure by the Company to provide for Xxxxxxx'x participation in any
current or future benefits or plans at a level or to an extent commensurate with
that of other top executives of the Company.
5.2 EFFECTS OF TERMINATION
(a) Upon termination of Xxxxxxx'x employment hereunder for any reason, the
Company will promptly pay Xxxxxxx all compensation owed to Xxxxxxx and unpaid
through the date of termination (including, without limitation, salary and
Xxxxxxx'x expense reimbursements).
(b) In addition, if Xxxxxxx'x employment is terminated under Sections
5.1(b), (d) or (e), then the Company shall also pay Xxxxxxx, immediately upon
such termination of employment, a lump sum severance payment in an amount equal
to Xxxxxxx'x then current annual salary.
(c) The Company agrees that it will provide to Xxxxxxx confidential
information regarding the Company and its business. In consideration of, among
other things, the Company's obligation to disclose confidential information to
Xxxxxxx and his receipt of that confidential information, upon termination of
Xxxxxxx'x employment hereunder for any reason, Xxxxxxx agrees that for the one
year period following the Termination Event:
(i) Xxxxxxx will not directly or indirectly, whether as an individual,
employee, director, consultant or advisor, or in any other capacity
whatsoever, provide services to any person, firm, corporation or other
business enterprise that (A) owns or operates diagnostic imaging centers or
the provision of diagnostic imaging services, (B) provides administrative,
management or other information services to radiology practices or (C)
provides management services in the area of radiology, in each case unless
he obtains the prior written consent of the Board of Directors.
(ii) Xxxxxxx will not directly or indirectly encourage or solicit, or
attempt to encourage or solicit, any individual to leave the Company's
employ for any reason or interfere in any other manner with the employment
relationships at the time existing between the Company and its current or
prospective employees.
(iii) Xxxxxxx will not induce or attempt to induce any provider,
payor, customer, supplier, distributor, licensee or other business relation
of the Company to cease doing business with the Company or in any way
directly interfere with the existing business relationship between any such
customer, supplier, distributor, licensee or other business relation and
the Company.
Xxxxxxx acknowledges that monetary damages may not be sufficient to compensate
the Company for any economic loss which may be incurred by reason of breach of
the foregoing restrictive covenants. Accordingly, in the event of any such
breach, the Company shall, in addition to any remedies available to the Company
at law, be entitled to obtain equitable relief in the form of an injunction
precluding Xxxxxxx from continuing to engage in such breach.
If any restriction set forth in this paragraph is held to be unreasonable, then
Xxxxxxx and the Company agree, and hereby submit, to the reduction and
limitation of such prohibition to such area or period as shall be deemed
reasonable.
6. GENERAL PROVISIONS
6.1 ASSIGNMENT. Neither party may assign or delegate any of his or its rights or
obligations under this Agreement without the prior written consent of the other
party.
6.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement between the
parties with respect to the subject matter hereof and supersedes any and all
prior agreements between the parties relating to such subject matter.
6.3 MODIFICATIONS. This Agreement may be changed or modified only by an
agreement in writing signed by both parties hereto.
6.4 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall inure to the
benefit of, and be binding upon, the Company and its successors and permitted
assigns and Xxxxxxx and Xxxxxxx'x legal representatives, heirs, legatees,
distributees, assigns and transferees by operation of law, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join and be bound by the terms and conditions hereof.
6.5 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of
Texas.
6.6 SEVERABILITY. If any provision of this Agreement is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect.
6.7 FURTHER ASSURANCES. The parties will execute such further instruments and
take such further actions as may be reasonably necessary to carry out the intent
of this Agreement.
6.8 NOTICES. Any notices or other communications required or permitted hereunder
shall be in writing and shall be deemed received by the recipient when delivered
personally or, if mailed, five days after the date of deposit in the United
States mail, certified or registered, postage prepaid and addressed, in the case
of the Company, to Radiologix, Inc., 3600 X.X. Xxxxxx Chase Tower, 0000 Xxxx
Xxxxxx, Xxxxxx, Xxxxx 00000-0000, attention: Board of Directors; and in the case
of Xxxxxxx, to the address shown for Xxxxxxx on the signature page hereof, or to
such other address as either party may later specify by at least ten days
advance written notice delivered to the other party in accordance herewith.
6.9 NO WAIVER. The failure of either party to enforce any provision of this
Agreement shall not be construed as a waiver of that provision, nor prevent that
party thereafter from enforcing that provision of any other provision of this
Agreement.
6.10 LEGAL FEES AND EXPENSES. In the event of any disputes under this Agreement,
each party shall be responsible for their own legal fees and expenses which it
may incur in resolving such dispute, unless otherwise prohibited by applicable
law or a court of competent jurisdiction.
6.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the Company and Xxxxxxx have executed this Agreement,
effective as of the day and year first above written.
COMPANY XXXXXXX
RADIOLOGIX, INC.
By: /s/ Xxxxxx X. Xxxxxxx /s/ Xxxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx Xxxxxxx X. Xxxxxxx
Title: Chairman of the Board Address:
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