EMPLOYMENT
AGREEMENT (referred to herein as “this
Agreement”)”) dated effective as of January 1, 2009
(the “Effective Date”), between Virtual Radiologic
Corporation, a Delaware corporation (the “Company”),
and Michael J. Kolar (“Executive”).
WHEREAS,
the Company desires to employ Executive in the capacities of Vice
President, General Counsel and Secretary of the Company;
WHEREAS,
the Company and Executive desire to enter into the Agreement as to
the terms of his employment by the Company;
NOW
THEREFORE, in consideration of the foregoing, of the mutual
promises contained herein and of other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as
follows:
(a) During
the Employment Term (as defined in Section 2 below), Executive
shall serve as the Vice President, General Counsel and Secretary of
the Company. In this capacity Executive shall have principal
responsibility and authority for the provision and management of
legal services for the Company and its subsidiaries or affiliated
entities, and shall perform the duties of Secretary of the Company
and its subsidiaries or affiliated entities as prescribed in the
By-Laws of the Company, or of its subsidiaries or affiliated
entities. Executive shall have such additional duties, authorities
and responsibilities commensurate with the duties, authorities and
responsibilities of persons in similar capacities in similarly
sized companies and such other duties and responsibilities as the
Chief Executive Officer shall designate that are consistent with
Executive’s position as Vice President, General Counsel and
Secretary of the Company. Executive shall report to the Chief
Executive Officer.
(b) During
the Employment Term, Executive shall devote substantially all of
his business time (excluding periods of vacation and other approved
leaves of absence) to the performance of his duties with the
Company; provided the foregoing shall not prevent Executive from
(i) participating in charitable, civic, educational,
professional, community or industry affairs or, with prior written
approval of the Board of Directors of the Company (the
“Board”), serving on the board of directors or advisory
boards of other companies; and (ii) managing his and his
family’s personal investments so long as such activities do
not materially interfere with the performance of his duties
hereunder or create a potential business conflict or the appearance
thereof. If at any time service on any board of directors or
advisory board would, in the good faith judgment of the Board,
conflict with Executive’s fiduciary duty to the Company or
create any appearance thereof, Executive shall promptly resign from
such other board of directors or advisory board after notice of the
conflict is received from the Board.
(c) Executive
further agrees to serve without additional compensation as an
officer and director of any of the Company’s subsidiaries or
affiliates, as the same may exist from
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time
to time, and agrees that any amounts received from any such
subsidiary or affiliate may be offset against the amounts due
hereunder. In addition, it is agreed that the Company may assign
Executive to one of its subsidiaries or affiliates for payroll
purposes providing this does not change the Executive’s role
as the Vice President, General Counsel and Secretary of the
Company.
Executive’s
term of employment under this Agreement (such term of employment,
as it may be extended or terminated, is herein referred to as the
“Employment Term”) shall be for a term commencing on
the Effective Date and, unless terminated earlier as provided in
Section 7 hereof, ending on the third anniversary of the
Effective Date (the “Original Employment Term”);
provided that the Employment Term shall be automatically extended,
subject to earlier termination as provided in Section 7
hereof, for successive additional one (1) year periods (the
“Additional Terms”), unless, at least 30 days
prior to the end of the Original Employment Term or the then
current Additional Term, the Company or Executive has notified the
other in writing that the Employment Term shall terminate at the
end of the then current term.
The
Company agrees to pay Executive a base salary (the “Base
Salary”) at an annual rate of Two Hundred Sixty Thousand
Dollars ($260,000), payable in accordance with the regular payroll
practices of the Company, but not less frequently than monthly.
Executive’s Base Salary shall be fixed for the Original
Employment Term, and thereafter in any Additional Term shall be
determined by the Board (or a committee thereof) and may be
increased, but not decreased, from time to time by the Board. The
base salary as determined herein from time to time shall constitute
“Base Salary” for purposes of this
Agreement.
During
the Employment Term, Executive shall be eligible to participate in
the Company’s bonus and other incentive compensation plans
and programs for the Company’s senior executives at a level
commensurate with his position. Executive shall have the
opportunity to earn an annual target bonus (the “Annual
Bonus”) to be determined by and measured against objective
financial criteria, management objectives, and the discretion of
the Chief Executive Officer, to be determined by the Board (or a
committee thereof) of up to 50% of Base Salary, or such greater
percentage as may be provided in an annual bonus plan approved by
the Board (or a committee thereof), upon the Company’s
achievement of financial and operating metrics to be annually
determined by the Board (or a committee thereof), and upon
recommendation of the Chief Executive Officer. Such annual
incentive bonuses are payable to the Executive no later than
60 days following the close of the fiscal year.
(a)
Initial Option Award . The Board or any committee of the
Board (the “Committee”) appointed to administer the
Company’s Equity Incentive Plan, as may be amended from time
to time (the “Stock Plan”) shall award Executive as of
the Effective Date, options to purchase Eighty Thousand (80,000)
shares of the Company’s common stock, $0.001 par
value
2
per
share, having an exercise price of equal to the fair market value
of one share of the Company’s common stock as of the
Effective Date as determined by the Board or Committee at the
earliest practicable time, which options shall be subject to
certain restrictions (the “Initial Options Award”). The
Initial Options Award shall vest in four (4) equal amounts and
successive increments of twenty thousand (20,000) shares on the
first, second, third, and fourth anniversaries of the Effective
Date, provided that Executive is employed on each vesting date. The
Initial Options Award shall be granted pursuant to and shall be
subject to all of the terms and conditions imposed upon such awards
granted under the Stock Plan and shall be evidenced by an Incentive
Stock Option Agreement in the form approved by the Board or
Committee; provided, however any provision in the Stock Plan,
including the limitations of Section 10.2 of the Stock Plan
relating to “Parachute Payments” under Internal Revenue
Code Section 280G(b)(2) shall not apply to the Initial Options
Award or future Award. . As a condition to receiving the Initial
Options Award, Executive acknowledges that the Option Award,
together with shares issued thereunder are subject to the
Stockholders Agreement dated May 2, 2005, as may be amended
from time to time, by and among the Company and certain holders of
the Company’s securities, and, if requested, Executive shall
also execute and deliver a letter in a form approved by the
Company’s underwriters agreeing not to sell any shares of
Company common stock during a customary period following the
completion of an initial public offering of the Company’s
common stock.
(b)
Discretionary Grants . In addition to the Initial Options
Award contemplated under this Section 5, at the sole
discretion of the Board or the Committee, Executive shall be
eligible for grants of stock options and other equity awards of a
level commensurate with his position and similar to other
Executives of the Company.
(c)
Change of Control . Notwithstanding any other provision of
this Agreement, the Stock Plan or the Incentive Stock Award
Agreement, in the event of a change in control, all equity awards
(including, but not limited to, any options or stock grants made
subsequent to the date of this Agreement) shall fully vest and be
immediately exercisable. For purposes of this Agreement a change in
control shall occur upon (i) any “person” (as such
term is used in Sections 13(d) of the Securities Exchange Act of
1934 (the “Exchange Act”)) first becoming after the
Effective Date either (a) a “beneficial owner” (as
defined in Rule 13(d) under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more
of the combined voting power of the Corporation’s then
outstanding securities or (b) able to elect a majority of the
directors of the Company (excepting in each case a person or group
owned by or affiliated with Generation Partners L.P.), or
(ii) the sale of all or substantially all of the assets of the
Company.
(d)
Option to Have Company Repurchase Stock and Options . If
Executive dies while employed, the Company shall, subject to any
restrictions contained in any credit or similar agreements or that
exist under the Delaware General Corporation Law, make reasonable
efforts to purchase all of Executive’s stock and any
outstanding options which are vested at the time of death. If the
representative of the Executive’s estate wishes to accept
such offer, he or she shall request, within six (6) months of
death, that the Board determine the fair market value of
Executive’s interest in the Company. This value shall be
communicated in writing to the representative, and the
representative shall have thirty (30) days to accept or reject
the valuation. If the valuation is rejected, the representative
shall have no further rights to have the interest
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repurchased
by the Company. If the valuation is accepted, the Company shall pay
the amount of the valuation in three (3) equal annual
installments without interest. The initial installment shall be
payable within ten days following the Company’s receipt of
the representatives written acceptance of the valuation and
delivery of the shares and/or options together with any transfer
documentation reasonably requested by the Company. A subsequent
installment shall be due on the first and on the second anniversary
of the payment date of the initial installment. The provision in
5(d) expires upon the Initial Public Offering of the
Company.
(a)
Benefit Plans . Executive shall be entitled to participate
in all employee benefit plans of the Company including, but not
limited to, equity, pension, thrift, profit sharing, medical
coverage, education, or other retirement or welfare benefits that
the Company has adopted or may adopt, maintain or contribute to for
the benefit of its senior executives at a level commensurate with
his position, subject to satisfying any applicable eligibility
requirements.
(b)
Paid Time Off . Executive shall be entitled to paid time off
in accordance with the Company’s policies applicable to its
senior executives, but in no event less than twenty days (as
prorated for partial years), which paid time off may be taken at
such times as Executive elects with due regard to the needs of the
Company.
(c)
Perquisites . The Company shall provide to Executive all
perquisites which other senior executives of the Company are
generally entitled to receive. For the avoidance of doubt, the
Company will pay or reimburse the Executive for reasonable
professional expenses, including state license fees, bar
association dues and reasonable costs and expenses incurred in
connection with continuing legal education activities.
(d)
Business and Entertainment Expenses . Upon presentation of
appropriate documentation, Executive shall be reimbursed in
accordance with the Company’s expense reimbursement policy
for all reasonable and necessary business and entertainment
expenses incurred in connection with the performance of his duties
hereunder.
Executive’s
employment and the Employment Term shall terminate on the first of
the following to occur:
(a)
Disability . Upon written notice by the Company to Executive
of termination due to Disability. For purposes of this Agreement,
“Disability” shall be defined as the inability of
Executive to have performed his material duties hereunder due to a
physical or mental injury, infirmity or incapacity for
180 days (including weekends and holidays) in any 365-day
period, with or without reasonable accommodations as defined (and
if required) by applicable state and federal disability laws. The
existence or nonexistence of a Disability shall be determined by an
independent physician selected by the Company and reasonably
acceptable to Executive.
(b)
Death . Automatically on the date of death of
Executive.
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(c)
Cause . Immediately upon written notice by the Company to
Executive of a termination for Cause. “Cause” shall
mean:
(i)
Executive shall have been indicted for a felony;
(ii)
Executive shall have been convicted of (or plead
“guilty” or “nolo contendre” to or been
found guilty and not convicted of) any misdemeanor or summary
offense involving fraud, theft, misrepresentation or moral
turpitude or any other misdemeanor or summary offense that will, in
the opinion of the Board, determined in good faith, adversely
affect in any material respect the Company’s prospects or
reputation or Executive’s ability to perform his obligations
or duties to the Company or any of its subsidiaries; or
(iii)
The termination is evidenced by a resolution adopted in good faith
by the Board concluding that Executive:
(A)
intentionally and continually failed substantially to perform his
reasonably assigned duties with the Company (other than a failure
resulting from Executive’s incapacity due to physical or
mental illness or from the assignment to Executive of duties that
would constitute Good Reason), which failure has continued for a
period of at least 30 days after a written notice of demand
for substantial performance, signed by a duly authorized member of
the Board, has been delivered to Executive;
(B)
intentionally engaged in conduct which is demonstrably and
materially injurious to the Company; provided, however, that no
termination of Executive’s employment shall be for Cause as
set forth in this subsection (B) until (1) there shall
have been delivered to Executive a copy of a written notice, signed
by a duly authorized member of the Board, stating that the Board
has determined that Executive has engaged in the conduct set forth
in this subsection (B), and (2) Executive shall have been
provided an opportunity to be heard by the Board;
(C)
willfully or repeatedly engaged in misconduct or gross negligence
in the performance of his duties to the Company or any of its
subsidiaries that has a material detrimental effect on the Company;
or
(D)
committed an act of fraud, theft or dishonesty against the Company
or any of its subsidiaries or any act or omission intended to
result in the personal enrichment of Executive or his spouse,
parents, siblings, or descendants (whether by blood or adoption and
including stepchildren) or the spouses of such individuals in
violation of law or of his duty of loyalty to the Company or its
subsidiaries at the expense, directly or indirectly, of the Company
or any of its subsidiaries.
(iv)
Notwithstanding anything in the foregoing to the contrary, if
Executive has been terminated ostensibly for Cause because he has
been indicted for a felony, and he is not convicted of, or does not
plead guilty or nolo contendere to, such
5
felony
or a lesser offense (based on the same operative facts), such
termination shall be deemed to be a termination without Cause as of
the date of the termination; provided, however, that, any payments
due hereunder shall be only paid after a final determination in
such proceeding is reached.
(d)
Without Cause . Upon written notice by the Company to
Executive of an involuntary termination without Cause, other than
for death or Disability.
(e)
Good Reason . Upon written notice by Executive to the
Company of a termination for Good Reason, unless such events are
corrected in all material respects by the Company within 30 days
following written notification by Executive to the Company that he
intends to terminate his employment hereunder for one of the
reasons set forth below (so long as such notice is given within
ninety (90) days of the occurrence of such Good Reason).
“Good Reason” shall mean, without the consent of
Executive, the occurrence of any of the following
events:
(i)
assignment to Executive of any duties inconsistent in any material
respect with Executive’s position (including titles and
reporting relationships), authority, duties or responsibilities as
contemplated by this Agreement; and
(ii)
any material failure by the Company to comply with any of the
material provisions regarding Executive’s Base Salary, bonus,
equity incentive, benefits and perquisites and other benefits and
amounts payable to Executive under this Agreement.
(f)
Without Good Reason . Upon 30 days’ prior written
notice by Executive to the Company of Executive’s voluntary
termination of employment without Good Reason (which the Company
may, in its sole discretion, make effective earlier than any notice
date).
8.
Consequences of Termination .
Any
termination payments made and benefits provided under this
Agreement to Executive shall be in lieu of any termination or
severance payments or benefits for which Executive may be eligible
under any of the plans, policies or programs of the Company or its
affiliates. No termination payments shall be payable hereunder
until Executive shall have returned to the Company all Company
property used by Executive including without limitation any
automobile, computer or laptop, cell phone, Blackberry or similar
device. Subject to Section 9, the following amounts and
benefits shall be due to Executive.
(a)
Disability . Upon such termination, the Company shall pay or
provide Executive (i) any unpaid Base Salary through the date of
termination; (ii) any unpaid bonus earned with respect to any
fiscal year ending on or preceding the date of termination;
(iii) reimbursement for any unreimbursed expenses incurred
through the date of termination; and (iv) all other payments,
benefits or fringe benefits to which Executive may be entitled
under the terms of any applicable compensation arrangement or
benefit, equity or fringe benefit plan or program or grant or this
Agreement (collectively, “Accrued Amounts”).
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(b)
Death . In the event the Employment Term ends on account of
Executive’s death, Executive’s estate shall be entitled
to any Accrued Amounts.
(c)
Termination for Cause or Without Good Reason . If
Executive’s employment should be terminated (i) by the
Company for Cause, or (ii) by Executive without Good Reason,
the Company shall pay to Executive any Accrued Amounts.
(d)
Termination Without Cause or for Good Reason . If
Executive’s employment by the Company is terminated by the
Company other than for Cause (other than a termination for
Disability) or by Executive for Good Reason, the Company shall pay
or provide Executive with (i) Accrued Amounts; (ii) a
pro-rata portion (determined by multiplying the amount Executive
would have received had employment continued through the end of the
performance year by a fraction, the numerator of which is the
number of days during the performance year of termination that
Executive is employed by the Company and the denominator of which
is 365) of Executive’s Annual Bonus for the performance year
in which Executive’s termination occurs at the time that
annual bonuses are paid to other senior executives; provided that
the Board determines in good faith that the Company was on plan for
Executive to earn such bonus at the time of termination;
(iii) continue his then current Base Salary as if his
employment continued for a period of twelve (12) months from
the date of termination; and (iv) subject to Executive’s
continued co-payment of premiums, continued participation for
twelve (12) months in all health and welfare plans which cover
Executive (and eligible dependents) upon the same terms and
conditions (except for the requirements of Executive’s
continued employment) in effect on the date of termination. To the
extent such coverage cannot be provided under the Company’s
health or welfare plans without jeopardizing the tax status of such
plans, for underwriting reasons or because of the tax impact on
Executive, the Company shall pay Executive an amount equal to the
amount the Company would have paid for such benefits on behalf of
Executive if the benefits were provided to him as an employee. The
continuation of health benefits under this subsection shall reduce
and count against Executive’s rights under the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended
(“COBRA”). All benefits provided under
Sections 8(d)(i) and (ii) may be paid to the Employee
within thirty (30) days of the termination date once all
necessary applicable releases have been signed by the Employee and
returned to the Company. Notwithstanding anything to the contrary
herein, if Executive is a “specified employee,” as
defined in Section 409A(a)(2)(B)(i) of the Internal Revenue Code as
of the date of any termination, any benefits due under this Section
8(d) otherwise payable within six months following termination
shall be provided in one lump sum six months from the date of
termination. However, any payment or portion thereof which is
subject to an exemption for separation pay to specified employees
as provided under Section 409A and the relevant Treasury
Regulations, or is subject to any other exemption provided under
Section 409A and the relevant Treasury Regulations allowing
for payment to a specified employee prior to the date that is six
(6) months after the date of separation from service, may be
paid to Employee
7
within
thirty (30) days of the termination date once all applicable
releases have been signed by the Executive and returned to the
Company.
(e)
Amounts Payable . The Company reserves the right to set off
against amounts payable to Executive hereunder any amounts owed by
Executive to the Company.
Any
and all amounts payable and benefits or additional rights provided
pursuant to this Agreement beyond Accrued Amounts shall only be
payable if Executive delivers to the Company a general release of
all claims of Executive occurring up to the release date in the
form of Exhibit A hereto (with such insertions or changes
therein as may be necessary in the reasonable opinion of counsel
for the Company to make it valid and encompassing under applicable
law) within 21 days of presentation thereof by the Company to
Executive, or such other longer or shorter period as may be
permitted or required by then applicable law.
10.
Restrictive Covenants .
(a)
Confidentiality . Executive shall not, directly or
indirectly, use, make available, sell, disclose or otherwise
communicate to any person, other than in the course of
Executive’s assigned duties and for the benefit of the
Company, either during the Employment Term or at any time
thereafter, any nonpublic proprietary or confidential information,
knowledge or data relating to the Company or any of its
subsidiaries or affiliates that has been obtained by Executive
during Executive’s employment by the Company or has been
obtained pursuant to any consulting services provided by Executive
to Company prior to Executive’s employment by the Company.
For purposes of this Agreement, non-public proprietary information
means information proprietary to the Company that is not generally
known (including any “trade secret” within the meaning
of the Economic Espionage Act of 1996, Title 18 U.S.C. §1839)
about the Company’s customers, products, services, personnel,
pricing, sales strategy, technology, methods, processes, research,
development, finances, systems, techniques, accounting, purchasing
and plans. All information disclosed to Executive or to which he
obtains access, whether origin
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