EMPLOYMENT
AGREEMENT (referred to herein as “ this Agreement
”) dated effective as of July 30, 2009 (the “
Effective Date ”), between Virtual Radiologic
Corporation, a Delaware corporation (the “ Company
”), and Michael J. Kolar (“ Executive
”).
WHEREAS, Executive
is currently employed by the Company;
WHEREAS, the
Company desires to continue to employ Executive in the capacity of
Vice President, General Counsel and Secretary, and Executive
desires to continue to be employed by the Company in such capacity;
and
WHEREAS, the
Company and Executive desire to enter into this Agreement as to the
terms of Executive’s 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, and will have such other 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
Executive’s business time (excluding periods of vacation and
other approved leaves of absence) to the performance of
Executive’s 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 Executive’s and Executive’s family’s
personal investments so long as such activities do not materially
interfere with the performance of Executive’s 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 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 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 December 31, 2011
(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 thirty
(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 reviewed and may be
increased, but not decreased, from time to time by the Board (or a
committee thereof). 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 Executive’s position. Without limiting the
foregoing, Executive shall have the opportunity to earn an annual
target bonus (the “ Annual Bonus ”) of not less
than fifty percent (50%) of Executive’s Base Salary, or such
greater amount as may be provided in an annual bonus plan approved
by the Board (or a committee thereof), contingent upon the
Company’s achievement of financial and operating metrics to
be annually determined by the Board (or a committee thereof), and
upon the Executive’s achievement of individual performance
goals recommended by the Chief Executive Officer and approved by
the Board (or a committee thereof). Such annual incentive bonuses
shall be paid to Executive within the sixty (60) day period
following the close of the Company’s fiscal year.
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(a)
Discretionary Grants . At the sole discretion of 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, or any
successor plan (any “ Stock Plan ”), Executive
shall be eligible for grants of stock options and other equity
awards of a level commensurate with Executive’s position and
similar to other executives of the Company.
(b)
Change of Control . Notwithstanding any other provision of
this Agreement, any Stock Plan or any equity award agreement, in
the event of a Change in Control, all equity awards (including, but
not limited to, any options and restricted stock grants made prior
or subsequent to the date of this Agreement) shall fully vest and
be immediately exercisable. For purposes of this Agreement, a
“ Change in Control ” shall mean the first of
the following events to occur:
(i) the sale,
lease, exchange or other transfer, directly or indirectly, of
substantially all of the assets of the Company (in one transaction
or in a series of related transactions) to a person or entity that
is not controlled by the Company;
(ii) the approval
by the shareholders of the Company of any plan or proposal for the
liquidation or dissolution of the Company;
(iii) a merger or
consolidation to which the Company is a party if the shareholders
of the Company immediately prior to effective date of such merger
or consolidation have “beneficial ownership” (as
defined in Rule 13d-3 under the Exchange Act), immediately
following the effective date of such merger or consolidation, of
securities of the surviving corporation representing (A) more
than 50%, but not more than 70%, of the combined voting power of
the surviving corporation’s then outstanding securities
ordinarily having the right to vote at elections of directors,
unless such merger or consolidation has been approved in advance by
the Incumbent Directors (as defined below), or (B) 50% or less
of the combined voting power of the surviving corporation’s
then outstanding securities ordinarily having the right to vote at
elections of directors (regardless of any approval by the Incumbent
Directors);
(iv) any person
becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
(A) 30% or more, but not 50% or more, of the combined voting
power of the Company’s outstanding securities ordinarily
having the right to vote at elections of directors, unless the
transaction resulting in such ownership has been approved in
advance by the Incumbent Directors, or (B) 50% or more of the
combined voting power of the Company’s outstanding securities
ordinarily having the right to vote at elections of directors
(regardless of any approval by the Incumbent Directors);
(v) the Incumbent
Directors cease for any reason to constitute at least a majority of
the Board; or
(vi) any other
change in control of the Company of a nature that would be required
to be reported pursuant to Section 13 or 15(d) of the Exchange
Act, whether or not the Company is then subject to such reporting
requirements.
3
For purposes of
this definition, “Incumbent Directors” of the Company
will mean any individuals who are members of the Board on the date
of this Agreement and any individual who subsequently becomes a
member of the Board whose election, or nomination for election by
the Company’s shareholders, was approved by a vote of at
least a majority of the Incumbent Directors (either by specific
vote or by approval of the Company’s proxy statement in which
such individual is named as a nominee for director without
objection to such nomination).
(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
Executive’s 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 (20) days (as
prorated for partial years).
(c)
Perquisites . The Company shall provide to Executive all
perquisites which other senior executives of the Company are
generally entitled to receive.
(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
Executive’s 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 each and every material duty of
Executive’s employment under this Agreement due to a physical
or mental injury, infirmity or incapacity for a period of 6
consecutive months in any 12-month period. The existence or
nonexistence of a Disability shall be determined by the Board,
acting reasonably and in good faith, taking into consideration the
opinion of an independent physician selected by the Company and
reasonably acceptable to Executive.
(b)
Death . Automatically on the date of death of
Executive.
(c)
Cause . Immediately upon written notice by the Company to
Executive of a termination for Cause. For purposes of this
Agreement, “ Cause ” shall mean:
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(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 Executive’s 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 Executive’s
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 thirty (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 Executive’s 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 Executive’s 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 Executive’s 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
Executive has been indicted for a felony, and Executive is not
convicted of, or does not plead guilty or nolo contendere to, such
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,
5
however, that,
any payments due hereunder shall be only paid after a final
determination in such proceeding is reached.
(d)
Without Cause . Upon thirty (30) days’ written
notice by the Company to Executive of an involuntary termination
other than for Cause, death or Disability.
(e) Good
Reason . Upon written notice by Executive to the Company of a
termination for Good Reason, unless such the events constituting
the basis for Good Reason are corrected in all material respects by
the Company within thirty (30) days following written
notification by Executive to the Company that he intends to
terminate his employment hereunder for Good Reason, and provided
that any such notice is given within ninety (90) days of the
occurrence of such Good Reason and Executive actually terminates
employment within twelve (12) months of the occurrence of such
Good Reason event. For purposes of this Agreement, “ Good
Reason ” shall mean, without the consent of Executive,
the occurrence of any of the following events:
(i) any material
reduction in Executive’s status, position(s), duties or
responsibilities as an executive of the Company;
(ii) any material
reduction by the Company in Executive’s Base Salary, equity
incentives, benefits or perquisites, or a material reduction by the
Company in the bonus that Executive may earn in a given year,
provided, however, that inability of the Company or the Executive
to satisfy performance objectives under any bonus plan shall not
constitute Good Reason;
(iii) 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;
(iv) a material
change in the geographic location at which Executive must perform
Executive’s services; or
(v) any other
material breach by the Company of its obligations
hereunder.
Executive’s
continued employment does not constitute consent to, or waiver of
any rights arising in connection with, any circumstances
constituting Good Reason.
(f)
Without Good Reason . Upon thirty (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 .
Subject to
Section 9, the following amounts and benefits shall be due to
Executive following Executive’s termination of employment;
provided, however, that no termination payments shall be payable
hereunder if Executive has not returned to the Company all Company
property used by Executive including without limitation any
automobile, computer or laptop, cell phone, Blackberry or similar
device.
6
(a)
Disability . Upon termination due to Disability, 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 (items (i)-(iv) being the “ Accrued
Amounts ”). The Accrued Amounts shall be paid to
Executive within fifteen (15) days of the termination date
.
(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. The Accrued Amounts shall be paid to
Executive within fifteen (15) days of notice of
Executive’s death.
(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. The Accrued
Amounts shall be paid to Executive within fifteen (15) days of
the termination date.
(d)
Termination Without Cause or for Good Reason Other Than in
Connection with a Potential Change of Control or Actual Change of
Control . If Executive’s employment by the Company is
terminated (1) by the Company other than for Cause, death or
Disability, or if the Company provides notice of its intention not
to renew pursuant to Section 2, or (2) by Executive for
Good Reason, but excluding, in each case (1) and (2) any
such termination in connection with a Potential Change of Control
(as defined in Section 8(e)) or an actual Change in Control,
then the Company shall pay or provide Executive with:
(ii) The right to
receive a pro-rata portion 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, which pro-rata portion shall be 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. For purposes of the foregoing, the
amount the Executive would have received shall be determined
pursuant to the Company’s bonus plan with respect to Company
performance against criteria for the full fiscal year, and with
respect to individual performance based upon the Board’s
determination, in good faith, as to the extent of the
Executive’s progress toward individual performance criteria
through the time of termination;
(iii) Continuation
of the Executive’s then current Base Salary as if
Executive’s employment continued for a period of twelve
(12) months from the date of termination;
(iv) A lump sum
payment equal to twelve (12) times the monthly premium amount
that the Company would have been required to pay for group life
insurance and group long term disability insurance coverage if
Executive had continued as an active
7
employee of the
Company, based on the premium amounts in effect at the
Executive’s date of termination (including any known increase
in such premiums); and
(v) Subject to
Executive’s timely election of any applicable continuation or
conversion coverage and continued co-payment of premiums, continued
participation for twelve (12) months in the Company’s group
medical and/or dental 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 group health and/or dental 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 not less frequently than monthly 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 (iv) shall be paid to
Executive within fifteen (15) days of the termination date,
subject to Section 9, as applicable.
(e)
Termination Without Cause or for Good Reason in Connection with
a Potential Change of Control or Actual Change of Control . If
Executive’s employment by the Company is terminated by
(1) the Company other than for Cause, death or Disability, or
if the Company provides notice of its intention not to renew
pursuant to Section 2, or (2) by Executive for Good
Reason, in each case (1) and (2) in connection with a
Potential Change of Control or an actual Change of Control, then
the Company shall pay or provide Executive with:
(i) Subject to
Section 9, as applicable, a lump sum payment, within fifteen
(15) days of the termination date, equal to the sum
of:
(B) twelve
(12) months of Base Salary,
(C) as
compensation for cancellation of Executive’s then-current
Annual Bonus opportunity, an additional 50% of annual Base Salary,
and
(D) twelve
(12) times the monthly premium amount that the Company would
have been required to pay for group life insurance and group long
term disability insurance coverage if Executive had continued as an
active employee of the Company, based on the premium amounts in
effect at the Executive’s date of termination (including any
known increase in such premiums); and
(ii) Subject to
Executive’s continued co-payment of premiums, continued
participation for twelve (12) months in the Company’s
group medical and/or dental 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
8
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 not less frequently than monthly 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 COBRA.
As used herein, a
“ Potential Change of Control ” shall be deemed
to have occurred if: (A) the Company enters into an agreement,
the consummation of which would result in the occurrence of a
Change of Control; (B) the Company or any person or entity
publicly announces an intention to take or to consider taking
actions which, if consummated, would constitute a Change of
Control; or (C) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change of Control
has occurred.
(f) Code
Section 409A . Payment of amounts under this
Section 8 are intended to comply with an exception to or
exclusion from the requirements of Code Section 409A and this
Agreement shall in all respects be administered in accordance with
such intention; provided, however, if any payment is or becomes
subject to the requirements of Code Section 409A, the
Agreement as it relates to such payment is intended to comply with
the requirements of Code Section 409A. In no event may
Executive, directly or indirectly, designate the calendar year of
any payment to be made under this Agreement. The payments to be
made under Section 8 are intended to be exempt from the
requirements of Code Section 409A because they are
(i) non-taxable benefits, (ii) welfare benefits within
the meaning of Treas. Reg. Sec. 1.409A-1(a)(5),
(iii) short-term deferrals under Treas. Reg. Sec.
1.409A-1(b)(4), or (iv) payments under a separation pay plan
within the meaning of Treas. Reg. Sec. 1.409A-1(b)(9). For purposes
of the limitations under Code Section 409A, each payment under
this Agreement shall be treated as a separate payment. All payments
to be made upon a termination of employment under this Agreement
may only be made upon a “separation from service” as
defined under Code Section 409A. All reimbursements to be made
under this Agreement that constitute deferred compensation subject
to Code Section 409A shall be made in accordance with the
requirements of Treas. Reg. Sec. 1.409A-3(i)(1)(iv). If, at the
time of Executive’s termination of employment, Executive is a
“specified employee” within the meaning of Code
Section 409A, then any payment of an amount that is deferred
compensation payable on account of a separation from service shall
be suspended and not made until the first day of the calendar month
following the end of the six (6) month period following
Executive’s termination of employment.
(g)
Parachute Payments; Potential Reduction in Payments
.
(i) Any provision
of any Stock Plan or any equity award agreement (including the
limitations of Section 10.2 of the Equity Incentive Plan)
relating to “parachute payments” under
Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended (the “ Code ”), shall not apply to any
equity award granted, at any time, to the Executive unless the
parties agree in writing to the contrary, including their express
intent to override the substance and effect of this
Section 8(g)(i).
(ii) The following
terms shall have the following meanings for purposes of this
Section 8(g).
9
(A) “
Excise Tax ” shall mean the excise tax imposed by
Section 4999 of the Code, together with any interest or
penalties imposed with respect to such excise tax.
(B) “ Net
After-Tax Receipt ” shall mean the present value (as
determined in accordance with Sections 280G(b)(2)(A)(ii) and
280G(d)(4) of the Code) of a Payment net of all taxes imposed on
Executive with respect thereto under Sections 1 and 4999 of
the Code and under applicable state and local laws, determined by
applying the highest marginal rate under Section 1 of the Code
and under state and local laws which applied to Executive’s
taxable income for the immediately preceding taxable year, or such
other rate(s) as Executive certifies, in Executive’s sole
discretion, as likely to apply to him in the relevant tax
year(s).
(C) “
Payment ” shall mean any payment or distribution in
the nature of compensation (within the meaning of
Section 280G(b)(2) of the Code) to or for the benefit of
Executive, whether paid or payable pursuant to this Agreement or
otherwise.
(D) “
Reduced Amount ” shall mean the greatest amount of
Agreement Payments that can be paid that would not result in the
imposition of the Excise Tax if the Accounting Firm determines to
reduce Agreement Payments pursuant to
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