Exhibit 10.6
EMPLOYMENT
AGREEMENT
This Agreement, dated as of March
30, 2004, is by and between NightHawk Radiology Holdings, Inc., a
Delaware corporation (“ Employer ”), and Paul
Berger, M.D. (“ Executive ”).
1. PERIOD OF EMPLOYMENT . Employer shall
employ Executive to render services to Employer in the position and
with the duties and responsibilities described in Section 2
for the period (the “ Period of Employment ”)
commencing on the date of this Agreement and ending on the date
upon which the Period of Employment is terminated in accordance
with Section 4 .
2. POSITION AND RESPONSIBILITIES
.
(a) Position . Executive
accepts employment with Employer as Chief Executive Officer and
shall perform all services appropriate to that position, as well as
such other services as may be assigned by Employer’s Board of
Directors (the “ Board ”). Executive shall
devote his best efforts and full-time attention to the performance
of his duties. Executive shall be subject to the direction of the
Board, which shall retain full control of the means and methods by
which he performs the above services and of the place(s) at which
all services are rendered. Executive shall be expected to travel if
necessary or advisable in order to meet the obligations of his
position.
(b) Other Activity . Except
upon the prior written consent of the Board, Executive (during the
Period of Employment) shall not (i) accept any other employment; or
(ii) engage in, manage, control, participate in, consult with, or
render services for, directly or indirectly, any other business,
commercial, or professional activity (whether or not pursued for
pecuniary advantage) that is competitive with Employer, creates a
conflict of interest with Employer, or otherwise interferes with
his duties to Employer or the business of Employer or any Affiliate
(as such businesses exist or are in development during the Period
of Employment) (and shall immediately cease any such ongoing
activity that becomes so competitive, begins to create such a
conflict or begins to interfere with his duties to Employer or the
business of Employer or any Affiliate). An “ Affiliate
” shall mean any person or entity that directly or indirectly
controls, is controlled by, or is under common control with
Employer (but, for the avoidance of doubt, the term “
Affiliate ” as used herein shall specifically exclude
any so-called “portfolio companies” of Summit Partners,
L.P. other than Holdings and its direct and indirect subsidiaries
(including, without limitation, Employer)).
3. COMPENSATION AND BENEFITS .
(a) Salary . In consideration
of the services to be rendered under this Agreement, Employer shall
pay Executive $600,000 per year (“ Base Salary
”), payable in regular installments in accordance with
Employer’s general payroll policies for salaried employees,
in effect from time to time. All compensation and comparable
payments to be paid to Executive under this Agreement shall be less
all applicable withholdings required by law. Executive’s Base
Salary will be reviewed for market and performance adjustments
within thirty (30) days of the beginning of each calendar year
during the Period of Employment by the Compensation Committee of
the Board and may be increased after such review with the unanimous
approval of such Committee.
(b) Bonus . In addition to
the Base Salary, Executive may (depending upon satisfaction of
certain criteria) be entitled receive a performance bonus relating
to the operating performance of NightHawk Radiology Services, LLC
(“NRS”), as described below. The performance bonus
could, in the aggregate, equal up to one-hundred percent (100%) of
Executive’s Base Salary, less applicable withholding. Such
performance bonus, if any, shall be based upon and subject to the
performance criteria as follows, and shall be payable, if at all,
in respect of any year (or portion thereof) within 30 days
following the delivery of NRS’ annual consolidated audited
financial statements for such year.
(i) Executive will be eligible to
receive an annual bonus in an amount not to exceed 100% of
Executive’s Base Salary for each calendar year (or portion
thereof) based upon attainment by NRS of Total Revenue goals
(“Total Revenue Goal”) and EBITDA goals (“EBITDA
Goal”) established by the Compensation Committee of the Board
(after consultation with Executive) on an annual basis prior to the
commencement of each calendar year or as soon as reasonably
practicable thereafter. If NRS shall attain the Total Revenue Goal
and the EBITDA Goal for any fiscal year, Executive shall receive a
bonus in an amount equal to 50% of Executive’s Base Salary,
less applicable withholding and subject to adjustment as described
in the next sentence. The bonus amount payable pursuant to the
immediately preceding sentence is subject to upward and downward
adjustment such that (i) for every one (1%) percentage point that
audited Total Revenue exceeds or falls below, as the case may be,
the Total Revenue Goal established for such year, such bonus amount
shall be appropriately adjusted, upward or downward, by 1.67% of
Executive’s Base Salary (such adjustment in no event to
exceed 25% of Base Salary) and (ii) for every one (1%) percentage
point that audited EBITDA exceeds or falls below, as the case may
be, the EBITDA Goal established for such year, such bonus amount
shall be appropriately adjusted, upward or downward, by 1.25 % of
Executive’s Base Salary (such adjustment in no event to
exceed 25% of Base Salary).
(ii) The Total Revenue Goal and the
EBITDA Goal for fiscal year 2004 is hereby agreed to be $30.5
million and $11.2 million (after accrual for any and all bonus or
incentive compensation amounts payable to the executive management
team of NRS and Employer), respectively.
(iii) “Total Revenue” is
hereby agreed to mean, for any particular period, total revenue
derived from the sale by NRS of radiology services and related
merchandise, less reserves for doubtful accounts
“EBITDA” is hereby agreed to mean, for any particular
period, NRS’ net income for such period, plus (i) the amount
of the provision for foreign, federal, state and local income taxes
for such period, plus (ii) the amount of depreciation, amortization
and non-cash compensation expenses and any extraordinary and
non-recurring charges incurred during such period, plus (iii) to
the extent applicable, the aggregate costs and expenses incurred by
NRS and Employer in connection with the transactions undertaken
with Summit Partners, L.P. For the avoidance of doubt, EBITDA
hereunder will be calculated after accrual for any and all amounts
payable to Executive and other members of the executive management
team NightHawk Radiology Services, LLC.
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(iv) The target amount of
Executive’s bonus as set forth above will be reviewed for
market and performance adjustments within thirty (30) days of the
beginning of each calendar year and may be increased after such
review in the Compensation Committee’s sole
discretion.
(c) Benefits . Executive
shall be entitled to vacation leave in accordance with
Employer’s standard policies for salaried employees, in
effect from time to time. As Executive becomes eligible, he shall
have the right to participate in and to receive benefits from all
present and future benefit plans specified in Employer’s
policies and generally made available to salaried employees of
Employer from time to time. The amount and extent of benefits to
which Executive is entitled shall be governed by the specific
benefit plan, as amended. Executive also shall be entitled to any
benefits or compensation tied to termination as described in
Section 4 . Employer reserves the ability, in its sole
discretion, to adjust benefits provided to Executive in connection
with the adjustment of benefits to salaried employees. No statement
concerning benefits or compensation to which Executive is entitled
shall alter in any way the term of this Agreement, any renewal
thereof, or its termination.
(d) Expenses . Employer shall
reimburse Executive for reasonable travel and other business
expenses incurred by Executive in the performance of his duties,
subject to reasonable documentation thereof and in accordance with
Employer’s policies in effect from time to time.
(e) Withholding . Any and all
payments made pursuant to this Agreement shall be subject to all
withholding required in accordance with applicable federal, state
or local law.
4. TERMINATION OF EMPLOYMENT .
(a) By Employer Without Cause
. At any time, Employer may terminate the Period of Employment
without Cause (as defined below), effective as of the date
specified in a written notice from Employer to Executive. Employer
may dismiss Executive as provided in this Section 4
notwithstanding anything to the contrary contained in or arising
from any statements, policies, or practices of Employer relating to
the employment, discipline, or termination of its employees. If the
Period of Employment is terminated by Employer without Cause,
Executive shall be entitled to continue to receive his Base Salary
and Bonus (pro-rated to the date of termination and paid in
accordance with Section 3(b) above) payable in regular installments
as special severance payments from the date of termination for a
period of twelve (12) months thereafter, (the “ Severance
Period ”), if and only if Executive has executed and
delivered to Employer the General Release substantially in form and
substance as set forth in Exhibit A attached hereto and only
so long as Executive has not revoked or breached the provisions of
the General Release or breached the provisions of this Agreement or
the Confidentiality and Non-Compete Agreement between Holdings and
Employer dated as of the date hereof (the “ Non-Compete
Agreement ”) and does not apply for unemployment
compensation chargeable to Employer during the Severance Period,
and Executive shall not be entitled to any other salary,
compensation or benefits after termination of the Period of
Employment, except as specifically provided for in Employer’s
employee benefit plans or as otherwise expressly required by
applicable law (such as COBRA); provided that Employer shall pay
Executive’s COBRA health insurance premiums from the date of
termination through the date that is twelve (12) months after the
date of termination. Notwithstanding anything to the contrary
contained in this
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Section 4(a), in the event Executive breaches
the provisions of this Agreement or the Non-Compete Agreement, the
severance amounts payable by Employer under this Section 4(a) shall
not terminate unless and until more than fifteen (15) days have
elapsed from and after the date written notice of such breach has
been delivered to Executive without such breach having been cured
during such 15-day period, provided, however, Executive will be
permitted to avail himself of the cure rights contained in this
Section 4(a) one time only during the Period of
Employment.
(b) By Employer For Cause .
At any time, and without prior notice (except as otherwise provided
in the definition of Cause set forth below), Employer may terminate
the Period of Employment for Cause. Employer shall pay Executive
all compensation then due and owing; thereafter, all of
Employer’s obligations under this Agreement shall cease.
Termination shall be for “ Cause ” if Executive:
(i) breaches his duty of loyalty to Employer or any of its
Affiliates or engages in any acts of dishonesty or fraud with
respect to Employer or any of its Affiliates or any of their
respective business relations; (ii) commits a felony or any crime
involving dishonesty, breach of trust, or physical or emotional
harm to any person (or enters a plea of guilty or nolo
contendere with respect thereto); (iii) breaches any material
term of this Agreement or any other agreement between Executive and
Employer or any of its Affiliates and such breach (if capable of
cure) is not cured within fifteen (15) days following written
notice thereof from Employer, (iv) reports to work under the
influence of alcohol or illegal drugs, the use of illegal drugs
(whether or not at the workplace) or other repeated conduct causing
Employer or any of its Affiliates substantial public disgrace,
disrepute or economic harm, (v) substantial and repeated failure to
perform the duties as reasonably directed by the Board, or (vi)
gross negligence or willful misconduct with respect to the Employer
or any of its Affiliates.
(c) By Executive for Good
Reason . If Executive shall resign for Good Reason, Executive
shall be entitled to continue to receive his Base Salary and Bonus
(pro-rated to the date of termination and paid in accordance with
Section 3(b) above) payable in regular installments as special
severance payments from the date of termination for a period of
twelve (12) months thereafter, if and only if Executive has
executed and delivered to Employer the General Release
substantially in form and substance as set forth in Exhibit
A attached hereto and only so long as Executive has not revoked
or breached the provisions of the General Release or breached the
provisions of this Agreement or the Non-Compete Agreement and does
not apply for unemployment compensation chargeable to Employer
during such twelve (12) month period, and Executive shall not be
entitled to any other salary, compensation or benefits after
termination of the Period of Employment, except as specifically
provided for in Employer’s employee benefit plans or as
otherwise expressly required by applicable law (such as COBRA).
Notwithstanding anything to the contrary contained in this Section
4(c), in the event Executive breaches the provisions of this
Agreement or any Ancillary Agreement, the severance amounts payable
by Employer under this Section 4(c) shall not terminate unless and
until more than fifteen (15) days have elapsed from and after the
date written notice of such breach has been delivered to Executive
without such breach having been cured during such 15-day period
provided, however, Executive will be permitted to avail himself of
the cure rights contained in this Section 4(c) one time only during
the Period of Employment. For purposes of this Section 4(c)
, “ Good Reason ” will mean Executive’s
voluntary resignation within ninety (90) days after the occurrence
of any of the following: (i) without the express written consent of
Executive, a reduction in Executive’s annualized Base Salary;
(ii) without the express written
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consent of Executive, a material diminution in
Executive’s supervisory responsibilities; or (iii) the
relocation of Executive in connection with any relocation of
Employer’s principal place of business to a facility or a
location more than fifty (50) miles outside of the greater Coeur
d’Alene, Idaho area without Executive’s written
consent. In addition, Employer shall pay Executive’s COBRA
health insurance premiums from the date of termination by Executive
for Good Reason through the date that is twelve (12) months after
the date of termination by Executive for Good Reason. In the event
that Executive terminates his employment for Good Reason, the
Company shall be entitled to deliver written notice to Executive
within fifteen (15) days following such termination demanding that
the determination of the existence of Good Reason be determined by
arbitration in accordance with the procedures set forth in
Section 9 hereof. If the arbitrator determines that Good
Reason did not exist, the termination shall be treated as a
voluntary termination by Executive and the Company shall have no
obligations to pay or provide to Executive the compensation
payments and other benefits to which he would have otherwise been
entitled to pursuant to a termination for Good Reason. If the
arbitrator determines that Good Reason did exist, Executive shall
be entitled to the compensation payments and other benefits set
forth in this Section 4(c) .
(d) Voluntary Termination By
Executive . At any time, Executive may terminate the Period of
Employment for any reason, with or without cause, by providing
Employer at least thirty (30) days’ advance written notice.
Employer shall have the option, in its complete discretion and upon
payment of all compensation then due and owing (including Bonus,
pro rated to the date of any such termination and paid in
accordance with Section 3(b) above) through the last day of the
notice period, to make Executive’s termination effective at
any time prior to the end of such notice period and, thereafter,
all of Employer’s obligations under this Agreement shall
cease.
(e) Termination Upon Death or
Permanent Disability . Executive’s employment with
Employer shall also terminate upon Executive’s death or
permanent mental or physical disability or other incapacity (as
determined by the Board in its good faith judgment). Upon any such
termination, Employer shall pay Executive (or Executive’s
estate or legal representative or guardian) all compensation then
due and owing (including Bonus, pro rated to the da
