Exhibit 10.17
EXECUTION COPY
EXECUTIVE EMPLOYMENT
AGREEMENT
AGREEMENT dated as of
May 15, 2008 between InSight Health Services Corp., a Delaware
corporation (“Company”), and Bernard O’Rourke
(“Executive”). Company is a wholly owned
subsidiary of InSight Health Services Holdings Corp., a Delaware
corporation (“Parent”).
Company wishes to
continue to employ Executive, and Executive wishes to accept such
continued employment, in each case subject to the terms and
conditions hereof. Accordingly, Company and Executive hereby
agree as follows:
I.
TERM
Commencing with the
effective date set forth above, Executive is to be employed by
Company on the terms and conditions set forth in this Agreement,
until such time as Executive or the Company terminate this
Agreement in accordance with its terms.
II.
EMPLOYMENT
SECTION 2.01
Employment by Company . Company
employs Executive to render full time services as Company’s
Executive Vice President and Chief Operating Officer and in such
other capacities as the President and Chief Executive Officer
(“CEO”) may assign and, in connection therewith, to
report to the CEO and perform such duties as are reasonably
consistent with Executive’s position and as the CEO shall
direct. .Executive agrees to perform such duties as are reasonably
consistent with the duties normally pertaining to the office to
which Executive has been elected or appointed, subject always to
the direction of the CEO and to conduct himself in a professional
and diligent manner. Subject to Section 5.01 hereof,
Executive’s expenditure of reasonable amounts of time for
personal business, charitable or professional activities will not
be deemed a breach of Executive’s undertaking to provide full
time services hereunder as long as such activities do not interfere
with Executive’s rendering of such services.
SECTION 2.02
Acceptance of Employment by Executive .
Executive accepts such employment and shall render the
services required by this Agreement to be rendered by
Executive. Executive shall also serve on request during all
or any part of the term of this Agreement as an officer or director
of any of Company’s subsidiaries or affiliates without any
compensation therefor other than as specified in this
Agreement.
SECTION 2.03
Place of
Employment . Executive’s principal place of
employment shall be located at 26250 Enterprise Court,
Suite 100, Lake Forest, California 92630. In connection
therewith, Executive shall move his principal residence from the
State of New York to the State of California by no later than
January 31, 2009. Thereafter, in the event that the
principal place of employment of Executive is relocated to a site
that is more than 80 miles from Executive’s principal
residence in the State of California, subject to
Section 4.05(a) hereof, Company may require Executive to
relocate Executive’s principal residence to within 80 miles
of such site. Notwithstanding the foregoing, Executive
acknowledges that the duties to be performed by
Executive hereunder are
such that Executive may be required to travel extensively,
principally within the United States, in connection with Company
Business (as defined below).
III.
COMPENSATION
SECTION 3.01
Salary,
Bonus, Life Insurance . As compensation for the
services to be rendered pursuant to this Agreement, Company shall
pay Executive, and Executive shall accept, a salary of $265,000 per
annum (“Annual Salary”), payable in accordance with the
payroll policies of Company for senior executives as from time to
time in effect, less such amounts as may be required to be withheld
by applicable federal, state and local law and regulations (the
“Payroll Policies”). Effective upon the date of
Executive’s relocation of his family and his principal
residence from the State of New York to the State of California,
Executive will receive a three percent (3%) increase in his Annual
Salary (“Relocation Increase”); provided, however, if
Executive has received an increase in Annual Salary in connection
with the Company’s annual common review date (“Interim
Increase”), then such Relocation Increase shall be reduced by
the amount of such Interim Increase.
In addition to the
Annual Salary, ,effective for the fiscal year ending June 30,
2009 , Executive shall be eligible to receive an annual bonus of up
to 45%, or such percentage as shall be approved by the Board of
Directors of the Company (“Board”), of
Executive’s Annual Salary (“Bonus”), which shall
be based upon Parent achieving the target financial goals or other
goals (“Target Goals”) approved by the Board for the
then-current fiscal year. The Target Goals shall be set forth
in a budget prepared by Executive and Company management and
approved by the Board, and shall, as applicable, be set at the plan
level applicable to the other executive officers of Company.
The Bonus is payable, if earned, promptly following the
completion of Parent’s year-end audit for such year and
delivery of a certification by Executive to the Board, certifying
the results for the year and the calculation of any Bonus so
payable. For the fiscal year ending June 30, 2009, the
Target Goals shall be set forth in a budget prepared by Company
management and approved by the Board prior to August 1,
2008.
Company shall
purchase and maintain in full force and effect at all times during
the term of this Agreement a policy of term insurance on the life
of Executive payable to such beneficiary or beneficiaries as
Executive may designate in an amount equal to three (3) times
the amount of the Annual Salary; provided, Executive shall comply
with the issuing insurance company’s requirements for
issuance of the policy. Executive shall provide reasonable
cooperation with the Company and its insurance agency in the event
the Company decides to obtain a “key man” insurance
policy on Executive for the benefit of Company.
SECTION 3.02
Performance Review . Executive’s
performance shall be reviewed and evaluated by the Board annually
during the term of this Agreement.
SECTION 3.03
Participation in Employee Benefit Plans
. Executive shall be entitled during the term of this
Agreement, if and to the extent eligible, to participate in any
life insurance, medical, health and accident and disability plan or
program, pension plan or similar benefit plan of Company, which may
be available to senior executives of Company generally, on the same
terms as such other executives.
SECTION 3.04
Business
E xpenses .
Subject to such policies as may from time to time be established by
Company for senior executives of Company generally, Company shall
pay or reimburse Executive for all reasonable business expenses
actually incurred and paid by Executive during the term of this
Agreement in the performance by Executive of services under this
Agreement, upon presentation of expense statements or vouchers or
such other supporting information as Company may reasonably
require.
SECTION 3.05
Automobile Allowance . Company
shall pay Executive an automobile allowance of $750 per month, and
shall reimburse Executive for expenses of operating such car
consisting of gas, insurance and registration, in such amount and
in accordance with and subject to such policies as may from time to
time be established and amended by the Board.
SECTION 3.06
Vacation . Executive shall be
entitled to three (3) weeks of paid vacation each year during
the term of this Agreement which shall be taken at a time or times
which do not unreasonably interfere with Executive’s duties
hereunder and in accordance with Company policy. Executive
may not accumulate any unused vacation in excess of six
(6) weeks at any one time.
SECTION 3.07
Equity
Award . Executive shall be entitled to
participate in Parent’s equity award program, on the terms
and conditions that are applicable to the other executive officers
of Company, as such award program may be determined by the board of
directors of Parent (“Parent Board”). The Parent
Board currently expects to award Executive non-statutory stock
options to acquire shares of Parent Common Stock
(“Options”). The Options will be subject to
performance-based vesting, which will occur upon a successful
refinancing (to be defined in the Option grant agreement) of the
currently outstanding issue of $315,000,000 Senior Floating Rate
Notes. The successful refinancing will include, among other
items, the absence of any dilution to the then-existing holders of
outstanding Parent Common Stock. The exercise price of the
Options will be set on the date of actual grant, currently expected
to occur not later than May 30, 2008, and will be calculated
as the 5-day average closing price ending on the date of grant, but
not less than the closing price on the date of grant.
SECTION 3.08
Relocation Expenses. Company
shall pay expenses relating to Executive’s relocation of his
principal residence from the State of New York to the State of
California up to a maximum of $35,000 (“Relocation
Expenses”). Such Relocation Expenses shall include
those items on the Relocation Guidelines attached hereto as Annex
A.
In addition, Company
will pay Executive’s income taxes related to the inclusion in
Executive’s W-2 income of the Relocation Expenses or the
Company’s reimbursement thereof.
IV.
TERMINATION
SECTION 4.01
Termination upon Death . If
Executive dies during the term of this Agreement, this Agreement
shall terminate as of the date of Executive’s
death.
SECTION 4.02
Termination upon Disability .
Executive’s employment may be terminated by Company due to
Executive’s permanent and total disability (within the
meaning of Section 22(e)(3) of the Internal Revenue Code of 1986,
as amended) (“Disability”), so that Executive is unable
substantially to perform Executive’s services required by
this Agreement to be rendered by Executive for (i) a period of
three (3) consecutive months or (ii) for shorter periods
aggregating three (3) months during any twelve (12) month
period. Company may, at any time after the last day of the
three (3) consecutive months of Disability or the day on which the
shorter periods of Disability equal an aggregate of three (3)
months, by 30 days’ written notice to Executive, terminate
this Agreement and Executive’s employment hereunder.
Any such determination of Disability shall be made by a physician
chosen by a majority of the members of the Board in its sole
discretion. Nothing in this Section 4.02 shall be deemed
to extend the term of this Agreement or of Executive’s
employment hereunder, beyond the term specified in Article I
hereof.
SECTION 4.03
Termination for Cause . If the
Board determines that Cause (as defined below) exists, it may
remove Executive for Cause and terminate this Agreement and the
term of Executive’s employment hereunder on the date
specified in written notice to Executive. If terminated for
Cause, Executive shall have no right to receive any monetary
compensation or benefit hereunder with respect to any period after
the date specified in such notice. Such notice may also
terminate Executive’s right to enter Company’s
premises. For purposes of this Agreement, the term
“Cause” means any of the following:
(a)
Executive has been convicted or pled guilty or no contest to any
(i) crime or offense which is likely to have an adverse impact
on the business operations, financial condition, or overall
business reputation of Parent, Company or any of their
subsidiaries, or (ii) felony offense;
(b)
Executive has committed or attempted to commit fraud or
embezzlement;
(c)
Executive has breached any of Executive’s obligations under
this Agreement and Executive has failed to cure the breach within
30 days following receipt of written notice of such breach from
Company or Executive engages in intentional and repeated actions
specifically and solely for the purpose of causing his termination
by the Company;
(d)
Parent or Company, after reasonable investigation, finds that
Executive has violated or attempted to violate any
material written policies and procedures of Parent or
Company, including but not limited to, policies and procedures
pertaining to harassment and discrimination;
(e)
Executive has failed to obey a specific written direction from the
Board (unless such specific written instruction represents an
illegal act), provided that (i) such failure continues for a
period of 30 days after receipt of such specific written direction,
and (ii) such specific written direction includes a statement
that the failure to comply therewith will be a basis for
termination hereunder; or
(f)
any willful act or omission on Executive’s part which is
injurious in any material respect to the business operations,
financial condition or business reputation of Parent or Company or
any of their subsidiaries.
SECTION 4.04
Termination in Discretion of Company
. Company may, at any time, on 15 days’ written
notice to Executive, terminate this Agreement and the term of
Executive’s employment hereunder, and Executive thereafter
shall receive all monetary compensation and benefits due
through the termination date specified in the notice, as well as
rights to receive monetary compensation or benefits hereunder in
respect of any period after the effective date of termination as
are specifically provided in Section 4.07 hereof. Such
notice may also terminate Executive’s right to enter
Company’s premises effective immediately.
SECTION 4.05
Voluntary Termination for Good Reason .
During the period commencing upon the occurrence of Good
Reason (as defined below) and continuing for 30 days thereafter,
Executive shall have the right to terminate Executive’s
employment for Good Reason (as defined below), whereupon Executive
shall become entitled to receive compensation as provided in
Section 4.07 hereof. The failure of Executive to deliver
such notice with the 30-day time period shall constitute agreement
by Executive to such event and eliminate the ability of Executive
to terminate this Agreement for such event. Termination by
the Executive pursuant to the preceding sentence shall be effective
upon 30 days written notice to Company. For purposes of this
Agreement, “Good Reason” means any of the
following:
(a)
the movement by Company, without Executive’s consent, of
Executive’s principal place of employment to a site that is
more than 80 miles from Executive’s principal residence in
the State of California;
(b)
a reduction by Company, without Executive’s consent, in
Executive’s Annual Salary or bonus opportunity, as they exist
on the date hereof; or
(c)
a failure by Company to comply with any material provisions of this
Agreement which has not been cured within 30 days after notice of
such noncompliance has been given by Executive to Company, or if
such failure is not capable of being cured in such time, for which
a cure shall not have been diligently initiated by Company within
such 30 day period.
SECTION 4.06
Voluntary Termination Without Good Reason
. Executive shall have the right to terminate this
Agreement upon 30 days’ written notice to Company and, upon
such termination, Executive shall not have the right to receive any
monetary compensation or benefit hereunder with respect to any
period after the date specified in such notice.
SECTION 4.07
Compensation on Termination
.
(a)
If the term of Executive’s employment hereunder is terminated
pursuant to Section 4.01 hereof, Company shall pay to the
executors or administrators of Executive’s estate or
Executive’s heirs or legatees (as the case may be) all
compensation accrued and unpaid up to the date of Executive’s
death. If the term of Executive’s employment hereunder
is terminated
pursuant to
Section 4.02 hereof, Company shall pay to Executive all
compensation accrued and unpaid up to the date of such
termination.
(b)
If the term of Executive’s employment hereunder is terminated
pursuant to Section 4.04, 4.05, or 4.07(c) hereof,
Company shall (i) pay to Executive all compensation accrued
and unpaid up to the effective date of termination; (ii) pay
to Executive additional compensation in an amount equal to twelve
(12) months of compensation at the monthly Annual Salary rate then
in effect, payable in accordance with the Payroll Policies; and
(iii) maintain, at Company’s expense, in full force and
effect, for Executive’s continued benefit until the earlier
of (x) twelve (12) months after the effective date of
termination or (y) commencement of Executive’s benefits
pursuant to employment with a new employer, all life insurance,
medical and health plans or programs, in which Executive was
participating immediately prior to the effective date of
termination; provided, that Executive’s continued
participation is permissible under the general terms and provisions
of such plans or programs and provided further, that Company shall
be entitled to amend or terminate any employee benefit plans which
are applicable generally to Company’s employees. In the
event that Executive’s participation in any such plan or
program is prohibited, Company shall arrange to provide Executive
with benefits substantially similar to those which Executive was
entitled to receive under such plans or programs. Any
payments made pursuant to this Section 4.07 shall be reduced
by such amounts as are required by law to be withheld or
deducted.
(c)
Notwithstanding any provision herein to the contrary, if Executive
is terminated by Company without Cause, or Executive terminates
Executive’s employment for Good Reason, within twelve (12)
months following a Change in Control (as defined herein) which
occurs after the Effective Time, Executive shall be entitled to the
payments and benefits set forth in Section 4.07(b). For
purposes hereof, a “Change in Control” shall be deemed
to have occurred if (i) any person, or any two or more persons
acting as a group, and all affiliates of such person or persons (a
“Group”), who prior to such time beneficially owned
less than 50% of the then outstanding capital stock of Company or
Parent, shall acquire shares of Company’s or Parent’s
capital stock in one or more transactions or series of
transactions, including by merger, and after such transaction or
transactions such person or group and affiliates beneficially own
50% or more of Company’s or Parent’s outstanding
capital stock, or (ii) Company or Parent shall sell all or
substantially all of its assets to any Group which, immediately
prior to the time of such transaction, beneficially owned less than
50% of the then outstanding capital stock of Company or
Parent.
(d)
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