Exhibit 10.40

ALLIANCE HEALTHCARE SERVICES, INC.

TRANSACTION BONUS PLAN

Effective as of March 29, 2016

 

1.

Introduction and Purpose.

This Alliance HealthCare Services, Inc. Transaction Bonus Plan (the “Plan”) has
been adopted effective as of March 29, 2016 in connection with that certain
transaction contemplated by Fujian Thai Hot Investment Co., Ltd. (“Thai Hot”)
and Oaktree Capital Management, L.P., MTS Health Investors, LLC, and Larry C.
Buckelew (together, the “Selling Stockholders”), whereby Thai Hot agreed to
purchase shares of common stock of Alliance HealthCare Services, Inc. (the
“Company”) from funds managed by the Selling Stockholders (the
“Transaction”).  The Company believes that the value of the Company will be
enhanced by the continued employment of the Company’s Covered Employees (as
defined below) through the consummation of the Transaction (the “Closing”), and
the Company has established this Plan to create an incentive for its Covered
Employees to continue their employment with the Company, through the grant of
transaction bonuses. Terms capitalized but not otherwise defined shall have the
meanings ascribed in Section 3 hereof.

 

2.

Transaction Bonus Awards.

(a) The Company shall establish a Transaction Bonus Pool (the “Transaction Bonus
Pool”) in an aggregate amount of up to $1,500,000.  Each individual who has been
selected to participate in the Plan as set forth on Exhibit A (each, a “Covered
Employee”) shall be eligible to receive from the Company a Transaction Bonus (a
“Transaction Bonus”) equal to the amount set forth opposite his or her name on
Exhibit A.

(b) The Transaction Bonuses that become payable pursuant to Section 2(a) above
shall be (i) paid according to the following schedule: one-third will vest and
be paid on the Closing, one-third will vest and be paid on the three-month
anniversary of the Closing and one-third will vest and be paid on the six-month
anniversary of the Closing (each, a “Payment Date”), in each case, subject to
the Covered Employee’s continuous employment by the Company through each Payment
Date, (ii) subject to reduction for all applicable income and employment
withholding taxes and other regular payroll deductions and (iii) subject to the
Covered Employee’s execution of that certain amendment to his or her executive
severance agreement approved by the Special Committee of the Board of Directors
of the Company in connection with the Transaction.

(c) Notwithstanding anything contained in this Section 2 to the contrary, if a
Covered Employee’s employment with the Company is terminated for any reason
prior to a Payment Date other than by (i) the Company without Cause or (ii) by
the Covered Employee for Good Reason, such Covered Employee shall immediately
forfeit any right to receive an unvested Transaction Bonus under the Section
2(a) above and shall have no further rights with respect thereto.

(d) Notwithstanding anything contained in this Section 2 to the contrary, if a
Covered Employee’s employment with the Company is terminated prior to a Payment
Date by (i) the

 

 

 

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Company without Cause or (ii) by the Covered Employee for Good Reason, such
Covered Employee’s Transaction Bonus, to the extent not vested, shall become
fully vested.

 

3.

Definitions.

(a) For purposes hereof, the term “Cause” shall mean any of the following: (i)
the Covered Employee is convicted of, or pleads guilty or no contest to any
crime that constitutes a felony, or any misdemeanor that involves the purchase
or sale of any security, the taking of a false oath, the making of a false
report, bribery, perjury, burglary, larceny, theft, robbery, extortion, forgery,
counterfeiting, fraudulent concealment, embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or a conspiracy to commit any of these
offenses, or substantially equivalent activity; (ii) the Covered Employee
commits any act of theft, dishonesty, fraud or embezzlement; (iii) the Covered
Employee fails to perform Covered Employee’s duties to the reasonable
satisfaction of the Company or to carry out instructions by the executive
officers or the Board of Directors of the Company (the “Board”), or breaches
Company policies or procedures. Unless the Company, in its sole discretion,
determines that such a failure or breach is incurable, such failure or breach
will only constitute grounds for termination for Cause if (i) such failure or
breach is not cured by the Covered Employee to the satisfaction of the Company
within 15 business days after the Company gives the Covered Employee written
notice identifying the manner in which the Company believes that Covered
Employee failed to perform or breached; (ii) the Covered Employee, in the
reasonable judgment of the Company, causes the reputation and goodwill of the
Company to suffer substantial damage, or subjects the Company to legal harm; or
(iii) the Covered Employee, in the reasonable judgment of the Company, engages
in conduct disloyal to the Company and/or breaches the Covered Employee’s
fiduciary duties to the Company. The determination whether a termination is for
“Cause” under the foregoing definition shall be made by the Company in its sole
discretion.

(b) For purposes hereof, the term “Good Reason” shall mean a Covered Employee’s
resignation only for the following events that occurs without the Covered
Employee’s written consent:  (a) the Company materially reduces Covered
Employee’s base salary, (b) the assignment to the Covered Employee of any duties
which diminish in any material respect the Covered Employee’s position with the
Company (including status, offices, titles and reporting requirements),
authority, duties or responsibilities, (c) any material failure by the Company
to comply with any of the provisions of any employment agreement between Covered
Employee and the Company, which is not remedied within 30 days after notice
thereof from the Covered Employee, (d) if Covered Employee is not based in
Alliance’s Resource Center in Southern California, and the Company requires
Covered Employee to materially change the location of Covered Employee’s
principal office to a facility or a location more than sixty (60) miles from
Covered Employee’s then-current residence, or (e) if Covered Employee’s
principal office is located in Alliance’s Resource Center in Southern
California, and the Company moves Alliance’s Resource Center more than sixty
(60) miles from the then present office location.  The Company and Covered
Employee further agree that for a resignation to constitute a resignation by
Covered Employee for “Good Reason”, (i) Covered Employee must provide written
notice to the Company of Covered Employee’s intent to resign within thirty (30)
days of one of the triggering events outlined in this Section 3(b), (ii) the
Company must fail to cure the condition giving rise to Good Reason within thirty
(30) days following its receipt of Covered Employee’s

 

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notice and (iii) Covered Employee’s resignation must be effective within thirty
(30) days following the Company’s failure to cure.

 

4.

Section 280G.

Notwithstanding anything in the Plan to the contrary, if any payment or benefit
a Covered Employee would receive pursuant to the Plan or otherwise (“Payment”)
would (a) constitute a “parachute payment” within the meaning of Section 280G of
the Internal Revenue Code of 1986, as amended (the “Code”), and (b) but for this
sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then such Payment shall either be (i) delivered in full, or (ii)
delivered as to such lesser extent which would result in no portion of such
Payment being subject to the Excise Tax, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and the
Excise Tax, results in the receipt by such Covered Employee on an after-tax
basis, of the largest payment, notwithstanding that all or some portion the
Payment may be taxable under Section 4999 of the Code.  If there is a reduction
pursuant to this Section 4 of the Payments to be delivered to the applicable
Covered Employee, such reduction shall first be applied to any cash amounts to
be delivered to the applicable Covered Employee under this Plan and thereafter
to any other severance benefits or payments otherwise owing to such applicable
Covered Employee.

 

5.

Section 409A.

(a) Notwithstanding anything in this Plan to the contrary, any compensation or
benefits payable under this Plan that constitutes “nonqualified deferred
compensation” (“Deferred Compensation”) within the meaning of Section 409A of
the Code, and which is designated under this Plan as payable upon a Covered
Employee’s termination of employment shall be payable only upon such Covered
Employee’s “separation from service” with the Company within the meaning of
Section 409A of the Code (a “Separation from Service”) and, except as provided
under Section 5(b) of this Plan, any such compensation or benefits shall not be
paid until the sixtieth (60th) day following the Covered Employee’s Separation
from Service.

(b) Notwithstanding any provision herein to the contrary, if a Covered Employee
is deemed by the Company at the time of such Covered Employee’s Separation from
Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of
the Code, to the extent delayed commencement of any portion of the benefits to
which such Covered Employee is entitled under this Plan is required in order to
avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such
portion of such Covered Employee’s benefits shall not be provided to such
Covered Employee prior to the earlier of (i) the expiration of the six-month
period measured from the date of such Covered Employee’s Separation from Service
or (ii) the date of such Covered Employee’s death. Upon the first business day
following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period,
all payments deferred pursuant to the preceding sentence shall be paid in a lump
sum to such Covered Employee (or such Covered Employee’s estate or
beneficiaries), and any remaining payments due to such Covered Employee under
this Plan shall be paid as otherwise provided herein.

(c) To the extent applicable, this Plan shall be interpreted in accordance with,
and incorporate the terms and conditions required by, Section 409A of the Code
and Department of

 

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Treasury regulations and other interpretive guidance issued thereunder,
including without limitation any such regulations or other guidance that may be
issued after the adoption of this Plan. Notwithstanding any provision of this
Plan to the contrary, in the event that the Company determines that any amounts
payable hereunder will be immediately taxable to a Covered Employee under
Section 409A of the Code and related Department of Department of Treasury
guidance, to the extent permitted under Section 409A of the Code, the Company
may, to the extent permitted under Section 409A of the Code (i) cooperate in
good faith to adopt such amendments to this Plan and appropriate policies and
procedures, including amendments and policies with retroactive effect, that they
determine necessary or appropriate to preserve the intended tax treatment of the
benefits provided by this Plan, preserve the economic benefits of this Plan
and/or (ii) take such other actions as mutually determined necessary or
appropriate to exempt the amounts payable hereunder from Section 409A of the
Code or to comply with the requirements of Section 409A of the Code and thereby
avoid the application of penalty taxes under such section. To the extent
applicable, each of the exceptions to Code Section 409A’s prohibition on
acceleration of payments of Deferred Compensation provided under Treasury
Regulation 1.409A-3(j)(4) shall be permitted under the Agreement.

 

6.

Plan Administration.

(a) The Plan shall be administered by the Board, provided, that the Board may
delegate any or all of its authority and/or duties under the Plan to a duly
authorized committee of the Board (the Board or, to the extent of any
delegation, any such delegate, the “Plan Administrator”). Subject to the express
provisions of this Plan, the Plan Administrator shall have sole authority to
interpret the Plan (including any vague or ambiguous provisions) and to make all
other determinations deemed necessary or advisable for the administration of the
Plan. Decisions of the Plan Administrator shall be made by a majority of its
members attending a meeting at which a quorum is present (which meeting may be
held telephonically), or by written action in accordance with applicable law.
All determinations and interpretations of the Plan Administrator shall be final,
binding, and conclusive as to all persons.

(b) Neither the Plan Administrator nor any employee, officer, agent, or director
of the Company shall be personally liable by reason of any action taken with
respect to the Plan for any mistake of judgment made in good faith, and the
Company shall indemnify and hold harmless each employee, officer, agent, or
director of the Company, including the Plan Administrator, to whom any duty or
power relating to the administration or interpretation of the Plan may be
allocated or delegated, against any reasonable cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim with
the approval of the Plan Administrator) arising out of any act or omission to
act in connection with the Plan unless arising out of such person’s own fraud,
bad faith, or gross negligence.

(c) The Plan Administrator may delegate any and all of its powers and
responsibilities hereunder to other persons and such persons shall have the full
authority to exercise the duties so delegated.

(d) The Plan Administrator shall maintain such accounts and records regarding
the fiscal and other transactions of this Plan and such other data as may be
required to carry out its functions under this Plan and to comply with all
applicable laws.

 

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7.

Right to Amend or Terminate Plan. 

This Plan shall not be amended except with the express written consent of each
affected Covered Employee. Notwithstanding anything herein to the contrary, this
Plan shall be effective as of the date it is approved by the Board and shall
terminate upon the earliest to occur of (a) the payment of all amounts payable
hereunder or (b) the date upon which the Merger Agreement is terminated without
the Transaction being consummated.

 

8.

No Guarantee of Employment.

This Plan is not a guarantee of continued employment for any employee of the
Company, including any employee potentially eligible for benefits hereunder. An
employee’s employment remains terminable at any time with or without cause by
either the employee or the Company.

 

9.

Applicable Law.

This Plan and all action taken under it shall be governed as to validity,
construction, interpretation, and administration by the laws of the State of
Delaware (without regard to the choice of law principles thereof) and any
applicable U.S. federal law.

 

10.

Unfunded Status.

This Plan shall be “unfunded,” and is not intended to constitute a plan subject
to the provisions of the Employee Retirement Income Security Act of 1974, as
amended. All benefits that become payable hereunder shall be paid out of the
general assets of the Company. All Covered Employees shall be solely unsecured
general creditors of the Company. If the Company decides in its sole discretion
to establish any advance accrued reserve on its books against the future expense
of the benefits payable hereunder, or if the Company decides in its sole
discretion to fund a trust under this Plan, such reserve or trust shall not
under any circumstances be deemed to be an asset of this Plan.

 

11.

Successors.

For purposes of this Plan, the Company shall include any and all successors and
assignees, whether direct or indirect, by purchase, merger, consolidation, or
otherwise, to all or substantially all of the business or assets of the Company,
and such successors and assignees shall perform the Company’s obligations under
this Plan, in the same manner and to the same extent that the Company would be
required to perform if no such succession or assignment had taken place. In such
event, the term “Company,” as used in this Plan, shall mean the Company, as
herein before defined and any successor, parent corporation or assignee to the
business or assets which by reason hereof becomes bound by the terms and
provisions of this Plan.

 

12.

General Provisions.

(a) Nothing contained herein shall give an employee any right to any employee
benefit upon termination of employment with the Company, except as specifically
provided herein.

 

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(b) No person having a benefit under this Plan may assign, transfer, or in any
other way alienate any benefit hereunder, nor shall any benefit under this Plan
be subject to garnishment, attachment, execution, or levy of any kind.

(c) Neither the establishment of this Plan, nor any modification thereof, nor
the payment of any benefits hereunder, shall be construed as giving to any
Covered Employee or other person any legal or equitable right against the
Company or the Plan Administrator, or any fiduciary, employee, or agent of the
Company.

(d) The Company shall have the right to make such provisions as it deems
necessary or appropriate to satisfy any obligations it reasonably believes it
may have to withhold for federal, state, or local income or other taxes incurred
by reason of payments pursuant to this Plan. In lieu thereof, the Company shall
have the right to withhold the amounts of such taxes from any other sums due or
to become due from the Company to a Covered Employee upon such terms and
conditions as the Plan Administrator may prescribe.

(e) Should any provision of the Plan be deemed or held to be unlawful or invalid
for any reason, such fact shall not adversely affect the other provisions of the
Plan unless such determination shall render impossible or impracticable the
functioning of the Plan, and in such case, an appropriate provision or
provisions shall be adopted so that the Plan may continue to function properly.

(f) Any benefits payable under this Plan shall not be deemed salary or other
compensation to a Covered Employee for the purposes of computing benefits to
which he or she may be entitled under any pension plan or other arrangement of
the Company maintained for the benefit of its employees, unless such plan or
arrangement provides otherwise.

(g) In the event that the Plan Administrator finds that a Covered Employee is
unable to care for his or her affairs because of illness or accident, then
benefits payable hereunder, unless claim has been made therefor by a duly
appointed guardian, committee, or other legal representative, may be paid in
such manner as the Plan Administrator shall determine, and the application
thereof shall be a complete discharge of all liability for any payments or
benefits to which such Covered Employee was or would have been otherwise
entitled under this Plan.

(h) All announcements, notices, and other communications regarding this Plan
will be made by the Company in writing (whether in electronic form or
otherwise). Except for written amendments to the Plan or official written
communications issued by the Company in connection with the Plan, participants
in the Plan may not rely on any representation or statement made by the Company
or its affiliates or any of its or their officers, directors, employees, or
agents, whether written or oral, regarding such participants’ participation in
the Plan and any rights thereunder.

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