Document:

aiq-ex1039_358.htm

Exhibit 10.39

FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT

 

This Non-Qualified Stock Option Agreement (this "Agreement"), is entered into as of March ___, 2016 by and between Alliance HealthCare Services, Inc., a Delaware corporation hereinafter referred to as the "Company," and _____________, an employee or other service provider of the Company or a Subsidiary (as defined below) of the Company, hereinafter referred to as "Optionee."

 

WHEREAS, the Company wishes to afford the Optionee the opportunity to purchase shares of its $0.01 par value Common Stock ("Common Stock");

 

WHEREAS, the Company wishes to carry out the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

 

WHEREAS, the Committee (as defined below) appointed to administer the Plan has determined that it would be to the advantage and best interest of the Company and its stockholders to grant the Non-Qualified Stock Option provided for herein to the Optionee as an incentive for increased efforts during his term of employment or other service with the Company or its Subsidiaries, and has advised the Company thereof and instructed the undersigned officers to issue said Option;

 

NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, receipt of which is hereby acknowledged, the parties hereto do hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Whenever the following terms are used in this Agreement, they shall have the meaning specified below unless the context clearly indicates to the contrary.  Capitalized terms used and not defined in this Agreement shall have the meaning specified in the Plan unless the context clearly indicates to the contrary.

 

	
SECTION 1.1
	
CAUSE

 

"Cause" shall mean (i) the Optionee's willful refusal to perform in any material respect the Optionee's lawful duties or responsibilities for the Company or its Subsidiaries; (ii) the Optionee's willful disregard in any material respect of any financial or other budgetary limitations established in good faith by the Company's Board of Directors; (iii) misconduct by the Optionee that causes material and demonstrable injury, monetarily or otherwise, to the Company or its Subsidiaries, including but not limited to misappropriation or conversion of assets of the Company or its Subsidiaries (other than non-material assets); (iv) conviction of or entry of a plea of nolo contendere to a non-vehicular felony; or (v) the Optionee's violation of any restrictive covenant contained in any employment or other service agreement to which he and the Company or one of its Subsidiaries are parties, which violation constitutes a material breach by Optionee of such agreement. No act or failure to act by the Optionee shall be deemed 

 

SV\1716376.1

 

"willful" if done, or omitted to be done, by him in good faith and with the reasonable belief that his action or omission was in the best interest of the Company or consistent with Company policies or the directive of the Company's Board of Directors. 

 

	
SECTION 1.2
	
CHANGE OF CONTROL

 

“Change of Control” shall mean the occurrence of any of the following: (i) the sale, lease or transfer, in one or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole; or (ii) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act, or any successor provision), including any group acting for the purpose of acquiring, holding or disposing of securities (within the meaning of Rule 13d-5(b)(1) under the Exchange Act), other than the Permitted Holders (as defined below) and their Related Parties (as defined below), in a single transaction or in a related series of transactions, by way of merger, consolidation or other business combination or purchase of beneficial ownership (within the meaning of Rule 13d-3 under the Exchange Act, or any successor provision) of 50% or more of the total voting power of the Voting Stock of the Company.  

 

	
SECTION 1.3
	
CODE

 

"Code" shall mean the Internal Revenue Code of 1986, as amended.

 

	
SECTION 1.4
	
COMMITTEE

 

"Committee" shall mean the Compensation Committee of the Board of Directors or any other committee of the Board of Directors of the Company designated to administer the Plan.

 

	
SECTION 1.5
	
EXCHANGE ACT

 

"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.

 

	
SECTION 1.6
	
GOOD REASON

 

“Good Reason” shall mean the occurrence of any of the following without the Optionee’s consent:

	
 
	
(i)
	
the Company’s material reduction of the Optionee’s base salary;

	
 
	
(ii)
	
the assignment to the Optionee of any duties which diminish in any material respect the Optionee’s position with the Company (including titles and reporting requirements), authority, duties or responsibilities;

	
 
	
(iii)
	
any material failure by the Company to comply with any of the provisions of any employment agreement between the Optionee and the Company, which is not remedied within thirty (30) days after written notice thereof from the Optionee;

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(iv)
	
if the Optionee is not based in the Company’s Resource Center in Southern California, the Company’s requirement that the Optionee materially change the location of the Optionee’s principal office to a facility or a location more than sixty (60) miles from the Optionee’s then-current residence; or 

	
 
	
(v)
	
if the Optionee’s principal office is located in the Company’s Resource Center in Southern California, the Company’s movement of the Resource Center more than sixty (60) miles from the then-present office location. 

 

The Company and the Optionee further agree that, for a resignation to constitute a resignation by the Optionee for “Good Reason,” (i) the Optionee must provide written notice to the Company of the Optionee’s intent to resign within thirty (30) days of one of the triggering events outlined in this definition, (ii) the Company must fail to cure the condition giving rise to “Good Reason” within thirty (30) days following its receipt of Optionee’s notice and (iii) Optionee’s resignation must be effective within thirty (30) days following the Company’s failure to cure.

 

	
SECTION 1.7
	
OPTION

 

"Option" shall mean the Non-Qualified Stock Option to purchase Common Stock granted under this Agreement.

 

	
SECTION 1.8
	
PERMANENT DISABILITY

 

The Optionee shall be deemed to have a "Permanent Disability" if the Optionee is unable to engage in the activities required by his employment or other service by reason of any medically determined physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, as reasonably determined by the Committee in good faith and in its discretion.

 

	
SECTION 1.9 
	
PERMITTED HOLDER 

 

“Permitted Holders” means OCM Principal Opportunities Fund IV, L.P. (“Oaktree”), MTS Health Investors II, L.P. (“MTS”) Fujian Thai Hot Investment Co., Ltd. (“Fujian Thai Hot”)  and affiliates of Oaktree, MTS and Fujian Thai Hot.  

 

	
SECTION 1.10
	
PERSON

 

"Person" shall mean an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature, and "control" shall have the meaning given such term under Rule 405 of the Securities Act.

 

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SECTION 1.11
	
PLAN 

 

"Plan" shall mean the 1999 Equity Plan for Employees of Alliance HealthCare Services, Inc. (f/k/a Alliance Imaging, Inc.) and Subsidiaries, as the same may be amended from time to time.

 

	
SECTION 1.12
	
PRONOUNS

 

The masculine pronoun shall include the feminine and neuter, and the singular the plural, where the context so indicates.

 

	
SECTION 1.13
	
RELATED PARTIES

 

“Related Parties” means any Person controlled by a Permitted Holder, including any partnership of which a Permitted Holder or its affiliates is the general partner.

 

	
SECTION 1.14
	
SECRETARY

 

"Secretary" shall mean the Secretary of the Company.

 

	
SECTION 1.15
	
SECURITIES ACT

 

"Securities Act" means the Securities Act of 1933, as amended and the rules and regulations promulgated thereunder.

 

	
SECTION 1.16
	
SUBSIDIARY

 

"Subsidiary" with respect to any entity shall mean any corporation in an unbroken chain of corporations beginning with such entity if each of the corporations, or group of commonly controlled corporations, other than the last corporation in the unbroken chain, then owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.

 

	
SECTION 1.17
	
VESTING REFERENCE DATE

 

"Vesting Reference Date" shall mean the date of this Agreement.

 

	
SECTION 1.18
	
VOTING STOCK

 

"Voting Stock" of the Company as of any date means the stock of the Company that is at the time entitled to vote in the election of the Board of Directors of the Company.

 

 

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ARTICLE II

GRANT OF THE OPTION

 

	
SECTION 2.1
	
GRANT OF THE OPTION

 

For good and valuable consideration, on and as of the date hereof the Company irrevocably grants to the Optionee an Option to purchase any part or all of an aggregate of the number of shares set forth with respect to such Option on the signature page hereof of its Common Stock upon the terms and conditions set forth in this Agreement.

 

	
SECTION 2.2
	
EXERCISE PRICE

 

The exercise price of the shares of stock covered by the Option, which shall be no less than 100% of the Fair Market Value of such shares on the date hereof, is set forth on the signature page hereto.

 

	
SECTION 2.3
	
CONSIDERATION TO THE COMPANY

 

In consideration of the granting of the Option by the Company, the Optionee agrees to render faithful and efficient services to the Company or one of its Subsidiaries, with such duties and responsibilities as the Company shall from time to time prescribe. Nothing in this Agreement or in the Plan shall confer upon the Optionee any right to continue in the employ or service of the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which are hereby expressly reserved, to terminate the employment or other service of the Optionee at any time for any reason whatsoever, with or without Cause.

 

	
SECTION 2.4
	
ADJUSTMENTS TO OPTION

 

Subject to Section 11 and Section 12 of the Plan, in the event that the outstanding shares of the stock subject to an Option are, from time to time, changed into or exchanged for cash or a different number or kind of shares of the Company or other securities of the Company by reason of a merger, consolidation, recapitalization, reclassification, stock split, stock dividend , combination of shares, or otherwise, or if the Company shall effect a cash dividend the amount of which, on a per Share basis, exceeds ten percent (10%) of the Fair Market Value of a share of Common Stock at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Common Stock in the form of cash that the Company’s Board of Directors determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Common Stock, then the Committee shall make an appropriate and equitable adjustment in the number and kind of shares or other consideration and the exercise price as to which such Option, or portions thereof then unexercised, shall be exercisable in order to prevent dilution or enlargement of the benefits intended to be made available with respect to any Option. Any such adjustment made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons.  In any such case, the Committee may also (or in lieu of the foregoing) make provision for a cash payment to the Optionee in exchange for the cancellation of all or a portion of the Option (without the consent of the holder of the 

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Option) in an amount determined by the Committee effective at such time as the Committee specifies (which may be the time such transaction or event is effective). In any event, the Option is subject only to such adjustments as are necessary to maintain the relative proportionate interest the Option represented immediately prior to any such event and to preserve, without exceeding, the value of the Option. 

 

ARTICLE III

PERIOD OF EXERCISABILITY

 

	
SECTION 3.1
	
COMMENCEMENT OF EXERCISABILITY

 

(a)The Option shall become exercisable with respect to one-third (1/3) of the shares of Common Stock subject to the Option on each of the first three anniversaries of the Vesting Reference Date; provided, that, notwithstanding the foregoing:  

 

(i) Upon termination of Optionee’s employment by the Company without Cause or by the Optionee for Good Reason within twelve (12) months following the consummation of a Change in Control, the Option shall become exercisable as to 100% of the shares of Common Stock subject to the Option upon such termination (but only to the extent such Option has not otherwise terminated). 

 

(ii) The Option shall become exercisable as to 100% of the shares of Common Stock subject to the Option upon the Optionee’s death or Permanent Disability.

 

(b)Notwithstanding the foregoing, neither the Option nor any portion thereof shall become exercisable as to any additional shares of Common Stock following the termination of employment of the Optionee for any reason and all or any portion of the Option which is non-exercisable as of the Optionee's termination of employment shall be immediately cancelled.

 

	
SECTION 3.2
	
EXPIRATION OF OPTION

 

The Option may not be exercised to any extent by anyone after the first to occur of the following events: 

 

(a)The tenth anniversary of the date hereof; or 

 

(b)The first anniversary of the date of the Optionee's termination of employment or other service by reason of death or Permanent Disability; or

 

(c)The first business day which is ninety (90) days after termination of employment or other service of the Optionee for any reason other than for Cause, death or Permanent Disability; or 

 

(d)The opening of business on the date of the Optionee's termination of employment or other service by the Company or a Subsidiary for Cause; or 

 

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(e)Subject to the provisions for accelerated exercisability pursuant to Sections 3.1(a) upon a Change of Control, if the Committee so determines pursuant to Section 11 and Section 12 of the Plan, the effective date of a Change of Control. At least ten (10) days prior to the effective date of such Change of Control, the Committee shall give the Optionee notice of such event if the Option has not then been fully exercised. 

 

ARTICLE IV

EXERCISE OF OPTION

 

	
SECTION 4.1
	
PERSON ELIGIBLE TO EXERCISE

 

During the lifetime of the Optionee, only he may exercise the Option or any portion thereof. After the death of the Optionee, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.2, be exercised by his personal representative or by any person empowered to do so under the Optionee's will or under the then applicable laws of descent and distribution.

 

	
SECTION 4.2
	
PARTIAL EXERCISE

 

Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.2; provided, however, that any partial exercise shall be for whole shares of Common Stock only.

 

	
SECTION 4.3
	
MANNER OF EXERCISE

 

 An Option, or any exercisable portion thereof, may be exercised solely by delivering to the Secretary or his office all of the following prior to the time when the Option or such portion becomes unexercisable under Section 3.2, or by such other methods as are prescribed by the Committee or its delegate from time to time:

 

(a)Notice by the Optionee or the other person then entitled to exercise the Option or portion thereof, in a form acceptable to the Committee, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Committee;

 

(b)Full payment (in cash, by check or by a combination thereof) for the shares with respect to which such Option or portion thereof is exercised;

 

(c)To the extent determined necessary by the Committee, a bona fide written representation and agreement, in a form satisfactory to the Committee, signed by the Optionee or other person then entitled to exercise such Option or portion thereof, stating that the shares of stock are being acquired for his own account, for investment and without any present intention of distributing or reselling said shares or any of them except as may be permitted under the Securities Act, and then applicable rules and regulations thereunder, and that the Optionee or other person then entitled to exercise such Option or portion thereof will indemnify the Company 

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against and hold it free and harmless from any loss, damage, expense or liability resulting to the Company if any sale or distribution of the shares by such person is contrary to the representation and agreement referred to above; provided, however, that the Committee may, in its absolute discretion, take whatever additional actions it deems appropriate to ensure the observance and performance of such representation and agreement and to effect compliance with the Act and any other federal or state securities laws or regulations; 

 

(d)Full payment to the Company (in cash, by check or by a combination thereof) of all amounts which, under federal, state or local law, it is required to withhold upon exercise of the Option; and 

 

(e)In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option.

 

Without limiting the generality of the foregoing, the Committee may require an opinion of counsel acceptable to it to the effect that any subsequent transfer of shares acquired on exercise of the Option does not violate the Securities Act, and may issue stop-transfer orders covering such shares. Share certificates or book entries evidencing stock issued on exercise of this Option shall bear an appropriate legend or include an appropriate stop-transfer restriction referring to the provisions of subsection (c) above and the agreements herein. The written representation and agreement referred to in subsection (c) above shall, however, not be required if the shares to be issued pursuant to such exercise have been registered under the Securities Act, and such registration is then effective in respect of such shares.

 

	
SECTION 4.4
	
CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES

 

The shares of stock deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued shares or issued shares which have then been reacquired by the Company. Such shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the following conditions: 

 

(a)The obtaining of approval or other clearance from any state or federal or foreign governmental agency which the Committee shall, in its absolute discretion, determine to be necessary or advisable; and

 

(b)The lapse of such reasonable period of time following the exercise of the Option as the Committee may from time to time establish for reasons of administrative convenience; provided, however, that no delay in the issuance of any certificate to be issued hereunder shall operate to prejudice or impair the Optionee's rights to participate in a corporate transaction providing for the disposition of stock. 

 

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SECTION 4.5
	
RIGHTS AS STOCKHOLDER 

 

The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company in respect of any shares purchasable upon the exercise of the Option or any portion thereof unless and until certificates representing such shares shall have been issued by the Company to such holder or such shares are otherwise held of record by such holder as evidenced to the Company's satisfaction.

 

ARTICLE V

MISCELLANEOUS

 

	
SECTION 5.1
	
ADMINISTRATION

 

The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee shall be final and binding upon the Optionee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the Option. In its absolute discretion, the Board of Directors may at any time and from time to time exercise any and all rights and duties of the Committee under the Plan and this Agreement.

 

	
SECTION 5.2
	
OPTION NOT TRANSFERABLE

 

Neither the Option nor any interest or right therein or part thereof shall be liable for the debts, contracts or engagements of the Optionee or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect; provided, however, that this Section 5.2 shall not prevent transfers by will or by the applicable laws of descent and distribution.

 

	
SECTION 5.3
	
SHARES TO BE RESERVED

 

The Company shall at all times during the term of the Option reserve and keep available such number of shares of stock as will be sufficient to satisfy the requirements of this Agreement. 

 

	
SECTION 5.4
	
LIMITATIONS APPLICABLE TO SECTION 16 PERSONS    

 

Notwithstanding any other provision of the Plan or this Agreement, if Optionee is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are 

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requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. 

 

	
SECTION 5.5
	
NOTICES

 

Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of its Secretary, and any notice to be given to the Optionee shall be addressed to him at his most recent address or e-mail account as reflected in the Company's records. By a notice given pursuant to this Section 5.5, either party may hereafter designate a different address for notices to be given to him or it. Any notice which is required to be given to the Optionee shall, if the Optionee is then deceased, be given to the Optionee's personal representative if such representative has previously informed the Company of his status and address by written notice under this Section 5.5.

 

	
SECTION 5.6
	
TITLES

 

 Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement. 

 

	
SECTION 5.7
	
APPLICABILITY OF PLAN; RECOUPMENT

 

The Option and the shares of Common Stock issued to the Optionee upon exercise of the Option shall be subject to all of the terms and provisions of the Plan. In the event of any conflict between this Agreement and the Plan, the terms of the Plan shall control. The Option, and any Common Stock issued or cash paid pursuant to the Option, shall be subject to any recoupment, clawback, equity holding, stock ownership or similar policies adopted by the Company from time to time (to the extent contemplated by such policies) and any recoupment, clawback, equity holding, stock ownership or similar requirements made applicable by law, regulation or listing standards to the Company from time to time (to the extent contemplated by such requirements).

 

	
SECTION 5.8
	
AMENDMENT

 

Except as provided in Section 11 and Section 12 of the Plan, the Committee may amend this Agreement, or waive any restrictions or conditions applicable to this Agreement or the exercise of the Option, provided that any modification or amendment that materially diminishes the rights of the Optionee, or the cancellation of the Option, shall be effective only if agreed to by the Optionee or any other person(s) as may then have an interest in the Award, but the Committee need not obtain Optionee (or other interested party) consent for the amendment or cancellation of the Option pursuant to the provisions of Section 5.6 of this Agreement or Section 12 of the Plan or as follows:  (i) to the extent the Committee deems such action necessary to comply with any applicable law, the listing requirements of any principal securities exchange or market on which the Common Stock is then traded; (ii) to the extent the Committee deems necessary to preserve favorable accounting or tax treatment of the Option for the Company; or (iii) to the extent the Committee determines that such action does not materially and adversely 

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affect the value of the Option or that such action is in the best interest of the Optionee or any other person(s) as may then have an interest in the Option. 

 

	
SECTION 5.9
	
GOVERNING LAW

 

The laws of the State of Delaware shall govern the interpretation, validity and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

 

	
SECTION 5.10
	
JURISDICTION

 

Any suit, action or proceeding against the Optionee with respect to this Agreement, or any judgment entered by any court in respect of any thereof, may be brought in any court of competent jurisdiction in the State of Delaware, and the Optionee hereby submits to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action, proceeding or judgment.  The Optionee hereby irrevocably waives any objections which he may now or hereafter have to the laying of the venue of any suit, action or proceeding arising out of or relating to this Agreement brought in any court of competent jurisdiction in the State of Delaware, and hereby further irrevocably waives any claim that any such suit, action or proceeding brought in any such court has been brought in any inconvenient forum. No suit, action or proceeding against the Company with respect to this Agreement may be brought in any court, domestic or foreign, or before any similar domestic or foreign authority other than in a court of competent jurisdiction in the State of Delaware, and the Optionee hereby irrevocably waives any right which he may otherwise have had to bring such an action in any other court, domestic or foreign, or before any similar domestic or foreign authority. The Company hereby submits to the jurisdiction of such courts for the purpose of any such suit, action or proceeding. 

 

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IN WITNESS WHEREOF, this Non-Qualified Stock Option Agreement has been executed and delivered by the parties hereto as of the date first written above. 

 

							
	
                        , OPTIONEE
	
 
	
 
	
ALLIANCE HEALTHCARE SERVICES, INC.

	
 
	
 
	

	
 
	
 
	
By:
	
 

	
 
	
 
	
 
	
Name:
	
Percy C. Tomlinson

	
 
	
Title:
	
President and CEO

 

______________________________

Optionee's Address

 

Exercise price per share:            $_____

 

Aggregate number of shares of Common Stock for

which the Option granted hereunder is exercisable: _____

 

 

12aiq-ex1040_359.htm

 

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 

 

 

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 

 

 

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. 

 

 

	
 
	
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. 

 

 

(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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