Document:

Exhibit 10.36

 

SEPARATION AND
CONSULTING AGREEMENT AND GENERAL RELEASE

 

This Separation
and Consulting Agreement and General Release (hereafter “Agreement”) is entered
into as of this 3rd day of February, 2006, between Russell D. Phillips, Jr.
(the “Executive”), and Alliance Imaging, Inc. (the “Company”), effective eight days after the Executive’s
signature (the “Effective Date”), unless he revokes his acceptance as provided
in Paragraph 6(c), below.

 

WHEREAS, the Executive
was the General Counsel of the Company, pursuant to an Employment Agreement
entered into as of April 29, 1998 (the “Employment Agreement”);

 

WHEREAS, the Executive
tendered his resignation, and the Company accepted such resignation effective
as of February 3, 2006 (the “Resignation Date”);

 

WHEREAS, the Executive
was granted options to purchase common stock of the Company in the amounts and
at the strike prices reflected on Exhibit A hereto;

 

WHEREAS, the Company
wishes to secure certain consulting services from the Executive following the
Resignation Date, and the Executive is willing to provide such services,
pursuant to terms set forth in this Agreement;

 

WHEREAS, the Company and
the Executive now wish to document the termination of their employment
relationship and fully and finally to resolve all matters between them;

 

THEREFORE, in exchange
for the good and valuable consideration set forth herein, the adequacy of which
is specifically acknowledged, the Executive and the Company hereby agree as
follows:

 

1.                                       Resignation of Employment. 
The Executive hereby confirms his resignation of all positions that the
Executive held as an officer of the Company and all subsidiaries of the
Company, all positions that the Executive held on the Board of Directors of the
Company and on the Boards of Directors of any of the Company’s subsidiaries,
all positions held with respect to employee benefit plans of the Company and
its subsidiaries (including membership on the Administrative Committee of the
Company’s 401(k) plan) and all Board of Directors and similar positions with
the Company’s and its subsidiaries’ joint venture entities (whether
consolidated or unconsolidated); and the Company, on behalf of itself and such
other entities, confirms its acceptance of such resignations, effective as of
the Resignation Date.  The Executive
further confirms his resignation of his employment with the Company effective on
the Resignation Date.

 

2.                                       Payment of Accrued Wages and Expenses.  On
or before the Resignation Date, the Company shall pay to the Executive an amount
equal to all accrued wages through the Resignation Date, including accrued
vacation, less applicable withholding.

 

3.                                       Consulting Services. 
For the period commencing on the Resignation Date and ending December 31,
2006 (the “Consulting Period”), the Executive shall make himself available

 

1

 

to the Company, as
the Company may request, pursuant to the terms of this Paragraph 3, as a
consultant.

 

(a)                                  The Executive shall provide up to five (5) hours
per month of consulting services, consisting of responding by telephone, at
such times as do not interfere with the Executive’s other work duties, to
factual questions and questions related to legal advice previously provided by
the Executive to the Company (the “Consulting Services”).  The Company shall not request that the
Executive provide any new legal advice. 
Any consulting services in excess of five (5) hours per month shall
be provided at a rate of $250 (two hundred fifty dollars) per hour, at such
dates and times as are mutually agreed upon by the Executive and the Company.

 

(b)                                 Consulting Services may be requested by
only the following Company officers:  (i) the
Chairman and Chief Executive Officer, (ii) the President and Chief
Operating Officer, (iii) the interim General Counsel or General Counsel, (iv) the
Chief Financial Officer, and (v) the Controller.

 

4.                                       Payments to the Executive. 
In consideration of the Executive’s services as a consultant, for the
release provided by the Executive herein, and in full satisfaction of all claims
that the Executive may have for bonus compensation for the year ending December 31,
2005, the Company shall pay to the Executive $75,000 (seventy-five thousand
dollars), less all required taxes and other withholding authorized by the
Executive, in three equal installments of $25,000 (twenty-five thousand
dollars).  The first installment shall be
paid no later than five (5) days following the Effective Date.  The second installment shall be paid three (3) months
after payment of the initial installment. 
The final installment shall be paid six (6) months after payment of
the initial installment.  In addition,
the Company shall reimburse the Executive within five (5) days following
his submission of an invoice for legal services in connection with his
separation from the Company and this Agreement; provided,
that the Company’s reimbursement obligation pursuant to this sentence shall be
capped at $5,000.

 

5.                                       Stock
Options.  By grants dated March 1,
1999, November 2, 1999, January 16, 2002, January 15, 2003, January 5,
2004 and January 3, 2005, the Executive was granted options to purchase
207,000 (two hundred seven thousand) shares of Company common stock.  As of the Resignation Date, the Executive
will be vested in options to purchase 146,000 (one hundred forty-six thousand
shares) of Company common stock (the “Vested Options”), at the strike prices
set forth in the Notices of Grant, the applicable Stock Option Agreements, and Exhibit A
to this Agreement.  The Executive shall
have 90 (ninety) days following the Resignation Date in which to exercise his
Vested Options.  All Vested Options not
exercised within 90 (ninety) days of the Resignation Date, and all options
granted to the Executive, but not vested as of the Resignation Date, shall
expire by their terms.  Except as
expressly provided herein, the Executive’s rights with respect to the stock
options granted to him shall be governed by the terms of the application Stock
Options Agreements and Stock Option Plans. 
The Executive covenants that his sale of shares of Company common stock
shall be made in accordance with all applicable federal and state securities
laws.

 

2

 

6.                                       General
Release of Claims by the Executive.

 

(a)                                  The Executive, on behalf of himself and his
executors, heirs, administrators, representatives and assigns, hereby agrees to
release and forever discharge the Company and all predecessors, successors and
their respective parent corporations, affiliates, related, and/or subsidiary
entities, and all of their past and present investors, directors, shareholders,
officers, general or limited partners, employees, attorneys, agents and
representatives, and employee benefit plans in which the Executive is or has
been a participant by virtue of his employment by the Company, from any and all
claims, debts, demands, accounts, judgments, rights, causes of action,
equitable relief, damages, costs, charges, complaints, obligations, promises,
agreements, controversies, suits, expenses, compensation, responsibility and
liability of every kind and character whatsoever (including attorneys’ fees and
costs), whether in law or equity, known or unknown, asserted or unasserted,
suspected or unsuspected (collectively, “Claims”), which the Executive has or
may have had against such entities based on any events or circumstances arising
or occurring on or prior to the date hereof or on or prior to the Resignation
Date, arising directly or indirectly out of, relating to, or in any other way
involving in any manner whatsoever the Executive’s employment by the Company or
the separation thereof, and any and all claims arising under federal, state, or
local laws relating to employment, including without limitation claims of
wrongful discharge, breach of express or implied contract, fraud,
misrepresentation, defamation, or liability in tort, claims of any kind that
may be brought in any court or administrative agency, any claims arising under
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment
Act, the Americans with Disabilities Act, the Older Workers Benefit Protection
Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act,
the Family and Medical Leave Act, and similar state or local statutes,
ordinances, and regulations.

 

Notwithstanding the generality of the foregoing, the
Executive does not release the following claims and rights:

 

(1)                                  Claims for unemployment compensation or any
state disability insurance benefits pursuant to the terms of applicable state
law;

 

(2)                                  Claims to continued participation in certain
of the Company’s group benefit plans pursuant to the terms and conditions of
the federal law known as COBRA;

 

(3)                                  Claims to any benefit entitlements vested as
the date of separation of employment, pursuant to written terms of any Company
employee benefit plan;

 

(4)                                  The Executive’s right to bring to the
attention of the Equal Employment Opportunity Commission claims of
discrimination; provided, however, that the Executive does release his right to
secure any damages for alleged discriminatory treatment; and

 

3

 

(5)                                  Claims for breach of the Company’s
obligations under this Agreement.

 

(6)                                  Claims for director and officer
indemnification and insurance coverage pursuant to the Company’s and its
subsidiaries’ charter documents, the indemnification agreement between the
Company and the Executive, and coverage under all applicable policies of
director and officer liability insurance.

 

(b)                                 THE EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN
ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542,
WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

BEING AWARE OF SAID CODE SECTION, THE
EXECUTIVE HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS
WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

(c)                                  The Executive agrees and expressly
acknowledges that this Agreement includes a waiver and release of all claims
which he has or may have under the Age Discrimination in Employment Act of 1967,
as amended, 29 U.S.C. § 621, et  seq. (“ADEA”).  The following terms and conditions apply to
and are part of the waiver and release of the ADEA claims under this Agreement:

 

(1)                                  This Paragraph 6(c), and this Agreement are
written in a manner calculated to be understood by him.

 

(2)                                  The waiver and release of claims under the
ADEA contained in this Agreement does not cover rights or claims that may arise
after the date on which he signs this Agreement.

 

(3)                                  This Agreement provides for consideration in
addition to anything of value to which he is already entitled.

 

(4)                                  The Executive has been advised to consult an
attorney before signing this Agreement.

 

(5)                                  The Executive has been granted twenty-one
(21) days after he is presented with this Agreement to decide whether or not to
sign this Agreement.  If he executes this
Agreement prior to the expiration of such

 

4

 

period, he does so voluntarily and after having had
the opportunity to consult with an attorney, and hereby waives the remainder of
the twenty-one (21) day period.

 

(6)                                  The Executive has the right to revoke this
general release within seven (7) days of signing this Agreement.  In the event this general release is revoked,
this Agreement will be null and void in its entirety, and he will not receive
any of the benefits of this Agreement.

 

If
Executive wishes to revoke this agreement, Executive shall deliver written
notice stating his intent to revoke this Agreement to Paul Viviano, Chairman
and Chief Executive Officer, on or before 5:00 p.m. on the seventh (7th)
day after the date on which he signs this Agreement.

 

7.                                       Company’s
Release of Claims.

 

(a) The Company, on behalf of itself and all
predecessors, successors and, with respect to derivative claims or other claims
that may be brought for the benefit of or through the Company only, on behalf
of all parent corporations, affiliates, related, and/or subsidiary entities,
and all of their past and present investors, shareholders, general or limited
partners, attorneys, agents and representatives, voluntarily releases and
discharges the Executive and his heirs, successors, administrators,
representatives and assigns from all Claims which it or they may have against
the Executive as the result of his employment or the resignation of his
employment or service in any other capacities at the request of the Company or
its subsidiaries.  Notwithstanding the
foregoing, nothing herein shall release or discharge any Claim by the Company or
any such other entity against the Executive, or the right of the Company to
bring any action, legal or otherwise, against the Executive as a result of any
failure by him to perform his obligations under this Agreement, or as a result
of any illegal acts or acts constituting fraud or intentional misconduct.

 

(b) 
THE COMPANY ACKNOWLEDGES
THAT IT HAS BEEN ADVISED OF AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME
OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY
AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

BEING AWARE OF SAID CODE SECTION, THE COMPANY HEREBY EXPRESSLY WAIVES ANY
RIGHTS IT MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR
COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

8.                                       Nondisparagement. 
The Executive agrees that neither he nor anyone acting by, through,
under or in concert with him shall disparage or otherwise communicate negative
statements or opinions about the Company, its Board members, officers,
employees or business.

 

5

 

The Company agrees
that neither its Board members nor officers shall disparage or otherwise
communicate negative statements or opinions about the Executive.  The Company’s Chief Executive Officer agrees
to provide upon request mutually agreeable written references.

 

9.                                       Cooperation. 
The Executive agrees to give reasonable cooperation, at the Company’s
request, in any pending or future litigation or arbitration brought against the
Company and in any investigation the Company or any government agency may
conduct (it being understood that time devoted to cooperation pursuant to this
Paragraph 9 shall count against the obligation to provide consulting services
pursuant to Paragraph 3(a)).  Following
the expiration of the Consulting Period, any time devoted to cooperation shall
be provided at the rate of $250 (two hundred fifty dollars) per hour, and at
such times and dates as are mutually agreed upon by the Executive and the
Company. The Company shall reimburse the Executive for all expenses reasonably
incurred by him in compliance with this Paragraph 9.  Notwithstanding the foregoing, the Company
shall have no obligation to pay the Executive for time spent and expenses
incurred by the Executive in any pending or future litigation, arbitration or
investigation where the Executive is a co-defendant or party to the arbitration
or litigation, or a target of the investigation.

 

10.                                 Executive’s Representations and Warranties.  The
Executive represents and warrants that:

 

(a)                                  During the course of the Executive’s
employment, he did not sustain any injuries for which he might be entitled to
compensation pursuant to California’s Workers Compensation law;

 

(b)                                 The Executive has not made any disparaging
comments about the Company, nor will he do so in the future; and

 

(c)                                  The Executive has not initiated any
adversarial proceedings of any kind against the Company or against any other
person or entity released herein, nor will he do so in the future (with respect
to matters that are within the scope of the release provided in Paragraph 6(a)),
except as specifically allowed by this Agreement.

 

11.                                 Confidential Information; Return of
Company Property.

 

(a)                                  The Executive hereby expressly confirms his
obligations to the Company to maintain the confidentiality of the Company’s
trade secrets and other proprietary information.

 

(b)                                 The Executive shall deliver to the Company
within 5 (five) business days of the Resignation Date all originals and copies
of correspondence, drawings, manuals, letters, notes, notebooks, reports,
programs, plans, proposals, financial documents, or any other documents
concerning the Company’s customers, business plans, marketing strategies,
products, processes or business of any kind and/or which contain proprietary
information or trade secrets which are in the possession or control of the
Executive or his agents or representatives.

 

6

 

(c)                                  The Executive shall return to the Company
within 5 (five) business days of the Resignation Date all equipment of the
Company in his possession or control, except that the Executive may retain the
Company computer, and any ancillary Company equipment currently installed at
the Executive’s home.

 

12.                                 Taxes.  To the extent
any taxes may be payable by the Executive for the benefits provided to him by
this Agreement beyond those withheld by the Company, the Executive agrees to
pay them himself and to indemnify and hold the Company and the other entities
released herein harmless for any tax claims or penalties, and associated
attorneys’ fees and costs, resulting from any failure by him to make required
payments.

 

13.                                 In the Event of a Claimed Breach. 
All controversies, claims and disputes arising out of or relating to
this Agreement, including without limitation any alleged violation of its
terms, shall be resolved by final and binding arbitration before a single neutral
arbitrator in Los Angeles, California, in accordance with the Employment
Dispute Resolution Rules of the American Arbitration Association (“AAA”).
The arbitration shall be commenced by filing a demand for arbitration with the
AAA within 14 (fourteen) days after the filing party has given notice of such
breach to the other party.  The
arbitrator shall award the prevailing party attorneys’ fees and expert fees, if
any.  Notwithstanding the foregoing, it
is acknowledged that it will be impossible to measure in money the damages that
would be suffered if the parties fail to comply with any of the obligations
imposed on them under Paragraph 11(a) hereof, and that in the event of any
such failure, an aggrieved person will be irreparably damaged and will not have
an adequate remedy at law.  Any such
person shall, therefore, be entitled to injunctive relief, including specific
performance, to enforce such obligations, and if any action shall be brought in
equity to enforce any of the provisions of Paragraph 11(a) of this
Agreement, none of the parties hereto shall raise the defense that there is an
adequate remedy at law.

 

14.                                 Choice of Law. 
This Agreement shall in all respects be governed and construed in
accordance with the laws of the State of California, including all matters of
construction, validity and performance, without regard to conflicts of law
principles.

 

15.                                 Notices.  All notices, demands or other
communications regarding this Agreement shall be in writing and shall be
sufficiently given if either personally delivered or sent by facsimile or
overnight courier, addressed to the party receiving notice at the last address
and facsimile number provided to the sending party.

 

16.                                 Severability. 
Except as otherwise specified below, should any portion of this
Agreement be found void or unenforceable for any reason by a court of competent
jurisdiction, the parties intend that such provision be limited or modified so
as to make it enforceable, and if such provision cannot be modified to be
enforceable, the unenforceable portion shall be deemed severed from the
remaining portions of this Agreement, which shall otherwise remain in full
force and effect.  If any portion of this
Agreement is so found to be void or unenforceable for any reason in regard to
any one or more persons, entities, or subject matters, such portion shall
remain in full force and effect with respect to all other persons, entities,
and subject matters.  This paragraph
shall not operate, however, to sever the Executive’s obligation to provide the
binding release to all entities intended to be released hereunder.

 

7

 

17.                                 Understanding and Authority. 
The parties understand and agree that all terms of this Agreement are
contractual and are not a mere recital, and represent and warrant that they are
competent to covenant and agree as herein provided.

 

18.                                 Integration Clause. 
This Agreement contains the entire agreement of the parties with regard
to the separation of the Executive’s employment, and supersedes any prior
agreements as to that matter. This Agreement may not be changed or modified, in
whole or in part, except by an instrument in writing signed by the Executive and
the Chief Executive Officer.

 

 19.                              Execution in Counterparts. 
This Agreement may be executed in counterparts with the same force and
effectiveness as though executed in a single document.

 

The parties have
carefully read this Agreement in its entirety; fully understand and agree to
its terms and provisions; and intend and agree that it is final and binding on
all parties.

 

IN WITNESS WHEREOF, and
intending to be legally bound, the parties have executed the foregoing on the
dates shown below.

 

	
  RUSSELL D.
  PHILLIPS, JR.

  	
  COMPANY

  
	
   

  	
   

  
	
  /s/ Russell D. Phillips, Jr.

  	
   

  	
  /s/ Paul Viviano

  	
   

  
	
   

  	
  By: Paul Viviano

  
	
   

  	
   

  
	
   

  	
  Title: Chairman
  and Chief Executive Officer

  
	
   

  	
   

  
	
  Date

  	
  January 26, 2006

  	
   

  	
  Date

  	
  January 26, 2006

  	
   

  
								

 

8

 

EXHIBIT A

 

Alliance
Imaging, Inc.

Options
Outstanding and Vested for Russell D. Phillips, Jr.

As of February 3,
2006

 

	
  Grant

  	
   

  	
  Options

  	
   

  	
  Options

  	
   

  	
  Exercise

  	
   

  
	
  Date

  	
   

  	
  Outstanding

  	
   

  	
  Vested

  	
   

  	
  Price

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3/1/99

  	
   

  	
  42,500

  	
   

  	
  42,500

  	
   

  	
  $

  	
  2.20

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11/2/99

  	
   

  	
  49,500

  	
   

  	
  49,500

  	
   

  	
  $

  	
  5.60

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1/16/02

  	
   

  	
  35,000

  	
   

  	
  28,000

  	
   

  	
  $

  	
  10.65

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1/15/03

  	
   

  	
  40,000

  	
   

  	
  20,000

  	
   

  	
  $

  	
  5.19

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1/5/04

  	
   

  	
  20,000

  	
   

  	
  5,000

  	
   

  	
  $

  	
  3.67

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1/3/05

  	
   

  	
  20,000

  	
   

  	
  1,000

  	
   

  	
  $

  	
  12.35

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  207,000

  	
   

  	
  146,000Exhibit 10.37

 

Alliance Imaging

2006 Executive Incentive Plan

 

A. Purpose

 

The
purpose of the Executive Incentive Plan (“Plan”) is to reward Executives of
Alliance Imaging, Inc. (“Company”) for enhancing the value of the Company by
rewarding the Executive for actions taken to achieve the Company’s value added targets
and by prudent fixed-site investments in imaging centers and radiation oncology
centers.

 

B. Eligible Participants

 

The
eligible participants of the Plan are the Company’s Chairman of the Board and Chief
Executive Officer, the President and Chief Operating Officer, and the Executive
Vice President and Chief Financial Officer. The Compensation Committee of the
Company’s Board of Directors (“Compensation Committee”) has sole discretion of
defining the eligible participants of this Plan.

 

Under this Plan, the Executive is eligible to
receive the bonus payment earned for the full year of 2006 provided that the
Executive is employed by the Company for the entirety of 2006. The Executive
must be an employee of the Company on December 31, 2006 to be to be eligible to
receive a bonus payment under the Plan.

 

An Executive who is employed by the Company
subsequent to January 1, 2006 will be eligible for a pro-rated portion of the
Value Added component of the Target Bonus and the Fixed-Site Return on Capital
component of the Target Bonus, as long as the Executive is employed by the
Company on or before June 30, 2006 and is employed by the Company on December
31, 2006.

 

C. Term of the Plan

 

This Plan is effective
January 1, 2006, and governs bonus payments to the Executive for the 2006
calendar year.

 

D. Target Bonus

 

The
Target Bonus is the product of the Executive’s base salary multiplied by a
percentage of the Executive’s base salary, as agreed to by the Compensation
Committee. The 2006 Target Bonus as a percentage of base salary is 85% for the
Chairman of the Board and Chief Executive Officer, and 75% for the President
and Chief Operating Officer, and 75% for Executive Vice President, Chief
Financial Officer.

 

CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

1

 

The
Target Bonus has two (2) components:  (i)
Value Added Bonus (75% of Target Bonus); and (ii) Fixed-Site Return on Capital
(25% of Target Bonus).

 

E. Bonus Calculation – Value Added Component

 

The Value Added component
of the Bonus constitutes 75% of the Target Bonus. The Bonus % targets under the
Value Added component of the Bonus range from 50% to 175% of the Executives Target
Bonus.

 

The minimum threshold for
the Executive to earn the Value Added component of the Bonus is to achieve [***]%
of the 2006 [***] budget ($[***]). If this achievement is met, the Target Bonus
% achievement will be based on the Value Added calculation. The attached
Exhibit A entitled “Value Added” sets forth the Target Bonus % earned by the
Executive.

 

The calculation of the
Value Added component of the Bonus is [***] less [***] and [***].

 

[***] is defined as [***]
up to a maximum of $[***]. Any adjustments to the Value Added calculation for [***]
or [***] will be approved by the Compensation Committee of the Board of
Directors.

 

The [***] is defined as
the Company’s [***] as of December 31, 2005, March 31, 2006, June 30, 2006,
September 30, 2006, and December 31, 2006, multiplied by [***]%. [***] is
defined as [***], less [***], less [***].

 

F. Bonus Calculation – [***] Return on Capital Component

 

The [***] Return on
Capital component of the bonus constitutes 25% of the Target Bonus. The [***]
Return on Capital component of the Bonus is based on the return on capital % of
the [***] and [***]. The bonus % targets under the [***] Return on Capital
component of the Target Bonus range from 20% to 175% of the Executive’s Target
Bonus. See attached Exhibit B entitled “[***] Return on Capital” for the Target
Bonus % range.

 

The calculation of return
on capital is defined as [***] of [***] divided by [***]. The return on capital
for [***] will be measured after 2008, when 50% of this portion of the bonus
will be paid based on the return at that time. The return on capital will be
measured again after 2009, and the total payout for this portion of the bonus
will be determined. Any amount paid the previous year would be deducted from
the final payment. If the calculation of the total payout is less than the
amount paid in the previous year, no additional payment will be made, but no
amount will be owed back to the Company by the Executive.

 

CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

2

 

G. Payment Schedule

 

The Company will calculate
the Value Added component of the bonus based on full year 2006 results. The
payment of the Value Added component of the bonus will be made upon the
completion of the annual audit of the Company’s financial statements by its
independent auditors.

 

The Return on Capital component
of the bonus will be calculated based on the 2008 results of the [***], and
calculated a second time based on the 2009 results of the [***]. The payments
of the Return on Capital component of the bonus will be made once the annual
audits of the Company’s financial statements are completed by its independent
auditors.

 

At its discretion, the
Compensation Committee can authorize Bonus payments prior to the completion of
the annual audits.

 

H. Other Terms and Conditions

 

1.               The Compensation Committee of the Company’s Board of
Directors governs this Plan. If any disagreements arise regarding the
interpretation of the provisions of this Plan, the Compensation Committee has
the sole discretion to interpret the Plan’s provisions.

 

2.               The Compensation Committee has the right to grant
discretionary payments under the Plan at its sole discretion.

 

3.               This Plan sets forth the entire Executive Incentive
Plan for the 2006 calendar year and supersedes all prior and contemporaneous
oral and written agreements, understandings, and representations, if any, with
respect to the components of Executive bonus and/or the calculation and payment
of Executive bonus.

 

CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

3

 

EXHIBIT A

Value Added

 

	
  [***]

  	
   

  	
  Bonus % Target

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  Value Added

  	
   

  
	
  [***]

  	
   

  	
  0.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
   

  	
   

  
	
  [***]

  	
   

  	
  50.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  $

  	
  (5.0

  	
  )

  
	
  [***]

  	
   

  	
  57.1

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  (3.6

  	
  )

  
	
  [***]

  	
   

  	
  64.3

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  (2.3

  	
  )

  
	
  [***]

  	
   

  	
  71.4

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  (0.9

  	
  )

  
	
  [***]

  	
   

  	
  78.6

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  0.5

  	
   

  
	
  [***]

  	
   

  	
  85.7

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  1.9

  	
   

  
	
  [***]

  	
   

  	
  92.9

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  3.3

  	
   

  
	
  [***]

  	
   

  	
  100.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  1.6

  	
   

  
	
  [***]

  	
   

  	
  107.1

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  3.0

  	
   

  
	
  [***]

  	
   

  	
  114.3

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  4.4

  	
   

  
	
  [***]

  	
   

  	
  121.4

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  5.9

  	
   

  
	
  [***]

  	
   

  	
  128.6

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  7.3

  	
   

  
	
  [***]

  	
   

  	
  135.7

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  8.7

  	
   

  
	
  [***]

  	
   

  	
  142.9

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  10.2

  	
   

  
	
  [***]

  	
   

  	
  150.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  11.6

  	
   

  
	
  [***]

  	
   

  	
  155.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  13.0

  	
   

  
	
  [***]

  	
   

  	
  160.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  14.5

  	
   

  
	
  [***]

  	
   

  	
  165.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  15.9

  	
   

  
	
  [***]

  	
   

  	
  170.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  17.3

  	
   

  
	
  [***]

  	
   

  	
  175.0

  	
  %

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
  18.8

  	
   

  
													

 

(1)          [***] is defined as
[***] up to a maximum of $[***]. Any adjustments to the value added calculation
for [***] or [***] will be approved by the Compensation Committee of the Board
of Directors.

 

(2)          [***] is computed as
follows:

 

[***]

 

*Computation
will take the [***] at December 31, 2005, March 31, 2006, June 30, 2006,
September 30, 2006, and December 31, 2006.

 

CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

4

 

EXHIBIT B

[***] Return on Capital

 

	
  (1)

  Return on Capital

  	
   

  	
  Bonus % Target

  	
   

  
	
  <11%

  	
   

  	
  0

  	
  %

  
	
  11%

  	
   

  	
  20

  	
  %

  
	
  12%

  	
   

  	
  40

  	
  %

  
	
  13%

  	
   

  	
  60

  	
  %

  
	
  14%

  	
   

  	
  80

  	
  %

  
	
  15%

  	
   

  	
  100

  	
  %

  
	
  16%

  	
   

  	
  110

  	
  %

  
	
  17%

  	
   

  	
  120

  	
  %

  
	
  18%

  	
   

  	
  130

  	
  %

  
	
  19%

  	
   

  	
  140

  	
  %

  
	
  20%

  	
   

  	
  150

  	
  %

  
	
  21%

  	
   

  	
  155

  	
  %

  
	
  22%

  	
   

  	
  160

  	
  %

  
	
  23%

  	
   

  	
  165

  	
  %

  
	
  24%

  	
   

  	
  170

  	
  %

  
	
  25%

  	
   

  	
  175

  	
  %

  

 

(1)          Return on capital is
defined as [***] generated by [***] divided by [***]. Return on capital for
these [***] will be measured in 2008 and 2009.

 

Example:  16.2% return on capital = 110% +
[(16.2%-16.0%)*(120%-110%)] = 112% of target bonus.

 

CERTAIN CONFIDENTIAL INFORMATION
CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

5

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