AMENDED AND RESTATED
ALLIANCE IMAGING, INC.
LONG-TERM EXECUTIVE INCENTIVE PLAN
PREFACE
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In order to provide the executive management team of Alliance Imaging, Inc. with
the opportunity for incentive compensation based upon meeting or exceeding
certain financial targets on which the December 31, 1994 restructuring of the
Company's balance sheet was based, the Compensation Committee of the Board of
Directors implemented the Long-Term Executive Incentive Plan effective as of
January 1, 1995. The Compensation Committee has amended and restated this plan
(LTIP) as of July 22, 1997.
The plan is structured to motivate the plan participants to exceed the minimum
cash flow targets agreed to by the lenders as sufficient to service their debt.
If management is able to exceed these cash flow thresholds, long-term incentives
would be earned. Additional incentive opportunity will be earned if the Company
is able to pay the Series A Preferred Stock dividends in cash, which would avoid
significant dilution to existing stockholders.
LONG-TERM EXECUTIVE INCENTIVE PLAN (LTIP)
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- - EBDIT COMPONENT
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The LTIP is based upon the Earnings Before Depreciation, Amortization, Interest,
Taxes and Equipment Charges under any asset management or similar arrangements
that the Company may have from time to time (EBDIT) in the financial model
presented to and accepted by the Company's lenders and Board of Directors, which
was utilized in the Company's December 31, 1994 balance sheet restructuring.
The EBDIT target utilized in the LTIP includes any charges related to the LTIP
(i.e., such target must be achieved after accrual of related LTIP charges).
For each fiscal year, the amount by which actual EBDIT exceeds the EBDIT Target
(as presented in the 1994 Debt Restructuring Model and shown in the following
table) is accrued into the incentive plan pool, up to a maximum of $225,000 in
each fiscal year, assuming the amounts are earned ratably during the four year
period. To the extent that the amounts are not earned ratably during the
period, the cumulative amount earned will be accrued in the year of cumulative
achievement. The first $125,000 (or such lesser amount) accrued each fiscal
year is deemed earned in recognition for achieving that year's goal. If the
cumulative EBDIT Target for 1995 through 1998 is met or exceeded, an additional
total amount of $400,000 is deemed earned in recognition of achievement of the
four-year goal.
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000's 1995 1996 1997 1998 Total
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EBDIT - Per Debt Restructuring Model $19,770 $19,870 $19,575 $19,278 $78,493
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- - DIVIDEND COMPONENT
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Additional incentive is earned for each year in which the Company is able to pay
Series A Preferred Stock dividends in cash rather than in common stock. If the
Company is able to pay such dividends in cash in any fiscal year, either by
generating sufficient EBDIT as described in the Company's loan agreements or by
raising funds through the sale of common stock at or above $4.00 per share net
proceeds to the Company, then the Fiscal Year Dividend Incentive Target of
$200,000 will be accrued into the incentive plan pool. If only a portion of
such dividends are paid in cash in any fiscal year, the incentive amount earned
shall be computed as follows:
Amount of dividends paid in cash
-------------------------------- X $200,000 = Fiscal Year Award Earned
Total dividends payable
For fiscal years 1995 through 1997, if Series A Preferred Stock dividends are
paid in cash using the proceeds from the sale of common stock at less than $4.00
per share net, then the annual incentive amount earned shall be reduced, as
follows: If the net proceeds from such sale of common stock are $2.50 per share
or less, no Dividend Incentive will be payable with respect to that portion of
the Series A Preferred Stock cash dividend payment. For net proceeds between
$2.50 and $4.00 per common share, a percentage of the Dividend Incentive will be
payable. Such percentage will be determined by dividing the amount by which the
net proceeds per common share exceed $2.50, by $1.50 (i.e., the difference
between $4.00 and $2.50 net proceeds per common share). For example, if the net
proceeds are $3.25 per common share, 50% of the Dividend Incentive would be
earned, computed as follows:
($3.25 - $2.50)
----------------------------------- = 50%
$1.50
After 1997, Series A Preferred Stock dividends may be paid in common stock at
the then current market value, as defined. Accordingly, for fiscal 1998, Series
A Preferred Stock dividends paid in common stock shall be deemed a sale of
common stock and any Dividend Incentive shall be computed as described above.
If all cumulative 1995 through 1998 Series A Preferred dividends are paid in
cash by generating sufficient EBDIT or utilizing funds from the sale or issuance
of Common Stock at not less than $4.00 per share net, an additional Cumulative
Dividend Incentive of $600,000 will be accrued into the incentive pool.
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PARTICIPANTS
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The current seven annual incentive plan participants are eligible to participate
in the Long-Term Incentive Plan and are the President and Chief Executive
Officer, Executive Vice President and Chief Operating Officer, Senior Vice
President and Chief Financial Officer, and four Senior Vice Presidents in charge
of regional operations. Any changes in participants or their shares must be
approved by the Compensation Committee. Participant shares are: President and
Chief Executive Officer - 25%, Executive Vice President and Chief Operating
Officer - 20%, Senior Vice President and Chief Financial Officer - 15% and
specified Regional Vice Presidents - 40% in total, not to exceed 10% for any
individual Regional Vice President. (In the event the participation percentages
total less than 100%, the unallocated amount will remain with the Company.)
PAYMENT
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Any amounts earned under this incentive plan will be calculated and paid by
March 31, 1999. Payment shall be made in cash.
VESTING
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A participant must be actively employed by the Company on the payment date to
receive any payment under this plan. Exceptions are involuntary termination
without cause, voluntary termination for "good reason" or "constructive
discharge" as defined in the participant's employment agreement, death or
disability, in which case the participant receives a pro rata share of total
plan achievement. Newly authorized participants, if any, receive a pro rata
share of the pool at their designated percentage from the date of approval for
participation to the end of fiscal 1998. Voluntary terminations (other than
voluntary termination for "good reason" or "constructive discharge" as defined
in the participant's employment agreement) and terminations with cause result in
forfeiture of all rights to any payment under this plan. Any undistributed
amounts in the pool as a result of such terminations revert to the Company.
CHANGE OF CONTROL
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In the event of a transaction that results in a change of control of the Company
as defined in the participant's employment agreement in effect on July 21, 1997,
LTIP earnings to the date of the closing will be calculated and paid in cash to
the executive at the closing. Following the closing, the participant will
continue to participate in the plan and is eligible to earn his/her remaining,
unearned and unpaid share of the pool, subject to the terms and other conditions
of the plan.
Cumulative EBDIT versus cumulative target, and cash payment of dividends from
EBDIT and qualifying sales of common stock, are calculated pro rata for the
period the plan was in existence. For example, if the Company is sold as of
December 31, 1996
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and cumulative EBDIT earnings are equal to the cumulative target for the first
two years, then 50% of the $400,000 cumulative incentive will be earned prior
to the closing of the sale. The same methodology would be used in determining
the Fiscal Year and the Cumulative Dividend Targets earned.
ADMINISTRATION
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This plan is administered and interpreted at the sole discretion of the
Compensation Committee of the Board of Directors and all participants agree to
be bound by their decisions.
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