Exhibit 10.4


 


	
  

  	
  InSight
  Health Corp.

  
	
  26250 Enterprise
  Court

  
	
  Suite 100

  
	
  Lake Forest, CA
  92630-8405

  
	
   

  
	
  Telephone - 949.282.6000

  
	
  Facsimile - 949.452.0253

  
	
   

  



 


June 27, 2008


 


PERSONAL AND CONFIDENTIAL


 


Mitch C. Hill


2 Slate Springs


Coto de Caza , CA 92679


 


Re:  Separation
Agreement


 


Dear Mitch:


 


This Letter Agreement (“Agreement”) sets forth the
terms and conditions of your separation from InSight Health Services Holdings
Corp. (“InSight” or “Company”) and InSight Health Services Corp. (“IHSC”), in
each case effective October 31, 2008 (“Effective Date”). InSight will pay
your earned wages and any unused accrued vacation through October 31,
2008, regardless of whether you sign this Agreement, and the other amounts and
benefits set forth below upon the terms and under the conditions set forth in
this Agreement.


 


In consideration of the mutual covenants and promises
made in this Agreement, you and InSight agree as follows:


 


Services. You shall continue to
provide services to the Company in your capacity as Executive Vice President
and Chief Financial Officer, and in connection therewith, to perform such
duties as are reasonably consistent with the position in which you have been
employed over the past three years and as the Board of Directors of the Company
(the “Board”) may reasonably assign. In the event you believe that any duties
assigned to you by the Board are not so consistent, you agree to notify the
Company and meet with the Chief Executive Officer and other members of
management or their advisors in order to agree, acting in good faith, on any
changes to such request. In the event anything comes to your attention that
would lead you to believe that you will not be able to provide such services to
the Company as you have previously been providing them and as are typical for a
Chief Financial Officer of a public company with Securities and Exchange
Commission reporting obligations, you agree to immediately notify the Chief
Executive Officer so that any reasonable changes can be made or issues addressed
to allow you to perform those duties. You and the Company agree that an
essential element of this Agreement is your provision of these services through
the Effective Date, and the inability of you to provide these services, for any
reason other than an intentional act by the Company which is designed to
prevent you from performing these services, shall provide the Company with the
ability to terminate this Agreement without any additional compensation or
obligation to you. In the event that the Company determines your services are
no longer needed, you shall be entitled


 

















 


to your base salary through the Effective Date, and
the other compensation and benefits set forth herein, notwithstanding that you
have not provided services through the Effective Date, it being understood that
in the event the Company hires a replacement Chief Financial Officer prior to
the Effective Date, you shall, at the request of the Company, provide
reasonable transition services to the Company until the Effective Date.


 


Termination. On the Effective Date
your employment, and any and all positions you held with InSight and any of its
subsidiary or affiliated entities (collectively “InSight Companies”) is
terminated, and as of that date you relinquish any and all of your authorities
with each of those companies. You and the Company agree that the Executive
Employment Agreement dated as of January 10, 2005 between you and IHSC (“Employment
Agreement”) is hereby terminated in its entirety  and you shall not be entitled to any monetary
compensation, including any salary in lieu of notice, or any fringe benefits,
perquisites or other employment benefits from the InSight Companies, except as
provided in this Agreement, which supercedes the Employment Agreement in all
respects.


 


Separation Payments. In addition to
your final paycheck and payment for any unused accrued vacation through and
including the Effective Date, in accordance with the “Consideration Period” and
“Revocation Period” (defined below), and in consideration for your signing this
Agreement and your agreement to continue to provide services to InSight as set
forth herein, InSight agrees to pay you an amount equal to your current regular
monthly base salary, less applicable taxes and withholdings required by law, on
a regular payroll basis, for a period of 
ten (10) months (the “Separation Payments). Separation Payments
will be made on the subsequent pay periods following the Effective Date. The
Separation Payments will be sent to your home address as set forth above. Notwithstanding
the foregoing, in the event that you breach any of the terms and conditions of
this Agreement, including your refusal or inability to continue to provide the
services set forth above to InSight, you shall no longer be entitled to receive
any salary, benefits or Separation Payments following the date of such breach
until such time as you have cured such breach, if it is capable of being cured.
The amounts payable pursuant to this paragraph shall not be reduced by the
amount of any other compensation or income you may receive from other full-time
employment or any other sources during the period you receive Separation
Payments.


 


FY 2008 Incentive Compensation. Also,
in accordance with the “Consideration Period” and Revocation Period,” the
Company agrees to pay you, if and when it is determined and approved by the
Company’s Compensation Committee, any FY 2008 incentive compensation for which
you may be eligible pursuant to the InSight Executive Management Incentive
Compensation Plan.


 


Discretionary Bonus. At the
completion of your services hereunder, and promptly following the Effective
Date, upon your request, the Board shall consider a request by you for a
discretionary bonus in the amount of two (2) months of your regular
current monthly base salary. You understand and agree that the payment of any
such amount is entirely within the absolute, sole and non-reviewable discretion
of the Board.


 


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Outplacement Counseling Services. As
further consideration for signing this Agreement, the Company agrees to provide
you with outplacement counseling services through a firm mutually agreed by you
and the Company for the six (6) month-period immediately following the
Effective Date. Your outplacement counseling benefits and limitations will be
explained in a separate agreement.


 


Benefits. As additional
consideration for this Agreement, the Company agrees to continue the employee
benefits specified in this paragraph until the first of the following occurs: (a) expiration
of the  ten (10) month period
following the Effective Date; or (b) until you are eligible for employment
benefits as the result of full-time employment with another employer. The
benefits you will receive during the applicable period are life insurance, medical,
health and accident, and disability plans or programs (including Exec-U-Care)
covering you and any dependents under the same terms and conditions as if you
had not been terminated, including the payment by you of required premiums and
co-payments that are to be made by you. In the event that the Company is not
able to keep you on the existing Company plans for health insurance, during the
period specified in (a) above, the Company will pay both the Company and
employee portion of all health insurance premiums for continuation coverage
under COBRA (as defined below) for you and any currently insured dependents and
you shall be responsible for the payment of the 
amount of any required deductibles and co-payments as you were
responsible for under the plans immediately prior to the Effective Date. The
Company’s agreement to provide these benefits during the applicable period is
contingent upon your participation being permissible under the general terms
and provisions of such plans and programs and contingent upon the Company’s
right to amend or terminate any employee benefit plans which are applicable
generally to the Company’s employees. In the event of either of these
contingencies, you will cease to receive these benefits effective the date of
the occurrence of the contingency. However, in such an event, the Company
agrees to arrange to provide you with benefits and costs substantially similar
to those you were receiving at the time of your termination for the applicable
period or its remainder as the Company may obtain for the same costs it was
paying for your benefits immediately prior to the Effective Date.


 


Release. In consideration of this
Agreement, you hereby irrevocably and unconditionally release, waive and
forever discharge the Company, its direct and indirect subsidiaries and
affiliates, affiliated persons, partnerships and corporations, successors and
assigns, and all of their past and present directors, members, partners,
contractors, distributors, officers, stockholders, consultants, agents,
representatives, attorneys, employees, employee benefit plans and plan
fiduciaries (collectively, the “Company Releasees”), individually and
collectively, from any and all actions, causes of action, claims, demands,
damages, rights, remedies and liabilities of whatsoever kind or character, in
law or equity, suspected or unsuspected, known or unknown, past or present,
that you have ever had, may now have, or may later assert against any of the
Company Releasees, concerning, arising out of or related to your employment by
or the performance of any services to or on behalf of any of the InSight
Companies or the termination of that employment, those services and your
positions with the InSight Companies, from the beginning of time to the
Effective Date (hereinafter referred to as “Executive’s Claims”), including
without limitation:  (i) any claims
arising out of or related to


 


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any federal, state and/or local labor or civil rights
laws, as amended, including, without limitation, the federal Civil Rights Acts
of 1866, 1871, 1964 and 1991 (including but not limited to Title VII), the
Age Discrimination in Employment Act of 1967, the National Labor Relations Act,
the Worker Adjustment and Retraining Notification Act, the Employee Retirement
Income Security Act of 1974, the Family and Medical Leave Act of 1993, the
Americans with Disabilities Act of 1990, the Fair Labor Standards Act of 1938,
the Older Workers’ Benefit Protection Act, the California Fair Employment and
Housing Act, the California Industrial Welfare Commission Wage Orders, and the
California Labor Code and/or any similar state anti-discrimination and
employment statutes; and (ii) any and all other of Executive’s Claims
arising out of or related to any contract or employment agreement, any and all
other federal, state or local constitutions, statutes, rules or
regulations, or under the laws of any country or political subdivision, or
under any common law right of any kind whatsoever. You also agree to waive all
rights to sue or obtain equitable, remedial or punitive relief, arising out of
or related to Executive’s Claims, from any or all Company Releasees of any kind
whatsoever including, without limitation, reinstatement, back pay, front pay,
attorney’s fees and any form of injunctive relief. Notwithstanding the
foregoing, this Agreement shall not affect any of your rights or obligations
under (a) the InSight Health Services Corp. 401(k) Savings Plan (“InSight
401(k) Plan”), (b) the Amended and Restated Indemnification Agreement
executed by you and the Company effective January 10, 2005 (“Indemnification
Agreement”), (c) the Consolidated Omnibus Budget Reconciliation Act (“COBRA”),
(d) workers’ compensation or unemployment insurance benefits claims, or (e) the
terms of this Agreement.


 


You and the Company hereby waive and relinquish all
rights and benefits afforded by California Civil Code Section 1542. You
and the Company understand and acknowledge the significance and consequences of
this specific waiver of Section 1542. California Civil Code Section 1542
states 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.


 


To the fullest extent
permitted by law, you represent, warrant and agree not to lodge or assist
anyone else in lodging any formal or informal complaint in court, with any
federal, state or local agency or any other forum, in any jurisdiction, arising
out of or related to Executive’s Claims. You hereby represent and warrant that
you have not brought any complaint, claim, charge, action or proceeding against
any of the Company Releasees in any jurisdiction or forum, nor assisted or
encouraged any other person or persons in doing so. You further represent and
warrant that you have not in the past and will not in the future assign any of
Executive’s Claims to any person, corporation or other entity.


 


Your
execution of this Agreement operates as a complete bar and defense against any
and all of Executive’s Claims against the Company and each of the other Company
Releasees to the maximum extent permitted by law. If you should hereafter make
any of Executive’s Claims in any charge, complaint, action, claim or proceeding
against the Company


 


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or any of the other Company
Releasees, this Agreement may be raised as, and shall constitute a complete bar
to, any such charge, complaint, action, claim or proceeding. You agree to
disclaim and waive any right to share or participate in any monetary award
resulting from the prosecution of any administrative investigation or
proceeding against any of the Company Releasees.


 


Release
by the Company. In
consideration of this Agreement, the Company on behalf of itself, its parent
and subsidiary corporations (“Company Releasors”) hereby irrevocably and
unconditionally releases, waives and forever discharges you, your spouse,
family members, heirs, and attorneys(collectively, the “Executive Releasees”),
individually and collectively, from any and all actions, causes of action,
claims, demands, damages, rights, remedies and liabilities of whatsoever kind
or character, in law or equity, suspected or unsuspected, known or unknown,
past or present, that they have ever had, may now have, or may later assert
against the Executive Releasees, whether or not arising out of or related to
your employment by or the performance of any services to or on behalf of the
Company or the termination of that employment and those services, from the
beginning of time to the Effective Date (hereinafter referred to as “Company’s
Claims”), including without limitation, any and all other of Company’s Claims
arising out of or related to any contract, any and all federal, state or local
constitutions, statutes, rules or regulations, or under the laws of any
country or political subdivision, or under any common law right of any kind
whatsoever, including, without limitation, any of Company’s Claims for any kind
of tortious conduct, promissory or equitable estoppel, breach of the Company’s
policies, rules, regulations, handbooks or manuals, breach of express or
implied contract or covenants of good faith, breach of duty of loyalty or
fiduciary duty. Notwithstanding the foregoing, this Agreement shall not
affect any of the Company’s rights or obligations under (a) the InSight
401(k) Plan, (b) the Indemnification Agreement, (c) COBRA, (d) workers’
compensation or unemployment insurance benefits claims, or (e) the terms
of this Agreement.


 


Further,
notwithstanding the foregoing, the Company’s Claims which are being released
herein shall not include any claims or causes of action that the Company
Releasors may have against you as of the Effective Date, which may arise from
or be related to (i) any acts or omissions undertaken by you, or
undertaken at your express direction, which constitute fraud, theft or
embezzlement against the Company or any act that constitutes a felony under the
laws of the United States or any state and such felony results in a damage,
loss, liability of claim to or against a Company Releasor ; or (ii) any
voluntary act undertaken by you in knowing and willful violation of a specific
written Company directive or policy, which causes the Company material harm or
subjects it to material liability, unless such directive or policy would cause
you to take an illegal act. The Company is not currently aware of any claim
that it may have for any matter covered under this subparagraph.


 


To the fullest extent
permitted by law, the Company agrees not to lodge or assist anyone else in
lodging any formal or informal complaint in court, with any federal, state or
local agency or any other forum, in any jurisdiction, against you or any of the other Executive Releasees
arising out of or related to Company’s Claims. The Company hereby represents
and warrants that it has not brought any complaint, claim, charge, action or
proceeding against any of the Executive Releasees in any jurisdiction or forum,
nor assisted or encouraged any other


 


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person or persons in doing
so. The Company further represents and warrants that it has not in the past and
will not in the future assign any of Company’s Claims to any person,
corporation or other entity.


 


Execution
of this Agreement by the Company operates as a complete bar and defense against
any and all of Company’s Claims against you or any of the other Executive
Releasees. If the Company should hereafter make any of Company’s Claims in any
charge, complaint, action, claim or proceeding against you or any of the other
Executive Releasees, this Agreement may be raised as and shall constitute a
complete bar to any such charge, complaint, action, claim or proceeding and you
and/or the other Executive Releasees shall be entitled to and shall recover
from the Company all costs incurred, including reasonable attorneys’ fees, in
defending against any such charge, complaint, action, claim or proceeding.


 


Continuing Obligations to Company. You
understand and agree that you have continuing obligations to the Company as set
for in Exhibit A attached hereto from the date hereof and continuing as
set forth therein. Should you have a legitimate question as to whether a
particular prospective employment would be in breach of your obligations under Exhibit A,
you may make an inquiry to the Company prior to accepting such a position and
if the Company determines that such potential employment will not be a breach
of Exhibit A, it will so advise you and/or your prospective employer in
writing.


 


Cooperation. Between the date hereof
and the Effective Date, you agree to ensure an orderly transition to such
person or persons that the Company may designate. During the period in which
you are receiving Separation Payments, but not to exceed five (5) hours
per month, you may be asked questions by the Company, its accountants,
financial advisors or attorneys relating to your former duties, to which you
agree to  respond in a reasonably timely
and responsible manner by providing such information as may be within your
knowledge. You and the Company acknowledge and agree that you may have future
employment and other obligations that may limit the amount of your time
available to cooperate with the Company under this paragraph and thus your
reasonable cooperation will take into account any such limitations. The Company
agrees to reimburse you for all your reasonably incurred out-of-pocket expenses
incurred in satisfying your obligations under this paragraph.


 


Return of InSight Property; Expenses.
As set forth in Exhibit A, you agree to immediately return, not later than
the earlier to occur of your ceasing to provide services hereunder and  the Effective Date, all Company property and
equipment in your possession or under your control, including, but not limited
to, credit cards, keys, building access cards, manuals, notebooks, financial
statements, TREO, Blackberry, cell phone, reports and any other Company property.
Notwithstanding the above, the Company will allow you to purchase the Sprint
Blackberry currently in your possession for $79. You should in a timely manner
submit to InSight all outstanding business expenses incurred by you through the
Effective Date, for reconciliation and payment in accordance with the Company’s
policies.


 


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Legal Representation. You and
InSight each acknowledge that you have had the opportunity to receive the
advice of independent legal counsel prior to the execution of this Agreement
and the opportunity to receive an explanation from legal counsel of the legal
nature and effect of this Agreement, and you have fully exercised that
opportunity to the extent desired and you understand the terms and provisions
of this Agreement and its nature and effect. You further represent that you are
entering into this Agreement freely and voluntarily.


 


No Admission of Liability. Nothing
contained in this Agreement or the fact that InSight has signed this Agreement
shall be considered as admission of any liability whatsoever by InSight. This
Agreement may not be introduced in any action or proceeding by anyone for any
purpose except to evidence or to enforce its terms.


 


Confidentiality. As a material inducement
to InSight to enter into this Agreement and as an indivisible part of the
consideration to be received for entering into this Agreement and for the
performance of obligations under this Agreement by each party to this
Agreement, you agree that you will not disclose, disseminate, and/or publicize
or cause or permit to be disclosed, disseminated, and/or publicized, any of the
specific terms of this Agreement, any claims or allegations or the basis for
any claims or allegations, which were or could have been made against InSight
and its divisions, affiliates, subsidiaries, predecessor and successor
corporations, and the past and present directors, officers, management
committees, stockholders, agents, servants, employees, representatives,
administrators, partners, general partners, managing partners, limited
partners, benefit plan fiduciaries and administrators, assigns, heirs,
successors or predecessors in interest, adjustors, insurers, and attorneys,
which concern and are within the scope of this Agreement, directly or
indirectly, specifically or generally, to any person, corporation, association,
governmental agency, or other entity except: (a) to the extent necessary
to report income to appropriate taxing authorities; (b) in response to an
order of a court of competent jurisdiction or a subpoena issued under authority
thereof; (c) in response to any subpoena issued by a state or federal
governmental agency; or (d) as otherwise required by law. Notwithstanding
the foregoing, InSight may file this Agreement with the Securities and Exchange
Commission in accordance with the Securities Exchange Act of 1934.


 


Assistance/Cooperation Regarding Current or Future
Litigation or Investigation. In connection with InSight’s
participation in current or future litigation or investigation relating to
events which occurred during your employment with the Company and/or about
which you have personal knowledge or information, you agree to cooperate in the
preparation, prosecution, or defense of the Company’s case or investigation,
including, but not limited to, meeting with the Company’s counsel, the
execution of truthful declarations, being a deponent and/or witness, or
providing information and/or documents requested by the Company or any
governmental agency. You further agree not to voluntarily assist any party, any
current or former employee of the Company, and/or attorney in any claim,
dispute, charge, or litigation adverse to the Company. This paragraph does not
prohibit you from testifying truthfully pursuant to a subpoena or lawful court
order. In consideration of your agreement to cooperate in the event that the
Company requests your cooperation about any matter that does not specifically
relate to you or to an action taken by you during your employment with the Company,
the Company agrees to reimburse you for all your reasonably incurred
out-of-pocket expenses incurred in assisting the Company. You and the Company
acknowledge and agree that you may have future employment


 


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or other obligations that may limit the amount of your
time available to cooperate with the Company under this paragraph, and thus
your reasonable cooperation will take into account any such limitations. To the
extent your time required to assist the Company exceeds five (5) hours in
any calendar month, the Company will compensate you at the rate of $225 per
hour.


 


Non Disparagement. As a material
inducement to InSight to enter into this Agreement, you agree that you will not
make any negative or disparaging comments about InSight or IHSC. InSight,
agrees that it  will not make any
negative or disparaging comments about you.


 


Other Agreements. Except for (i) Exhibit A,
(ii) the InSight 401(k) Plan, and (iii) the Indemnification
Agreement, the terms of this Agreement supercede any and all other agreements,
understandings, negotiations, or discussions, either oral or in writing,
express or implied, among you, the Company and IHSC and this Agreement shall
operate to terminate all such other agreements between you and the InSight
Companies.


 


Successors. This Agreement is
binding upon the Company and you and upon the Company’s and your respective
successors, assigns, heirs, executors, administrators and legal
representatives.


 


No Strict Construction. The language
in this Agreement shall be deemed to be the language mutually chosen by the
parties to reflect their mutual intent and no doctrine of strict construction
shall apply against any party.


 


Entire Agreement. This Agreement
constitutes the full, complete, and exclusive agreement among you, InSight and
IHSC with respect to the subject matter herein. This Agreement cannot be
changed unless in writing, signed by you, InSight, and IHSC.


 


Waiver. No waiver of any of the
provisions of this Agreement shall be deemed, or shall constitute, a waiver of
any other provision, whether or not similar. No waiver shall constitute a
continuing waiver. No waiver shall be binding unless executed in writing by the
party charged with the waiver.


 


Severability. In the event any provision
of this Agreement shall be determined to be unlawful, such provision shall be
deemed to be severed from this Agreement and every other provision of this
Agreement shall remain in full force and effect.


 


Headings. The headings of the
paragraphs of this Agreement are for the purposes of convenience only, and
shall not be deemed to amend, modify, expand, limit or in any way affect the
meanings of any of the provisions hereof.


 


Governing Law. This Agreement is
made and entered into in the State of California, without regard to any
conflicts of law principles thereof that would call for the application of the
laws of any other jurisdiction.


 


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Resolution of Disputes. Any
controversy or claim arising out of or relating to this Agreement, or any
breach thereof, will be submitted to final and binding arbitration in Orange
County, California, before a mutually agreed upon arbitrator from Judicial
Arbitration and Mediation Services (JAMS), as the exclusive remedy for such
controversy or dispute. Judgment upon any award rendered by the arbitrator may
be entered in the Superior Court of the County of Orange, State of California,
which will have exclusive jurisdiction thereof. The prevailing party in any
proceeding brought to enforce the terms of this Agreement will be entitled to
recover from the other party all damages, costs and expenses, including without
limitation, reasonable attorneys’  and
arbitrators’ fees , incurred as a result of such action. In agreeing to this
arbitration, you understand and agree that you are waiving  the  right
to  a  jury  trial as to any issue(s) subject to
this Agreement. The decision of the arbitrator will be bound by generally
accepted legal principles, including but not limited to all rules of law
and legal principles concerning potential liability, burdens of proof, and
measure of damages found in all applicable California statutes and
administrative rules and codes, and all California case law. The parties
agree that this provision does not limit his/its/their right to seek injunctive
relief in the threat of imminent and irreparable harm as a result of breach of
this Agreement.


 


Consideration Period. You have until
5:00 p.m. on July 18, 2008, or twenty-one (21)  days from receipt of this Agreement to
consider it. InSight hereby advises you to consult with an attorney before
signing this Agreement.


 


Revocation Period. For a period of
seven (7) days following the signing of this Agreement, you may revoke
this Agreement. This Agreement does not become effective or enforceable until
the revocation period has expired without you exercising your option to revoke.


 


Please acknowledge your understanding and acceptance
of this Agreement by signing this Agreement below and returning it to me no later
than 5:00 p.m. on July 18, 2008, or on the twenty-first (21st)
day from the day you receive this Agreement. An extra copy of this Agreement
has been signed by me and is enclosed for your records.


 


	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Louis E.
  Hallman, III

  
	
   

  	
  Louis E.
  Hallman, III

  
	
   

  	
  President and Chief
  Executive Officer

  
	
   

  	
  InSight Health Services
  Corp. and

  
	
   

  	
  InSight Health Services
  Holdings Corp.

  
	
  Enclosures

  	
   

  
	
   

  	
   

  
	
  ACKNOWLEDGED AND
  AGREED:

  	
   

  
	
   

  	
   

  
	
  Dated: June 27, 2008.

  	
   

  	
  /s/ Mitch C. Hill

  
	
   

  	
   

  	
  Mitch C. Hill

  



 


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EXHIBIT A


 


V.                                    CERTAIN
COVENANTS OF EXECUTIVE


 


SECTION 5.01  Covenants Against Unfair
Competition.


 


(a)                                  Acknowledgments. Executive
acknowledges that, as of the date hereof (i) the principal business of
Company and its affiliates is the provision of diagnostic imaging, treatment
and related management services through a network of mobile magnetic resonance
imaging (“MRI”) and positron emission tomography (“PET”) facilities, fixed-site
MRI and PET facilities and multi-modality centers, at times, together with
other healthcare providers, utilizing the related equipment and computer
programs and “software” and various corporate investment structures (“Company
Business”); (ii) Company Business is primarily national in scope; (iii) the
industry is highly competitive; and (iv) Executive’s duties hereunder will
cause Executive to have access to and be entrusted with various trade secrets
not readily available to the public or competitors, consisting of business
accounts, lists of customers and other business contacts, information
concerning Company’s relationships with actual or potential clients or
customers and the needs or requirements of such clients or customers, budgets,
business and financial plans, employee lists, financial information, artwork,
designs, graphics, marketing plans and techniques, business strategy and
development, know-how or other matters connected with Company Business,
computer software programs and specifications (some of which may be developed
in part by Executive under this Agreement), which items are owned exclusively
by Company and used in the operation of Company Business (“Trade Secrets”). Notwithstanding
the foregoing, the parties agree that the term “Trade Secrets” shall not
include information which (i) is or becomes generally available to the
public, without violation of any obligation of confidentiality by Executive, (ii) is
or becomes available from a third party on a nonconfidential basis, provided
that such third party is not bound by a confidentiality agreement concerning
the Trade Secrets and (iii) is or has been independently acquired or
developed by Executive without violating the provisions of this Section.


 


Executive further acknowledges that the Trade Secrets
will be disclosed to Executive or obtained by Executive and received in
confidence and trust for the sole purpose of using the same for the sole
benefit of Company Business. Executive also acknowledges that such Trade
Secrets are valuable to Company, of a unique and special nature, and important
to Company in competing in the marketplace.


 


During and after the term of this Agreement (otherwise
than in the performance of this Agreement), without Company’s prior written
consent, Executive shall not divulge or use all or any of the Trade Secrets to
or for any person or entity except (i) for the benefit of Company and as
necessary to perform Executive’s services under this Agreement; and (ii) when
required by law, and then only after consultation with Company or unless such
information is in the public domain. In the event that Executive, becomes or is
legally compelled (whether by deposition, interrogatories, request for
documents, subpoena, civil investigative demand or similar process) to disclose
any Trade Secrets, Executive shall provide Company with prompt, prior written
notice of such requirement so that Company may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Section.
Executive agrees that his obligations under this Section 5.01 shall be
absolute and unconditional.


 

















 


(b)                                 Breach. Executive understands and
agrees that Executive’s employment with Company may be terminated if Executive
breaches this Agreement or in any way divulges such Trade Secrets. Executive
further understands and agrees that Company may be irreparably harmed by any
violation or threatened violation of this Agreement and, therefore, Company may
be entitled to injunctive relief to enforce any of the provisions contained
herein.


 


(c)                                  Non-Compete. During the period of
Executive’s employment, Executive will not directly or indirectly either as an
employee, employer, consultant, agent, principal, partner, stockholder,
corporate officer, director, or in any other individual or representative
capacity, engage or participate in any activity or business which Company shall
determine in good faith to be in competition in any substantial way with
Company Business within any metropolitan area in the United States or elsewhere
in which Company is then engaged in Company Business. The parties acknowledge
that in California and some states post-employment non-compete clauses may be
generally unenforceable, but that other states and jurisdictions permit such
agreements. Executive hereby agrees that Executive will not directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual
or representative capacity, engage or participate in any activity or business
which Company shall determine in good faith to be in competition in any
substantial way with Company Business as conducted at the effective date of
termination of Executive’s employment by Company for or a period of twelve (12)
months after the termination of Executive’s employment and that this Section will
be enforceable to the greatest extent of the law.


 


(d)                                 No Solicitation of Employees. During
Executive’s employment and for a period of twelve (12) months after the
termination of Executive’s employment, Executive will not, either directly or
indirectly, either alone or in concert with others, solicit or entice or
participate in the solicitation or attempt to solicit or in any manner
encourage employees of Company to leave Company or work for anyone that is in
competition in any substantial way with Company Business (which in the case of
the period following Executive’s termination, shall mean Company Business as
conducted as of the effective date of termination of Executive’s employment
with Company); provided, however, that the public listing, advertising or posting
of an available position shall not constitute solicitation or an attempt to
solicit hereunder and this subsection (d) shall not preclude
Executive from hiring an individual pursuant thereto.


 


(e)                                  No Solicitation of Customers. Executive
will not during the course of Executive’s employment, or for twelve (12) months
thereafter, either directly or indirectly call on, solicit, or take away, or
attempt to call on, solicit or take away any of Company’s customers on behalf
of any business that is in competition in any substantial way with Company. Executive
promises and agrees not to engage in any unfair competition with Company. During
Executive’s employment, Executive agrees not to plan or otherwise take any
preliminary steps, either alone or in concert with others, to set up or engage
in any business enterprise that would be in competition with Company Business. In
the event of the termination of Executive’s employment and for a period of
twelve (12) months thereafter, Executive will not accept any employment or
engage in any activities which Company shall determine in good faith to be
competitive with


 

















 


Company, if the fulfillment of the duties of the competitive employment
or activities would inherently require Executive to reveal Trade Secrets to
which Executive has access or learned during Executive’s employment on behalf
of any business that is in competition in any substantial way with Company.


 


(f)                                    Return of Company Property. In the
event of the termination of Executive’s employment, Executive will deliver to
Company all devices, records, sketches, reports, proposals, files, customer
lists, mailing or contact lists, correspondence, computer tapes, discs and
design and other document and data storage and retrieval materials (and all
copies, compilations and summaries thereof), equipment, documents, duplicates,
notes, drawings, specifications, research tape or other electronic recordings,
programs, data and other materials or property of any nature belonging to
Company or relating to Company Business, and Executive will not take with
Executive or allow a third party to take, any of the foregoing or any
reproduction of any of the foregoing. Company property includes personal
property, made or compiled by Executive, in whole or in part and alone or with
others, or in any way coming into Executive’s possession concerning Company
Business or other affairs of Company or any of its affiliates.


 


(g)                                 Disclosure and Assignment of Rights. (i)  Executive
shall promptly disclose and assign to Company and its affiliates or its
nominee(s), to the maximum extent permitted by Section 2870 of the
California Labor Code, as it may be hereafter amended from time to time, all
right, title and interest of Executive in and to any and all ideas, inventions,
discoveries, secret processes and methods and improvements, together with any
and all patents that may be issued thereon in the United States and in all
foreign countries, which Executive may invent, develop or improve, or cause to
be invented, developed or improved, during the term of this Agreement or which
are (1) conceived and developed during normal working hours, and (2) related
to the scope of Company Business. As used in this Agreement, the term “invent”
includes “make”, “discover”, “develop”, “manufacture” or “produce”, or any of
them; “invention” includes the phrase “any new or useful original art, machine,
methods of manufacture, process, composition of matter, design, or
configuration of any kind”; “improvement” includes “discovery” or “production”;
and “patent” includes “Letters Patent” and “all the extensions, renewals,
modifications, improvements and reissues of such patents”.


 


(ii)                                  Executive
shall disclose immediately to duly authorized representatives of Company any
ideas, inventions, discoveries, secret processes and methods and improvements
covered by the provisions of paragraph (i) above, and execute all
documents reasonably required in connection with the application for an
issuance of Letters Patent in the United States and in any foreign country and
the assignment thereof to Company and its affiliates or its nominee(s).


 


SECTION 5.02  Rights and Remedies Upon
Breach. If Executive breaches, or threatens to breach, in any
material respect any of the provisions of Section 5.01 hereof (“Restrictive
Covenants”), Company shall, in addition to all its other rights hereunder and
under applicable law and in equity, have the right to seek specific enforcement
of the Restrictive Covenants by any court having jurisdiction, including,
without limitation, the granting of a preliminary injunction which may be
granted without the necessity of proving damages or the posting of a bond or
other security, it being acknowledged that any such breach or threatened breach
may


 

















 


cause irreparable injury to Company and that money damages may not
provide an adequate remedy to Company. In
addition to and not in lieu of any other remedy that Company may have pursuant
to this Agreement or otherwise, in the event of any breach of any provision of Section 5.01
during the period which Executive is entitled to receive payments and benefits
pursuant to Section 4.07, such period shall terminate as of the date of
such breach and Executive shall not thereafter be entitled to receive any
salary or other payments or benefits under this Agreement, including, but not
limited to, any stock options granted to Executive.


 


SECTION 5.03  Severability and
Modification of Covenants. Company
and Executive agree and acknowledge that the duration, scope and geographic
area of the Restrictive Covenants described in this Section 5.01 are fair,
reasonable and necessary in order to protect the good will and other legitimate
interests of Company, that adequate consideration has been received by
Executive for such obligations, and that these obligations do not prevent Executive
from earning a livelihood. If any court of competent jurisdiction
determines that any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the Restrictive Covenants shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions. If any court of competent jurisdiction construes any of the
Restrictive Covenants, or any part thereof, to be unenforceable because of the
duration or geographic scope of such provision or otherwise, such provision
shall be deemed amended to the minimum extent required to make it enforceable
and, in its reduced form, such provision shall then be enforceable and
enforced.


 


SECTION 6.01     (a)   Customers, Suppliers. Executive
does not have, and at any time during the term of this Agreement shall not
have, any employment with or any direct or indirect interest in (as owner,
partner, shareholder, employee, director, officer, agent, consultant or
otherwise) any customer of or supplier to Company.


 


(b)                                 Certain Activities. Executive
during the term of this Agreement shall not (i) give or agree to give, any
gift or similar benefit of more than nominal value to any customer, supplier,
or governmental employee or official or any other person who is or may be in a
position to assist or hinder Company in connection with any proposed
transaction, which gift or similar benefit, if not given or continued in the
future, might adversely affect the business or prospects of Company, (ii) use
any corporate or other funds for unlawful contributions, payments, gifts or
entertainment, (iii) make any unlawful expenditures relating to political
activity to government officials or others, (iv) establish or maintain any
unlawful or unrecorded funds in violation of Section 30A of the Securities
Exchange Act of 1934, as amended, and (v) accept or receive any unlawful
contributions, payments, gifts, or expenditures.