Exhibit 10.19


 


EXECUTIVE
EMPLOYMENT AGREEMENT


 


EXECUTIVE EMPLOYMENT
AGREEMENT dated as of October 27, 2008 between InSight Health Services
Corp., a Delaware corporation (“Company”), and Keith S. Kelson (“Executive”).  Company is a wholly owned subsidiary of
InSight Health Services Holdings Corp., a Delaware corporation (“Parent”).


 


Company wishes to employ
Executive, and Executive wishes to accept such employment, in each case subject
to the terms and conditions hereof. 
Accordingly, Company and Executive hereby agree as follows:


 


I.              TERM


 


Commencing as of the first date of
Executive’s employment with Company, Executive is to be employed by Company for
rolling twelve (12) month periods, whereby Executive’s term of employment is
twelve (12) months on a continuing basis, unless earlier terminated in
accordance with Article IV below.


 


II.            EMPLOYMENT


 


SECTION 2.01  Employment by Company.  Effective as of November 1, 2008,
Company employs Executive to render full time services as Executive Vice
President and Chief Financial Officer to Parent, Company, and its subsidiaries
(“InSight Companies”) and in such other capacities as the Company’s President
and Chief Executive Officer (“CEO”) may assign and, in connection therewith, to
report to the CEO and perform such duties as are reasonably consistent with
Executive’s position and as the CEO shall direct.  Executive agrees to perform such duties as
are reasonably consistent with the duties normally pertaining to the office to
which Executive has been elected or appointed, subject always to the direction
of the CEO.  Subject to Section 5.01
hereof, Executive’s expenditure of reasonable amounts of time for personal
business, charitable or professional activities will not be deemed a breach of
Executive’s undertaking to provide full time services hereunder, provided that
such activities do not interfere materially with Executive’s rendering of such
services.


 


SECTION 2.02  Acceptance of Employment
by Executive.  Executive
accepts such employment and shall render the services required by this
Agreement to be rendered by Executive. 
Executive shall also serve on request during all or any part of the term
of this Agreement as an officer or director of any of the InSight Companies or
affiliates without any compensation therefor other than as specified in this
Agreement.


 


SECTION 2.03  Place of Employment.  Executive’s principal place of employment
shall be located at 26250 Enterprise Court, Suite 100, Lake Forest,
California 92630.  In the event that the
principal place of employment of Executive is relocated to a site that is more
than 50 miles from Executive’s principal residence, subject to Section 4.05(a) hereof,
Company may require Executive to relocate Executive’s principal residence to
within 50 miles of such site.  Notwithstanding
the foregoing, Executive acknowledges that the duties to be performed by
Executive hereunder are such that Executive may be required to travel
extensively, principally within the United States, in connection with Company
Business (as defined below).


 


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III.           COMPENSATION


 


SECTION 3.01  Salary,
Bonuses, Life Insurance.  As compensation for the services to be
rendered pursuant to this Agreement, Company shall pay Executive, and Executive
shall accept, a salary of $260,000 per annum (“Annual Salary”), payable in
accordance with the payroll policies of Company for senior executives as from
time to time in effect, less such amounts as may be required to be withheld by
applicable federal, state and local law and regulations (“Payroll Policies”).


 


In addition to the
Annual Salary, Executive shall be eligible to receive an annual bonus in
accordance with any executive incentive compensation plan for the then-current
fiscal year (“Bonus”), 80% of which Bonus shall be based upon Parent achieving
the target financial goals or other goals approved by the Board of Directors of
Parent (“Parent Board”)  for the
then-current fiscal year (“Target Goals”) and 20% of which the Bonus shall be
based on the achievement of certain personal management objectives established
over the course of each fiscal year and approved by the CEO.  The Target Goals shall be set forth in a
budget prepared by the CEO and Company management and approved by the Parent
Board and shall as applicable, be set at the plan level applicable to the other
executive officers of Company, and in accordance with any executive incentive
compensation plan for the then-current fiscal year. The Bonus is payable, if
earned, promptly following the completion of Parent’s year-end audit for such
year and delivery of a certification by the CEO to the Parent Board, certifying
the results for the year and the calculation of any Bonus so payable.


 


Company shall purchase
and maintain in full force and effect at all times during the term of this
Agreement a policy of term insurance on the life of Executive payable to such
beneficiary or beneficiaries as Executive may designate in an amount equal to
three (3) times the amount of the Annual Salary; provided Executive shall
comply with the issuing insurance company’s requirements for issuance of the
policy.


 


SECTION 3.02  Performance Review. Executive’s
performance shall be reviewed and evaluated by the CEO annually during the term
of this Agreement.


 


SECTION 3.03  Participation
in Employee Benefit Plans.  Executive shall be entitled during the term
of this Agreement, if and to the extent eligible, to participate in any life
insurance, medical, health and accident and disability plan or program, pension
plan or similar benefit plan of Company, which may be available to senior
executives of Company generally, on the same terms as such other executives.


 


SECTION 3.04  Business
Expenses.  Subject to such policies as may from time to
time be established by Company for senior executives of Company generally,
Company shall pay or reimburse Executive for all reasonable business expenses
actually incurred or paid by Executive during the term of this Agreement in the
performance by Executive of services under this Agreement, upon presentation of
expense statements or vouchers or such other supporting information as Company
may reasonably require.


 


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SECTION 3.05  Automobile
Allowance.  Company shall pay Executive an automobile
allowance of $750 per month and shall reimburse Executive for all expenses of
operating such automobile consisting of gas, insurance, registration, in an
amount and in accordance with and subject to such policies as may from time to
time be established and amended by the Parent Board.


 


SECTION 3.06  Vacation.  Executive shall be entitled to three (3) weeks
of paid vacation each year during the term of this Agreement, which shall be
taken at a time or times which do not unreasonable interfere with Executive’s
duties hereunder and in accordance with Company policy.  Executive may not accumulate any unused
vacation in excess of six (6) weeks at any one time.


 


SECTION 3.07  Equity
Award.  Executive shall be entitled to participate in
Parent’s 2008 Employee Stock Option Plan (“Option Plan”) on the terms and
conditions that are applicable to the other senior officers of Company. The
Parent Board currently expects to award Executive nonstatutory stock options to
acquire 70,000 shares of Parent common stock (“Options”), although there is no
present commitment to do so.  The Options
will be subject to performance-based vesting, which will occur upon a
successful refinancing (as defined in the stock option grant agreement) of the
currently outstanding $312,500,000 Senior Floating Rate Notes.  The successful refinancing will include among
other items, the absence of any dilution to the then-existing holders of
outstanding Parent common stock. The exercise price of the Options will be set
on the date of actual grant in accordance with the Option Plan.


 


IV.           TERMINATION


 


SECTION 4.01  Termination
upon Death.  If Executive dies during the term of this
Agreement, this Agreement shall terminate as of the date of Executive’s death.


 


SECTION 4.02  Termination
upon Disability.  Executive’s employment may be terminated by
Company due to Executive’s permanent and total disability (within the meaning
of Section 22(e)(3) of the Internal Revenue Code of 1986, as amended)
(“Code”) (“Disability”), so that Executive is unable substantially to perform
Executive’s services required by this Agreement to be rendered by Executive for
(i) a period of three (3) consecutive months or (ii) for shorter
periods aggregating three (3) months during any twelve (12) month
period.  Company may, at any time after
the last day of the three (3) consecutive months of Disability or the day
on which the shorter periods of Disability equal an aggregate of three (3) months,
by 30 days’ written notice to Executive, terminate this Agreement and Executive’s
employment hereunder.  Any such
determination of Disability shall be made by a physician chosen by a majority
of the members of the Parent Board in its sole and unfettered discretion.  Nothing in this Section 4.02 shall be
deemed to extend the term of this Agreement or of Executive’s employment
hereunder, beyond the term specified in Article I hereof.


 


SECTION 4.03  Termination
for Cause.  If the Parent Board decides that Cause (as
defined below) exists, it may remove Executive for Cause and terminate this
Agreement and the term of Executive’s employment hereunder on the date
specified in written notice to Executive. 
If terminated for Cause, Executive shall have no right to receive any
monetary compensation or benefit hereunder with respect to any period after the
date specified in such notice.  Such
notice may also terminate Executive’s right to enter Company’s premises.  For purposes of this Agreement, the term “Cause”
means any of the following:


 


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(a)           Executive
has been convicted or pled guilty or no contest to any crime or offense (other
than any crime or offense relating to the operation of a motor vehicle) which
is likely to have a material adverse impact on the business operations or
financial condition of Company, or any felony offense;


 


(b)           Executive
has committed fraud or embezzlement;


 


(c)           Executive
has breached any of Executive’s obligations under this Agreement and Executive
has failed to cure the breach within 30 business days following receipt of
written notice of such breach from Company;


 


(d)           Company,
after reasonable investigation, finds that Executive has violated material
written policies and procedures of Company, including but not necessarily
limited to, policies and procedures pertaining to harassment and discrimination;


 


(e)           Executive
has failed to obey a specific written direction from the Parent Board (unless
such specific written instruction represents an illegal act), provided that (i) such
failure continues for a period of 30 business days after receipt of such
specific written direction, and (ii) such specific written direction
includes a statement that the failure to comply therewith will be a basis for
termination hereunder; or


 


(f)            any willful act or willful omission on Executive’s part which
is materially injurious to the financial condition or business reputation of
the InSight Companies.


 


SECTION 4.04  Termination
in Discretion of Company.  Company
may, at any time thereafter by 30 days’ written notice to Executive,
terminate this Agreement and the term of Executive’s employment hereunder, and
Executive thereafter shall have only such rights to receive monetary
compensation or benefits hereunder in respect of any period after the effective
date of termination as are provided in Section 4.07 hereof.  Such notice may also terminate Executive’s
right to enter Company’s premises.


 


SECTION 4.05  Voluntary
Termination for Good Reason.  During the period commencing upon the
occurrence of Good Reason (as defined below) and continuing for 30 days
thereafter, Executive shall have the right to terminate Executive’s employment
for Good Reason (as defined below), whereupon Executive shall become entitled
to receive compensation as provided in Section 4.07 hereof.  Termination by the Executive pursuant to the
preceding sentence shall be effective upon 30 days written notice to
Company.  For purposes of this Agreement,
“Good Reason” means any of the following:


 


(a)           the
movement by Company, without Executive’s consent, of Executive’s principal
place of employment to a site that is more than 50 miles from Executive’s
principal residence;


 


(b)           a
reduction by Company, without Executive’s consent, in Executive’s Annual
Salary, bonus opportunity, duties and responsibilities, and title, as they may
exist from time to time; or


 


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(c)           a
failure by Company to comply with any material provisions of this Agreement
which has not been cured within 30 days after notice of such noncompliance has
been given by Executive to Company, or if such failure is not capable of being
cured in such time, for which a cure shall not have been diligently initiated
by Company within the 30 day period.


 


SECTION 4.06  Voluntary
Termination Without Good Reason.  Executive
shall have the right to terminate this Agreement upon 30 days’ written notice
to Company and, upon such termination, Executive shall not have the right to
receive any monetary compensation or benefit hereunder with respect to any
period after the date specified in such notice.


 


SECTION 4.07  Compensation
on Termination.


 


(a)           If
the term of Executive’s employment hereunder is terminated pursuant to Section 4.01
hereof, Company shall pay to the executors or administrators of Executive’s
estate or Executive’s heirs or legatees (as the case may be) all compensation
accrued and unpaid up to the date of Executive’s death.


 


(b)           If
the term of Executive’s employment hereunder is terminated pursuant to Section 4.02,
4.04, 4.05, or 4.07(c) hereof, Company shall (i) pay to Executive all
compensation accrued and unpaid up to the effective date of termination; (ii) pay
to Executive additional compensation in an amount equal to twelve (12) months
of compensation at the Annual Salary rate then in effect, payable in accordance
with the Payroll Policies as in effect at the time of termination; and (iii) maintain,
at Company’s expense, in full force and effect, for Executive’s continued
benefit until the earlier of (x) twelve (12) months after the effective
date of termination or (y) commencement of Executive’s benefits pursuant
to full time employment with a new employer under such employer’s standard
benefits program, all life insurance, medical, health and accident, and
disability plans or programs, in which Executive was entitled to participate
immediately prior to the effective date of termination; provided, that
Executive’s continued participation is permissible under the general terms and
provisions of such plans or programs and provided further, that Company shall
be entitled to amend or terminate any employee benefit plans which are
applicable generally to Company’s employees. 
In the event that Executive’s participation in any such plan or program
is prohibited, Company shall arrange to provide Executive with benefits
substantially similar to those which Executive was entitled to receive under
such plans or programs; provided further, that any such payments shall only be
payable upon the execution of the release described in Section 4.07(e) and
shall commence at such time as determined in accordance with such Section 4.07(e).  Any amounts paid by Company to Executive
under (i) and (ii) above may be reduced, in the case of termination
pursuant to Section 4.02, by the amount which Executive is entitled to
receive under the terms of Company’s long-term disability insurance policy for
senior executives as and if in effect at the effective date of
termination.  Any payments made pursuant
to this Section 4.07 shall be reduced by such amounts as are required by
law to be withheld or deducted.


 


(c)           Notwithstanding
any provision herein to the contrary, if Executive is terminated by Company
without Cause, or Executive terminates Executive’s employment for Good Reason,
within twelve (12) months of a Change in Control (as defined herein) which
occurs after the date hereof, Executive shall be entitled to the payments and
benefits set forth in Section 4.07(b). 
For purposes hereof, a “Change in Control” shall be deemed to have
occurred if (i) any person, or any two or more 


 


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persons acting as a
group, and all affiliates of such person or persons (a “Group”), who prior to
such time beneficially owned less than 50% of the then outstanding capital
stock of Company or Parent, shall acquire shares of Company’s or Parent’s
capital stock in one or more transactions or series of transactions, including
by merger, and after such transaction or transactions such person or group and
affiliates beneficially own 50% or more of Company’s or Parent’s outstanding
capital stock, or (ii) Company or Parent shall sell all or substantially
all of its assets to any Group which, immediately prior to the time of such
transaction, beneficially owned less than 50% of the then outstanding capital
stock of Company or Parent.


 


(d)           The
compensation rights provided for Executive in this Section 4.07 shall be
Executive’s sole and exclusive remedies with respect to Section 4.01,
4.02, 4.04, 4.05, or 4.07(c) hereof, and Executive, the executors or
administrators of Executive’s estate or Executive’s heirs or legatees (as the
case may be) shall not be entitled to any other compensation, damages or relief
in connection therewith.


 


(e)           Executive shall forfeit
all rights to such payments and benefits provided in this Section 4.07
unless a release substantially in the form of Exhibit A attached hereto is
signed and delivered (and no longer subject to revocation, if applicable)
within 30 days following the date of Executive’s termination of
employment.  The cash payments that are contingent upon the execution of a release
consistent with the foregoing sentence shall be paid on the thirtieth day
following Employee’s termination of employment, and the first payment in
respect thereof shall include payment of all amounts that otherwise would have
been due prior thereto had the foregoing release requirement not been imposed.


 


Notwithstanding
any other payment schedule provided herein to the contrary, if Executive is
deemed on the date of termination to be a “specified employee” within the
meaning of that term under Code Section 409A(a)(2)(B), then each of the
following shall apply:


 


(i) With
regard to any payment that is considered deferred compensation under Code Section 409A
payable on account of a “separation from service,” such payment shall be made
on the date which is the earlier of (A) the expiration of the six
(6)-month period measured from the date of such “separation from service” of
Executive, and (B) the date of Executive’s death (the “Delay Period”) to
the extent required under Code Section 409A.  Upon the expiration of the Delay Period, all
payments delayed pursuant to this Section (whether they would have
otherwise been payable in a single sum or in installments in the absence of
such delay) shall be paid to Executive in a lump sum, and all remaining
payments due under this Agreement shall be paid or provided in accordance with
the normal payment dates specified for them herein; and


 


(ii) To the
extent that any benefit to be provided during the Delay Period are considered
deferred compensation under Code Section 409A payable on account of a “separation
from service,” and such benefits are not otherwise exempt from Code Section 409A,
Executive shall pay the cost of such benefits during the Delay Period, and
Company shall reimburse Executive, to the extent that such costs would
otherwise have been paid by Company or to the extent that such benefits would
otherwise have been provided by Company at no cost to Executive, Company’s
share of the cost of such benefits upon expiration of the Delay Period, and any
remaining benefits shall be reimbursed or provided by Company in accordance
with the procedures specified herein.


 


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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 the InSight Companies and
affiliates is the provision of diagnostic imaging, treatment and related
management services through a network of mobile magnetic resonance imaging (“MRI”)
Computed Tomography (“CT”), positron emission tomography (“PET”) and PET/CT
facilities, fixed-site MRI and PET and PET/CT 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 with any of
the InSight Companies 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
Executive’s obligations under this Section 5.01 shall be absolute and
unconditional.


 


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(b)           Breach.  Executive understands and agrees that
Executive’s employment with Company may be terminated if Executive materially
breaches Section 5.01 of 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 Section 5.01 of this Agreement and, therefore,
Company may be entitled to injunctive relief to enforce any of the provisions
contained Section 5.01.


 


(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.


 


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(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
compensation or other payments or benefits under this Agreement.


 


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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.


 


VI.           CERTAIN AGREEMENTS


 


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.


 


VII.         MISCELLANEOUS


 


SECTION 7.01  Notices.  Any notice or other communication required or
which may be given hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed or faxed, or sent by certified, registered or
express mail, postage prepaid, and shall be deemed given when so delivered
personally, telegraphed, telexed or faxed, or if mailed, two (2) days
after the date of mailing, as follows:


 


	
  (i)            If
  to Company, addressed to it at:

  	
   

  	
  InSight Health Services Corp.

  
	
   

  	
   

  	
  26250 Enterprise Court, Suite 100

  
	
   

  	
   

  	
  Lake Forest, CA 92630

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Facsimile No.: (949) 462-3703

  



 


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  (ii)           If
  to Parent, addressed to it at:

  	
   

  	
  InSight Health Services Holdings Corp.

  
	
   

  	
   

  	
  26250 Enterprise Court, Suite 100

  
	
   

  	
   

  	
  Lake Forest, CA 92630

  
	
   

  	
   

  	
  Attention: General Counsel

  
	
   

  	
   

  	
  Facsimile No.: (949) 462-3703

  



 


(iii)          If
to Executive, to the address or facsimile set forth below Executive’s signature
hereto.  Any party hereto may, by notice
to the other, change its address for receipt of notices hereunder.


 


SECTION 7.02  Entire
Agreement.  This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior agreements, written or oral, with respect thereto.


 


SECTION 7.03  Waivers
and Amendments.  This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, amended, modified, superseded, canceled, renewed or extended,
only by a written instrument signed by Executive and Company.  No waiver of any provision of this Agreement
shall be deemed to be a waiver of any other provision, whether or not
similar.  No such waiver shall constitute
a continuing waiver.  No delay on the
part of either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any waiver on the part of either
party of any right, power or privilege hereunder, preclude any other or further
exercise thereof or the exercise of any other right, power or privilege
hereunder.


 


SECTION 7.04  Assignment.  This Agreement is personal to Executive, and
Executive’s rights and obligations hereunder may not be assigned by
Executive.  Company may assign this
Agreement and its rights, together with its obligations, hereunder (i) in
connection with any sale, transfer or other disposition of all or substantially
all of its assets or business(s), whether by merger, consolidation or
otherwise; or (ii) to any wholly owned subsidiary of Company, provided
that Company shall remain liable for all of its obligations under this
Agreement.


 


SECTION 7.05  Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.


 


SECTION 7.06  Headings.  The article and section headings in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.


 


SECTION 7.07  Number.  Unless the context of this Agreement
otherwise requires, words using the singular or plural number will also include
the plural or singular number.


 


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SECTION 7.08  Governing
Law.  This Agreement shall be governed by the laws
of 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.  Subject to Section 7.10
below, any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Agreement may be brought against either of
the parties in the courts of the State of California, or if it has or can
acquire jurisdiction, in the United States District Court for the Southern
District of California, and each of the parties hereby consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.  Process in any action or proceeding referred
to in the preceding sentence may be served on any party anywhere in the world,
whether within or without the State of California.


 


SECTION 7.09  Expenses.  Should
either party institute an action to enforce this Agreement or any provision
hereof, or for damages by reason of any alleged breach of this Agreement or any
provisions hereof, Executive shall be entitled to receive from Company
Executive’s reasonable travel and living expenses, incurred by Executive in
connection with preparation for and participation in any proceeding relating to
the action if Executive is the prevailing party or such portion thereof as the
court  may award.


 


SECTION 7.10   (a)   Resolution of Disputes.   Executive and Company mutually agree and
understand that as an inducement for Company to enter into this Agreement,
Executive and Company agree and consent to the resolution by arbitration of all
claims or controversies, past, present or future, whether arising out of the
employment relationship (or its termination) or relating to this Agreement that
Company may have against Executive or that Executive may have against Company
or against its officers, directors, employees or agents in their capacity as
such or otherwise. The only claims that are arbitrable are those that, in the
absence of this arbitration provision, would have been justiciable under
applicable state or federal law. The claims covered by this arbitration provision,
include, but are not limited to, claims for wages or other compensation due;
claims for breach of any contract or covenant (express or implied); tort
claims; claims for discrimination, retaliation or harassment (including, but
not limited to, race, sex, sexual orientation, religion, national origin, age,
marital status, or medical condition, handicap or disability); claims for
benefits (except claims under an employee benefit or pension plan that either (i) specifies
that its claims procedure shall culminate in an arbitration procedure different
from this one, or (ii) is underwritten by a commercial insurer which
decides the claims); and claims for violation of any federal, state, or other
governmental law, statute, regulation or ordinance, except claims excluded in Section 7.10
(b) below.


 


Except as otherwise
provided in this arbitration provision, both Company and Executive agree that
neither of them shall initiate or prosecute any lawsuit or administrative
action (other than an administrative charge of discrimination) in any way
related to any claim covered by this arbitration provision.


 


(b)           Claims Excluded From Arbitration.
Claims Executive may have for workers’ compensation or unemployment
compensation benefits are not covered by this arbitration provision. Also not
covered are claims by Company for injunctive and/or other equitable relief,
including but not limited to those for unfair competition and/or the use and/or
unauthorized disclosure of Trade Secrets or confidential information, as to which
Executive understands and agrees that Company may seek and obtain relief from a
court of competent jurisdiction.


 


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(c)           Arbitration Procedures.
Executive and Company understand and agree that the arbitration will take place
in Orange County, California, in accordance with the California Employment
Dispute Resolution Rules of the American Arbitration Association then in
effect in the State of California, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof. The
decision of the arbitrator(s) shall 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.


 


SECTION 7.11.  Section 409A Compliance.


 


(a)           The
intent of the parties is that payments and benefits under this Agreement comply
with Code Section 409A and the regulations and guidance promulgated
thereunder and, accordingly, to the maximum extent permitted, this Agreement
shall be interpreted to be in compliance therewith.  In no event whatsoever shall Company be
liable for any additional tax, interest or penalty that may be imposed on
Executive by Code Section 409A or damages for failing to comply with Code Section 409A.


 


(b)           Termination
of employment shall not be deemed to have occurred for purposes of any provision
of this Agreement providing for the payment of any amounts or benefits upon or
following a termination of employment unless such termination is also a “separation
from service” within the meaning of Code Section 409A and, for purposes of
any such provision of this Agreement, references to a “termination”, “termination
of employment” or like terms shall mean “separation from service.”All expenses
or other reimbursements under this Agreement shall be made on or prior to the
last day of the taxable year following the taxable year in which such expenses
were incurred by Executive (provided that if any such reimbursements constitute
taxable income to Executive, such reimbursements shall be paid no later than March 15th
of the calendar year following the calendar year in which the expenses to be
reimbursed were incurred), and no such reimbursement or expenses eligible for
reimbursement in any taxable year shall in any way affect the expenses eligible
for reimbursement in any other taxable year.


 


(c)           For
purposes of Code Section 409A, Executive’s right to receive any
installment payment pursuant to this Agreement shall be treated as a right to
receive a series of separate and distinct payments.


 


(d)           Whenever
a payment under this Agreement specifies a payment period with reference to a
number of days (e.g., “payment shall be made within 30 days following
the date of termination”), the actual date of payment within the specified
period shall be within the sole discretion of Company. Notwithstanding any
other provision of this Agreement to the contrary, in no event shall any
payment under this Agreement that constitutes “deferred compensation” for
purposes of Code Section 409A be offset by any other payment pursuant to
this Agreement or otherwise.


 


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IN WITNESS WHEREOF, the
parties have executed this Executive Employment Agreement as of the date first
above written.


 


	
   

  	
  COMPANY:

  
	
   

  	
   

  
	
   

  	
  INSIGHT
  HEALTH SERVICES CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Louis E. Hallman, III

  
	
   

  	
   

  	
  Name: 

  	
  Louis E. Hallman, III

  
	
   

  	
   

  	
  Title:

  	
  President and
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Keith S. Kelson

  
	
   

  	
  Keith S. Kelson

  
	
   

  	
   

  
	
   

  	
  Address and Facsimile Number:

  
	
   

  	
  273 Upland Road

  
	
   

  	
  Laguna Beach, CA 92651

  



 


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EXHIBIT A


 


Waiver and Release


 


In consideration of compensation rights and other
benefits, Executive will irrevocably and unconditionally release, waive and
forever discharge Company, its Parent, 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, “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 Executive has ever had,
may now have, or may later assert against any of Company Releasees, concerning,
arising out of or related to Executive’s employment by or the performance of
any services to or on behalf of any of the InSight Companies, arising out of or
related to the termination of Executive’s employment agreement with Company, or
arising out of any other agreement Executive may have or may have had with the
InSight Companies, in all cases from the beginning of time to the effective
date of termination (hereinafter referred to as “Executive’s Claims”),
including without limitation: (i) any claims arising out of or related to
any federal, state and/or local labor or civil rights laws, as amended,
including, without limitation, the federal Civil Rights Acts of 1866,1964, 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 antidiscrimination and employment statutes, and (ii) any
and all other 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.  Executive also agrees, with
the respect to Executive’s Claims, to waive all rights to sue or obtain
equitable, remedial or point relief from any or all Company Releasees of any
kind whatsoever, including, without limitation, reinstatement, back pay, front
pay, attorneys’ fees and any form of injunction relief. Through the effective
date of termination, notwithstanding the foregoing, this Waiver and Release
shall not affect any of Executive’s rights or obligations under (a) Company’s
401(k) Savings Plan, (b) the Indemnification Agreement executed among
Executive, Parent and Company effective
              ,
2008, (c) Executive’s right to statutory indemnification pursuant to  California Labor Code Section 2802, (d) the
Consolidated Omnibus Budget Reconciliation Act, (e) workers compensation
or unemployment insurance benefit claims, or (f) the terms of the
Agreement.


 


Executive and Company hereby waive and relinquish all rights and
benefits afforded by California Civil Code Section1542.  Executive and Company understand and
acknowledge the significance and consequences of this specific waiver of Section 1542.  California Civil Code Section 1542
states as follows:


 


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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 affect his or
her settlement with the debtor.


 


To the fullest extent permitted by law, Executive represents, warrants
and 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, arising out of or related to Executive’s Claims.  Executive hereby represents and warrants that
Executive has not brought any complaint, claim, charge, action or proceeding
against any of Company Releasees in any jurisdiction or forum, nor assisted or
encouraged any other person or persons in doing so.  Executive further represents and warrants
that Executive has not in the past and will not in the future assign any of
Executive’s Claims to any person, corporation or other entity.


 


Executive’s execution of this Waiver and Release operates as a complete
bar and defense against any and all of Executive’s Claims against Company and
each of the other Company Releasees to the maximum extent permitted by
law.  If Executive should hereafter make
any of Executive’s Claims in any charge, complaint, action, claim or proceeding
against Company or any of the other Company Releasees, Waiver and Release
Agreement may be raised as, and shall constitute a complete bar to, any such
charge, complaint, action, claim or proceeding and Executive agrees to disclaim
and waive any right to share or participate in any monetary award resulting
from the prosecution of any administrative investigation or proceeding.


 


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