**Exhibit 10.21**

 

May 19, 2003

 

***PERSONAL AND CONFIDENTIAL***

 

ThomasV. Croal

18742Monte Vista Circle

VillaPark, CA 92861

 

Re:                               Resignation Agreement

 

DearTom:

 

This Letter Agreement(“Agreement”) sets forth the terms and conditions of your resignation from InSightHealth Services Corp. (“InSight” or “Company”).  Your resignation from InSight is effective today, May 19,2003.  Accordingly, as of 5:00 p.m.today, you will be relieved of any and all duties as an employee of theCompany.  InSight appreciates your serviceto the Company and sincerely wishes you the very best in your futureendeavors.  InSight will pay you earnedwages, thirty (30) days wages in lieu of notice and any unused accrued vacationthrough today, regardless of whether you sign this Agreement.

 

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

 

Resignation.  Yourresignation from InSight is effective as of 5:00 p.m. on May 19, 2003. A pressrelease identical to Exhibit A attached hereto will be released by the Companyon or about Tuesday, May 20, 2003.

 

SeparationPayments.  In addition to your final paycheck and anyunused accrued vacation, and in consideration for your signing this Agreement,InSight agrees that, beginning on the Company’s first regular payday that ismore than eight (8) days after you sign this Agreement without revocation, itwill pay you separation payments equal to your annual salary at the timeof resignation for a period of twelve (12) months (“Separation Payments”).These Separation Payments will be made in approximately equal payments on theCompany’s regular paydays for the payment period.  All applicable state and federal tax withholding and other lawfuldeductions will be taken from the gross amount of said checks.

 

----

 

The Separation Paymentswill be sent to your home address as set forth above on this Agreement.

 

InSight 401(K) Plan Match.As further consideration for signing this Agreement, if the Company makes thediscretionary match to the InSight 401(K) Plan for the fiscal year endingJune 30, 2003 and if permitted by the plan, InSight agrees that it willcontribute eleven- twelfths (11/12) of an applicable match to your account.

 

Bonus.As additional consideration for signing this Agreement, InSight agrees that itwill pay you eleven-twelfths (11/12) of any bonus for the fiscal year endingJune 30, 2003 in accordance with InSight’s executive bonus policy, a copyof which is attached hereto as Exhibit B.

 

Compliance with StockOption Agreements.  Inaccordance with the Stock Option Agreement (i) executed by you and InSightHealth Services Holdings Corp., (“IHSHC”) on June 29, 2001 (the“June 29th Stock Option Agreement”), and (ii) between you andIHSHC, but unexecuted by you, dated October 17, 2001 (the “October 17thStock Option Agreement” and together with the June 29th StockOption Agreement, the “Stock Option Agreements”), you agree to comply in fullwith their terms. Additionally, you are party to the Third Amended and RestatedStockholders Agreement, dated October 10, 2002, by and among IHSHC and thestockholders of IHSHC signatory thereto (the “Stockholders Agreement” andcollectively with the Stock Option Agreements, the “Stock Agreements”).

 

Call on Vested Options.You hereby agree and acknowledge that IHSHC has elected to exercise its optionto purchase all of the Subject Securities (as defined in the StockholdersAgreement) owned by you in accordance with Section 2.5 of the StockholdersAgreement. Your Subject Securities consists of Vested Options (as defined inthe Stockholders Agreement) to purchase 52,500 shares of IHSHC common stockpursuant to the June 29th Stock Option Agreement (the “RolloverOptions”) and Vested Options to purchase 3,500 shares of IHSHC common stockpursuant to the October 17th Stock Option Agreement (the“Performance Options”). You hereby agree and acknowledge that the Call Price(as defined in the Stockholders Agreement) for the Rollover Options shall be$19.07 per share and the Call Price for the Performance Options shall be $19.07per share. Accordingly, pursuant to Section 2.5 of the StockholdersAgreement, upon receipt by you of the aggregate Call Price for your SubjectSecurities of $565,495.00, less applicable state and federal withholdings andother lawful deductions, the Stock Option Agreements shall terminate and be ofno further force and effect, your rights in

 

2

----

 

and to the SubjectSecurities shall cease and you shall surrender your Stock Option Agreements andany other documents evidencing ownership in Subject Securities to IHSHC forcancellation.

 

Benefits.  Asadditional consideration for signing this Agreement, the Company agrees tocontinue the employee benefits specified in this provision until the first ofthe following occurs: (a) expiration of the twelve (12) month period followingthe date of your resignation; or (b) until you are eligible for employmentbenefits as the result of full-time employment with another employer.  The benefits you will receive during theapplicable period are life insurance, medical, health and accident, anddisability plans or programs covering you and any dependents under the sameterms and conditions as if you had not resigned, including any requiredco-payments.  The Company’s agreement toprovide these benefits during the applicable period is contingent upon yourparticipation being permissible under the general terms and provisions of suchplans and programs and contingent upon the Company’s right to amend orterminate any employee benefit plans which are applicable generally to theCompany’s employees.   In the event ofeither of these contingencies, you will cease to receive these benefitseffective the date of the occurrence of the contingency.  However, in such an event, the Companyagrees to arrange to provide you with benefits substantially similar to thoseyou were receiving at the time of your resignation for the applicable period orits remainder.

 

OutplacementServices. As yetadditional consideration for signing this Agreement, the Company agrees toprovide you with outplacement counseling services through a firm selected bythe Company for a period of three (3) months. If you are not employed by theend of the three (3) month period, the Company will provide you with a furtherthree (3) months of outplacement counseling services. Your outplacementcounseling benefits and limitations will be explained in a separate document.

 

Release.  Youhereby release and discharge InSight and its divisions, affiliates, parents (includingIHSHC), subsidiaries, predecessor and successor corporations, and the past andpresent directors, officers, management committees, shareholders, agents,servants, employees, representatives, administrators, partners, generalpartners, managing partners, limited partners, benefit plan fiduciaries andadministrators, assigns, heirs, successors or predecessors in interest,adjustors, and attorneys, from all rights, claims, causes of action, anddamages, both known and unknown, in law or in equity, concerning and/or arisingout of your employment with InSight prior to the date of this Agreement, theStock Agreements and any other agreement between you and IHSHC and/or any ofits subsidiaries, predecessor or successor corporations,

 

3

----

 

affiliatesor shareholders (other than this Agreement) which you now have, or ever had,including, but not limited to, any rights, claims, causes of action or damagesarising under Title VII of the Civil Rights Act of 1964, the Age Discriminationin Employment Act of 1967, the Older Workers’ Benefit Protection Act, EmployeeRetirement Income Security Act, the Americans with Disabilities Act, theCalifornia Industrial Welfare Commission Wage Orders, the California Fair Employmentand Housing Act, and the California Labor Code.

 

Youhereby waive and relinquish all rights and benefits afforded by CaliforniaCivil Code section 1542.  Youunderstand and acknowledge the significance and consequences of this specificwaiver of section 1542.  CaliforniaCivil Code section 1542 states as follows:

 

A general releasedoes not extend to claims which the creditor does not know or suspect to existin his favor at the time of executing the release, which if known to him musthave materially affected his settlement with the debtor.

 

ContinuingObligations to Company.  You understand and agree that you havecontinuing obligations to the Company under Section V of the ExecutiveEmployment Agreement executed by you and effective on June 29, 2001 (“Section V”).  You further understand and agree that shouldyou breach any provisions thereunder, the Company has the right to terminateany and all of its obligations under this Agreement effective immediately.  This right is in addition to any other rightsor remedies to which the Company is entitled for your breach ofSection V.  A copy ofSection V is attached hereto as Exhibit C for your ease of reference.

 

Returnof InSight Property; Expenses.  As set forth in Section V,you agree to immediately return all Company property and equipment in yourpossession or under your control.  Youmust immediately submit to InSight all outstanding business expenses incurredon or before May 19, 2003, for reconciliation and payment in accordance withthe Company’s policies.

 

LegalRepresentation.  You and InSight each acknowledge that youhave had the opportunity to receive the advice of independent legal counselprior to the execution of this Agreement and the opportunity to receive anexplanation from legal counsel of the legal nature and effect of thisAgreement, and you have fully exercised that opportunity to the extent desiredand you understand the terms and provisions of this Agreement and its natureand effect.  You further represent that

 

4

----

 

youare entering into this Agreement freely and voluntarily.

 

NoAdmission of Liability.  Nothing contained in this Agreement or thefact that InSight has signed this Agreement shall be considered as admission ofany liability whatsoever by InSight.

 

Confidentiality.  As amaterial inducement to InSight to enter into this Agreement and as anindivisible part of the consideration to be received for entering into thisAgreement and for the performance of obligations under this Agreement by eachparty to this Agreement, you agree that you will not disclose, disseminate,and/or publicize or cause or permit to be disclosed, disseminated, and/orpublicized, any of the specific terms of this Agreement, any claims orallegations or the basis for any claims or allegations, which were or couldhave been made against InSight and its divisions, affiliates, parents(including IHSHC), subsidiaries, predecessor and successor corporations, andthe past and present directors, officers, management committees, shareholders,agents, servants, employees, representatives, administrators, partners, generalpartners, managing partners, limited partners, benefit plan fiduciaries andadministrators, assigns, heirs, successors or predecessors in interest,adjustors, insurers, and attorneys, which concern and are within the scope ofthis Agreement, directly or indirectly, specifically or generally, to anyperson, 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 subpoenaissued under authority thereof; (c) in response to any subpoena issued by astate or federal governmental agency; or (d) as otherwise required by law.

 

NonDisparagement.  As a material inducement to InSight to enterinto this Agreement, you agree that you will not make any negative ordisparaging comments about InSight or IHSHC. Those familiar with this Agreement at InSight agree that they will notmake any negative or disparaging comments about you.

 

OtherAgreements.  Except for Section V (as definedabove), the Stock Agreements (as defined above), the InSight 401k Plan, and theAmended and Restated Indemnification Agreement executed by you and the Companyeffective October 17, 2001, this Agreement supercedes any and all otheragreements, understandings, negotiations, or discussions, either oral or inwriting, express or implied, among you and the Company and IHSHC.

 

EntireAgreement.  This Agreement constitutes the full,complete, and exclusive agreement between you and InSight with respect to thesubject matter

 

5

----

 

discussedherein.  This Agreement cannot bechanged unless in writing, signed by you, InSight, and IHSHC.

 

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

 

Severability.  In theevent any provision of this Agreement shall be determined to be unlawful, suchprovision shall be deemed to be severed from this Agreement and every otherprovision of this Agreement shall remain in full force and effect.

 

GoverningLaw.  This Agreement is made and entered into inthe State of California, and shall in all respects be interpreted, enforced,and governed under the laws of said state.

 

Resolutionof Disputes. Anycontroversy or claim arising out of or relating to this Agreement, or anybreach thereof, will be submitted to final and binding arbitration in OrangeCounty, California, before a mutually agreed upon arbitrator from JudicialArbitration and Mediation Services (JAMS), as the exclusive remedy for suchcontroversy or dispute. Judgment upon any award rendered by the arbitrator maybe entered in the Superior Court of the County of Orange, State of California,which will have exclusive jurisdiction thereof. The prevailing party in anyproceeding brought to enforce the terms of this Agreement will be entitled torecover from the other party all damages, costs and expenses, including withoutlimitation, attorneys’ and arbitrators’ fees, incurred as a result of suchaction.  In agreeing to thisarbitration, you understand and agree that you are waivingtherighttoajurytrial as to any issue(s) subject to thisAgreement.  The decision of thearbitrator will be bound by generally accepted legal principles, including butnot limited to all rules of law and legal principles concerning potentialliability, burdens of proof, and measure of damages found in all applicableCalifornia statutes and administrative rules and codes, and all California caselaw.  The parties agree that thisprovision does not limit their right to seek injunctive relief in the threat ofimminent and irreparable harm as a result of breach of this Agreement.

 

Consideration Period.  You have until 5:00 p.m. on Monday,June 19, 2003, or twenty-one (21) days from receipt of this amendedAgreement to consider it.  InSighthereby advises you to consult with an attorney before signing this Agreement.

 

6

----

 

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

 

Please acknowledge yourunderstanding and acceptance of this Agreement by signing this Agreement belowand returning it to me no later than 5:00 p.m. on Thursday, June 19, 2003,or on the twenty-first day from the date you receive this amended Agreement.  I have signed an extra copy of thisAgreement which is attached for your records.

 
|                            | Sincerely,                                      |
|---------------------------------|-------------------------------------------------|
|                            |                                            |
|                            |                                            |
|                            | /s/  Marilyn U. MacNiven-Young                  |   |
|                            | Marilyn  U. MacNiven-Young                      |
|                            | Executive  Vice President & General Counsel |
|                            | InSight  Health Services Corp.                  |
|                            |                                            |
|                            | Executive  Vice President & General Counsel |
|                            | InSight  Health Services Holdings Corp.         |
|                            |                                            |
|                            |                                            |
| Enclosures                      |                                            |
|                            |                                            |
| ACKNOWLEDGED  AND AGREED:       |                                            |
|                            |                                            |
|                            |                                            |
| Dated:  June 2, 2003. | /s/  Thomas V. Croal                            |   |
|                            | Thomas  V. Croal                                |
|                                 |                                                 |  |  |

 

7

----