Document:

Exhibit 10.27

 

EXECUTION COPY

 

EXECUTIVE
EMPLOYMENT AGREEMENT

 

AGREEMENT dated as of July 1, 2005
between InSight Health Services Corp., a Delaware corporation (“Company”), and
Bret W. Jorgensen (“Executive”).  InSight
Health Services Holdings Corp., a Delaware corporation (“Parent”) is a party to
this Agreement solely for the purposes of Section 3.07 and the last paragraph
of Section 3.01.

 

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.  Company, for itself and its subsidiaries and
affiliates, employs Executive for the term of this Agreement to render full
time services as Company’s President and Chief Executive Officer and in such
other capacities as the Board of Directors of Company (“Board”) may assign and,
in connection therewith, to perform such duties as are reasonably consistent
with Executive’s position and as the Board 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 Board.  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 a director of Company and Parent and as an officer or
director of any of Company’s subsidiaries 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).

 

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
$400,000.00 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 (the “Payroll Policies”).

 

In addition to the
Annual Salary, Executive shall be eligible to receive and Company shall pay an
annual bonus of up to 100% of Executive’s Annual Salary (“Bonus”) (a) 75%
of which Bonus shall be based upon Company achieving the goals set forth in a
budget prepared by Company management and adopted or approved by the Board; and
(b) 25% of which Bonus shall be based upon the achievement of other goals
mutually agreed upon by Executive and the Board.  Such Bonuses are payable on the earlier to
occur of the date Parent’s (i) annual report on Form 10-K is filed with the
Securities and Exchange Commission (“SEC”) for such year and (ii) year-end
audit has been completed for such year.

 

For the fiscal year
ending June 30, 2006, Executive shall receive a Bonus, which shall equal at
least 50% of Executive’s Annual Salary. 
Subject to compliance with all state and federal securities laws,
Executive shall be entitled to invest up to $1,000,000 in shares of Parent’s
common stock at a price equal to $19.82 per share, within 90 days of the date
of this Agreement.

 

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 Board 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  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

 

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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.

 

SECTION 3.05  Automobile Allowance.  Company shall pay Executive $1,000 per month
and all reasonable expenses of operating an automobile subject to such policies
as may from time to time be established and amended by Company.

 

SECTION 3.06  Vacation.  Executive shall be entitled to four (4) weeks
of paid vacation each year during the term of this Agreement, which Executive
may accumulate up to six (6) weeks, to be taken at a time or times which do not
unreasonably interfere with Executive’s duties hereunder.

 

SECTION 3.07  Stock Options.  Parent shall grant stock options to
Executive, pursuant to the terms of the Stock Option Agreement substantially in
the form of Exhibit A, to purchase shares of Parent common stock in an amount
to be determined by the board of directors of Parent.

 

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) (“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 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 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:

 

(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

 

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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 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 omission on Executive’s
part which is materially injurious to the financial condition or business
reputation of Company or any of its subsidiaries.

 

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 60 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 60 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

 

(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

 

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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 60 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; 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.  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
Effective Time, 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 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

 

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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.

 

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.

 

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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.

 

(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.

 

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(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

 

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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.

 

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

 

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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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  If to Parent, addressed to it at:

  	
   

  	
  InSight Health Services Holdings Corp.

  
	
   

  	
   

  	
   

  	
   

  	
  c/o J.W. Childs Associates, L.P.

  
	
   

  	
   

  	
   

  	
   

  	
  111 Huntington Avenue, Suite 2900

  
	
   

  	
   

  	
   

  	
   

  	
  Boston, MA 02199

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Edward D. Yun

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.: (617) 753-1101

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with copies to:

  	
   

  	
  The Halifax Group, L.L.C.

  
	
   

  	
   

  	
   

  	
   

  	
  1133 Connecticut Avenue, N.W., Suite
  700

  
	
   

  	
   

  	
   

  	
   

  	
  Washington, D.C. 20036

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: David Dupree

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.: (202) 296-7133

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Kaye Scholer LLP

  
	
   

  	
   

  	
   

  	
   

  	
  425 Park Avenue

  
	
   

  	
   

  	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Stephen C. Koval, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
  Facsimile No.: (212) 836-8689

  

 

(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.

 

10

 

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, Company and Parent.  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.

 

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 7.11
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.

 

11

 

SECTION 7.10  Effective Date.  This Agreement shall be effective as of the
date hereof (the “Effective Time”).

 

SECTION 7.11  (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.

 

(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.

 

12

 

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/ Michael N. Cannizzaro

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael N. Cannizzaro

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive

  Officer

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Bret W. Jorgensen

  	
   

  
	
   

  	
  Name: Bret W. Jorgensen

  
	
   

  	
   

  
	
   

  	
  Address and Facsimile Number:

  
	
   

  	
   

  
	
   

  	
  7891 Muirfield Way

  	
   

  
	
   

  	
  PO Box 675926

  	
   

  
	
   

  	
  Rancho Santa Fe, California 92607

  	
   

  
	
   

  	
  (858) 759-8254

  	
   

  
	
   

  	
   

  
	
   

  	
  PARENT:

  
	
   

  	
   

  
	
   

  	
  INSIGHT HEALTH SERVICES

  HOLDINGS CORP.

  
	
   

  	
  (solely for the purpose of Section 3.07
  and

  the last paragraph of Section 3.01)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael N. Cannizzaro

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Michael N. Cannizzaro

  
	
   

  	
   

  	
  Title:

  	
  President and Chief Executive

  Officer

  
					

 

13

 

EXHIBIT
A

 

STOCK
OPTION AGREEMENTExhibit 10.28

 

EXECUTION COPY

 

STOCK OPTION AGREEMENT

 

AGREEMENT entered into as of the 1st day of
July, 2005 (the “Grant Date”) by and between InSight Health Services Holdings
Corp., a Delaware corporation (the “Company”), and the undersigned employee (the
“Employee”) of the Company or one of its subsidiaries.

 

WHEREAS, the Company desires to grant the Employee a
nonqualified stock option to acquire shares of the Company’s common stock,
$0.001 par value per share (“Common Stock”); and

 

WHEREAS, the Employee
desires to accept such option subject to the terms and conditions of this
Agreement.

 

NOW, THEREFORE, in consideration of the premises and
of the mutual covenants and agreements contained herein, the Company and the
Employee, intending to be legally bound, hereby agree as follows:

 

1.             Grant
of Option.  As of the Grant Date, the
Company grants to the Employee a nonqualified stock option (the “Option”) to
purchase all (or any part) of 248,236 shares of Common Stock (the “Shares”) on
the terms and conditions hereinafter set forth. 
This Option is not intended to be treated as an incentive stock option
under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

 

2.             Exercise
Price.  The exercise price (“Exercise
Price”) for the Shares covered by the Option shall be $19.82 per share.

 

3.                                       Vesting and Exercisability.  The total Option
set forth in Section 1 shall be available for vesting as follows:

 

(A)                              fifteen
percent (15%) of the total Option shall vest and become exercisable on each
anniversary of the Grant Date during the Company’s fiscal years 2006 - 2010;

 

(B)                                twenty-five
percent (25%) of the total Option (the “Performance Options”) shall vest and
become exercisable as set forth on Schedule I attached hereto and
incorporated herein.

 

In the event the Employee is employed by the Company
or one of its subsidiaries at the time a Change in Control (as defined below)
occurs, all of the Options (to the extent not already vested) which are to vest
over time pursuant to clause (A) above shall vest immediately prior to the
Change in Control.

 

4.                                       Term of Options.

 

(a)           Each Option shall expire on the tenth
anniversary of the Grant Date, but shall be subject to earlier termination as
provided in subsections (b) and (c) below.

 

 

(b)           If the Employee is terminated for
Cause (as defined in Schedule II hereto) or voluntarily terminates his/her
employment with the Company at any time without Good Reason (as defined in
Schedule II), the Option shall terminate on the date of such termination of
employment, whether or not then fully vested and exercisable.

 

(c)           If the Employee is terminated by the
Company without Cause, resigns for Good Reason, dies, or becomes Disabled (as
defined in Schedule II) at any time during the term of his/her
employment by the Company, any portion of the Option that is not then fully
vested and exercisable shall terminate immediately; provided, however,
that the board of directors of the Company (the “Board”) shall have the
discretion to vest any portion of such Employee’s Options that have not yet
become eligible to vest, and any such accelerated Options shall be subject to
the same terms and conditions as other Options that have vested pursuant to
Section 3.  Any portion of the Option
that is vested and exercisable shall terminate on the first anniversary of the
date of such termination of employment.

 

5.                                       Manner of Exercise of Option.

 

(a)           The Employee may exercise any Option
that is fully vested and exercisable by giving written notice to the Company
stating the number of Shares (which shall not be less than 100, unless the
total Shares which are vested and exercisable at such time is less than 100) to
be purchased and accompanied by payment in full of the Exercise Price for such
Shares.  Payment shall be either in cash
or by a certified or bank cashier’s check or checks payable to the Company.

 

At any time when Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934, as amended, the Option may
also be exercised by means of a “broker cashless exercise” procedure approved
in all respects in advance by the Board, in which a broker:  (i) transmits the Exercise Price for any
Shares to the Company in cash or acceptable cash equivalents, either (1)
against the Employee’s notice of exercise and the Company’s confirmation that
it will deliver to the broker stock certificates issued in the name of the
broker for at least that number of Shares having a fair market value equal to
the Exercise Price therefor, or (2) as the proceeds of a margin loan to
the Employee; or (ii) agrees to pay the Exercise Price therefor to the Company
in cash or acceptable cash equivalents upon the broker’s receipt from the
Company of stock certificates issued in the name of the broker for at least
that number of Shares having a fair market value equal to the Exercise Price
therefor.  The Employee’s written notice
of exercise of the Option pursuant to a “cashless exercise” procedure must
include the name and address of the broker involved, a clear description of the
procedure, and such other information or undertaking by the broker as the Board
shall reasonably require.  If payment is
to be made in whole or in part in Shares underlying the Option, the Employee
shall direct the Company to subtract from the number of Shares underlying the
Option, that number of Shares having a fair market value (as determined in good
faith by the Board) equal to the purchase price (or portion thereof) to be paid
with such underlying Shares.

 

Upon such purchase, delivery of a certificate for
paid-up, non-assessable Shares shall be made at the principal office of the
Company to the Employee (or the person entitled to exercise the Option pursuant
to Section 7), not more than 10 days from the date of receipt of the notice by
the Company.

 

2

 

(b)           The Company shall at all times during
the term of the Option reserve and keep available such number of Shares as will
be sufficient to satisfy the requirements of the Option.

 

(c)           Notwithstanding Section 5(a) of this
Agreement, the Company may delay the issuance of Shares covered by the Option
and the delivery of a certificate for such Shares until one of the following
conditions is satisfied:  (i) the Shares
purchased pursuant to the Option are at the time of the issuance of such Shares
effectively registered or qualified under applicable federal and state
securities laws or (ii) such Shares are exempt from registration and
qualification under applicable federal and state securities laws.

 

6.             Administration.  This Agreement shall be administered by the
Board.  The Board shall be authorized to
interpret this Agreement and to make all other determinations necessary or
advisable for the administration of this Agreement.  The determinations of the Board in the
administration of this Agreement, as described herein, shall be final and
conclusive.  The Secretary shall be
authorized to implement this Agreement in accordance with its terms and to take
such actions of a ministerial nature as shall be necessary to effectuate the
intent and purposes thereof.

 

7.             Non-Transferability.  The right of the Employee to exercise the
Option (as and when vested) shall not be assignable or transferable by the
Employee otherwise than by will or the laws of descent and distribution, and
such Shares may be purchased during the lifetime of the Employee only by
him/her (or his/her legal representative in the event that he/she is
Disabled).  Any other such transfer shall
be null and void and without effect upon any attempted assignment or transfer,
except as hereinabove provided, including without limitation any purported
assignment, whether voluntary or by operation of law, pledge, hypothecation or
other disposition contrary to the provisions hereof, or levy of execution,
attachment, trustee process or similar process, whether legal or equitable,
upon the Option.

 

8.                                       Representation Letter and Investment Legend.

 

(a)           In the event that for any reason the
Shares to be issued upon exercise of a vested Option shall not be effectively
registered under the Securities Act of 1933, as amended (the “1933 Act”), upon
any date on which the Option is exercised, the Employee (or the person
exercising the Option pursuant to Section 7) shall give a written
representation to the Company in the form attached hereto as Exhibit A,
and the Company shall place the legend described on Exhibit A, upon
any certificate for the Shares issued by reason of such exercise.

 

(b)           The Company shall be under no
obligation to qualify Shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purposes of covering the issue of Shares; provided, that the Company will use
its reasonable best efforts to comply with any available exemption from
registration and qualification of the Shares under applicable federal and state
securities laws.

 

9.                                       Adjustments upon Changes in Capitalization.

 

(a)           In the event that the outstanding
shares of the Common Stock of the Company are changed into or exchanged for a
different number or kind of shares or other

 

3

 

securities
of the Company or of another corporation by reason of any reorganization,
merger, consolidation, recapitalization, reclassification, stock split-up,
combination of shares, or dividends payable in capital stock, appropriate
adjustment shall be made in the number and kind of Shares, and the Exercise
Price therefor, as to which the Option, to the extent not theretofore
exercised, shall be exercisable.

 

In addition, unless otherwise determined by the Board
in its sole discretion, in the case of a Change in Control (as hereinafter
defined) of the Company, the purchaser(s) of the Company’s assets or stock may,
in his/her/its discretion, deliver to the Employee, to the extent that the
right to purchase Shares under the Option has vested, the same kind of
consideration (net of the Exercise Price for such Shares) that is delivered to
the stockholders of the Company as a result of the Change in Control, or the
Board may, in its sole determination, cancel the Option, to the extent not
theretofore exercised, in exchange for consideration in cash or in kind, which
consideration in either case shall be equal in value to the value of those
shares of stock or other consideration the Employee would have received had the
Option been exercised (to the extent it has vested and not been exercised) and
no disposition of the shares acquired upon such exercise been made prior to the
Change in Control, less the Exercise Price therefor.  Upon receipt of such consideration by the
Employee, the Option shall immediately terminate and be of no further force and
effect, with respect to both vested and nonvested portions thereof.  The value of the stock or other securities
the Employee would have received if the Option had been exercised shall be
determined in good faith by the Board. 
In addition, in the case of a Change in Control, the Board may, in its
sole discretion, accelerate the vesting of all or any portion of the Option
that would remain unvested after the application of the accelerated vesting in
Section 3 hereto.  A “Change in
Control” shall be deemed to have occurred if (i) any person, or any two or more
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 the Company shall acquire shares of the Company’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 the Company’s outstanding capital
stock, or (ii) the Company 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 the
Company.

 

(b)           Upon dissolution or liquidation of
the Company, the Option shall terminate, but the Employee shall have the right,
immediately prior to such dissolution or liquidation, to exercise any then
vested Options.

 

(c)           No fraction of a share of Common
Stock shall be purchasable or deliverable upon the exercise of the Option, but
in the event any adjustment hereunder of the number of shares covered by the
Option shall cause such number to include a fraction of a share, such fraction
shall be adjusted to the nearest smaller whole number of shares.

 

10.           No
Special Employment Rights.  Nothing
contained in this Agreement shall be construed or deemed by any person under
any circumstances to bind the Company or any of its subsidiaries to continue
the employment of the Employee for the period within which this Option may vest
or for any other period.

 

4

 

11.           Rights
as a Stockholder.  The Employee shall
have no rights as a stockholder with respect to any Shares which may be
purchased upon the vesting of this Option unless and until a certificate or
certificates representing such Shares are duly issued and delivered to the
Employee.  Except as otherwise expressly
provided herein, no adjustment shall be made for dividends or other rights for
which the record date is prior to the date the stock certificate is issued.

 

12.           Withholding
Taxes.  The Employee hereby agrees,
as a condition to any exercise of the Option, to provide to the Company an
amount sufficient to satisfy its obligation to withhold certain federal, state
and local taxes arising by reason of such exercise (the “Withholding Amount”),
if any, by (a) authorizing the Company to withhold the Withholding Amount from
his/her cash compensation, or (b) remitting the Withholding Amount to the
Company in cash; provided that, to the extent that the Withholding Amount is
not provided by one or a combination of such methods, the Company may at its
election withhold from the Shares delivered upon exercise of the Option that
number of Shares having a fair market value (in the good faith judgment of the
Board) equal to the Withholding Amount.

 

13.           Execution
of Stockholders’ Agreement.  The
Employee acknowledges that he/she has previously executed and delivered the
stockholders agreement by and among the Company and the stockholders of the
Company named therein (the “Stockholders Agreement”).  The Employee further agrees that this
Agreement, the Option and all Shares acquired by him/her upon exercise of the
Option will be subject to the terms and conditions of the Stockholders
Agreement, as the same may have been amended or modified in accordance with its
terms.

 

14.           Governing
Law.  This Agreement shall be
governed by the laws of the State of Delaware, without regard to any conflicts
of law principles thereof that would call for the application of the laws of
any other jurisdiction.  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 Delaware, or if it has or can acquire jurisdiction, in
the United States District Court for the District of Delaware, 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
Delaware.

 

*  *  * 
*  *  *  *  *  *

 

[Signatures on Following Page]

 

5

 

STOCK
OPTION AGREEMENT

 

Counterpart Signature
Page

 

IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed, by its officer thereunto duly authorized, and the
Employee has executed this Agreement, all as of the day and year first above
written.

 

	
  INSIGHT
  HEALTH SERVICES

  HOLDINGS CORP.

  	
  EMPLOYEE

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael N.
  Cannizzaro

  	
   

  	
  /s/ Bret W. Jorgensen

  	
   

  
	
   

  	
  Name:

  	
  Michael N. Cannizzaro

  	
  Name: Bret W. Jorgensen
  

  
	
   

  	
  Title:

  	
  President and Chief
  Executive

  Officer

  	
  Address:

  
	
   

  	
  7891 Muirfield Way

  
	
   

  	
  PO Box 675926

  
	
   

  	
  Rancho Santa Fe,
  California 92607

  
	
   

  	
  Fax (858) 759-8254

  
						

 

6

 

SCHEDULE
I

 

Performance
Options Vesting Schedule

 

If, on or prior to the fifth anniversary of the Grant
Date, J.W. Childs Equity Partners II, L.P., Halifax Capital Partners, L.P. and
their respective affiliates each receive a net cash return on their total
investment in the Company (an “Exit Event”) equal to:

 

(A)                              at
least two times (2x) their respective total investment in the Company, then
one-third (1/3) of the total Performance Options shall vest and become
exercisable upon the consummation of such Exit Event;

 

(B)                                at least
two and one-half times (2.5x) their respective total investment in the Company,
then an additional one-third (1/3) of the total Performance Options shall vest
and become exercisable upon the consummation of such Exit Event; and

 

(C)                                at least
three times (3x) their respective total investment in the Company, then an
additional one-third (1/3) of the total Performance Options shall vest and
become exercisable upon the consummation of such Exit Event.

 

With respect to any Exit Event occurring after the
fifth anniversary of the Grant Date, the Performance Options shall vest in
accordance with the provisions set forth in clauses (A), (B) and (C) provided
that the multiple thresholds set forth above shall be increased by fifteen
percent (15%), rounded to up the nearest thousandth, for each year after the
fifth anniversary of the Grant Date.  For
example:  (i) if an Exit Event occurs on
or prior to the sixth anniversary (but after the fifth anniversary) of the
Grant Date, the multiple set forth in clause (A) above shall be increased from
2 to 2.3, the multiple in clause (B) above shall increase from 2.5 to 2.875 and
the multiple set forth in clause (C) above shall increase from 3 to 3.45 and (ii)
if an Exit Event occurs on or prior to the seventh anniversary (but after the
sixth anniversary) of the Grant Date, the multiple set forth in clause (A)
above shall be increased from 2.3 to 2.645, the multiple in clause (B) above
shall increase from 2.875 to 3.306 and the multiple set forth in clause (C)
above shall increase from 3.45 to 3.968.

 

I-1

 

SCHEDULE
II

 

Definitions
Applicable to

Stock Option Agreement

 

1.             “Cause,”
with respect to the Employee, shall have the meaning attributed to it under the
executed written employment agreement between the Employee and the Company (or
a subsidiary thereof) or, in the absence of such employment agreement, “Cause”
shall mean the occurrence of any of the following during the term of the
Employee’s employment with the Company (or a subsidiary thereof):

 

(a)                                  the
Employee has performed his/her duties negligently;

 

(b)                                 the
Employee is guilty of misconduct in connection with the performance of the
Employee’s duties;

 

(c)                                  the
Employee has committed any serious crime or offense;

 

(d)           the Employee
has failed or refused to comply with the oral or written policies or directives
of the Board of Directors; or

 

(e)                                  the
Employee has breached any provision or covenant contained in this Agreement.

 

2.             “Disabled,”
with respect to the Employee, shall have the meaning attributed to it under the
executed written employment agreement between the Employee and the Company (or
a subsidiary thereof) or, in the absence of such employment agreement, the
Employee shall be deemed to have become “Disabled” if, during the term of the
Employee’s employment with the Company (or a subsidiary thereof), the Employee
shall become physically or mentally disabled, whether totally or partially,
either permanently or so that the Employee, in the good faith judgment of the
Board, is unable substantially and competently to perform his/her duties on
behalf of the Company (or a subsidiary thereof) for a period of 90 consecutive
days or for 90 days during any six month period during the said term of
employment.  In order to assist the Board
in making that determination, the Employee shall, as reasonably requested by
the Board, (i) make himself/herself available for medical examinations by one
or more physicians chosen by the Board and (ii) grant to the Board and any such
physicians access to all relevant medical information concerning him/her,
arrange to furnish copies of his/her medical records to the Board and use
his/her best efforts to cause his/her own physicians to be available to discuss
his/her health with the Board.

 

3.             “Good
Reason,” with respect to the Employee, shall have the meaning attributed to it
under the executed written employment agreement between the Employee and the
Company (or a subsidiary thereof) or, in the absence of such employment
agreement, “Good Reason” shall be deemed to have occurred if, other than for
Cause, any of the following has occurred during the term of the Employee’s
employment with the Company (or a subsidiary thereof):

 

II-1

 

(a)           the Employee’s base salary has been
reduced, other than in connection with a reduction of executive compensation
imposed by the Board in response to negative financial results or other adverse
circumstances affecting the Company or its subsidiaries; or

 

(b)           the Company has reduced or
reassigned, in any material respect, the duties of the Employee as an employee
of the Company (or a subsidiary thereof) and such event has not been rescinded
within 10 business days after the Employee notifies the Company (or a
subsidiary thereof) in writing that he/she objects thereto.

 

4.             “Person”
shall mean an individual, corporation, partnership, limited
liability company, trust, unincorporated association, government or any
agency or political subdivision thereof, or any other entity.

 

II-2

 

EXHIBIT A

TO STOCK OPTION AGREEMENT

 

Ladies and Gentlemen:

 

In connection with the purchase by me of
                                
shares of common stock, $0.001 par value per share, of InSight Health Services
Holdings Corp., a Delaware corporation (the “Company”) under the nonqualified
stock option granted to me pursuant to that certain Stock Option Agreement
dated as of                     
     , 200     (the “Option
Agreement”), I hereby acknowledge that I have been informed as follows:

 

1.             The
shares of common stock of the Company to be issued to me upon exercise of said
option have not been registered under the Securities Act of 1933, as amended
(the “Act”), and accordingly, must be held indefinitely unless such shares are
subsequently registered under the Act, or an exemption from such registration
is available.

 

2.             Routine
sales of securities made in reliance upon Rule 144 under the Act can be made
only after the holding period and in limited amounts in accordance with the
terms and conditions provided by that Rule, and with respect to which that Rule
is not applicable, registration or compliance with some other exemption under
the Act will be required.

 

3.             The
Company is under no obligation to me to register the shares or to comply with
any such exemptions under the Act, other than as set forth in the Stockholders’
Agreement referenced and defined in paragraph 13 of the Option Agreement (the “Stockholders
Agreement”).

 

4.             The
availability of Rule 144 is dependent upon adequate current public information
with respect to the Company being available and, at the time that I may desire
to make a sale pursuant to the Rule, the Company may neither wish nor be able
to comply with such requirement.

 

5.             The
shares of common stock of the Company to be issued to me upon the exercise of
said option are subject to the terms and conditions, including restrictions on
transfer, of the Stockholders Agreement.

 

In consideration of the issuance of certificates for
the shares to me, I hereby represent and warrant that I am acquiring such
shares for my own account for investment, and that I will not sell, pledge,
hypothecate or otherwise transfer such shares in the absence of an effective
registration statement covering the same, except as permitted by an applicable
exemption under the Act.  In view of this
representation and warranty, I agree that there may be affixed to the
certificates for the shares to be issued to me, and to all certificates issued
hereafter representing such shares (until in the opinion of counsel, which
opinion must be reasonably satisfactory in form and substance to counsel for
the Company, it is no longer necessary or required) a legend as follows:

 

“The securities represented by this certificate have
not been registered under the Securities Act of 1933, as amended (the “Act”),
and may not be sold, transferred,

 

A-1

 

offered for sale, pledged or hypothecated in the
absence of an effective registration statement as to the securities under the
Act or an opinion of counsel satisfactory to the Company and its counsel that
such registration is not required.”

 

“The securities represented by this certificate are
subject to the terms and conditions, including restrictions on transfer, of a
Fourth Amended and Restated Stockholders’ Agreement among the Company and its
stockholders dated as of July 1, 2005, as amended from time to time, a copy of
which is on file at the principal office of the Company.”

 

I further agree that the Company may place a stop
order with its transfer agent, prohibiting the transfer of such shares, so long
as the legend remains on the certificates representing the shares.

 

I hereby represent and warrant that:  My financial situation is such that I can
afford to bear the economic risk of holding the shares issued to me upon
exercise of said option for an indefinite period of time, I have no need for
liquidity with respect to my investment and have adequate means to provide for
my current needs and personal contingencies, and can afford to suffer the
complete loss of my investment in such shares.

 

(a)           I am an “accredited investor” within
the meaning of Rule 501 under the Act and I, either alone or with my purchaser
representative (as such term is defined in Rule 501 under the Act) have such
knowledge and experience in financial and business matters that I am capable of
evaluating the merits and risks of my investment in the shares issued to me
upon exercise of said option.

 

(b)           I have been afforded the opportunity
to ask questions of, and to receive answers from, the Company and its
representatives concerning the shares issued to me upon exercise of said option
and to obtain any additional information I have deemed necessary.

 

(c)           I have a high degree of familiarity
with the business, operations, financial condition and prospects of the
Company.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [Employee]

  

 

A-2

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