Exhibit 10.18
EXECUTIVE EMPLOYMENT AGREEMENT
AGREEMENT dated as of June 29, 2001 between InSight Health Services
Corp., a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxxxxxxxx (the
"Executive"). InSight Health Services Holdings Corp., a Delaware corporation
("Parent") is a party to this Agreement solely for the purposes of Section
3.07.
The Company wishes to employ the Executive, and the Executive wishes
to accept such employment, in each case, subject to the terms and conditions
hereof. Accordingly, the Company and the Executive hereby agree as follows:
I. TERM OF EMPLOYMENT
Commencing at the Effective Time (as defined below), the Executive is
to be employed by the Company for rolling twelve (12) month periods, whereby
the Executive's term of employment is twelve (12) months on a continuing
basis, unless earlier terminated in accordance with Article IV below.
II. EMPLOYMENT, DUTIES AND ACCEPTANCE
SECTION 2.01. EMPLOYMENT BY COMPANY. The Company for itself and its
affiliates, employs the Executive for the term of this Agreement to render
full-time services as Company's Sr. Vice President, Human Resources and in
such capacities as the Board of Directors of the Company (the "Board") and its
affiliates may assign and, in connection therewith, to perform such duties as
are consistent with the Executive's initial appointment and as the Board shall
direct. The Executive agrees to perform such duties as are consistent with the
duties normally pertaining to the offices to which she has been elected or
appointed, subject always to the direction of the Company's Board. Subject to
Section 5.01 hereof, the Executive's expenditure of reasonable amounts of time
for personal business, charitable or professional activities will not be
deemed a breach of her undertaking to provide full-time services hereunder,
provided that such activities do not interfere materially with the Executive's
rendering of such services.
SECTION 2.02. ACCEPTANCE OF EMPLOYMENT BY THE EXECUTIVE. The Executive
accepts such employment and shall render the services required by this
Agreement to be rendered by her. The Executive shall also serve on request
during all or any part of the term of this Agreement as an officer of the
Company and of any of its affiliates without any compensation therefor other
than specified in this Agreement.
SECTION 2.03. PLACE OF EMPLOYMENT. The Executive's principal place of
employment shall be located at 0000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000. In the event that the principal place of employment
of the Executive is relocated to a site that is more than 50 miles from the
Executive's principal residence, the Company may require the Executive to
relocate her principal residence to within 50 miles of such office.
Notwithstanding the foregoing, the Executive acknowledges that the duties to
be performed by her hereunder are such that she may be required to travel
extensively both
throughout the United States and abroad and, in some cases, spend extended
periods of time away from the Company's corporate headquarters.
III. COMPENSATION
SECTION 3.01. SALARY, BONUSES, LIFE INSURANCE. As compensation for all
services to be rendered pursuant to this Agreement, the Company shall pay the
Executive, and the Executive shall accept, a salary of $135,000.00 per annum,
subject to adjustment in accordance with Section 3.02 hereof (as so adjusted,
the "Annual Salary"), payable in accordance with the payroll policies of the
Company 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 (no less
frequently than annually beginning for the fiscal year ending June 30, 2002)
for such discretionary bonuses, if any, as awarded by the President and Chief
Executive Officer of the Company and approved by the Board.
The 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 the Executive payable to such beneficiary or beneficiaries as the
Executive may designate in an amount equal to three times the amount of the
Annual Salary.
SECTION 3.02. ANNUAL REVIEW. Commencing with the first renewal period,
if any, of the term of this Agreement and annually thereafter during the term
of this Agreement, the Executive's performance shall be reviewed and evaluated
by her immediate supervisor and the Annual Salary shall be reviewed by the
Board and may be adjusted (but in no event to an amount less than the Annual
Salary then in effect) for the then upcoming year, if the Board, in its sole
discretion, determines that such adjustment is warranted.
SECTION 3.03. PARTICIPATION IN EMPLOYEE BENEFIT PLANS. The Executive
shall be entitled during the term of this Agreement, if and to the extent
eligible, to participate in any health, hospitalization or disability
insurance plan, pension plan or similar benefit plan of the Company, which may
be available to senior executives of the 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 the Company for senior executives of the Company
generally, the Company shall pay or reimburse the Executive for all reasonable
business expenses actually incurred or paid by the Executive during the term
of this Agreement in the performance of the Executive of services under this
Agreement, upon presentation of expense statements or vouchers or such other
supporting information as the Company may reasonably require.
SECTION 3.05. AUTOMOBILE. The Company shall pay Executive $750 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.
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SECTION 3.06. VACATION. The Executive shall be entitled to four (4)
weeks of paid vacation per year during the term of this Agreement, which she
may accumulate up to eight (8) weeks, to be taken at a time or times which do
not unreasonably interfere with her 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 President and Chief Executive Officer of the
Company and approved by the board of directors of Parent. The stock options
granted by Parent to Executive shall be part of the total available pool of
options, which shall equal 10% of the fully diluted common stock of Parent as
of the Effective Time. The exercise price of the stock options shall be the
price per share that subscribing stockholders pay to Parent as of the
Effective Time in connection with their subscription of Parent common stock.
IV. TERMINATION
SECTION 4.01. TERMINATION UPON DEATH. If the Executive dies during
the term of this Agreement, this Agreement shall terminate as of the date of
her death.
SECTION 4.02. TERMINATION UPON DISABILITY. If during the term of this
Agreement, the Executive becomes physically or mentally disabled, whether
totally or partially, so that she is unable substantially to perform the
services required by this Agreement to be rendered by her for (i) a period of
three consecutive months or (ii) for shorter periods aggregating three months
during any 12-month period, the Company may at any time after the last day of
the three consecutive months of disability or the day on which the shorter
periods of disability equal an aggregate of three months, by thirty (30) days'
written notice to the Executive, terminate this Agreement and the Executive's
employment hereunder. Nothing in this Section 4.02 shall be deemed to extend
the term of this Agreement or of the Executive's employment hereunder.
SECTION 4.03. TERMINATION FOR CAUSE. If the Board determines that the
Executive has neglected her duties hereunder, has performed such duties
negligently, is guilty of misconduct in connection with performance of her
duties hereunder, or has breached in any material respect any affirmative or
negative covenant or undertaking hereunder, or if the Executive is convicted
of or pleads guilty or no contest to any serious crime or offense, commits any
willful act or omission which is materially injurious to the financial
condition or business reputation of the Company or any of its subsidiaries, or
fails or refuses to comply with the oral or written policies or directives of
the Company's Board or President and Chief Executive Officer of the Company
(unless such instructions represent an illegal act) (collectively, hereinafter
referred to as "Cause"), the Company may at any time thereafter (i) by written
notice to the Executive, terminate the Executive's right to enter the
Company's premises, and such termination shall be effective as of the date
notice is given and (ii) by thirty (30) days' written notice to the Executive,
terminate this Agreement and the term of the Executive's employment hereunder,
and the Executive shall have no right to receive any monetary compensation or
benefit hereunder in respect of any period after the effective date of such
notice.
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SECTION 4.04. TERMINATION IN DISCRETION OF THE COMPANY. The Company
may, at any time, (i) terminate the Executive's right to enter the premises of
the Company by giving notice of such termination, and such notice shall be
effective as of the date notice is given and (ii) by thirty (30) days' written
notice to the Executive terminate this Agreement and the term of the
Executive's employment hereunder, and the 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 4.06 hereof.
SECTION 4.05. TERMINATION BY THE EXECUTIVE. The Executive shall have
the right to terminate this Agreement upon sixty (60) days' written notice to
the Company and, upon such termination, the 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 4.06. COMPENSATION ON TERMINATION.
(a) If the term of the Executive's employment hereunder is
terminated pursuant to Section 4.01 hereof, the Company shall pay to the
executors or administrators of the Executive's estate or the Executive's heirs
or legatees (as the case may be) all compensation accrued and unpaid up to the
date of the Executive's death.
(b) If the term of the Executive's employment hereunder is
terminated pursuant to Sections 4.02, 4.04 or 4.06(c) hereof, the Executive
shall be entitled to receive all compensation accrued and unpaid up to the
effective date of termination, plus additional compensation in an amount equal
to twelve (12) months of compensation at the Annual Salary rate then in
effect, paid in accordance with the Payroll Policies, less, in the case of
termination pursuant to said Section 4.02, the amount which the Executive is
entitled to receive under the terms of the Company's long-term disability
insurance policy for key executives as and if in effect at the time of
termination. Any payments made pursuant to this Section 4.06 shall be reduced
by such amounts as are required by law to be withheld or deducted. In
addition, the Company shall maintain, at the Company's expense, in full force
and effect, for the Executive's continued benefit until the earlier of (x)
twelve (12) months after the effective date of termination or (y) commencement
of the 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 the
Executive was entitled to participate immediately prior to the effective date
of termination; provided, that the Executive's continued participation is
permissible under the general terms and provisions of such plans or programs
and provided further, that the Company shall be entitled to amend or terminate
any employee benefit plans which are applicable generally to the Company's
employees. In the event that the Executive's participation in any such plan or
program is prohibited, the Company shall arrange to provide the Executive with
benefits substantially similar to those which the Executive was entitled to
receive under such plans or programs.
(c) Notwithstanding any provision herein to the contrary, if the
Executive is terminated by Company without Cause, within twelve (12) months of
a Change in Control (as defined herein) which occurs after the Effective Time,
the Executive shall be entitled to the payments and benefits set forth in
Section 4.06(b). For purposes hereof, a "Change in Control"
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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 or Parent, shall acquire shares of
the 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 the Company's or Parent's outstanding capital stock, or (ii) the 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 the Company or Parent.
(d) The compensation rights provided for the Executive in this
Section 4.06 shall be the Executive's sole and exclusive remedies in the event
of a breach of this Agreement by the Company, and the Executive, the executors
or administrators of the Executive's estate or the Executive's heirs or
legatees, as the case may be, shall not be entitled to any other compensation,
damages or relief.
V. CERTAIN COVENANTS OF THE EXECUTIVE
SECTION 5.01. COVENANTS AGAINST UNFAIR COMPETITION. The 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
(the "Company Business"); (ii) the Company Business is national and
international in scope; and (iii) the Executive's duties hereunder will bring
her into close contact with much confidential information not readily
available to the public, including without limitation, corporate, business and
financial plans, marketing strategy, the result of the Company's efforts in
the areas of product research, development and improvement, plans for future
development and other matters. The Executive agrees that her obligations under
this Section 5.01 shall be absolute and unconditional. In order, therefore, to
induce the Company to enter into this Agreement, the Executive covenants as
follows:
(a) Non-Compete. During the term of this Agreement and for twelve
(12) months after the termination of this Agreement (the "Restricted
Period"), the Executive shall not anywhere in the world, directly or
indirectly, (i) engage in the Company Business for her own account;
(ii) enter the employment of, or render any services to, any person
engaged in such activities; and (iii) become interested in any person
engaged in the Company Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
employee, trustee, consultant or in any other relationship or
capacity; provided, however, that the Executive may own, directly or
indirectly, solely as an investment, 5% of securities of any entity
which are traded on any national securities exchange if the Executive
neither (x) is a controlling person of, or a member of a group which
controls, such entity nor (y) owns, directly or indirectly, one or
more of any class of securities of such entity. The parties
acknowledge that in California and some states
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post-employment non-compete clauses may be generally unenforceable,
but that other states and jurisdictions permit such agreements.
(b) Confidential Information.
(i) For purposes of this Agreement, "Confidential
Information" shall mean (i) all of the Company's financial statements
and related financial data and (ii) any other trade secrets,
proprietary information or other information relating to the Company
Business, or of any customer or supplier of the Company or any of its
affiliates, that has not been previously publicly released or widely
disseminated to multiple parties in the same or substantially the same
form by duly authorized representatives of the Company or any of its
affiliates or known by the Executive prior to the commencement of the
Executive's employment by the Company. By way of illustration, but not
limitation, Confidential Information shall include any and all
customer lists (whether or not current), agreements with customers
(whether or not currently in effect or expired), standard forms of
customer agreements, data concerning customers, data concerning
customer service requirements, financial information concerning
customers, agreements with equipment manufacturers and other
suppliers, trade secrets, processes, ideas, inventions, improvements,
know-how, techniques, drawings, designs, original writings, software
programs, plans, proposals, marketing and sales plans, financial
information concerning the Company and its affiliates, cost or pricing
information, blueprints, specifications, promotional ideas, and all
other concepts, information or ideas related to the present or
potential business of the Company or any of its affiliates.
(ii) The Executive agrees that, during and after employment
by the Company, without limitation as to duration except as
hereinafter expressly provided, she shall keep confidential and not
(i) communicate or disclose to any person any Confidential
Information, or (ii) use or exploit in any fashion any of such
Confidential Information or permit the use or exploitation in any
fashion of any such Confidential Information by any other person or
entity; provided, however, that (a) the foregoing confidentiality
restriction shall not apply in any particular circumstance in which
the Executive is required to disclose particular Confidential
Information pursuant to governmental process, as indicated in a
written opinion of counsel to the Executive reasonably satisfactory to
the Company which is delivered to the Company, and (b) the foregoing
confidentiality and exploitation restrictions shall not apply to any
particular Confidential Information if and to the extent that such
information becomes generally known and available to the public
otherwise than in connection with a disclosure or communication of
such information by the Executive. The Executive acknowledges and
agrees that all Confidential Information, and all copies thereof, are
the sole and exclusive property of the Company. The Executive agrees
that, on the date of her termination of employment, she shall have
delivered to the Company all documents and materials in her possession
or under her control which constitute Confidential Information,
including all copies thereof, and no copies thereof shall be retained
by the Executive.
(c) Property of the Company. All correspondence, memoranda, notes,
lists, records, computer tapes, discs and design and other document
and data storage and retrieval
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materials (and all copies, compilations and summaries thereof), and
all other personal property, made or compiled by the Executive, in
whole or in part and alone or with others, or in any way coming into
her possession concerning the business or other affairs of the Company
or any of its affiliates, shall be the property of the Company or any
such affiliates, and no copies thereof shall be retained by the
Executive after termination thereof for any reason.
(d) Disclosure and Assignment of Rights. (i) The Executive shall
promptly disclose and assign to the 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 the 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 the
Executive may invent, develop or improve, or cause to be invented,
developed or improved, during the term of this Agreement or, in the
event that the Executive's employment is terminated pursuant to the
provisions of Section 4.03 hereof, during the 12-month period
commencing on the date of termination, which are (i) conceived and
developed during normal working hours, and (ii) which are related to
the scope of the Company's Business or are related to any work carried
on by the Company or are related to any projects specifically assigned
to the Executive. 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) The Executive shall disclose immediately to duly authorized
representatives of the Company any ideas, inventions, discoveries,
secret processes and methods and improvements covered by the
provisions of clause (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 the Company and its affiliates or its
nominee(s).
(e) No Solicitation of Customers or Employees. As provided above in
subparagraph (b)(i), the Executive acknowledges and agrees that the
identity and location of the Company's customers and the positions,
duties and terms of employment of the Company's and its subsidiaries'
employees constitute Confidential Information of the Company. The
Executive agrees that during any period that the Executive is
receiving compensation from the Company pursuant to Section 4.06
hereof or for a period of twelve (12) months after the Executive's
termination of employment, whichever is later, she shall not, directly
or indirectly, solicit, entice, divert or otherwise contact or attempt
to solicit, entice, divert or otherwise contact any customer or
employee of the Company, for any provision of services which
constitute Company Business.
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SECTION 5.02. RIGHTS AND REMEDIES UPON BREACH. If the Executive
breaches, or threatens to breach, in any material respect any of the
provisions of Section 5.01 hereof (hereinafter referred to as the "Restrictive
Covenants"), the Company shall, in addition to all its other rights hereunder
and under applicable law and in equity, have the right and remedy, to have the
Restrictive Covenants specifically enforced 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 will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. In addition to and
not in lieu of any other remedy that the 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 during which the Executive is entitled to receive
payments and benefits pursuant to Section 4.06, such period shall terminate as
of the date of such breach and the Executive shall not thereafter be entitled
to receive any salary or other payments under this Agreement, including, but
not limited to, any stock options granted to the Executive.
SECTION 5.03. SEVERABILITY OF COVENANTS. 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.
SECTION 5.04. BLUE-PENCILING. The Company and the Executive agree and
acknowledge that the duration, scope and geographic area of the Restrictive
Covenants are fair, reasonable and necessary in order to protect the good will
and other legitimate interests of the Company, that adequate consideration has
been received by the Executive for such obligations, and that these
obligations do not prevent the Executive from earning a livelihood. If any
court of competent jurisdiction construes any of the Restrictive Covenants, or
any part thereof, to be unenforceable because of the duration or geographic
scope of such provision or otherwise, such provision shall be deemed amended
to the minimum extent required to make it enforceable and, in its reduced
form, such provision shall then be enforceable and enforced.
SECTION 5.05. ENFORCEABILITY IN JURISDICTION. Notwithstanding Section
7.08, the parties hereto hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
such Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
their duration, geographic scope or otherwise, it is the intention of the
parties that such determination not bar or in any way affect the Company's
right to the relief provided herein in the courts of any other jurisdiction
within the geographical scope of such Restrictive Covenants as to breaches of
such Restrictive Covenants in such other jurisdiction, such Restrictive
Covenants as they relate to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
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VI. CERTAIN AGREEMENTS
SECTION 6.01. CUSTOMERS, SUPPLIERS. The 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 the Company.
SECTION 6.02. CERTAIN ACTIVITIES. The 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 the 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 the 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 days after the
date of mailing, as follows:
(i) If to Company, addressed to it at:
InSight Health Services Corp.
0000 XxxXxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile No.: (000) 000-0000
(ii) If to Parent, addressed to it at:
InSight Health Services Holdings Corp.
c/o X.X. Childs Associates, L.P.
Xxx Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxx
Facsimile No.: (000) 000-0000
with copies to:
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The Halifax Group, L.L.C.
0000 Xxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxx
Facsimile No.: (000) 000-0000
Xxxx Xxxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Facsimile No.: (000) 000-0000
(iii) If to Executive, to the address or facsimile set forth
below her 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, only by a written instrument signed by
Company, Executive and Parent or, in the case of a waiver, by the party
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof, nor shall any
waiver on the part of any party of any right, power or privilege hereunder,
nor shall any single or partial exercise 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 the Executive,
and the Executive's rights and obligations hereunder may not be assigned by
the Executive. The 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(es),
whether by merger, consolidation or otherwise; or (ii) to any wholly-owned
subsidiary of the Company; provided that the 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.
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SECTION 7.07. GENDER, NUMBER. Unless the context of this Agreement
otherwise requires, words of any gender will be deemed to include each other
gender and words using the singular or plural number will also include the
plural or singular number, respectively.
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. EFFECTIVE DATE. This Agreement shall be effective at the
Effective Time (as defined in the Agreement and Plan of Merger, dated as of
June 29, 2001, by and among Parent, JWCH Merger Corp. and the Company).
Immediately prior to the Effective Time, the Executive's current employment
agreement with the Company shall be terminated and be of no further force or
effect, and Executive waives any and all rights she may have under such
employment agreement, including any payments for severance or in respect of a
change of control contained therein.
SECTION 7.10. (a) RESOLUTION OF DISPUTES. The Executive and the
Company mutually agree and understand that as an inducement for the Company to
enter into this Agreement, the Executive and the 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 the Company may have against
the Executive or that the Executive may have against the 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 the Company
and the 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.
11
(b) CLAIMS EXCLUDED FROM ARBITRATION. Claims the Executive may have
for workers' compensation or unemployment compensation benefits are not
covered by this arbitration provision. Also not covered are claims by the
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 the
Executive understands and agrees that the Company may seek and obtain relief
from a court of competent jurisdiction.
(c) ARBITRATION PROCEDURES. The Executive and the 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/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name:Xxxxxx X. Xxxxxxxxx
Title: President & CEO
EXECUTIVE
/s/ Xxxxxxx X. Xxxxxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Address and Facsimile Number:
00000 Xxxxx Xxxx
------------------------------------
Xxxxxx, XX 00000
------------------------------------
------------------------------------
------------------------------------
INSIGHT HEALTH SERVICES HOLDINGS CORP.
(solely for the purpose of Section 3.07)
By: /s/ Xxxxxx X. Xxx
--------------------------------
Name:Xxxxxx X. Xxx
Title: President
13
EXHIBIT A
STOCK OPTION AGREEMENT
14
STOCK OPTION AGREEMENT
AGREEMENT entered into as of the ___ day of ________, 2001 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 Effective Time (as defined in the
Agreement and Plan of Merger, dated as of June 29, 2001, by and among the
Company, JWCH Merger Corp. and InSight Health Services Corp.) (the "Grant
Date"), the Company grants to the Employee a nonqualified stock option (the
"Option") to purchase all (or any part) of _____________ 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 $18.00* per share.
3. Vesting and Exercisability. Twenty percent (20%) of the total Option set
forth in Section 1 shall be available for vesting each fiscal year during
the Company's 2002-2006 fiscal years as follows: (A) twenty-five percent
(25%) of the number of available Options for each such fiscal year shall
vest and become exercisable upon the anniversary of the Grant Date in such
fiscal year and (B) seventy-five percent (75%) of the number of available
Options for each such fiscal year shall vest and become exercisable upon
the Company's attainment of the performance goals 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. Notwithstanding the
foregoing, to the extent any of the Options which may vest pursuant to
clause (B) above do not vest in accordance with Schedule I by the eighth
(8th) anniversary of the Grant Date, they shall be deemed to vest on such
date.
------------------
* Intended to be the subscription price for all stockholders who
subscribe as of the Effective Time. Currently anticipated to be $18.00
per share.
15
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
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 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 120th day
following 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
16
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.
(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
(or his legal representative in the event that he 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
17
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 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 or 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 on Schedule I and 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
18
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.
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
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
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 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
00
Xxxxxx Xxxxxx Xxxxxxxx Xxxxx 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]
20
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 EMPLOYEE
HOLDINGS CORP.
BY:
_________________________________________
BY: Name:
_________________________________
Name: Address:
Title: _________________________________________
_________________________________________
_________________________________________
Telecopier Number: _____________________
Social Security Number: _________________
21
SCHEDULE I
OPTION PERFORMANCE VESTING SCHEDULE
(a) For each of the Company's fiscal years ending June 30 in the years
2002 through 2006, the portion of the total Option described in clause (B) of
Section 3 of the Agreement shall vest and become exercisable if the Company
achieves a return on equity ("XXX") for such year that equals or exceeds the
following Base Targets:
Base Target 90% of Base Target
----------- ------------------
2002 1.11 1.00
2003 2.40 2.16
2004 3.50 3.15
2005 5.00 4.50
2006 6.50 5.85
If the Company achieves more than 90% but less than 100% of the Base Target
XXX in any fiscal year, the Options available to vest in that year shall vest
in the ratio by which XXX achieved exceeds 90% of Base Target XXX for such
fiscal year (i.e., for XXX of 90.5% of Base Target XXX, one-twentieth of the
available Options would vest; for XXX of 96%, six-tenths of the available
Options would vest).
For purposes hereof, XXX for any fiscal year shall be calculated by
the following formula: [(5.25 x EBITDA) - D+C]/TE where
D = the Company's Consolidated Indebtedness at fiscal
year-end (or at time of sale of the Company)
C = the Company's Excess Cash at fiscal year-end (or at
time of sale of the Company)
TE = total equity invested as of the Effective Time
(including the net pre-tax value of any options rolled
over as of the Effective Time)
EBITDA = EBITDA for such fiscal year
If TE is increased at any time after the Effective Time and during the
Company's fiscal years ending on June 30 in the years 2002 through 2006, the
Board, in good faith, shall adjust the Base Targets. The Options available for
vesting shall vest, if the Targets are met, upon completion of the audit for
the Company and its subsidiaries' consolidated financial statements for such
fiscal year.
(b) Notwithstanding the foregoing, if in the fiscal year ending June
30, 2006, (1) the percentage of Options available to vest that do vest exceeds
(2) the cumulative percentage of Options available to vest in the fiscal years
ending June 30 in the years 2002-2005 that did vest in those years, the
vesting percentage achieved in fiscal year ending June 30, 2006 shall be
SCHEDULE I-1
carried back to the fiscal years ending June 30 in the years 2002-2005 and
applied to the Options available to vest in those fiscal years. The number of
vested Options for the fiscal years ending on June 30 in the years 2002
through 2005 shall be adjusted to reflect such higher percentage.
(c) (1) In the event a Change in Control of the Company occurs before
the end of the fiscal year ending June 30, 2006, the Base Target for the year
in which the Change in Control occurs and the above formula will be modified
as follows:
- the Base Target for such year will be adjusted to be an
amount determined by adding to the Base Target for the fiscal year immediately
prior to the fiscal year in which the Change in Control occurs an amount equal
to the product of (i) a fraction the numerator of which is the number of days
that elapsed since the first day of the fiscal year in which the Change in
Control occurs until the date of the consummation of the Change in Control and
the denominator of which is 365 and (ii) the difference between the Base
Target for the year in which the Change in Control occurs and the Base Target
for the immediately preceding fiscal year.
- the formula for determining XXX at the time of the Change in
Control will be adjusted by using EBITDA for the 12 full calendar months
immediately preceding the date of the Change in Control so that the multiple
of EBITDA used will be the greater of 5.25 and the multiple used in
determining the Company's enterprise value in the Change in Control.
(2) The percentage of Options that vest in accordance with the formula
as so modified will then be applied to fiscal years preceding and following
the year in which the Change in Control occurs and the number of vested
Options shall be adjusted to reflect such percentage; provided that, if the
cumulative percentage of Options that vested in the fiscal years preceding the
Change in Control exceeds the percentage that vest in the fiscal year of the
Change in Control pursuant to the modified formula, the cumulative percentage
of Options that vested prior to the Change in Control will instead be applied
to the fiscal years that follow the Change in Control.
(d) Notwithstanding the foregoing, in the event X.X. 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 resulting (i) in an internal rate of return of at least 35% on their
total investment in the Company and (ii) in an amount of cash equal to at
least three times their respective total investment in the Company, then
one-third of the total Options described in clause (B) of Section 3 of the
Agreement (i.e., 25% of the total Option set forth in Section 1 of the
Agreement) shall vest and become exercisable. This vesting provision is not
intended to be additive to the preceding provisions, but is intended to be in
the alternative.
For purposes of this Schedule I, the following terms have the
following meanings:
"Consolidated Indebtedness" shall mean, as of any date, the aggregate
amount outstanding, on a consolidated basis, of (a) all obligations of the
Company or its subsidiaries for borrowed money, (b) all obligations of the
Company or its subsidiaries evidenced by bonds, debentures, notes or other
similar instruments or upon which interest charges are customarily paid, (c)
all obligations of the Company or its subsidiaries for the deferred purchase
price of property or services, except current accounts payable arising in the
ordinary course of business
SCHEDULE I-2
and not overdue beyond such period as is commercially reasonable for the
Company or its subsidiaries' business, (d) all obligations of the Company or
its subsidiaries under conditional sale or other title retention agreements
relating to property purchased by such Person and all capitalized lease
obligations, (e) all payment obligations of the Company or its subsidiaries on
or for currency protection agreements, (f) all obligations of the Company or
its subsidiaries as an account party under any letter of credit (excluding
those supporting trade payables), (g) all obligations of any third party
secured by property or assets of the Company or its subsidiaries (regardless
of whether or not such Person is liable for repayment of such obligations) and
(h) all guarantees of the Company or its subsidiaries.
"EBITDA" shall mean consolidated earnings of the Company and its
subsidiaries, including equity in the earnings from non-consolidated
subsidiaries, before interest, taxes, depreciation, amortization and the
management fees paid to X.X. Childs Associates, L.P. and The Halifax Group,
L.L.C. or any of their respective affiliates and after deduction of all
operating expenses, minority interest expenses and incentive compensation, all
as calculated in accordance with generally accepted accounting principles
consistently applied, as reflected in the Company's consolidated financial
statements. For purposes of calculating EBITDA, upon the Company making an
acquisition or disposition of any assets or business, the Board, in good
faith, shall adjust EBITDA for any fiscal year to include or exclude on a pro
forma basis, as applicable, the EBITDA for such assets or business for the
period of time the assets or business are not owned by the Company for the
fiscal year in which the assets or business are acquired or sold.
"Excess Cash" shall mean cash in excess of the Company and its
subsidiaries' operating needs, in the good faith judgment of the Board.
SCHEDULE I-3
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 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 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, arrange
to furnish copies of his medical records to the Board and use his best efforts
to cause his own physicians to be available to discuss his 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):
(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
SCHEDULE II-1
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 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.
SCHEDULE 11-3
EXHIBIT A
TO STOCK OPTION AGREEMENT
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 June ____, 2001 (the "Option Agreement"), I hereby acknowledge that I have
been informed as follows:
EXHIBIT A-1
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, 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
Stockholders' Agreement among the Company and its stockholders dated
as of ____________, 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]
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